WHY DID the world's stock markets crash almost simultaneously on October 19? Is it the herald of a new great depression, comparable to 1929; or is it rather a repetition of the 1974-75 or 1980-82 recessions? And what will be the effects on the world political situation,
West and East, in the imperialist heartlands and in the dominated countries?
Ernest Mandel answered these an other questions at a public meeting on the crash held by the Ligue
Communist Révolutionnaire, French section of the
Fourth International, on November 3 in Paris.
ERNEST MANDEL
HE WORLD SITUATION has
T undergone a very profound change. The capitalist system suffered a very severe blow on October 19. This turning point is a genuinely global one, because at the same time we are seeing the development of a crisis in the capitalist countries and a particular crisis of the system in those countries dominated by the Soviet bureaucracy.
These two processes taken together are creating a world that has little in common with the one that came into being after
1945, or after Yalta, as is sometimes said.
The first notion that has to be cleared away is the claim that there is a separation between what has happened on the stock market and what is happening in what some commentators call the real economy. Supposedly, the stock market was in an unhealthy state, and that is why it experienced without any impact on the economy. All the serious economists — not just Marxists, but all those who do not swear by "the power of positive thinking" — have pointed out that such losses are certainly going to mean a fall in consumption. The yuppies are going to buy less Jaguars and BMWs. That is all right for them, but not for the Jaguar and BMW factories or for the workers in those factories. A cut in consumer spending, including on luxuries, is going to be reflected in a drop in employment.
Much more important than the drop in consumer spending, the stock market losses are surely going to lead to a reduction in plant investment. On this question, there is another myth that needs to be exploded, ting credit and financing investment have been severely cut back.
Exchanges had reached absurd, irrational levels
So, it is simply absurd to claim that what is happening on the stock market is detached from what is happening in the real economy. But it is also necessary to examine the other aspect of the problem. Not only does what is happening on the stock market have consequences for the real economy, but the causes of this have nothing to do with a purely stock market phenomena.
It is being said, and it is formally true, that the immediate cause of the fall in stock market values was the rising rate of interest in the United States in the weeks and months preceding October 19. The average rate — if you can talk about an average, because there are many different interest rates -went from 7.5% to just over 10%.
There is a rule, to be sure a very theoretical one, that the price of stocks on the market is the capitalization of dividends, the incomes of these stocks in comparison with the average interest rate. There is an automatic movement: if interest rates rise, stock prices fall. It is also true that some stock exchanges, especially Tokyo, Hong Kong and New York, had reached totally absurd, irrational levels. On the New York stock exchange, prices had risen to the point where THEY'VE BEEN UNUSUALLY QUIET SINCE I SPOKE /
TEr. BUTTS
DOCCOL a drop, but the real economy is healthy and therefore the economic outlook is not bad.
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This is totally illogical.
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To comprehend how illogical this notion
OCON is, you only have to look at two key figures on the market losses. In the United States alone, $1,200,0000 million have been lost in the space of two weeks, more than the third world debt built up over 20 years. In two weeks, stock holders in all the imperialist countries have lost $1,600,000 million dollars, which is equivalent to 80% of the national debt of the United States, the richest and most powerful country in the world.
You only have to take these two figures to see that it is totally absurd to believe that this is simply a stock market phenomena
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November 23, 1987 • International Viewpoint
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AFTER THE CRASH... ECONOMY the notion that the losses caused by the fall in stock prices are only paper losses, ac- counting losses, because no one has to sell stocks that have fallen too low. Leaving aside the fact that a lot of these stocks have been sold, that the losses have been taken, in the world situation
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ECONOMY the average dividend no longer paid more than 2.5% interest. In Tokyo, prices had risen to the point where the turn on stocks was only 1.5%. These two percentages are lower than you would get from just depositing your money in a bank.
Continuing to buy stock in these conditions no longer made any sense from the standpoint of possible returns. It was a purely speculative operation, unrelated to the return on the stocks. So technically you could say that a fallback was inevitable.
