The economic crisis and the return of history by david north

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THE ECONOMIC CRISIS +

& THE RETURN OF HISTORY

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DAVID NORTH

The Economic Crisis & The Return of History

David North

World Socialist Web Site Print Series

Š January 2012 Mehring Books www.mehring.com Published by Mehring Books P.O. Box 48377 Oak Park, MI 48237 Printed in the United States of America ISBN 978-1-893638-16-7

About the Author David North is is the National Chairman of the Socialist Equality Party in the United States and Chairman of the International Editorial Board of the World Socialist Web Site. He is the author of numerous books and pamphlets, including In Defense of Leon Trotsky, The Crisis of American Democracy, and The Heritage We Defend: A Contribution to the History of the Fourth International

Contents

Introduction.......................................................................................5 The Capitalist Crisis & the Return of History........................................ 9 The Economic Crisis & the Resurgence of Class Conflict in the US.....................................................................29 Seventy Years Since the Outbreak of World War II: Causes, Consequences and Lessons....................................................47

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Introduction

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n September 15, 2008, the collapse of US investment bank Lehman Brothers set off a global financial panic and economic crisis unlike any since the Great Depression of the 1930s. In the months that followed, world governments, led by the United States, funneled trillions of dollars to the banks, claiming that this was necessary to restore growth and economic stability. Meanwhile, millions of people were thrown out of work and thrust into poverty.

Where do things stand three years later? All the rationalizations and justifications for the “free market� capitalist system lie in ruins. The events of 2008 can now be seen as a critical turning point in the history of American and world capitalism. There is no credible sign of economic recovery.

In the United States, the official unemployment rate remains close to 9 percent and long-term unemployment is at record levels. The unofficial jobless rate is substantially higher. Europe is mired in an intractable debt crisis that threatens to tear apart the European Union. There are growing indications that the Chinese economy is faltering. But the most significant expression of crisis is the demand of capitalist governments all over the world for savage austerity measures.

Where did this crisis come from? Behind the surface appearance, what are its fundamental causes? Above all, what must be done to resolve it? The lectures in this pamphlet, by David North, provide a framework for answer5

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ing these questions. Their reproduction today is extremely timely. In the two-and-a-half years since they were delivered, all of their basic themes and conceptions have been strikingly vindicated.

Particularly notable is the emphasis North places on social inequality as the dominant feature of American society and politics. For decades, the significance of social inequality has been denied by what has passed for the “left” in the United States. Various forms of identity politics have been elevated in its place, all premised on the claim that race, gender and sexual orientation are the fundamental social categories, not class. The capitalist crisis, however, has set the stage for an entirely different type of politics.

This is the most significant feature of the Occupy Wall Street movement, which, in the closing months of 2011, spread throughout the country and internationally. These protests are an initial expression of explosive class struggles on the horizon. While as yet politically amorphous, they have been animated by growing popular anger over mass unemployment, poverty and indebtedness alongside the ever greater concentration of wealth in the hands of a tiny financial elite that has exploited the crisis to further enrich itself.

North argues against all those who provide a superficial analysis of the crisis that erupted in 2008, explaining that, whatever its immediate causes, it was a manifestation of the long-term decline in the global position of the United States. North sees financialization—the ever more direct subordination of American and world society to the rapacious dictates of giant banks and investors—as inextricably linked to this historical process.

These themes are developed in different ways throughout this pamphlet. In the first lecture, “The Capitalist Crisis and the Return of History,” North reviews the development of American capitalism, including the changing structures of corporations over the past century. He traces the changes in corporate organization through five successive waves of mergers and acquisitions. Over the past 30 years, this process has involved a staggering increase in the influence of Wall Street and financial speculation over the American economy.

North calls attention to the impact of financialization on the “social physiognomy” of the ruling elite. “The operation of the capitalist economy cannot be abstracted in some sort of metaphysical way from the class relations and interests to which it gives rise and in which it is embedded,” North notes.

The social character of the ruling class is evident in the response of the political establishment to the economic crisis. Writing only a few months

Introduction

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after the inauguration of Barack Obama, North warned, in words that have proven extremely prescient, that the policies of his administration would be determined “entirely by the interests of the corporate and financial aristocracy.”

The second lecture, “The Economic Crisis and the Resurgence of Class Conflict in the United States,” extends the analysis of the historical origins of the crisis, with a focus on the history of the class struggle in the United States. The ruling class responded to its declining position and the crisis of the post-war order, including the collapse of the Bretton Woods system in 1971, by launching a ferocious assault on the jobs and social conditions of the working class. Entire industries have been shut down, a process that has devastated many American cities.

