From monetary crisis to the war economy

This report on the international situation is an effort to trace the basic politico-economic perspectives which will face the capitalist system on a world scale over the coming years. Rather than a detailed ana­lysis of the present economic and political conjuncture in even the major capitalist states -- analyses which are now forthcoming on a regular basis in the publications of the various territorial sections of the International Communist Current -- we will concentrate on indicating the broad lines, the fundamental axes, which will determine the course of the capitalist economy over the next years, and which will shape the political orientation of the various nat­ional bourgeoisies and the actions of the two imperialist blocs. In so doing we hope to elaborate a coherent perspective with which to guide the intervention of the. ICC in the increasingly decisive class battles which lie ahead; a perspective which will be one of the elements which will insure that the ICC can become an active factor in the development of proletarian class conscious­ness, can become a vital element in the proletarian storm which will uproot and destroy the capitalist state throughout the world and initiate the transition to communism.

Despite the triumphant proclamations of ‘recovery’ with which bourgeois politicians and statesmen have attempted to feed an increasingly hungry and impoverished world for the past two years, the global capital­ist economic crisis has relentlessly deep­ened. In the industrialized nations of the American bloc (the OECD), both the growth in real GNP and in exports has been declining since the beginning of 1977:

Percentage change, seasonally adjusted annual rates

*1977 est

Yet even these dismal figures do not begin to convey the catastrophic situation in which the economically weakest European countries like Britain, Italy, Spain, and Portugal now find themselves. Quasi-stagnant GNPs, a collapse of investment in new plant, and huge trade and balance of payments deficits have led to effective devaluation of their currencies, drastic falls in their foreign exchange reserves and burgeoning foreign debts. The result has been hyperinflation (Britain: 16-17% Italy: 21%; Spain: 30%; Portugal more than 30%) and massive unemployment (Britain: 1.5 million; Italy: 1.5 million; Spain: 1 million; Portugal: 500,000 - 18% officially). All four countries are virtually bankrupt, and are only being kept afloat by loans and credits which ultimately depend on a green light from the US. The bourgeoisies of these sick men of Europe no longer even speak of ‘recovery’ or ‘growth’; their new watchword is ‘stabilization’, the euphemism for the draconian austerity, de­flation and stagnation to which their eco­nomic weakness and the dictates of their creditors condemn them. Moreover the ranks of these sick men are now being joined by France, Belgium, Denmark, Sweden and Canada, countries whose economic strength was unquestioned in bourgeois circles a few years ago, but which are now rapidly sinking into the quagmire of unmanageable trade and payments deficits, devaluations, mounting debts, hyper-inflation, and sky-rocketing unemployment, which have already claimed their weaker neighbours.

A look at the economic giants of the American bloc -- the US, West Germany, and Japan -- will quickly reveal the extreme fragility and grim prospects for even these seemingly strong economies. The apparent health of Germany and Japan -- with their fat trade surpluses and robust currencies -- rests almost exclusively on massive export drives and systematic dumping. The US, meanwhile, has benefitted from a reflation­ary package which has now run its course, and the fact that its trade deficit has been largely offset by huge invisible earnings (interest payments, profits, from foreign investments, capital transfers, etc) which accrue to the leader of the imperialist bloc. Indeed, despite their protestations that they would not indulge in a beggar-thy-neighbour policy to atten­uate the shock of the world crisis, the US, Germany and Japan have done precisely that, and have preserved a semblance of economic health only by deflecting the worst effects of the crisis onto the weaker nations of the bloc. However, with new investment down alarmingly, and with the trade deficit countries taking extreme steps to slash their imports, the prospects of the US, Germany and Japan achieving their planned -- for 1977 growth targets (US: 5.8%; Germany: 5%; Japan: 6.7%) and there­by reducing their already dangerously high unemployment (US: 6.7 million; Germany: 1.4 million; Japan: 1.4 million) let alone providing any sort of stimulus for their weaker ‘partners’, appears increasingly dim. Nor will any of the three giants take up the slack through new reflationary budgets at home, faced as they are with the spectre of galloping inflation, which is already again rapidly heading towards double digits in the US (6.4% and Japan (9.4%)

In the Russian bloc (COMECON) even the state planning agencies must now acknowledge the presence and growth of inflation and unemployment -- the unmistakable effects of capitalist production and its permanent crisis. Economic activity in the Russian bloc has been fuelled by $35-40 billion in loans by western banks over the past few years (part of the explosion of credit by the American bloc in a vain effort to com­pensate for the saturation of the world market). The Russian bloc has now launched a massive export drive, a frantic quest for markets, on the outcome of which the repayment of its huge loans depends. Yet not only does this export offensive occur at a time when the countries of the Ameri­can bloc are desperately moving to cut imports to the bone and when the countries of the ‘Third World’ hover on the brink of bankruptcy, it will also come to grief because of the barriers to additional loans (a result of both political and financial considerations) without which the Russian bloc cannot purchase the new technology which alone could make -- in conjunction with the planned attacks on the working class -- her commodities competitive on the world market. Thus, after a great burst of trade and exchanges with the American bloc between 1971-1976, the Russian bloc finds itself in an economic cul-de-sac.

The Third World -- including even its indus­trial powerhouses like South Africa, Brazil, Mexico and Argentina, etc -- sinks deeper into a growing barbarism with each passing day. The nightmare world of hunger, disease, labour camps and begging to which decadent capitalism condemns the masses of humanity has already claimed countries constituting two thirds of the world’s population. The $78 billion in loans to the Third World in 1974-1976 have done practically nothing to even slow the rush of these economies towards total collapse (though they were a temporary palliative for the lack of effective demand which was condemning more and more of the world’s industrial apparatus to idleness). Yet given the complete bankruptcy of the Third World countries, whatever new funds are forthcoming -- on a greatly reduced scale -- will serve only to avert default on past loans and the resultant collapse of major western banks. The brutal austerity which the regimes of the Third World –‘socialist’, Marxist-Leninist, Nationalist, and Democratic -- are now in the process of imposing, in a desperate attempt to reduce the staggering trade deficit ($22 billion in 1976 for the non-oil developing countries with the OECD alone!) brought on by their dependence on raw material and agricultural exports, will be a death sentence to millions.

We can better understand why the perspective which faces world capital today is one of an inevitable fall in production and trade, if we look at the nature, bases and limits of the upturn in production and trade during the winter of 1975-76, following the excep­tionally sharp downward plunge of 1975, and the spurt in output (though not in trade) which occurred this past winter, following last summer’s lull. The collapse of 1975 was halted primarily by hastily devised reflationary budgets and a new massive explo­sion of credit, the creation of fictitious capital, which could for a short time once again, offset the saturation of markets which underlies capitalism’s death crisis. To these two factors must be added the momen­tary shot in the arm contributed by the inventory re-stocking which followed the run-down of stocks as production plummeted, as well as falling savings by the middle classes which provoked a mini-boom in con­sumer durables (cars, etc) and which owed less to any confidence in recovery than to a well-placed conviction in the permanence of inflation. Both of these last two fac­tors helped fuel the OECD countries 7-8% growth in real GNP achieved in the winter of 1975-76, while only the credit explosion and governmental fiscal stimulation under­pinned the much more fragile upturn this winter.

Today, the barriers to a continuation of the credit explosion -- without which world trade will shrink -- is apparent in the growing threat of default by the biggest borrowers like Zaire, Peru, Mexico and Brazil, and in the gaping trade and payments deficits which plague the Third World, the Russian bloc and the weaker countries of the American bloc. The sources of credit are drying up as the capacity of the debtor countries to repay their recent loans has been stretched to the breaking point. New loans to the countries of the Third World -- hesitantly provided by the IMF rather than the overextended ‘private’ banks -- will serve to assure repayment of past loans and their service, and not to finance a contin­ued flow of commodities. Moreover, such loans will be contingent on strict controls over the debtor countries’ economies and the requirement that they reduce or eliminate their payments deficits by drastically slashing their imports. To this consider­able pressure which will contract world trade must be added the politico-financial limita­tions to a new round of massive loans to the Russian bloc, without which trade between the two blocs will decline. Finally, the trade deficit countries of the American bloc have been driven to the verge of bankruptcy by their mounting debts and their payments deficits. Having reached the limits of their credit-worthiness, and facing economic collapse, these countries must either opt for protectionism and autarky or accept IMF control and discipline -- either of which means strict limitations on imports and a further contraction of world trade.