First crash in all capitalist countries
Some people have also light-mindedly suggested that the use of computers tended to amplify or accelerate the movement. At a certain moment, the operators no longer saw anything but the screen. The screen said "sell," and so everyone sold. That is a rather facile explanation. The computers could at most amplify a movement that had other causes than the shortsightedness of inexperienced young people employed in buying and selling shares.
What is more important is the ultra-rapid internationalization of the fall. This is the first time we have seen a stock market crash in all the capitalist countries.
In 1929, the crash hit just Wall Street; the other markets were hit only after a certain delay. This time, the delay was not even 24 hours. The internationalization of liquid or quasi-liquid finance capital, the stock market speculation that followed the internationalization of capital and the emergence of multinationals represent the principal form of organization of capital in the age of late capitalism.
All these remarks are pertinent, but fundamentally there is a question that links the stock market to the real economy and which links an analysis of the crash to that of the present capitalist epoch. And here I think that the Marxists are the only ones who offer more than a superficial analysis.
Since the beginning of the long wave of depression - that is, from 1974 and the start of the first generalized recession in the international capitalist economy since the second world war - we have entered into a period characterized by an average growth rate less than half that of the preceding 25 years. This is reflected by a constant rise of unemployment over all the conjunctural ups and downs. In the imperialist countries alone, 40 million people have no jobs.
During this long depressive period, accumulation of capital has, of course, continued. There is no such thing as a neverending crisis. There are always periods of recession followed by periods of upturn. We had a recession in 1974-75, and another in 1981-82. We had an upturn after that recession that lasted from 1983 to 1986. But what strikes observers or analysts who take more than a superficial view is that over all these upturns, productive investInternational Viewpoint • November 23, 1987 ment in new factories has not followed the cyclical upturns. Here I mean productive investment in the broad sense of the term. Not just in manufacturing, but also in telecommunications, transport, electricity, gas and infra-structural projects. There has been less and less productive investment.
A study has just appeared in Germany, whose merits have been applauded by the very conservative US publication Business Week, showing that despite the lowering of taxes, despite a sharp increase in profits in 1982-87, productive investments by the big German firms are barely half what they were in the early 1970s.
There has, thus, been an enormous overaccumulation of capital that has not been invested productively, and the reason for this is simple. Enormous surplus capacity, enormous real or potential overproduction, is weighing down on the market. There are already too many cars, too many airplanes, too many electrical appliances, and in these conditions no one is going to play around adding more enormous factories to those that already exist. I am not talking about small factories or workshops but factories of the same type and scale as those that were the driving force of the post-war
The capitalists had hoped (and many ideologues, even in the workers' movement, repeated this hope that new products and new industries such as computers, personal computers and robotics would take over from cars, electrical appliances and building, because it was these latter industries that played the essential role in impelling the post-war expansion. But all you have to do is look at the production and sales figures in the new industries to see that there is no question of this. Barely 10% to 15% of homes have personal computers and just 2% to 3% of jobs have been eliminated by
Over-accumulation of commodities
These industries and products are not taking up the slack, and in these conditions, with the over-accumulation of capital - or more precisely the over-accumulation of commodities and the impossibility of selling them — a good deal of capital remains in liquid or semi-liquid form, chasing placements other in than production. That is the answer to the mystery.
In fact, aside from some small dealings, works of art and things like that, there are not a lot of alternatives for placing $100,000 million, $200,000 million or $300,000 million a year. I say a year because that is the scale. You cannot place $300,000 million dollars a year in Monet or Breughel paintings or in gold; that is not possible. There is only real estate and the stock market. There are no other outlets for that kind of money. And so the wealth of new capital has been flooding into these ar-
This is what explains the dizzying rise in the prices of stocks and in land and housing in most of the world's big cities. This is still relatively moderate in Paris. In Tokyo, it is five or ten times worse: a room in Tokyo costs as much as a house or a luxury apartment in Paris. These price increases have nothing to do with any economic return or economic rationality. They are simply the result of the fact that enormous capital has flowed into these markets, and through the operation of the law of supply and demand prices are shooting up.