North takes up the different social and political forces that made these changes possible. He pays particular attention to the role of the trade unions, which responded to the deepening crisis of American capitalism by ruthlessly suppressing all forms of working class resistance to the attacks on workers’ living standards.

The lecture includes a striking graph relating the virtual collapse in strike activity over the past 30 years and the corresponding rise in social inequality. North points to the revolutionary consequences of what he calls the “zone of conflict.” He writes, “A protracted period of social and political reaction signifies the forcible and artificial suppression of social and economic contradictions. The degree to which these contradictions have been suppressed determines the force and intensity of the crisis that follows.”

The third lecture, delivered in October 2009, marked the seventieth anniversary of the outbreak of World War II. Recalling the staggering human costs of the twentieth century’s two world wars, North warns that the tensions generated by the present world economic crisis are preparing the ground for a new eruption of global military conflict.

The imperialist war against Libya, the spreading conflict throughout the Middle East, and the increasingly belligerent attitude of the Obama administration toward China give added weight to this analysis. “Is it possible to imagine the reemergence of international disputes and antagonisms that would make the outbreak of World War III possible?” North asks. “The answer to this question does not require far-fetched speculation. The real question is less whether a new eruption of global warfare is possible, but how long do we have before such a catastrophe occurs.”

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The Economic Crisis & the Return of History

This pamphlet is published today under conditions of an upsurge of class struggle internationally. Historians will see the events of 2011 as the first tremors of a social earthquake, ushering in a new period of world revolution. As workers enter into struggle, they must understand the nature of the system they confront, the role of the social and political forces involved, and the tasks that history has posed. This pamphlet provides an indispensable contribution to the development of this understanding.

Joseph Kishore December 10, 2011

The Capitalist Crisis & the Return of History

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t is acknowledged by serious bourgeois economists that the global economic crisis—the worst since the 1930s—has dealt a devastating blow to the international legitimacy of the capitalist system. The free-market nostrums that have been exalted as unchallengeable truths by politicians, media talking heads and many academic economists for nearly three decades have been discredited, intellectually and morally. There is growing apprehension about the future that awaits the capitalist system. On March 8, 2009, Martin Wolf of the Financial Times wrote: It is impossible at such a turning point to know where we are going. Yet the combination of financial collapse with a huge recession, if not something worse, will surely change the world. The legitimacy of the market will weaken. The credibility of the US will be damaged. The authority of China will rise. Globalization itself may founder. This is a time of upheaval.

The Financial Times quotes from a column by Bernie Sucher, the head of Merrill Lynch operations in Moscow: Our world is broken—and I honestly don’t know what is going to replace it. The compass by which we steered as Americans has gone. The last time I saw anything like this, in the sense of disorienLecture given at San Diego State University and University of California, Berkeley in March 2009

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The Economic Crisis & the Return of History

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tation and loss, was among my friends [in Russia] when the Soviet Union broke up.

A failure of explanation The present debate within the ruling class and its political establishment is centered on how the system is to be saved. And yet, notwithstanding the gravity of the situation, the historical and economic origins of this crisis are not understood. It is widely recognized that the implosion of the subprime mortgage industry, the collapse of asset values, and the freezing up of credit markets are significant components of the crisis that have brought the American banking system and, with it, the world economy to their knees.

But references to these elements of the crisis do not provide us with an explanation as to why and how these phenomena have developed. Recently the Wall Street Journal asserted that “defaulting loans” and “soured assets” were the “root causes” of the crisis. Here we have a tautology being palmed off as an explanation. “Defaulting loans” and “soured assets” are manifestations of the crisis, whose “root causes” have still to be explained.

There are definite reasons why serious explanations of the origins of the crisis—that is, explanations that go beyond descriptions of the present situation, and even beyond the identification of the proximate causes of the unfolding disaster—are not be to be found. First, the fundamental viability of the capitalist system, particularly within the United States, and its historical immutability cannot be questioned. As Martin Wolf declares categorically in the column quoted above, “no credible alternative to the market economy exists...” This view, held even by more thoughtful analysts like Wolf, is bound up with another conception: that this crisis is the product of circumstances that, however dreadful in their cumulative impact, are somehow external to the economic system. The cause of the crisis is not to be found in the essential nature of the profit system. Rather, the problem lies in the environment within which it presently operates.