Shrinking world trade cannot be offset by a sharp rise in demand within the industrial heartlands of capitalism. The obstacles to a continuation (let alone acceleration) of the fiscal stimulation which has been practically the sole basis for a higher level of demand in the industrialized coun­tries of the American bloc, preclude the launching of any ambitious ‘recovery’ pro­grammes and the introduction of reflationary budgets or policies adequate to generate a new spurt in industrial output. In those countries wracked by hyper-inflation, so long as political conditions permit (the level of class struggle) cuts in ‘public’ spending, compression of the money supply, in other words, deflation is a necessity. In the ‘strong’ economies (the US, Germany, Japan) the bourgeoisie is extremely hesitant to reflate lest it unleash the hyperinfla­tion which its array of austerity measures have for the moment kept at bay.

If governmental fiscal stimulation can no longer be utilized on the past scale to prevent a fall in production, the collapse will be all the more devastating because of the present catastrophic decline in new investments in industrial plant. The bour­geoisie’s unwillingness to invest is linked to the prodigious and continuing fall in the rate of profit since world capital again plunged into open crisis around 1967. This phenomenon can be illustrated by the situation of German capital (which has cer­tainly weathered the first assaults of the open crisis better than practically any other) where the average rate of profit after taxes was 6% in 1960-67, 5.3% in 1967-71, and 4.1% in 1972-75. The fall in the rate of profit has accelerated as a result of the growth in unproductive expenditures by the capitalist state as it tries to counter­act the effects of the saturation of the world market and contain the class antagon­isms brought to a fever pitch by the deepen­ing crisis. This, and the high interest rates with which the bourgeoisie desperately seeks to combat the hyper-inflation which its unproductive -- but necessary -- expendi­tures have generated, have depressed invest­ments (particularly in Department I, the production of the means of production) to the point where a collapse of production looms menacingly on the horizon.

The failure of the different governments’ efforts to stimulate their economies and overcome the effects of the crisis with alternating ‘recovery’ and austerity pro­grammes and budgets, the persistence and worsening of galloping inflation together with recession, of an explosion of credit together with a devastating fall in invest­ments, of dwindling profit rates together with unprecedented levels of ‘public’ spending, of massive unemployment together with huge budget deficits, all demonstrate the absolute bankruptcy of Keynesianism, of the reliance on fiscal and monetary policy, which has been the cornerstone of bourgeois economic policy since the reappearance of the open crisis in 1967. The impossibility of stimulating the economy without setting off hyper-inflation, the impossibility of controlling inflation without a dizzying fall in production and profits, the increa­singly short gaps between the swings of recession and galloping inflation, in fact, the permanent and simultaneous character of recession and inflation have shattered the economic theories (sic) on which the bourgeoisie has based its policies. The impotence of governmental fiscal and mone­tary policy before a new plunge in world trade and production, impose on the bour­geoisie a new economic policy to face its death crisis.

The bourgeoisie must attempt to escape the breakdown of Keynesian policies by recourse to a more and more totalitarian and direct control over the whole economy by the state apparatus. And if important factions of the bourgeoisie still hesitate to admit that Keynesianism has had its day, its more in­telligent representatives have no doubts about what the alternative will be. The leading spokesmen for the US’s dominant financial-industrial groups put it this way:

“If fiscal and monetary policy can bring the economy back toward balance, this will be all they need. If the broad policies fail, however, government, labour and business can all expect (state) intervention on a scale for which there is no precedent in this country.” (Business Week, 4 April, 1977)

Revolutionaries must be absolutely clear about the nature of the steps which capi­talism’s permanent crisis forces each national faction of the bourgeoisie to take, about the thrust of state capitalism, a new phase in whose evolution faces our class:

“State capitalism is not an attempt to resolve the essential contradictions of capitalism as a system for the exploita­tion of labour power, but the manifesta­tion of these contradictions. Each grouping of capitalist interests tries to deflect the effects of the crisis of the system onto a neighbouring, competing grouping, by appropriating it as a market and field for exploitation. State capitalism is born of the neces­sity for this grouping to carry out its concentration and to put external markets under its control. The economy is there­fore transformed into a war economy.” (‘The Evolution of Capitalism and the New Perspective’, 1952, reprinted in Bulletin D’Etude et de Discussion of Revolution Internationale, no.8, p.9).

The war economy which is arising on the shambles of Keynesianism is in no sense a way out of the world crisis, it is not an economic policy which can solve the contra­dictions of capitalism, nor provide the basis for a new stage of capitalist dev­elopment. The war economy can only be understood in terms of the inevitability of another inter-imperialist war if the proletariat does not put an end to the reign of the bourgeoisie; it is the indis­pensable framework for the bourgeoisie’s preparations for the conflagration which the blind laws of capitalism and the inexor­able deepening of the crisis impose on it. The only function of the war economy is... war: It’s raison d’être is the systematic and efficient destruction of the means of production and the production of the means of destruction -- the very logic of capital­ist barbarism.

Only the institution of a war economy can now prevent the capitalist productive appar­atus from grinding to a halt. In order to establish a full-fledged war economy, how­ever, each national faction of capital must:

1. subject the whole apparatus of produc­tion and distribution to the totalitar­ian control of the state, and direct the economy towards a single goal -- war.

2. drastically reduce the consumption of all social classes and strata.

3. massively increase the output and degree of exploitation of the one class which is the source of all value, of all wealth -- the proletariat.

The enormity and difficulty of such an undertaking is the cause of the growing political crisis in which the bourgeoisie of each country now finds itself enmeshed. The totalitarian organization of the economy and its direction to a single goal often produce bitter struggles between factions of the bourgeoisie, as those factions whose particular interests will be sacrificed fight against the juggernaut of statifica­tion. The reduction in overall consumption which the war economy necessitates provokes incessant turmoil and bitter opposition within the ranks of the middle strata, petty-bourgeoisie and peasants. But it is the assault on the proletariat which -- be­cause it risks unleashing a generalized class war -- is not only the most difficult task for the bourgeoisie to accomplish in the present conjuncture, but the veritable key to the constitution of a war economy. The war economy absolutely depends on the physical and/or ideological submission of the proletariat to the state, on the degree of control that the state has over the working class.

The war economy in the present epoch, how­ever, is not simply established on a nat­ional scale, but also on the scale of an imperialist bloc. Incorporation into one of the two imperialist blocs -- each one dominated by a mammoth continental state capitalism, the US and Russia -- is a nece­ssity which not even the bourgeoisies of formerly great imperialist powers like Britain, France, Germany and Japan can resist. The powerful drive by the US and Russia to co-ordinate, organize and direct the war-making potential of their blocs intensifies the political crisis of each national bourgeoisie as the pressure to bow to the requirements for the consolida­tion of the imperialist bloc on the one hand and the need to defend the national capital interest on the other, generate irresistible and growing tensions.

We shall now, in turn, look at the specific problems which are faced and the actual measures being taken by the bourgeoisie in the US and throughout the American bloc, and by the bourgeoisie in the Russian bloc, to organize their war economies, to over­come the different types of resistance this generates, and to resolve their poli­tical crises. We will then focus on the sharpening inter-imperialist conflicts throughout the world which are relentlessly, though gradually, leading the imperialist blocs towards world war. Finally, we will indicate the perspectives for the intensi­fication of the class struggle of the prole­tariat, indicating the impediments to and the tendencies towards generalized class war.