There is a fourth link in the argument: the contradiction that is moving to the center of the international capitalist economy. The United States continues to be the world's main market. It alone accounts for almost 40% of the capitalist world's imports. A good part of these liquid or quasi-liquid holdings have flowed to the United States, simply because there was no other opening. You can hardly see the oil sheikhs or the Japanese capitalists investing $300,000 million dollars in Norway or Tanzania, where there is nothing to buy on that scale. US dominance undermined for a decade
But, at the same time, the competitiveness of US industry or, more precisely, the dominance of American imperialism in the capitalist world, has been irrevocably and constantly undermined for more than a decade. We were the first to point to this. And we were laughed at. Some people even said that we were agents of American imperialism because we told the truth. Today, the facts are obvious. No one doubts them any
I will give one figure to show how rapid this decline has been. Between 1981 and 1986, the US share of world exports dropped from 20% to 13.8%. Never before in the history of capitalism has there been such a rapid decline. If you look at Britain's decline, it stretches over several decades. Such a decline in five years is extraordinary. Of course, Reagan is responsible for part of this, but it is still extraordinary.
Here we are at the center of an analysis of both the structure and the cause of the stock market crash. This situation means, and this is the contradiction, that foreign capital rushed to the United States at the very moment that a permanent deficit set in to the US balance of trade. The Americans are importing more and more and exporting less and less. (Of course you have to keep a sense of proportion. A country like France, for example, would be very happy to have the US's export figures.)
Taken together, this flow of capital into the United States and the growing American trade deficit led inevitably to two results: The first was the continuing decline of the value of the dollar against other currencies. Once again, this was inevitable. Americans need more yens, marks, Swiss francs and Dutch guilders — even a few
French and Belgian francs — to pay for their imports. Thus, the demand for foreign currencies rises more sharply than the demand for dollars, and the dollar drops.
However, at the same time the Americans need foreign capital to cover this deficit, because they have practically no more currency reserves to pay the bill. If they did not get foreign capital they would be reduced to the humble position of a mere Peru or Brazil, not to say Poland — they would be bankrupt, unable to pay for their imports.
They have to attract foreign capital, and accomplish this with a national currency of declining value. So, they had to set interest rates substantially higher than those obtained in Tokyo, in Frankfurt, in Zurich or Amsterdam. US interest rates include what you could call an insurance premium against a devaluation of the dollar to the order of 3% to 4%. You have here a quasi-automatic mechanism.
It is well known that those when the dollar drops, exports become easier. But it is also true that imports become more expensive. While the effect on imports, notably oil imports, into the United States is immediate, the effect on exports comes only in the medium-term - and sometimes recedes altogether to a distant
The effect can be the opposite of that intended. The trade deficit can increase despite the fall in the dollar. That happened in August and September, and frightened the market specialists, the speculators. This is one of the psychological explanations of the October 19 drop in stock prices.
However, there is a more important,
ECONOMY not in the epoch of imperialism. Nor do I think that there has been a deliberate US policy of facilitating the purchase by foreign capitalists, not only of factories producing needles or sewing machines, but also missiles and even nuclear missiles' components. Why should they do that? They would have to be totally crazy to do such a thing. Moreover, they are not doing
The proof of this is that the Japanese managed to buy the biggest bank in the United States. It is the first time in the twentieth century that such a thing has happened. It's OK for the banks to go. But when they wanted to buy Fairchild, which is one of the high-tech arms and electronics factories, the US administration said, "no," we will not tolerate that, we are in the age of imperialism, not of laissez-faire when governments took no interest in the way factories were used. Controlling your own arms who have the most to gain I'VE BEEN LIVING
ABOVE MY MEANS! reorientation, international capitalism, are Japanese finance capitalists exporting capital to the US. They are doing this at $150,000 milvolume of capital the history of capipeak of the British empire. In August of this year, this figure fell abruptly by 90%, from $12,000 million to $1,100 million. That produced a panic on Wall Street and in
The Japanese might not continue to cover the deficit in the American balance of trade. They began to withdraw from the New York stock exchange. This was the result of interest rates rising from 7% to 7.5%, and as a result stock prices on Wall Street collapsed. Here you can see how the purely technical mechanism of the stock market is linked not only to the structural features of late capitalism, but to the shift in the inter-imperialist relationship of forces, with all its consequences.