Marxism rejects such a superficial view. It maintains a historically critical attitude toward capitalism, and explains the present crisis as the outcome of contradictions that are embedded, so to speak, in the socioeconomic DNA of the capitalist mode of production. Bourgeois economists and journalists, in contrast, adopt an apologetic approach to capitalism, which denies the existence of economic contradictions that lead inexorably to crisis and breakdown. But, as Karl Marx explained:

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Crises exist because these contradictions exist. Every reason which they [the apologists of capitalism] put forward against crisis is an exorcised contradiction, and, therefore, a real contradiction, which can cause crises. The desire to convince oneself of the nonexistence of contradictions, is at the same time the expression of a pious wish that the contradictions, which are really present, should not exist. (Theories of Surplus Value, Book II, Amherst, New York: Prometheus Books, 2000, p. 519) The attempt to exorcise contradictions takes the following form: As presented in the media, the capitalist system is the victim of sundry and indistinctly identified malefactors—reckless speculators, poorly regulated banks, excessively-leveraged hedge funds, greedy and overpaid executives, and even the self-indulgent American consumer—to whom the talented Mr. Obama, the new chief moralist of the United States, delivered a stern rebuke in his inaugural address. What all these “explanations” have in common is that they interpret the crisis in essentially subjective terms—that is, as the product of various faults and errors, rather than as the outcome of deeply-rooted objective contradictions in the historical development of the capitalist system, within the United States and internationally.

Thus, for example, commentators explain the turbulence in the financial markets as the product of abuses in various credit markets—first and foremost, the profligate extension of mortgages to individuals who would not be in a position to repay them. Why this occurred, and to the tune of hundreds of billions of dollars, is not explained.

The “End of History”?

One must also call attention to the curious intellectual double standard that exists in the manner in which the present world economic crisis is assessed, as compared to the crisis which erupted in Eastern Europe and the Soviet Union 20 years ago. Back in 1989, it was taken as an article of faith that the economic crisis of the Stalinist regimes demonstrated the total failure of socialism. The dissolution of the USSR in December 1991 was declared to be the irrefutable demonstration that socialism was economically unviable, and that, henceforth, no rational person could even imagine an alternative to capitalism. Mankind had arrived at, in a phrase popularized by Francis Fukuyama, the “End of History.”

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The Economic Crisis & the Return of History

Of course, Fukuyama did not claim that there would be in the future no “events.” Rather, the “End of History” signified that, in terms of socioeconomic organization, capitalism represented the final destination of historical progress. His book expressed the triumphalism that swept through the American and international ruling class in the aftermath of the collapse of the Stalinist regimes. All limits to the expansion of capitalism—not only geographic but also historical—had been swept away. But here we come to the double-standard: If the crisis of Soviet Union and Eastern Europe signified the failure of socialism (leaving aside the non-socialist character of these regimes), why is it that the present crisis of the American and world economy is not interpreted as a crisis and failure of the capitalist system?

Swept up in the euphoria of its political triumph over its Cold War adversary, the American ruling class imagined that it was omnipotent.

This delusion was based not only on an incorrect evaluation of the “root causes” of the demise of the Stalinist regimes, but also on the self-deluding denial of the contradictions of American capitalism, especially the deteriorating position of the United States in world capitalism.

What the American political establishment failed to understand, or perhaps preferred to ignore, was that the economic forces that undermined the Stalinist regimes were global in character, and that these same pressures—emanating from the irresistible pressure of a global and increasingly integrated economy on national states—were bearing down upon and weakening the United States.

The dissolution of the Stalinist regimes created, in the short term, favorable geopolitical conditions that the United States exploited to advance its strategic interests. However, the demise of the Stalinist regimes did not reverse the long-standing decline, already quite advanced by 1989-1991, in the global position of American capitalism. For all the talk of the “End of History,” the United States remained in the grip of historically developed contradictions that continued to erode its economic foundations.

The historical context of the crisis In years to come, the Great Crash of 2008 will be seen first as the outcome of the protracted decay and breakdown, several decades in the making, in the global position of the United States; and secondly as the beginning of a new period of systemic crisis and revolutionary class struggle within the US and internationally.

The Capitalist Crisis & the Return of History

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The United States played the decisive role in the world capitalist system in the twentieth century. By the end of World War I, the US was the industrial powerhouse of the world. In every sphere of industry, American corporations achieved a dominant position. However, despite the growth in the United States, the eruption of World War I in 1914 marked the beginning of a 30-year period of global crisis and instability.

The outbreak of World War I shattered the economic, political and social equilibrium of European and, as soon became apparent, world capitalism. The Russian Revolution and the coming to power of the Bolsheviks in October 1917 revealed the revolutionary implications of the objective crisis.

Another revolutionary explosion in Germany, in November 1918, brought the World War to an end. The next two years were marked by economic disorder and revolutionary upheaval throughout Europe. But the absence of experienced revolutionary leadership enabled the European bourgeoisie to survive the disorder and restore a degree of stability.

The brief and feverish economic recovery and expansion of the mid1920s gave way, however, to the devastating global economic breakdown, which began on Wall Street in October 1929. Notwithstanding the many experiments of President Roosevelt’s “New Deal,� this highly skilled leader of the American ruling class was unable to bring the Depression to an end.