The United States and the American bloc

In his first months as President of the US, Jimmy Carter has dealt a stinging rebuke to the orthodox Keynesians within his adminis­tration by scrapping his original reflationary budget (in eliminating the proposed tax rebates and new investment tax credits, Carter presented a budget which is less expansionary than the one proposed by his Republican predecessor, Gerald Ford!). But if Carter and his team have seen the limits of Keynesianism, they are certainly not beating a retreat to the ‘fiscal conserva­tism’ and monetarism which many Republicans still insist is the only governmental answer to the crisis and to the spectre of gallop­ing inflation. The Carter Administration has seen the utter futility of trying to stem the crisis by relying on fiscal and monetary policies (stimulative or restric­tive), and is beginning to move the US into a new phase of war economy and state totali­tarianism.

The one element in the American budget which will grow at a prodigious rate is armaments research and production. The probable go ahead -- depending on the outcome of the SALT talks -- for the MK-12A nuclear warhead (the ‘silo-buster’) and the B-1 bomber, is only the beginning of a new explosion of armaments which will increasingly become the hub of economic activity. Furthermore the Carter Administration’s recent initia­tives to subject arms exports more directly to American strategic interests, and to limit the spread of nuclear technology which produces plutonium in a form suitable for bomb-making, are not moves to limit armaments but rather part of an overall policy to consolidate the American bloc around the exclusive domination of the US and to subject weaponry and its development solely to the control, will, and aims of American imperialism.

The Carter Administration’s resolute move towards a war economy, and its acceleration of the tendency towards state capitalism, can be clearly seen in its energy policy, its proposals for expansion of the scope and scale of commodity stockpiling, and its steps towards centralizing world trade. The necessities of a war economy have led the government to inaugurate a national energy policy through a network of state agencies, and the proposal to create a super agency headed by a national energy czar. The American state intends to dictate the price of energy, the kinds of energy to be utili­zed, and the quantities of energy to be allocated to the different regions, and to the various types of production and consumption. The energy policy’s emphasis on conservation is the cutting edge of the drive to restrict the consumption of all classes and strata (though primarily the working class), the brutal austerity which is basic for a war economy. The development of new sources of energy to both assure America’s energy ‘independence’ in time of war, and to make the other countries of the bloc totally dependent on the US, will proceed through the statification of the energy industry. Complete statification of energy is occurring in two ways. First, the American state directly owns most of the remaining energy resources of the country:

“The best prospects for oil and gas now lie offshore in federal waters. Coal production is shifting to the West, where the government controls most of the mineral rights, Even the nation’s uranium lies largely in public hands.” (Business Week, 4 April, 1977)

Second, the development of nuclear techno­logy and the infrastructure for coal lique­faction demands a state plan and state capital, as even the leading spokesmen for America’s monopolies realize:

“To develop and implement such technology on the necessary grand scale dictates major economic adjustments -- for instance much higher fuel prices and massive capital formation. Only the government seems capable of directing such a leviathan effort.” (Ibid.)

The Carter team is also considering a mass­ive expansion of the American government’s commodity stockpiles, by adding ‘economic’ stocks to the $7.6 billion strategic military reserve of 93 commodities. The stra­tegic stockpile is intended to ensure sup­plies in case of war. Economic stocks of key raw materials will permit the American state to shape domestic plans, and to put pressure on foreign producers to cut prices, through its capacity to release stockpiled commodities onto the market.

Finally, the American state is in the fore­front of the movement to cartelize world trade. In contrast to the international cartels which dominated the world market in the epoch of monopoly capitalism, and which were established by ‘private’ trusts, a new type of cartelization appropriate to the epoch of state capitalism and war eco­nomy is emerging. The cartels presently being organized to set and regulate the prices of important raw materials, and to determine the share of key markets to be allotted to the different national capitals, are negotiated and operated directly by the various state apparatuses.

Two types of cartels are being pushed by the Carter Administration. The first are commodity cartels which involve both exporting and importing nations, and which will determine the acceptable price range for a commodity and regulate the movement of prices through the use of buffer stocks in the hands of either the national govern­ments or the cartel. The US is now in the process of organizing such cartels for sugar and wheat, which may be the forerunners of cartels for other raw materials and agri­cultural products. Such state organized commodity cartels would attempt to stabilize raw materials prices, a basic element in the drawing up of an overall economic plan, and in counteracting the fall in the rate of profit, as well as facilitating a ‘cheap food’ strategy, which would lower the value of labour power and thereby smooth the way to a compression of the wages of the working class -- all of which are essential ingred­ients of the war economy.

The second type of cartel is a direct res­ponse to a shrinking world market, and in­volves state planning not for expansion, but for contraction of world trade. What is involved are agreements between exporting and importing states to assign quotas or shares of a national market for specific commodities to the several competing natio­nal capitals. The US has recently arranged what it euphemistically calls ‘orderly marketing agreements’ with Japan on special steels and TV sets (this latter will reduce Japanese exports to the US by 40%), and is now in the process of negotiating agreements to divide up world markets for textiles, garments, shoes and basic steel. These cartels represent Washington’s alternative to an orgy of protectionism and autarky on the part of each national capital within the American bloc, an organized and co­ordinated shrinking of markets which is intended to preserve the cohesion of the bloc under the impact of the world crisis.

As an inseparable part of its steps to con­solidate a war economy, the Carter Adminis­tration has brandished a new war ideology -- the crusade for ‘human rights’. In the epoch of imperialist world wars; when vic­tory depends primarily on production, when every worker is a ‘soldier’, an ideology capable of binding the whole of production to the state and instilling a willingness to produce and sacrifice is a necessity for capitalism. Moreover, in an era when wars are not fought between nations, but between world imperialist blocs, national chauvinism alone is no longer a sufficient ideology. As the bourgeoisie prepares for a new world butchery, the struggle for human rights is replacing anti-communism in the ideological arsenal of the ‘democratic’ imperialisms of the American bloc as they begin to mobi­lize their populations for war with the ‘totalitarian dictatorship’ of the Russian bloc (all the more so as countries like China which are being incorporated into the American bloc have ‘communist’ regimes and as the participation of ‘Communist’ parties in the governments of several West European countries is foreseen). Behind Jimmy Carter’s moralistic appeals for the universal recognition of human rights, American swords are being sharpened.

The organization of a fully developed war economy in the US is not taking place, however, without furious resistance on the part of many powerful bourgeois interests. In particular, the Mid-Western farm bloc and agri-business oppose what they perceive as a ‘cheap food’ strategy; the steel, textile, shoe and many other industries are militantly protectionist, seeing the govern­ment’s concern with the cohesion and stability of the world imperialist bloc as a betrayal of American industry; the South-Western oil and gas interests violently object to the Carter energy policy. All of these groupings are organizing to defend their particularistic interests by resisting the stranglehold of a leviathan state over the whole economy. Moreover, they are trying to mobilize the legions of small and medium capitalists (for whom state capital­ism is a death sentence) as well as the disenchanted middle classes to resist the tide of statification. Nonethless, it is the interests of the global national capi­tal -- which absolutely requires a war economy -- which will win out in any intra-­bourgeois struggle, and it is those factions of the bourgeoisie which most closely re­flect those interests which will ultimately dictate the orientation of the capitalist state and determine its policies.

Because of the ever-widening gap between the relatively increasing economic weight of the US and the lessening economic stren­gth of Europe and Japan, the US has the capacity to determine, to dictate, the eco­nomic priorities and orientation of other countries in its bloc. Moreover, with the intensifications of the crisis in America itself, the US will increasingly have to deflect the worst effects of the crisis onto Europe and Japan (within the limits that do not destroy the overall cohesion of the bloc). The US is now implementing a policy of putting Europe on rations. The manner in which American capital is imposing austerity on the bankrupt countries of Europe is through its capacity to grant or withhold the loans without which Europe faces economic ruin, and therefore to compel the sickmen of the continent to place control of their economies virtually in the hands of their American creditor. Unlike the 1920s when desperately needed American loans were largely provided by ‘private’ banks, today, -- under the prevailing conditions of state capitalism -- the bulk of the credits are channeled through state or semi-state institutions, like the Treasury, the Federal Reserve System, or the Washington controlled International Monetary Fund.