The fall of the dollar has sometimes been presented as a sort of conspiracy by US imperialism to punish its partners and competitors and to re-establish its balance of trade. From a purely technical point of view, the results are not convincing. It is true that more structural aspect than this formal one. When the dollar declines, exports are stimulated, but at the same time all the real assets in the United States - factories, stock, land, buildings — become cheaper for foreign capitalists. Japanese, German, Swiss or Dutch capitalists today can spend 40% less than they did two years ago to buy the same factories, stock, land or buildings in
That is, behind any plot by US imperialism to let the dollar fall — which I don't believe in - US imperialism would have to be following a half-witted policy of deliberately selling off their assets to foreign capitalists. I don't believe that, especially matter for imperialists in in. The conclusion is that the placement of foreign capital in factories is still largely blocked, not by the market but by the intervention of ernment. Not by deregulation but by regulation. So, this
HAVEN'T enormous mass of capital floods into financial instruments, the stock market and real estate.
I'm going to give you another figure that says a great deal about the scope of this movement. In Los Angeles, the second largest city in the
United States, the heart of the new
West Coast economy whose praises have been so loudly sung in the French and European press, 75% of the big buildings are today foreign-owned, and that is only a sign of the times if the Americans let the dollar fall. This trend is growing and threatens to produce fundamental shake ups in the structure of monopoly capital on an international scale.
In this sense, from a structural point of view — which is much more important than a conjunctural analysis of the stock market phenomenon that the stock market crash points to — it would be premature to say that it reflects a restructuring of big monopoly capital in some key countries in the opposite direction of the one that took place in the early 1970s. To characterize the policy of Prime Minister Thatcher and
November 23, 1987 • International Viewpoint
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ECONOMY President Reagan, people have talked about a wholesale de-industrialization of Great Britain and the United States.
of imperialism, deindustrialization carried all the way means a loss of military and economic power. What if you let your missiles be built in South Korea or Taiwan? Can you see the United States depending on a socially and politically unstable South Korea? So, this trend must be reversed, and the enormous the enormous loss of value, of finance capital since October 19 marks the beginning of this restructuring. The pendulum is going to swing back, and it is no secret to say that this will be accompanied by
A certain political personnel have conducted this de-industrialization and offered this windfall for speculators, but another political personnel is going to carry out a policy leading in the opposite direction. In the United States, the Republicans are going to lose the coming elections. I think, without claiming to be a prophet, that the right is going to lose the presidential elections in France. For the same reason, I think that if there were elections in England today, Thatcher would lose them, and that social democracy, with its semi-liberal allies, those who embody the neo-Keynesian policy, are generally going to rise again.
After ten years of misadventures, of an all-out free enterprise offensive, the neofree-enterprisers are on the ropes today. In history, there has rarely been a shift in the International Viewpoint • November 23, 1987 spirit of the times, in the dominant ideology of the ruling class, as fast as the one we have seen in the last two weeks.