Throughout the 1930s unemployment remained at staggeringly high levels.

It was the entry of the United States into the war in December 1941, resulting in massive government spending on war production, that produced the long-awaited economic revival.

The post-war system and the dominance of the United States With tragic irony, the destruction caused by the war created the conditions that made possible a new systemic capitalist equilibrium necessary for long-term economic growth and stability. This stabilization depended on the financial and industrial resources of the United States. The American ruling class, fearful of socialist revolution in Europe and Japan, organized the economic reconstruction of world capitalism. The basic structures and mechanisms of this reconstruction were formulated at the Bretton Woods conference in August 1944.

The most important element of the new global economic structure was a US-dollar-based international monetary system. In this system, all currencies outside the United States were assigned a value in relation to the

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The Economic Crisis & the Return of History

dollar. In turn, the dollar was linked to gold, into which the currency could be converted at the rate of $35 per ounce. Thus, the dollar would function as the world reserve currency. International trade was to be denominated in dollars—that is, international commercial and financial transactions were settled in dollars. Countries outside the United States would hold dollars, and employ these dollars to cover their own international commercial transactions. Confidence in the integrity of the American currency was sustained by the American guarantee to convert, upon demand, dollars into gold at the agreed upon rate of $35 per ounce.

There was little concern about the ability of the United States to honor this commitment under conditions, prevailing in the aftermath of World War II, in which it was the unchallenged economic and financial power in the world. In 1952, nearly 60 percent of all industrial production in the advanced capitalist countries was located in the United States. On a per capita basis, total economic output in the United States was nearly double that in the United Kingdom and France, nearly three times that in Germany, and four times that in Italy. As late as 1957, 43 of the largest 50 companies in the world were based in the United States. Its dominant position found expression in its ability to maintain substantial trade and payment surpluses, even as the United States financed European and Japanese reconstruction.

The beginning of US economic decline However, it was inevitable that the system would come under mounting stress as the reemergence of European and Japanese industries undermined American dominance. By the late 1950s, economists such as Robert Triffin began to express concern about the deterioration of the US balance of payments, warning that the accumulation of a dollar deficit would call into question the ability of the United States to honor its pledge to redeem dollars with gold. These fears were justified by the collapse of the Bretton Woods system on August 15, 1971, when the Nixon administration, without warning, suspended the convertibility of the dollar into gold. This act represented a turning point in the post-World War II history of capitalism. It unsettled the financial equilibrium that had made the post-war expansion of global capitalism possible. In the aftermath of August 1971, world capitalism became increasingly susceptible to destabilizing shocks. Indeed, as I have already suggested, the present crisis is in many respects the culmination of the process of disequilibrium that has been under way for the last 37 years.

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The collapse of the system of dollar-gold convertibility and fixed exchange rates was a dramatic expression of the deterioration of the position of the United States in the global economy. But an understanding of the far-reaching consequences of this decline, and especially its relationship to the specific form taken by the crisis of American capitalism (that is, a series of speculation-driven bubbles and financial breakdowns), requires that attention be given to significant changes in the strategic orientation of US corporations over the last 45 years.

Impact of economic crisis on US corporations Among the most significant innovations introduced by American capitalism in the early years of the twentieth century was the creation of the industrial corporation. This new form of economic organization was a response to the challenges posed by the development of new communications and transportation technologies associated with the railroad, steamship, telegraph and cable. As one of the most brilliant historians of American business, Alfred Chandler, Jr., explained in his monumental study, Scale and Scope: The Dynamics of Industrial Capitalism: (Cambridge, Mass.: Harvard University Press, 1990): The building and operating of the rail and telegraph systems called for the creation of a new type of business enterprise. The massive investment required to construct those systems and the complexities of their operations brought the separation of ownership from management. The enlarged enterprises came to be operated by teams of salaried managers who had little or no equity in the firm. The owners, numerous and scattered, were investors with neither the experience, the information, nor the time to make the myriad decisions needed to maintain a constant flow of goods, passengers and messages. Thousands of shareholders could not possibly operate a railroad or a telegraph system.

A major theme of Chandler’s study, which he documents industry by industry, was the increasing separation during the first decades of the twentieth century of ownership from management. In most cases, the powerful capitalist families that owned substantial portions of entire industries exerted direct and daily influence over corporate policy only to the extent that

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The Economic Crisis & the Return of History

individual members became part of the professional management team. Significant sections of American industry were directed by managers who, according to Chandler, “owned less than 1% of the stock of the company they administered.� He writes: ... These salaried managers, unencumbered by the wishes of large stockholders (whether members of founding families, venture capitalists, or outside investors) selected their own boards of directors and nominated their own successors (p. 145).