The plans of American capital on the one hand to drastically reduce consumption in Europe, and on the other hand to more firmly commit Europe to the imperatives of a war economy constructed on the scale of the whole American imperialist bloc, can be seen in the recent IMF negotiations for loans to Britain, Italy and Portugal. As a con­dition for a $3.9 billion loan, the IMF demanded that Britain severely reduce govern­ment spending and place strict limits on the growth of the money supply, in other words, the imposition of brutal deflationary measures. At the same time the IMF insisted that Britain guarantee that no broad or permanent import controls would be imposed and that no currency restrictions would be instituted, guarantees that eliminate the possibility of protectionist or autarkic measures which could splinter the bloc or jeopardize American interests. In the case of Italy, the IMF’s conditions for a $530 million loan were a start at dismantling the indexation system which automatically makes some adjustments in wages as prices rise, limits and controls over national and local government spending, and an IMF veto on expansion of the money supply. Portugal’s request for a $1.5 billion loan from the IMF was met by a demand for a 25% devalua­tion of the escudo so as to slash real wages and reduce imports (20% of which are foodstuffs); in the event, the Portuguese devalued by 15%, and the American vaults have begun to open.

As an integral part of its policy to assure the stability of the American bloc as a whole, the US aims to distribute the impact of the world crisis more evenly throughout its bloc (America aside), by imposing on West Germany and Japan a policy of aiding and propping up the economies of those European countries which are near collapse. Thus, the US is insisting that West Germany and Japan reflate their economies to provide markets for the weaker countries, and significantly reduce their exports -- this latter in part to be accomplished through an upvaluation of the mark and the yen. The rise in the value of the German and Japanese currencies will also help to stem the export offensive towards America, and reduce the competitiveness of the US’s two major commercial rivals. This policy has begun to bear its first fruits as the Fukuda government in Japan let the yen rise by more than 7% against the dollar between January and April.

While one of the bases of America’s strangle­hold over all the economies of her bloc is her overwhelming financial power, her ulti­mate control over vital energy resources is another. It is Washington’s Pax Americana in the Middle East that insures that Europe and Japan will have the oil on which the operation of their productive apparatus now depends. The US’s firm opposition to the development and spread of fast breeder nu­clear reactors which produce their own plutonium as a source of fuel is in part due to the fact that such technology could potentially make the European and Japanese economies independent of America as far as energy is concerned. In giving up the development of fast breeder reactors, how­ever, the US itself sacrifices nothing, since its supplies of uranium still make the utilization of nuclear power compatible with America’s goal of energy independence.

For Europe and Japan, though, nuclear energy which depends on uranium as a fuel condemns them to permanent absolute dependence on the US in energy matters.

While the US puts Europe on rations, and dictates austerity to the countries of its bloc, there is one area where America dem­ands a massive increase in output and spending: armaments. The sharpening of inter-imperialist conflict and the necessi­ties of a war economy has already led the US to insist that its NATO allies increase their military budgets. The European and Japanese economies will henceforth be in­creasingly organized for the production of guns not butte!

The need to impose a draconian austerity to accelerate the tendency towards state capitalism, to unleash an onslaught against the proletariat (under conditions of growing class struggle), and to adjust its policies to the dictates of American capital, have led the bourgeoisies of Europe and Japan into the jaws of a devastating political crisis. The nature of the tasks which these bourgeoisies must try to accomplish all dictate a course which, gradually or abruptly (depending on the speed with which a given economy collapses or on the acute­ness of the class struggle), will bring the left to power. In the present conjunc­ture, it is left governments dominated by the Socialist parties1, and based on the trade union organizations, or popular fronts which include the Stalinist parties, which are best adapted to the needs of the bourgeoisie.

Because it is not inextricably tied to ‘private capital’, to particularistic in­terests within the national capital, and to anachronistic factions of the bourgeoi­sie (which characterizes the right), the left can best impose the totalitarian and centralized control of the state over the whole economy, and the drastic reduction in the consumption of the bourgeoisie and the petty-bourgeoisie, which are hallmarks of the war economy. Because of its working class electoral support and mass base, and its ‘socialist’ ideology, only the left -- faced with a combative proletariat which is becoming the axis of political life -- has a chance to derail the class struggle and to bring about the savage reduction of the proletariat’s standard of living, the in­tensification of its exploitation, and its ideological submission to the state -- on all of which the lethal success of the war economy depends. Because of its Atlanticism, its ‘internationalism’, the left (at least the Socialist parties and trade unions) is also best suited to further the consolida­tion of a war economy on the scale of the American bloc as a whole.

This convergence of a left government and the interests of American imperialism can be seen, for example, in the efforts of the US to impose different economic policies on the weaker and the stronger economies of its bloc. In the weaker economies (Britain, France, Italy, Spain, and Portugal), the US insists on austerity and deflation, resistance to which is crystallizing around the right parties linked to ‘private’ capi­tal and to the anachronistic and retrograde sectors of the bourgeoisie who need massive government subsidies, easy credit and refla­tion of the home market to stay afloat. In contrast, it is the left-of-centre and left parties which are prepared to accept the IMF’s ‘recommendations’ and impose the American diktat. Even the left’s policy of nationalization, which is integral to a war economy (such as nationalization of aircraft and shipbuilding in Britain, or nationaliza­tion of Dassault and the electronics monopolies proposed by the Programme Commun in France), will not damage American interests, and indeed can facilitate American control on a direct state-to-state level. In Germany and Japan, the US demands reflation, upvaluation of the currency and limitations on exports, all of which are generating considerable opposition on the part of factions of the bourgeoisie coalescing around the right parties which are extremely reluc­tant to take any steps to limit national competitiveness on the world market, and to adjust the interests of the national capital to the interests of the bloc. In contrast, it is the moderate left (the SPD in Germany, Democratic Socialists and Eda wing of the SP in Japan) which is most amenable to co­ordinating the interests of the national capital with the demands of America.

American capital clearly prefers Labour to the Tories in Great Britain, and the Social Democrats to the Christian Democrats in Germany. In Portugal, Soares and the Socialists are better adapted to American interests than Sa Carneiro and Jaime Neves. In Spain, Washington wants a government led by Suarez with the direct or indirect par­ticipation of Felipe Gonzalez and the PSOE, while a government led by Fraga Iribarne and the Alianza Popular would be intolerable. In France, a government based on Mitterand and the SP is preferred by the Americans to one led by Chirac. Even in Italy, an Andreotti-Berlinguer combination is better suited to American needs than a government led by Fanfani and the right-wing of the Christian Democrats.

The right, then, is more and more incapable of adopting the necessary economic measures imposed by the deepening crisis, as well as being inadequate to face the proletarian threat, and increasingly hostile to American interests, while the left is the only vehicle through which the bourgeoisie can realisti­cally try to establish a war economy in the present conjuncture. Yet this ineluctable movement of the bourgeoisie to the left seems to be contradicted by the outcome of recent elections in many of the countries of the American bloc. In a number of countries, there has been a very pronounced electoral trend to the right: victories of the right in general elections in Australia, New Zealand and Sweden in 1976; impressive gains for the CDU/CSU in the German general elec­tion that same year; the considerable shift to the right in Portugal between the April 1975 elections for a Constitutent Assembly and the Parliamentary elections a year later; sweeping victories for the Tories in both Parliamentary by-elections and local elections in Britain this year; the triumph of the Social Christians in Belgium’s general election this past April.