Here are two examples, I could give a dozen. On the front page of the International Herald Tribune, exactly eight days ago, on October 26, there was an article reprinted from the New York Times — these are the two main US newspapers, 100% bourgeois. The article started with the following extraordinary phrase, which a month ago no social democrat would have dared write: "The world risks being thrown into a grave depression; everything depends on whether the uncontrollable forces of the market will throw us into chaos or whether reasoned and reasonable intervention by governments will get us out of this impasse." That is the classical statist credo in a period of crisis. Where is faith in the "Great English revolution"
flops after crash
I will give you a second example: Poor Mrs Thatcher had the bad luck to announce at the Tory congress three weeks before the crash that the great English revolution had arrived. For the first time there would be more small shareholders than union members. [There are around 10 million trade-union members.] Today, small shareholders would rather be union members in order to avoid the losses that they have taken! But Mrs Thatcher's government, imprudently, without foresight, without looking at what was going to happen on the stock exchange, even though it was a big market operation, incautiously launched the privatization of the biggest nationalized British company, British Petroleum (BP). They set the subscription price at 330 pence a share, and everybody jumped at it. It would be a bonus in comparison to the price of the shares on the market - not very large, but
Much more incautiously, a whole gaggle of courtiers, bankers and financial intermediaries on the international scale jumped to get the commission on the sale of the issue, the big money. In exchange for a 2% commission, they told the government that they would guarantee 330 pence per share. And then October 19 came along, and BP shares collapsed on the London stock exchange and then in Wall Street. They fell to about 260 pence, a staggering loss for the guarantors of 70 pence per share, a total loss of nearly $2,000 million.
Then what did we see from the great admirers of the market laws, these great opponents of state intervention? They jumped on poor old Thatcher, "We're not playing any rore, we were counting on a rise not a decline; you have to break the contract. We want our thousand millions, the government has to save us, otherwise it means bankruptcy." It was a wretched spectacle. This government let hundreds of thousands of small shareholders go down without intervening to save them a penny. But when a few big banks risked losing $2,000 million, it naturally intervened. Climate changed in space of a few days
There was official intervention by the Canadian and US government to save some big brokerage houses. In Canada, the biggest risked losing more than 1,000 million French francs. Finally there was a compromise with a part of these losses being absorbed by the Bank of England. This is how much the climate changed in the space of a few days. The creed of the market economy, the free enterprise virtues of egoism and "enrich yourselves," all dissipated, and the singers of its praises went back to their Keynesian and neo-Keynesian amours, supplicating governments and public authorities, as General de Gaulle said, to "do
But there is a glaring contradiction in this appeal for public intervention, a painfully obvious basic absurdity. All the governments in the imperialist world are raging at the United States, demanding that it put an immediate stop to its deficit spending. While the United States, as monetarist as it is and as conservative as Mr Reagan is, was the first to apply a neo-Keynesian policy of expanding global demand to get out of the 1980-82 recession. In fact, budget deficits are the most classical form of neoKeynesianism — deficit spending, increasing demand or the volume of money, it all comes down to the same thing.
Obviously, you can argue about how this deficit spending is allotted. Here the neoconservatives get their own back. It is essentially military spending, gifts to the rich through tax reform. Spending on public works has been cut back. Today, half of the bridges in the United States are no longer safe because there has been no investment in public works for years.
In the area of social spending, they have been more careful about medical insurance, which is as sacrosanct in the United States as it is in Europe. Aside from Medicare and Medicaid, they have slashed social spending, as have conservatives throughout the world. But overall, especially in view of the expanding military budget, there has been an increase in demand, in the volume of money. This produced both the economic upturn, from which all capitalist countries benefited, and the swollen American domestic market that attracted not only capital, but especially commodities. These goods are not only Japanese and German, and to a lesser extent Italian, French, British and Belgian, but also commodities from a whole series of semi-industrialized third world countries — Brazil, Mexico (to a degree), South Korea, Taiwan, Hong Kong. Today, all these countries have a balance of trade surplus with the United States.