The management structure of the American corporation emphasized long-term growth. Again, quoting Chandler: Until well after World War II, both the managers with little equity in the enterprise (the inside directors) and the representatives of the major stockholders (the outside directors) agreed that retained earnings should be reinvested in facilities and personnel in industries where the enterprises had developed competitive advantages based on its organizational capabilities. They agreed that such investment carried lower risk and higher probability of a satisfactory rate of return than making comparable investments in industries where the firm did not have such advantages (p. 595).

In light of contemporary conditions, the scene drawn by Chandler may appear almost idyllic. What, then, led to its breakdown? Two historically conditioned and interrelated factors appear especially significant. First, and most important, was the overall deterioration in the position of the United States in the world economy. While the United States remained the dominant industrial power well into the 1970s, it steadily ceded ground to its rivals in Europe and Japan throughout the late 1950s and 1960s. Second, the change in corporate structure and investment strategies within the United States was closely related to the deterioration in the rate of profit. This assumed global dimensions, even in the context of the ongoing post-World War II boom, in the 1960s and early 1970s.

According to one study, the profit rate in the advanced capitalist countries fell by one-fifth in the business and manufacturing sectors between 1968 and 1973. [Philip Armstrong, Andrew Glyn and John Harrison, Cap-

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italism Since 1945, (Oxford and Cambridge: Basil Blackwell, 1991) p. 182] Many factors contributed to this process, of which the most significant was the massive accumulation of capital itself in the aftermath of the war. For Germany and Japan, in particular, the destruction wrought by the war on their old industrial infrastructure enabled these countries to utilize the most advanced technologies and production methods in the rebuilt industries.

By the 1960s the technologically advanced industries of Europe and Japan were competing effectively with the United States for position in global markets, including within the American market. Growing pressure on global profit rates, increasingly apparent by the mid-1960s, intensified international competitive pressures, which further weakened the global standing of US industry. This led to significant changes in the strategic orientation of American corporations. Chandler writes: As increased competition threatened to lower profits and reduce opportunities to reinvest earnings in industries where firms’ organizational capabilities gave them competitive advantages, their managers began to seek new ways of growth and devise new ways of management. (p. 606)

Mergers and acquisitions: the first two “waves” Among the strategies employed by American corporations was the use of diversification through mergers and acquisitions. In the history of American capitalism, especially in the development of its modern corporate form, mergers and acquisitions have played a significant role. Prior to the 1960s, there had been two significant “waves” of mergers and acquisitions. The first began in the aftermath of the protracted profit depression of 1873-1895, and reached its climax between 1898 and 1904. This was the period of historic “horizontal” mergers, in which competitors within a single industry were consolidated into a massive monopolistic structure. The most significant corporation to emerge from this first wave was US Steel, which eventually accounted for 75 percent of US steel making capacity. Other products of this merger wave were DuPont, Inc., Standard Oil, General Electric, Eastman Kodak and American Tobacco Inc. [Mergers, Acquisitions, and Corporate Restructuring, Fourth Edition, by Patrick A. Gaughan, Hoboken, N.J.: Wiley & Sons, 2007, pp. 31-33]

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The second wave of mergers occurred between 1916 and 1929. This wave differed from the first in several key respects. First, a far greater percentage of mergers were “vertical” rather than “horizontal” in character— that is, they combined firms which had a buyer-seller, or vendor-supplier, rather than a competitive, relationship. In some cases, as in the formation of Allied Chemical, the merged firms shared similar production processes and marketing strategies, from which strategic competitive advantages were derived. In historical terms, the first and second wave of mergers and acquisitions were significant episodes in the rise of American corporations to a position of global dominance.

The “third wave” of mergers and acquisitions The characteristics of the third wave of mergers, which erupted between 1965 and 1969, differed fundamentally from those of the first two waves. The aim of the third wave strategy—developed in response to the deteriorating global position of the United States and growing pressure on profits—was to maintain growth and build profits by aggressively buying companies only remotely related, or not related at all, to the industry in which the corporation making the purchase was historically rooted. This new strategy reflected deepening pessimism within a broad section of the American ruling class and corporate management about the profit potential within its core industries. Mergers and acquisitions became a central preoccupation of American corporations. The number of such transactions grew from 2,000 in 1965 to more than 6,000 in 1969. (Chandler, op. cit., p. 622) A result of this mania was the development of a powerful new business enterprise: the buying and selling of corporations, the creation of “a market for corporate control.” This market expanded exponentially in the 1970s. The merger and acquisition wave was followed by a divestiture wave, as corporations sought to sell off “underperforming” components of their organizations. To a significant extent, the divestitures were an indictment of previously ill-considered acquisitions. It was, in any case, a new phenomenon. Prior to 1970, divestitures were quite rare. In the course of the 1970s, it became a common business transaction. The buying and selling of businesses was transformed into a major component of business activity in the United States.