This electoral trend to the right is fuelled by a wave of bitterness and discontent on the part of small and medium capitalists, the petty bourgeoisie and the middle classes, all of whom have seen their standard of living drastically fall over the past few years. Because the capitalist state has hesitated to unleash too direct an attack on the proletariat out of fear of prema­turely sparking a generalized class war or even a mass strike wave for which it is not yet prepared, the middle classes -- more fragmented and not a direct threat to the bourgeois order -- have been the object of many of the first concerted austerity mea­sures. As a result, the middle strata and its frustrations have momentarily become the axis of politics in a number of countries, and this has provoked the present electoral renaissance on the right. However, to prevent the impending economic collapse and establish a real war economy, the bour­geoisie -- whatever its hesitations -- must quickly focus its attack directly on the proletariat and attempt to deflect the mounting class struggle this will unleash. And as the working class becomes the axis of politics, the electoral trend will soon reflect the basic course of the bourgeoisie: a left turn.

Yet even this short-term electoral shift to the right has not altered or even slowed the bourgeoisie’s resolute move to the left in the constitution of its governments (thereby again demonstrating the purely ornamental nature of Parliaments and the solely mystificatory character of elections in the epoch of capitalist decadence). Were the bourgeoisie looking for an opening to effect a governmental shift to the right (as the leftists insist), the recent electoral trend would have provided it. Instead, the bourgeoisie has largely dis­regarded the results of the elections in constituting or perpetuating a governmental team which expresses its present need to base itself on the left parties and the trade unions. Thus, in Britain, where a general election would almost certainly return a Tory government, the bourgeoisie is holding on until the electoral trend again shifts to the left, and meanwhile to avoid a premature election is propping up the Labour government with the votes of the Liberal Party. In Portugal, despite the line-up in Parliament, the bourgeoisie insists on a purely Socialist government. In Belgium, where the election results have made a right-of-centre Social Christian-Liberal government possible, the bourgeoisie instead is determined to constitute a left-­of-centre Social Christian-Socialist govern­ment with a powerful trade union base.

With the clear perspective of a turn to the left by the bourgeoisie we must now look at the nature of the Stalinist parties today. The participation of the Stalinists in government will increasingly become a nece­ssity for the bourgeoisies of some of the weakest European countries (Italy, France, Spain) inasmuch as the Stalinists are best equipped to impose the essential austerity measures on the working class and to derail the class struggle. However, Stalinist participation in the government provokes furious -- often violent -- opposition on the part of powerful factions of the national bourgeoisie and resistance and distrust on the part of the US. We must be clear about the real character of Stalinism, its dis­tinctive features as a bourgeois party, so as to understand what the sources of this opposition and distrust are, and to what extent they may impede the Stalinists’ accession to power.

First, the Stalinist parties are not anti national parties or agents of Moscow. All bourgeois parties (right and left), what­ever their orientation on the international arena may be, are nationalist parties.

“In the epoch of imperialism, the defence of the national interest can only take place within the enlarged framework of an imperialist bloc. It is not as a fifth column, as a foreign agent, but as a function of its immediate or long term interests, properly understood, that a national bourgeoisie opts for and adheres to one of the world blocs which exists. It is around this choice for one bloc or the other bloc that the division and internal struggle within the bourgeoisie takes place; but this division always takes place on the basis of a single concern and a single common goal: the national interest, the interest of the national bourgeoisie.” (Inter­nationalisme, no.30, 1948)

Nationalism, is, and always has been, the basis of the Stalinist parties, and when they opted for the Russian bloc in the 1940s when the division of Europe between the two world imperialist blocs was taking place, they were no more a fifth column of Moscow than the Social Democrats or Christian Democrats were a fifth column of Washington: what divided these bourgeois parties was the question of incorporation into which imperialist bloc would best serve the national capital’s vital interests.

In the present conjuncture, however, when a change of blocs by any of the Western European countries or Japan is hardly possible short of war or -- at the very least -- a dramatic and fundamental change in the world balance between the two imper­ialist camps, no faction of the bourgeoisie which realistically expects to come to power can seek incorporation into the Rus­sian bloc. In this sense “Eurocommunism” is the recognition by the Stalinists that the interests of their national capitals today precludes a change of blocs. The na­tionalism of the Stalinist parties in these countries now takes the form of support for protectionist responses to the deepening economic crisis, and a commitment to what is still only an embryonic tendency towards autarky. If this orientation on the part of the Stalinists does not call into question the incorporation of their countries into the American bloc, it nonetheless goes counter to the plans of American capital to more closely integrate the different coun­tries of the bloc in a mammoth war economy under the absolute control of Washington. Here, then, is one of the bases for America’s continuing distrust of the Stalinists, and her preference for the Socialist parties, for whom the vital interests of the national capital demand the most complete adjustment of national policies to the overall needs of the bloc.

But it is not its support for autarkic poli­cies -- which in any case it shares with the extreme right -- which is the most distinct­ive characteristic of Stalinism, and which accounts for the ferocity with which it is opposed by other factions of the national bourgeoisie. The Stalinist parties, whatever their present democratic and pluralist phraseology, are the exponents of the most complete and extreme form of state cap­italism, of the totalitarian and direct state control over every aspect of production and distribution, of the single party state, and the complete militarization of society. Un­like the other bourgeois parties (including the Socialists) the Stalinists have no ties whatsoever to ‘private’ capital. Whereas other factions of the bourgeoisie support a greater or lesser fusion of ‘private’ capital and state capital, Stalinists in power would mean the extinction of ‘pri­vate’ capital and with it all of the other bourgeois parties. This is the basis for the unrelenting fear and hostility of other bourgeois factions towards the Stalinists; and it explains many of the reservations of American imperialism, which still exercises much of its control over its ‘allies’ not yet directly on a state-­to-state basis, but through the links of ‘private’ capital -- links which Stalinism would shatter.

It is for these reasons that both the US and the other parties of the bourgeoisie in Europe and Japan are determined to keep a tight rein on the Stalinists, even as the worsening economic and political situation moves them closer to some kind of direct participation in the government in a vain effort to stabilize the crumbling bourgeois order. Yet as both the economic and poli­tical situation continues to deteriorate, and as the need for the most thoroughgoing war economy asserts itself, there will be more and more of a complete convergence of the vital needs of the national capital and the naked programme of Stalinism.

The Russian bloc

The permanent crisis of world capitalism condemns the Russian bloc to face a parti­cularly acute problem: its extreme weakness and enormous material disadvantages as it contemplates the intensification of the commercial struggle with the American bloc, and behind it the growing prospect of a military struggle for a redivision of the world market. The countries of the Russian bloc must try to compensate for the extremely low productivity of their labour power, the backwardness of their productive appara­tus, with a far greater dependence on the extraction of absolute surplus value than their competitors in the American bloc. Yet even the most drastic lowering of wages, massive speed-ups, and the extension of the working day -- the barrier to which can be seen in the resurgent combativity of the proletariat -- would not succeed in making Russian capital competitive with its rivals on the shrinking world market. Whilst it is true that surplus value is solely the product of the living labour newly added during the productive process of variable capital, both the mass and the rate of surplus value absolutely depend on the level of machinery and technology which the workers set in motion, on the constant capital en­gaged in the productive process. It is for this reason that the competitiveness of the Russian bloc is integrally linked to the acquisition of advanced machinery and technology, which under prevailing conditions can only be got from the American bloc -- by purchase or conquest.