One of the least understood and most irrational aspects of the way the capitalist
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economy functions today is the celebrated question of the third world debt, a debt that will never be repaid; no one disputes that. But even the very onerous service on this debt can only be paid if the countries concerned have a trade surplus with the imperialist countries. Where else would they get the dollars to pay it? This means that in insisting that the interest be paid, the United States, the IMF and the World Bank are insisting that the deficit in the US balance of trade increase. But if today the United States say "that's it, the deficit has to end," the whole marvelous mechanism that has kept the international capitalist economy a fraction of an inch above water over the last five years will grind to a halt, and it will
If there is no longer a budget deficit in the United States, the American domestic market and US imports will shrink. That will mean an end to German and Japanese expansion. It will mean an end to interest payments by South Korea, Mexico, Brazil, Argentina and so on. And recession will spread from the United States to all the cap-
This is inevitably going to happen in 1988. And it will be a recession in worse conditions, much worse for the international capitalist economy, than the 1980-82 recession. Because while inflation has been on the decline for the last five to seven years, it is inevitably going to rise again, at least in the United States. Perhaps also in Germany and Japan, but certainly in the United States. And from the United States it is going to spread to all the countries of the third world, where already high inflation will be accentuated. It will also reach the weaker capitalist countries such as
There are a whole series of reasons for this. Today, the US government has done something that is economic nonsense. It wanted to lower interest rates at any cost to halt the fall in the stock exchange. It had some success, but in order to do this it inflated the monetary mass. And if you inflate the monetary mass with an already devalued money, obviously you revive inflation, and the interest rate will go up
Attempts to avert an international recession
The Japanese have already virtually stopped buying American paper and in particular, they stopped buying US Treasury Bonds in August. This month there will be another issue of Treasury Bonds, and if the Japanese prove reluctant to buy them, interest rates will go back up by a point, two points, or more. When the rate of inflation is already 5%, you can see the results that will ensue, in addition to higher prices for imports. The two will combine.
The question is posed of replacing a US budget deficit with a German and Japanese expansion to avert an international recession. This does not seem very realistic for two reasons. First of all, if you look at Germany's domestic market, in what is perhaps the most solid imperialist country today, the country has a population of 60 to 65 million. That cannot replace the market of 240 million in the United States. Germany cannot import the same volume as the US from Brazil, the United States, South Korea, Taiwan and Mexico. The second reason is that Germany and Japan have themselves experienced a parallel evolution, and their productive investments have been very, very limited, even in Japan. No recognized world-wide authority over capital
The big Japanese firms have practiced financial placement, speculation, quick profits at the expense of production. The last big wave of investments was in color TV. They flooded the world with these gadgets, but now that is over. There is no equivalent new impulse. So, they have thrown themselves into financial operations. In these conditions, the Japanese domestic market, with wages 40% lower than in Europe, absorb a major volume of
But there is a deeper reason — the internationalization of capital, of speculation and the stock exchanges. Underlying this are big international firms producing on a world scale, which are not matched by a world state that could do what Roosevelt could in the United States, or Churchill in England, or de Gaulle in France. There is no recognized authority that has the power to impose its authority worldwide over
Capital continues to be politically and military fragmented into states with varying degrees of independence from each other. This reflects fundamentally private property, competition and the use of the state by factions of capital organized nationally to defend their own, particular interests. We are watching a tragic spectacle for the capitalist world, a real spectacle that you can see in the papers. They shout wildly that we are all in the same boat, but they prefer it if their neighbors fall into the water before them! This is what has dominated the international monetary and political scene since the beginning of the long
This is true even in Europe, where it is clear that the only solution for the European capitalists is finishing the construction of a European economy, transforming the European currency unit (ECU) into a real currency. This is the only solution for averting a grave recession. But even for the Germans and French, who are ready to have a common army and to pool together a few miserable thousand million dollars, "Yes, but..." remains the watchword.
Even this absolutely necessary unification will not take place in a period of crisis. In a period of crisis, competition, contra-
ECONOMY inter-imperialist competition sharpens. I am not saying that the Common Market is going to collapse, but the status quo will remain. They will be unable to take the big step forward that they need to, if only to avoid a grave recession.
So, I will end with three questions. The first is the scope of this recession, which is inevitable because of everything that has happened over recent years. It will probably come at the beginning of 1988. But the time is not so important. Marxist analysts have never been able to predict exactly what an ounce of gold will be worth on January 13, 1988. We are concerned with general trends, not with making predictions.
Will this inevitable recession be more or less of the same type as the 1974-75 one or the 1980-82 one, or will it be much graver? It is still too early to answer this question. The chain of the capitalist economy has broken at its weakest link, the stock
Two other links are now threatened. A series of brokerage houses and commercial banks that immersed themselves in stock market speculation on a grand scale and have overdrafts of tens of millions of dollars, which governments and central banks may or may not bail out. Probably, they will be bailed out, although it is hard to tell to what extent. That will be decided in the coming weeks.