This development was to have a massive impact on the structure of American (and, later, international) corporations and on the entire relationship between finance and industry. New investment strategies led to a

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dramatic reconstruction of American corporations. Long-term investment in securities, which had been the norm prior to the mid-1960s, was replaced by strategies that sought to maximize short-term returns. The management and direction of industry was dictated by financial transactions on Wall Street.

The banks, representing finance capital, had of course played a significant role in American business throughout the twentieth century. But, as Chandler documented in his historical studies, that role was exercised within the framework of a long-term business strategy, generally related to the achievement of competitive advantages in different branches of industry.

But the role of finance changed in the mid-1960s. As a consequence of Wall Street transactions, corporate policy could be rapidly changed, and brought into alignment with financiers’ demands for short-term profits, by changing its ownership through the acquisition of shares. The scale of transactions on Wall Street grew exponentially. On the New York Stock Exchange in the early 1950s, the number of shares traded annually was approximately one-half billion. As late as 1965, that number had grown to only 1.5 billion.

By 1985, it had risen dramatically to 27.5 billion. In 2006, the total share volume was over 625 billion annually. Bound up with this process was the central role that investment banks came to play in the reorganization of American corporations. Writes Chandler: Before the acquisitions binge of the late 1960s, almost no investment banking house had merger and acquisition departments. Very soon such specialized departments became their banks’ largest money makers. (Strategy and Structure: Chapters in the History of the American Industrial Enterprise, Cambridge, Mass.: The MIT Press, 1990, Introduction, p. vi)

The “fourth wave” of mergers and acquisitions The significance of the stock exchange in American (and, subsequently, international) business was particularly evident in the fourth wave of mergers, which occurred between 1984 and 1989. It was during this period that the essentially parasitic, destructive and criminal modus operandi of the new finance-driven corporate model was firmly established. Investment bankers played a central role in this process. Mergers, as Patrick Gaughan points out, “were a great source of virtually risk-free advisory fees for investment bankers. Merger specialists at both investment banks and law firms developed many innovative products and techniques designed to facilitate or prevent

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takeovers” (Mergers, Acquisitions and Corporate Restructuring, p. 57). Under the guidance of investment bankers, the “hostile takeover”—though hardly unknown in the history of American capitalism—assumed unprecedented and staggering dimensions. Another significant feature of the fourth wave was the financial scale of the mergers. The number of transactions involving more than $100 million increased more than 23 times between 1974 and 1986 (Ibid, p. 54). The hostile takeovers of the 1980s saw the triumph of the very personification of financial parasitism: the “corporate raider,” whose main source of income was the proceeds generated by the attempted takeover. Enrichment did not depend on the success of the effort, let alone on the long-term viability of the company in the aftermath of the takeover attempt.

The leveraged buyouts and “Merchants of Debt” Mergers during the fourth wave were financed with immense amounts of debt. As one specialist in the subject has explained: Another term that came into the lexicon of the business community during this fourth wave of acquisition and merger activity is the leveraged buy-out or LBO. Kohlberg Kravis helped develop and popularize the LBO concept by creating a series of limited partnerships to acquire various corporations, which they deemed to be underperforming. In most cases, Kohlberg Kravis financed up to ten percent of the acquisition price with its own capital and borrowed the remainder through bank loans and by issuing high-yield bonds...

The bank loans and bonds used the tangible and intangible assets of the target company as collateral... Investment banks such as Drexel Burnham Lambert, led by Michael Milken, helped raise money for leveraged buyouts. Following the acquisition, Kohlberg Kravis would help restructure the company, sell off underperforming assets, and implement cost-cutting measures. After achieving these efficiencies, the company was usually then resold at a significant profit. (“The Lessons of History Related to Mergers and Acquisitions,” by Bill Duncan) The operations of firms such as Kohlberg Kravis were not merely the product of personal greed. Rather, the decay of the industrial base of Ameri-

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can capitalism found expression in the destructive activities of “Merchants of Debt” such as Kohlberg Kravis and Drexel Burnham Lambert. While the global position of US-based manufacturing continued to decline precipitously, as shown by every index of economic activity, financial speculation became the principal means by which the American bourgeoisie enriched itself. In 1980 only six percent of corporate profits were realized in the finance industry. By 2005, the finance industry generated 40 percent of corporate profits. That is, the fastest way to accumulate wealth was not by engaging in production, but by staying as far away from it as possible. This is borne out by another statistic: Between 1981 and 2008, the aggregate debt of the US financial sector went from 22 percent of GDP to 117 percent!