One of the differences between the autarkic ‘socialism’ of Stalin and the mercantile ‘socialism’ of Brezhnev is that under condi­tions of an ongoing redivision of the world market and the establishment of new imper­ialist constellations (1939-1949), Stalin sought to overcome Russia’s backwardness first through the military conquest, looting, and shipment to Russia of the more advanced industrial plant of Germany, Danubian Europe and Manchuria, and then through the direct incorporation of these areas into the orbit of Russian imperialism; while under the momentary conditions of relative stabilization between the world imperialist blocs (at least as concerns the most industrialized areas), Brezhnev has tried to compensate for Russian back­wardness through trade and the massive purchase of Western technology. However, mercantile ‘socialism’ has now reached an impasse. Mounting trade deficits, which are the grim testimony to the continuing un-competitiveness of Russian capital on the world market, have made the purchase of technology from the American bloc com­pletely dependent on loans and credits. But, the burgeoning foreign debt of the Russian bloc, in conjunction with its trade deficits, is making a massive new round of loans too financially risky for western banks to undertake. To this must be added the politico-military factors which will increa­singly militate against a continuing flow of funds and technology from the American bloc to the COMECON countries.

The deepening economic crisis is intensi­fying economic competition between the blocs (particularly in the Third World, where Russia has a trade surplus, and where machines and technology bought from the West will be indispensable to her export offensive), and sharpening inter-imperialist conflicts. In response, American imperialism (as part of the consolidation of a war economy on the scale of its bloc) will ruthlessly subordinate short-term trade considerations to longer term political and strategic objectives, which will lead to a slackening of commercial exchanges between the blocs. As a result, conquest and war will finally be the only way for Russian imperialism to try to overcome the technical backwardness of its productive apparatus; and from the shambles of mercan­tile ‘socialism’ and its policy of detente, an up-dated version of the autarkic ‘social­ism’ of yesterday will again arise on Russian soil.

The present strategic and tactical superior­ity of the Warsaw Pact over NATO along the line that divides the two imperialist camps in Central Europe should not obscure the overwhelming material inferiority of the Russian bloc should it attempt to seize the West European industrial heartland. Marxism demonstrates the primacy of economic over politico-military factors in any clash be­tween capitalist states; in the final ana­lysis economic superiority must be trans­lated into military superiority, as the two inter-imperialist world wars demonstrated. The very superiority of the productive apparatus of the American bloc, which ultimately leaves Russian imperialism no choice but a war of conquest if it is not to be consigned to economic extinction by the American be­hemoth, is also the reason why American imperialism holds all the high cards in its game of death with its Russian rival. The Russian bourgeoisie faces the dilemma that to make war successfully you must first have economic superiority, while to achieve economic superiority in the epoch of capi­talist decadence you must first make war. The only way the Russian bloc can hope to tilt the balance somewhat as it is led to prepare for world war, is to compensate for its economic inferiority with a more efficient organization of its war economy, a more total commitment of all its resources -- human and machine -- to the direct necessi­ties of war production.

The extreme forms of state capitalism in the countries of the Russian bloc -- which are the result of their economic weakness -- should not lead us to conclude that a well organized war economy has already been established there. The chaotic situation in the production and distribution of food­stuffs, whose efficient organization is vital to a war economy so as to feed the producers and wielders of weapons as cheaply as possible, and so devote the bulk of the available labour, tools and raw materials to the production of the machines of war, will indicate the magnitude of the problem now faced by the bourgeoisie in the Russian bloc. The prevalence of small and ineffi­cient ‘private’ farms (85% of agricultural production in Poland) and ‘private’ plots on collective farms (as much as 50% of the income of the Russian Kolkhozian comes from the sale of crops from ‘private’ plots), as well as the flourishing free and black markets in foodstuffs, means that the state does not yet have the totalitarian control over Department II, the production of the means of consumption, or the distribution network, which is essential to a war economy. The subjugation of the peasantry and the complete control of the agricultural sector by the leviathan state, as well as the elim­ination of the free and black markets are formidable tasks that face the bourgeoisie of the Russian bloc over the next few years.

Even in industry, the quasi-totality of which is nationalized in the Russian bloc, there are significant obstacles to the consolidation of a war economy. The decen­tralization of industry and the autonomy of the enterprise, which was a concomitant of mercantile ‘socialism’, must first be eliminated if Department I is to be centrally organized around the goal of armaments production. Yet such an undertaking will generate clashes within the bourgeosie it­self as managers and directors of particular factories and trusts will try to preserve their prerogatives.

The need for a more unified and autarkic economic order (directed by Moscow) on the scale of the whole bloc is also exacerbating tensions within each national bourgeoisie over the precise manner in which the inter­ests of the national capital will be recon­ciled with the demands of Russian imperia­lism. Given the prevailing politico-military situation, no significant faction of the bourgeoisie in any of the COMECON countries can seriously challenge its nation’s incorporation into the Russian bloc. Nonetheless, there are serious divergences between those factions of the bourgeoisie in each country which seek to expand trade with the West and encourage the investment of Western capital, so as to stimulate the development of purely national industries, and other factions for whom the interests of the national capital demands the orientation of economic life more exclusively around the overall needs of the bloc and the construction of a unified war economy. The overwhelming politico-military weight of Russian imperialism in Eastern Europe will be directed to assuring that it is these latter factions which win out in this intra-bourgeois clash.

The enormity of the political crisis of the bourgeoisie in the Russian bloc however, really manifests itself in its very halting steps to contain the threat of a combative proletariat. The depth of the economic crisis and the necessities of a war economy require a drastic lowering of the already abysmal living standards and working condi­tions of the proletariat; yet the political apparatus of the bourgeoisie perfected during the depths of the counter-revolution when the working class was pulverized, is ill-adapted to the tasks of subjugating a pro­letariat which is launching increasingly bitter and militant struggles. The economic weakness of each national faction of capital has led to its quasi-total dependence on its police and military apparatus to maintain order. Moreover, the domination of Russian imperialism over its bloc -- in contrast to the situation of American imperialism -- has depended almost exclusively on military factors. Thus, in an historical conjuncture when too great a reliance on the direct physical subjugation of the proletariat risks provoking a generalized class war, when capital must first try to control the proletariat ideologically as a prerequisite to its later physical crushing, the bourg­eoisie in the Russian bloc has been incapable of adjusting the forms of its dictatorship to the requirements of the new balance of forces between the classes. Any relaxation of the directly repressive apparatus risks exacerbating the weakness of the state; too great a utilization of the repressive appar­atus risks igniting the proletarian flame. As a result the bourgeoisie in the Russian bloc is paralysed before its urgent task of attacking the proletariat.

Inter-imperialist antagonisms

If armaments production and the establishment of a war economy is the only way to prevent the breakdown of the capitalist productive apparatus, it is, nonetheless not an economic policy in itself (whatever important segments of the bourgeoisie may still think), but the preparation for a world conflagration, an expression of the inter-imperialist anta­gonisms which the death crisis of capital­ism is sharpening to the breaking point. The inexorable deepening of the world crisis has not only brought about an extraordinary heightening of tensions between the two imperialist blocs, but has also more clearly revealed the different ways in which Russian and American imperialism dominate the other countries and reservoirs of cheap labour-power. Because of her economic weak­ness, Russia’s domination of other countries depends almost exclusively on direct mili­tary occupation or at least the prospect of speedy and relatively unhindered inter­vention by her armed forces. Moreover, as a result of America’s still overwhelming naval superiority, the regions subject to the military control of Russian imperialism are effectively limited to the Eurasian land mass, to areas readily accessible to Russia’s land armies. This is both the key to Russian domination of Eastern Europe and Mongolia, as well as the inability of Russian imperialism to have more than a very tenuous hold over countries beyond the direct reach of her tanks. In contrast, the supremacy of the productive apparatus of American imperialism is such that it can economically dominate any part of the world. The only barrier to American economic domination is the military hegemony of Russian imperialism over a given area, which as we have seen is for strategic reasons (its naval inferiority) today still limited to areas contiguous to Russia itself.