The other weak link is a series of cour: 9 tries threatened by bankruptcy. These are November 23, 1987 • International Viewpoint
ECONOMY above all in the third world, but not entirely. Some imperialist countries are in debt up to their ears and, as soon as the recession comes, they could find themselves in very grave difficulties. Already it is clear that simply the fear of a recession has touched off a drop in raw materials' prices that is hitting some third world countries very hard. And the onset of the recession will have a very severe effect on the exports of countries such as Brazil, where the recession has probably already begun; South Korea, which is still in full expansion; Taiwan and Hong Kong, which are still in full expansion and can fall into recession overnight. Several of these countries may find themselves unable to meet their payments.
### Threat to big multinational firms
A third decisive link is that a series of failures starting in the financial sector could extend to some big multinational industrial and mining firms. This is possible. I do not predict it, but it is possible. This possibility arises as an immediate consequence of the stock market crash. The financial soundness of some of these firms was shaken overnight. If their sales, their turnover, drops, they could go over the
These three links have not yet broken. But they could. And if they do, this crisis will be a very grave one. If they do not, it will be a repetition of the 1980-82 crisis. Let us not forget that the 1929 stock exchange crash did not lead to a collapse of production in the same year. It took three years to arrive at an unemployment rate of 30% to 35%. Today also, the deterioration of the capitalist economy could stretch out over several years, through successive phases of recession, stagnation, new
The second question is the social consequences of all this. I have pointed to three successive links, after the stock exchange. I did not add the one that interests us the most, which interests the workers, the popular masses on an international scale. It is the finances of social security. They are in a bad state in every country. This is the cumulative result of 15 years of depression and mass unemployment. There has been an attempt to straighten this out, because the bourgeoisie, to say nothing of the reformists, know perfectly well that this is where the most explosive material lies, where the masses might fightback the hardest. These are the people's important gains, especially health insurance and pensions.
But if the finances break down totally, if state resources shrink because of the recession, I think that this link is going to be threatened. I am not saying necessarily that it is going to break, but there is a direct connection between the economic and so10 officially registered ere amployed in thilim. cial crisis. Today, there are 31 to 32 million International Viewpoint • November 23, 1987 perialist countries. The real figure, cited by the BIT [International Work Bureau], is nearly 40 million. All governments have played around with the statistics, removing people who are still alive, kicking and looking for work.
We have to realize that together with the families of the unemployed, this represents nearly 100 million people just in the world's richest countries. If this figure increases by 10% or 15% in the coming recession, we are not so far from a very grave crisis, despite social security, despite un-
Another frightening figure, that few people know about, is that in the imperialist countries as a whole almost half the unemployed are no longer receiving benefits. They are living off charity. There has been talk about a new poverty. This is absurd, because there is nothing new in this poverty. It has always existed. But what they want to designate by this term is impoverishment, the worsening of poverty in contries such as Portugal, Spain, southern Italy and France - and also in Britain. This is worse in France than in the Scandinavian countries or in Germany. There are differences among countries. But the general trend is already grave.
I think that we were right to underline the fact that, as in 1929, the first effect of all this on the working class, on the workers' movement, on the capacity of the workers for fighting back, is not positive. That is clear. If there is a mass of unemployed, if there is fear of unemployment, and if there is fear of impoverishment, the first reaction (especially in the absence of a well structured, conscious trade-union movement confidently organizing a fightback, a movement that has managed to establish or reestablish the unity of working class forces -- and we find this nowhere) - in these conditions the first reaction will be rather a fragmentation of resistance: everybody for
As the crisis takes on more definite form, as the bourgeoisie's political and ideological offensive is discredited, as it is being discredited today by the crisis, things can change. They may not change quickly. After 1929, we had to fight five years for such a change. It was only in 1934 that the workers began to fight back in Europe, in France and in Austria. No one can make any predictions today. But the response is going to come. That seems absolutely certain, and those who still harbor any illusions about a general revival of the capitalist economy or a soft landing to the long depression followed by a new expansion in the mediumterm are wasting their time. After this grave stock market crisis, it is clear that that is out of the question.