Speculation has proved a far more reliable means of getting money, than the arduous and uncertain process of industrial production.

The fourth wave of mergers and acquisitions ended amidst the collapse of the junk bond market and the Savings and Loan scandals on the late 1980s. The careers of Boesky and Milken ended in disgrace and with indictments and jail terms. The US economy slipped into recession in 1990-1991. The recovery from that recession, which triggered the explosion in the market indices, set into motion the fifth wave of massive mergers. Once again, mergers were seen as the fastest means of realizing profits.

The “fifth wave” of mergers and acquisitions A distinct feature of this fifth wave, which began in 1992 and seems to have continued up until the eruption of the global crisis of 2008, has been the use of corporate equity to finance acquisitions. This was facilitated by the wildly inflated share values in the stock market boom of the 1990s. In reality, many of these deals made during this period—though hailed in the media as creating efficiencies and “synergies”—lacked any substantive economic rationale, beyond the immediate financial gains eagerly anticipated by the investment bankers, law firms, big shareholders and corporate executives. The results of many of these speculative transactions were disastrous. A large number of consolidated companies eventually went bankrupt.

Between 1998 and 2001, the shareholders of firms acquired through mergers and acquisitions lost the staggering sum of $240 billion (Gaughan, p.

63). Eighty-seven deals lost acquiring shareholders $1 billion dollars or more (Ibid, p. 64).

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The fifth wave of mergers has been significant in yet another respect. It is international in scope. Though it began somewhat later than in the United States, by 1999 the value of European transactions were almost as large as the American deals. Asia also has participated significantly in this wave of mergers. This trend continued into the new century, after a period of slowdown that followed the market contraction of 2001-2002. According to Gaughan: …the M&A business picked up steam again and became truly globalized. New potential targets and bidders came on the market as a result of increased privatizations—especially in Eastern Europe, Asia, and Central and South America. (Ibid, p. 68) As this survey has shown, the history of merger “waves” tracks the rise, decline and fall of American capitalism. The first two waves (1898-1904 and 1916-1929) were part of the rise of American corporations to a position of global dominance. The third wave (1965-1969) arose as a response to declining profit rates and the initial manifestations of the deterioration in the global status of American capitalism. The fourth and fifth waves (1984-1989 and 1992-2008) have been socioeconomic phenomena of decline, decay and extreme parasitism. The last waves have been powered by massive debt, the growth of which proceeded alongside of, and demanded the destruction of the real productive forces. The essential purpose of these transactions has been to destroy social wealth in the interest of investors’ profit and private wealth accumulation. This process is described very well by Charles R. Morris in his book The Trillion Dollar Meltdown (Philadelphia: Perseus Books, 2008). He tells the story of Travelport, a Web-based reservations company.

It was purchased by the Blackstone private equity firm and a smaller partner: ...They paid $1 billion of their own money and used Travelport’s balance sheet to borrow an additional $3.3 billion to complete the purchase. They doubtless paid themselves hefty investment banking fees, which would also have been billed to Travelport. After seven months, they laid off 841 workers, which at a reasonable guess of $125,000 all-in cost per employee (salaries, benefits, space, phone, etc.) would represent annual savings of more than $100 million.

And then the two partners borrowed $1.1 billion more on Travelport’s balance sheet and paid that money to themselves, presum-

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ably as a reward for their hard work. In just seven months, that is, they got their $1 billion fund investment back, plus a markup, plus all those banking fees and annual management fees, and they still owned the company. And note that the annual $100 million in layoff savings would almost exactly cover the debt service on the $1.1 billion. That’s elegant—what the financial press calls “creating value.”

Another word that springs to mind is “looting.”

What Blackstone had done, of course, was to reallocate value, not create it. (pp. 137-38)

The social and economic consequences of parasitism This account of the impact of Blackstone’s operations—whose chairman, Steven Schwartzman, has a net worth of more than $7 billion—calls attention to their essential social significance. The activities of outfits like Blackstone are not socially neutral. The phrase “creating shareholder value” is a social euphemism that is employed to conceal and justify the brutally exploitative, socially destructive and essentially criminal character of these financial transactions. The merger and acquisitions wave of the 1980s required and could not have succeeded without a massive assault on the social position of the working class in the United States. The policies implemented by the Reagan administration—with the support of the Democratic Party—created the necessary political framework for the operations of the corporate raiders. Paying down the huge debts incurred in the leveraged buyouts of the 1980s required intensified exploitation of workers, realized in the form of union-busting, wage cuts, reduction of benefits, more onerous work rules, and the outright elimination of hundreds of thousands of jobs.