Russia’s economic inferiority and the limits of her military reach are such that even when the faction of the bourgeoisie, armed and supported by Russia, triumphs in a localized inter-imperialist war and comes to power (Vietnam, Mozambique, Angola), this does not mean that the country unequivocally passes into the Russian bloc. Rather, the combination of the American bloc’s economic weight, which becomes relatively more pro­nounced as the world crisis strikes the weakest economies most furiously, and the strategic limitations of Russian imperialism often produce a period of oscillation be­tween the blocs. Vietnam’s quest for Amer­ican bloc investment, credit, and trade in a vain effort to reconstruct her shattered economy points to the inability of Russia to firmly incorporate even a regime whose very existence depended on Russian military aid into the Russian bloc. Mozambique’s continued economic dependence on South Africa, and Angola’s reliance on the American bloc for the extraction and sale of the oil and minerals which are the basis of her economic life, both indicate the enormous difficulties which Russia is having in trying to dislodge American imperialism from its African strong-points. Be­cause of its economic superiority, even the military defeat of the faction of the local bourgeoisie which it supported, is not in itself sufficient to break the stranglehold of American imperialism over a country; whereas because of its economic weakness nothing short of outright military occupa­tion is sufficient to assure the effective control of a country by Russian imperialism.

It is this economic and strategic superior­ity which is the basis for the continuing shift in the balance between the two imp­erialist camps in favour of the American bloc. The US is now in the midst of elim­inating the most important beachheads that Russian imperialism had established in its efforts to expand beyond the central Eur­asian heartland which is its core. Thus in the Middle East, Egypt and the Sudan are being politically, economically, and even militarily reincorporated into the American bloc, while Syria has already taken the first steps down this same path. Russian imperialism’s recent effort to win a domin­ant place in the Lebanon through the Pales­tinian-Muslim leftist front which it armed and diplomatically backed has been smashed by the very Syrian army -- prompted by Washington -- which Moscow had once so lavishly equipped. The military defeats in Lebanon and the weakening of Russian imperialism throughout the Middle East, have now lead the most powerful factions of the Palestinian Liberation Organization to re­consider their pro-Russian orientation. Moreover, the US is now beginning to chal­lenge even the hitherto unquestioned Russian hegemony in Iraq. With the re-establishment of America’s almost total domination of the Arab world -- a domination which now embraces the ‘socialist’ as well as the royalist regimes -- nearing completion, the Carter Administration is now directing its attention to the imposition of an Arab-Israeli settle­ment, which would involve the erection of a Palestinian rump state on the West Bank and the Gaza Strip. American imperialism there­by hopes to establish an enduring Pax Amer­icana over the region and make the Middle East a solid barrier to the expansion of Russian imperialism, rather than the high­way for a Russian drive into Africa and South Asia which decades of internecine warfare had turned it into.

The bitter struggle between the two blocs for control of the Horn of Africa and the vital Bab el-Mandeb Straits which command the sea routes between Europe and Asia, is now entering a decisive stage. The appar­ent triumph of Russia in Ethiopia, where Colonel Mengistu’s regime has opted for Moscow and where Russian arms will permit an escalation of the barbarous war in Eritrea, as well as driving the Eritrean Liberation Front into dependence on American imperialism, may have as its counterpart a reorientation of Somalia towards the Ameri­can bloc. This and the growing influence of America’s client state, Saudi Arabia, over South Yemen is bringing about a change in the imperialist line-up around the Horn of Africa, which may well leave Russian imperialism with only a landlocked Ethiopia, important pieces (Eritrea, Ogaden) of which are being torn from her by avaricious neighbours and liberation fronts backed by the US. An independent American-backed Eritrea, an independent Djibouti occupied by France, and Somali and South Yemeni regimes being drawn into the American orbit by Saudi-Arabia, would (with Egypt and the Sudan now firmly in the American camp) make the Red Sea an American lake.

In India, the defeat of Indira Gandhi by the pro-American Janata coalition and the for­mation of a government headed by Morarji Desai is both forging new economic chains to bind New Delhi to Washington, and is bringing about the complete elimination of the politico-military links to Moscow (established in the course of the Indo-­Pakistani War), upon which Russian imperia­lism sought to challenge American hegemony in South Asia and the Indian Ocean. It is not the expansion of Russian imperialism, but the consolidation of the stranglehold of the American bloc over the Indian sub-continent that is taking place.

Meanwhile in the Far East, the incredible heightening of inter-imperialist antagonisms between Russia and China and the growing military build-up along their extensive frontier is also leading China into the American bloc, a process which the desperate state of her economy is accelerating. While the Carter Administration has perhaps yet to determine the precise nature of America’s commitment to China in the event of a Sino-­Russian war, the flow of arms from the American bloc to Peking and the budding Sino-Indian rapprochement (which most cer­tainly has Washington’s blessing) are unmistakable signs of the weakening of Russian imperialism on the Asian continent.

Washington’s initiatives in the Middle East, the Horn of Africa, the Indian sub-continent and the Far East are intended to turn these regions into so many links in a ring of steel which the American bloc is trying to construct so as to confine Russian imper­ialism tightly within its Eurasian core. The success of this policy of American imperialism depends in large part on its capacity to stabilize these regions and attenuate the imperialist rivalries between the different states -- a stabilization of the barbarism into which the permanent crisis of capitalism has already thrust so great a proportion of humanity. The only course open to Russian imperialism if it is to have any possibility of challenging American imperialism for world dominion -- which is the only alternative to its economic extinction -- is to devote all its efforts to destabilizing these regions, fanning the flames of war through its poli­tical and military support to national liberation struggles and those factions of the bourgeoisie within each country for whom the American imposed imperialist status quo in their region is intolerable. Thus in the Middle East, Russia’s only hope of regaining a foothold is through a new Arab-Israeli war. On the Indian sub-continent, the expansion of Russian imperialism can only take place through a new Indo-Pakistani war -- even if this time Russia supports Islamabad, and tries to forge a Muslim bloc consisting of Pakistan, Bangladesh, and Afghanistan with which to challenge an American-backed India. It is just such a policy of destabilization that Russian capi­tal has undertaken in Southern Africa, where arms and money are going to the Patriotic Front in Rhodesia, to SWAPO in South West Africa, and to the emerging urban guerrilla movement in South Africa itself. The US, clearly recognising the danger which such a destabilization represents to its supremacy in this vital part of the world, is attempting to impose black majority rule in Rhodesia and South West Africa, and a system of power-sharing in South Africa, which is in­tended to place its imperialist domination on a firmer basis by providing it with the support of a black faction of the bourgeoi­sie. In all of these regions, however, Russia’s strategic limitations, though not preventing an active policy of destabiliza­tion, make direct military occupation -- the only real basis for Russian hegemony -- ex­tremely difficult.

There is one region, though, where the attempt of Russian imperialism to push outwards from its geo-political core, both gives the promise of yielding the advanced technology and machinery which are the sinews of war, and which is not subject to overwhelming strategic limitations: Europe. The one country in Europe where a Russian moves is likely, and which would not auto­matically precipitate a major war between the two imperialist blocs is Yugoslavia. The death of Tito will exacerbate all of the divisions within the Yugoslav bourgeoi­sie between factions favouring a pro-Russian orientation (the Kominformists) and those favouring a pro-American orientation for the national capital; between the dominant Serbian faction of the bourgeoisie and the growing nationalism of the Croatian and Slovene factions of the bourgeoisie. Russian imperialism may either seek to provoke a change of power in Belgrade or try to dis­member Yugoslavia by providing decisive material support for the establishment of independent Croat and Slovene states tied to Moscow. With its strategic and practical superiority in South East Europe, the spectre of a Russian march to the Adriatic looms large. The effects of such a move -- if it could be successfully accomplished -- would be to significantly alter the rapport de force between the blocs in Southern Europe, and to subject Italy and Greece to growing Russian pressure. To this must be added the growing tensions between Greece and Turkey over Cyprus and over mineral rights in the Aegean Sea, which can provide Russian imperialism with the prospect of tearing the American bloc’s flank in the Mediterranean if Washington cannot quickly impose a stable solution. This concentra­tion of Russian pressure in South East Europe and Asia Minor indicates where the next flashpoint of inter-imperialist con­flict may be.