The bourgeoisie's confidence in its own future, in its own destiny, its own economy may have been more shaken than the illusions of the reformists and the workers. A deep and broad expansion of this economy in the coming years is totally excluded. It would take a profound change in the situation, a very grave defeat of the working class, a radical change in the Eastern bloc countries for this confidence to revive, for the market to be able to expand, for investments to regain the rate of the 1950s and
I will conclude with a third problem. We are in a new world situation, owing to political, economic, moral and ideological shake ups. But there has not yet been a social upheaval. It is clear that this may take time, but the four areas in which there have already been shocks are important enough using the term "a new world
The tragic irony is that this is not fortuitous. It is the historical price that we — and above all the Soviet working class — pay for the crimes of Stalinism.
The tragic irony is that at the very moment when imperialism is going into one of the deepest, if not the deepest, crises in its history and when confidence in the market economy has been profoundly shaken in the West, not to mention third world countries, the virtues of market mechanisms are now being extolled in the Soviet Union. Expanding market mechanisms is presented as the only recourse and only solution to the grave systemic crisis gripping the USSR and its satellite countries. This systemic crisis is so undeniable that it is now acknowledged openly and frankly by the leaders themselves.
Effects of crisis on USSR regime
Two terrible statistics, cited by Gorbachev himself in his book, capture its gravity. First: one-third of working hours in the Soviet Union are wasted. Second: there are four times more tractors in the USSR than in the USA, but the USSR produces less wheat than the US. This leads to constant shortages that force the Soviet Union to spend thousands of millions of dollars each year importing wheat from capitalist
These two figures suffice to prove that the crisis is one specific to this regime. The theoreticians who claim capitalism has been restored or that state capitalism exists in the Soviet Union are at a loss to explain this. Stock exchanges have collapsed in all the capitalist countries, but not in Moscow or Peking. There's another economy there, that's clear. Anyone who cannot see this is denying reality. These economies are not playing the same game, according to the same rules, in the same structure.
That does not mean that the USSR's is a perfect economy that functions well. It has its own crisis, its own problems. The Soviet leaders are more or less powerless to deal with them, and don't know which saint to invoke - although they know they mustn't invoke comrade Trotsky, as we've just seen! They are completely disoriented and there will be no big changes. This year, the growth rate of Soviet industry has
"Jake - come back - Jake - the market's rising - Jake..." fallen below the level it had reached in Brezhnev's last year. There is a lot of noise, which is good; a good deal of openness, which is even better; some glasnost', which is insufficient. But little has really changed, and nobody predicts real changes in the months and years ahead.
So what do we mean when we say that the world situation has profoundly changed, or is changing profoundly? As I said, we have seen a long period of retreat the fall of Mussolini in 1943. We then had a long, partial rise of the social revolution — complicated, not clear cut and less conscious than that after 1917, but important all the same. The Chinese revolution, the victory of the Cuban revolution, of the Vietnamese and Nicaraguan revolutions — all that has created a different world from 1940, from that of Hitler and Mussolini, and others of the same ilk.
US and USSR proletariats no longer on sidelines
But this slow rise of the international movement has been weighed down by a tremendous handicap, the fact that the two biggest working classes in the world — those of the USSR and USA - have been out of the game for 40 years. That is more than a quarter of the world working class, and its most concentrated contingents — 135 million proletarians in the USSR and 115 million in the United States — who were on the sidelines.
The crisis in itself doesn't change that. Gorbachev alone will change nothing. But the crisis sets changes in motion. Gorbachev has been a trigger and an amplifier for movements whose development means that in the next ten years these two great proletarian concentrations will no longer be spectators on the sidelines.
That is a fundamental change, giving us great hope for a continuation, growth and generalization of workers' action, of the proletarian revolution, of socialism as defined by Marx: the rule of freely associated producers. *
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