The class struggle of the proletariat

The deepening economic crisis, which threa­tens to paralyze the capitalist productive apparatus, and its manifestations in the sharpening of inter-imperialist antagonisms, impels the bourgeoisie to establish a war economy, and finally to prepare for a new world butchery. However, the proletariat everywhere bars the way to a war economy and to the world conflagration for which it is the indispensable preparation. The ideological and physical submission of the working class to the capitalist state is a necessary pre-condition for the constitu­tion of a full-fledged war economy. Yet today, the bourgeoisie confronts an undefeated, combative and increasingly class conscious proletariat.

This combativity of the working class was expressed by its militant response to the very first blows of the crisis which sig­naled the definitive end of the period of post-war reconstruction. The wave of fac­tory occupations which culminated in the general strike of 10 million workers in France in 1968; the hot autumn of 1969 in Italy during which industry was paralyzed by mass strikes and factory occupations; the anti-trade union strike by the Kiruna miners that same year, which shattered the more than three decades of “labour peace” which had made Sweden a paradise for capi­tal under its Social Democratic regime; the bitter struggles of the Limburg miners in Belgium in 1970; the violent strikes and pitched battles between tens of thousands of workers and police which spread through Poland’s industrial centres in the winter of 1970-71; the strike wave in Britain, which reached a peak with the general strike in solidarity with the dock-workers in 1972 ; the struggles at SEAT (Barcelona) in 1971 and at Vigo and Ferrol in 1972, which -- with their barricades and street battles with police and their factory assemblies -- marked the resurgence of the proletariat in Spain, were all so many hammer blows which left the bourgeoisie of the capitalist metropoles reeling, and clearly demonstrated that the growing economic crisis coincided with a course towards class war. As a result, if on the one hand, economic necessities made it absolutely imperative for the bourgeoisie to move quickly and decisively to crush the prole­tariat, on the other hand, political reali­ties, the rapport de force between the classes, dictated that the bourgeoisie try to avoid for as long as possible any direct confrontation with the working class.

By comparison with the years 1968-72, the next four years appear to represent a down­swing, a lull, in the class struggle of the proletariat. In fact, as the bourgeoisies of the metropoles having absorbed the first shock-waves of the crisis, desperately sought to displace its most devastating effects onto the weaker capitals, so the most intense confrontations between the proletariat and the bourgeoisie shifted to the Middle East, Africa, Latin America, and China. Egypt has been gripped by waves of wild-cat strikes since 1974: the Helwan textile mills in 1975, the strikes which paralyzed the country’s three great indus­trial centres - Alexandria, Helwan and Cairo in April 1976, and the strikes and street battles which greeted the government’s announcement of price rises in basic foodstuffs in January of this year.

In Israel, violent protests were the workers’ response to huge price rises in 1975, and in November-December 1976, a strike wave affected 35% of the country’s work force in an assault on the Labour Government’s trade union impo­sed social contract. In Africa, in 1976, the proletariat launched massive strikes against the regimes of both ‘black’ and ‘white’ capital: in July the ports of Angola were crippled by strikes, which the MPLA bloodily repressed; in September, the aus­terity measures of Ethiopia’s Marxist-Lenin­ist junta provoked a general strike in the banking, insurance, water, gas and electri­city sectors, leading to violent confronta­tions with the Army: in South Africa both the mining and automobile industry were the scene of bitter strikes, while in Rhodesia the bus drivers in Salisbury paralyzed the city’s transit system for more than forty days, in the face of brutal police repression. In Latin America, the proletariat has responded to the crisis with more and more massive, violent and unified struggles: in Argentina, workers in the electric utilities cut off power in the ma­jor cities in the autumn of 1976, while in Cordoba, the automobile workers clashed with the police; in Peru semi-insurrectional strikes turned Lima into a battlefield both in 1975 and in 1976; in Bolivian tin mines, in Colombia’s plantations and textile mills and in the mill towns and iron-ore mines of Venezuela, the proletariat has engaged in bitter struggles. In China, 1975 and 1976 saw strikes generalize from industry to industry, grip whole provinces and take on semi-insurrectional proportions, as at Hangchow where a general strike lasted three months, involved attacks by workers on gov­ernment and party offices and the erection of barricades in working class districts, and required the use of 10,000 soldiers to bring under control. What took place in 1973-77 was not a slackening in the inten­sity of the proletariat’s resistance to the effects of the crisis but a momentary displacement of the epicentre of the class struggle to the peripheries of the capitalist world.

Moreover, even with respect to the capitalist metropoles, all talk of a gap between the depths of the crisis and the response of the proletariat, of the downswing in class struggle after 1972, must not obscure the fact that no political defeat of the proletariat has taken place, that in none of the centres of world capital has the bourgeoisie physically or ideologically crushed the working class.

Indeed, the apparent lull in the class strug­gle did not represent a diminution in the combativity of the class -- even provisional -- so much as a growing awareness on the part of workers of the ultimate futility of purely economic struggles. It is through their incapacity to defend even their ‘imme­diate’ interests through their often bitter economic struggles that the proletariat has been learning that it must confront capital and its state with directly political strug­gles, that it has been learning the neces­sity for the generalization and politiciza­tion of its struggles.

The wave of strikes that quickly spread from one end of Spain to the other in January-March 1976 and the violent strikes that erupted in Poland in June 1976 marked the beginning of a new phase of generalization and radicalization of proletarian struggles in the capitalist metropoles. The speed with which the struggles at Radom (Poland) and Vitoria (Spain) generalized from industry to industry, taking on an insur­rectional character, is indicative of the lessons of the struggle the class has al­ready learned and of the fury of the gath­ering proletarian storm. During the past year, the bourgeoisies of Italy, Britain, Portugal, Denmark and Holland have faced the first onslaughts of this new wave of workers’ struggle. But no mere enumeration of strikes or of countries affected can any longer provide an accurate picture of the real nature of the present moment, when the proletariat is the key to the turn in the world situation:

“The conditions are being slowly created for the international unity of the class; for the first time in history, the upsurge of workers’ struggles coincides in all countries of the world, both on the periphery (Africa, Asia, Latin America) and in the centre (North America, Europe).” (Accion Proletaria, April-May 1977)

Just as the reappearance of the open crisis in 1976 generated a wave of militant and combative proletarian struggles in the years which followed, so the new stage in the crisis, which is compelling the bour­geoisie to establish a war economy and which is leading the bourgeoisie to genera­lized inter-imperialist war, will itself become a factor in generating a growing recognition on the part of the working class of the necessity of directly political struggles. Thus the bourgeoisie’s imperious necessity to construct a war economy will become a significant factor in accelerating the course towards generalized class war.

The bourgeoisie is led to try to establish its war economy in obedience to the blind laws which determine its actions; while the bourgeois class is incapable of understand­ing the forces which propel it towards war, revolutionary marxists can clearly see what course the bourgeoisie will be compelled to take, and can understand the basic tendencies of capitalist economy and politics which the bourgeoisie can only dimly perceive. It is for this reason that the ICC can trace the basic political and economic perspectives which will face the capitalist system in the coming years. However, the class struggle of the proletariat as it becomes a directly political struggle is not produced by blind laws, but is a conscious struggle. Thus, if revolutionaries cannot predict when such struggles will erupt -- just because of this factor of consciousness which is their key -- they can, and must, by their political intervention in the class struggle, by carrying out their vital role of contri­buting to the generalization of revolution­ary consciousness throughout the class, bec­ome an active and decisive factor in the actual outbreak and development of the political struggles which will lead towards the generalized class war of the proletariat against the bourgeoisie which is now on the historical agenda.

Summer, I977

1 In Italy, were the Socialist Party is too weak, the necessary move to the left by the bourgeoisie must immediately proceed through the incorporation of the Stalinists into the government – directly or indirectly.