The repeated occurrence of economic disasters cannot be explained as unfortunate accidents, which might have been avoided had investors been less greedy, executives more responsible, or administrators more watchful.

Since the 1980s, there has been a major disaster every five years or so. In the 1980s, the so-called “Decade of Greed,” there was the Savings and Loans scandal, the junk bond mania (Ivan Boesky and Michael Milken), and the 1987 Wall Street crash. In the 1990s, there was the Mexican peso crisis, the dot.com bubble, the Asian crisis, the Russian financial crisis, and the collapse of Long Term Capital Management. In 2001 Enron collapsed almost

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overnight, when its fraudulent bookkeeping, in which prestigious accounting firms acted as accomplices, was exposed. Then, abetted by the decision of the Federal Reserve to cut interest rates to their lowest levels in decades, the housing boom developed. Underlying all these speculative operations is the decay of the real productive foundations of American capitalism, the separation of the process of the ruling class’ self-enrichment from the processes of production and the creation of real value.

The end of dollar dominance This crisis cannot be reversed by reviving a mythical “Golden Age” of American capitalism. First, the objective position of American capitalism in the world economy has deteriorated dramatically over the past 40 years. As I explained earlier in this report, the weakening of the dollar as far back as the late 1950s was among the earliest signs of the deterioration of the global position of the United States. In 1971 the US ended dollar-gold convertibility.

Still, the dollar has remained the world reserve currency even as the United States became the largest debtor nation and accumulated a massive current accounts deficit. In yet another sign that this crisis marks a historic turning point, Chinese Prime Minister Wen Jiabao has publicly expressed concern about the future viability of the American dollar and the safety of Chinese dollar holding. “We have lent a huge amount of money to the US. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried,” he said recently.

The financial viability of the United States has been called into question by a major economic power—one that happens to be the largest foreign holder of US dollars. While American commentators have, for the most part, brushed off Wen’s statement—on the grounds that China would not, for its own sake, risk the global financial consequences of lowering its dollar holdings and igniting a run on the American currency—it is difficult to exaggerate its significance. Up until now, the global role of the dollar provided the United States with a unique financial advantage. The United States controlled the printing of a currency that functioned as the world reserve currency.

Were the dollar to lose its unique global status, this would have immediate consequences not only for the global position of American capitalism, but also for the conduct of its domestic economic policies. It needs only to be pointed out that the entire stimulus package of the Obama administra-

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tion, which entails running multi-trillion-dollar deficits, depends upon the willingness of foreign creditors to hold US dollars.

A systemic crisis The analysis presented in this lecture has stressed that the present crisis is of a systemic, rather than conjunctural character, and that its development is the outcome of the protracted decline in the global position of American capitalism. The rampant financial speculation, fueled by debt, is not the cause of the crisis, but, rather, a manifestation of deep-rooted contradictions in the American and global economy. As we have sought to explain, the very measures undertaken by American capitalism to respond to economic pressures that it confronted more than four decades ago prepared the foundations for the crisis that it confronts today.

Precisely because of the historic and global character of the contradictions that underlie the present crisis, the claims of the Obama administration that the present downturn will give way, within some sort of reasonable timeframe, to renewed and sustained economic growth, accompanied by a recovery and improvement in the living standards of the broad mass of the population, will be discredited by events. Regardless of fluctuations in the economic conjuncture from month to month and quarter to quarter, the enduring impact of this crisis will be a long-lasting and deeply painful deterioration in the living standards of the working class in the United States.

Moreover, if history teaches us anything, it is that an international systemic breakdown of capitalism leads inexorably to violent political convulsions. Capitalism in crisis becomes the breeding ground of political dictatorships and rampant militarism. Out of the economic breakdown of the early 1930s emerged first fascism and then world war. The restabilization of capitalism in the aftermath of World War II was purchased with the blood of tens of millions of people.

The social physiognomy of the American ruling class To recognize the dangerous implications of the unfolding crisis is not alarmism, but political realism. There is no reason to believe that the ruling elites will respond in the first and second decades of the twenty-first century to the breakdown of capitalism with any less brutality than they did in the 1930s and 1940s. Nothing in contemporary culture suggests that the

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The Economic Crisis & the Return of History

super-rich of the corporate and financial elite has grown more civilized and less prone to violence in defense of its interests than the magnates of the last century. The operation of the capitalist economy cannot be abstracted in some sort of metaphysical way from the class relations and interests to which it gives rise and in which it is embedded. During the past quarter century, the decay of American capitalism has created a powerful social constituency, commanding vast wealth, whose social and political arrogance has been magnified by its economic parasitism. If any conclusion can be drawn from its initial response to the bankruptcies and collapses produced by its own policies, it is that the ruling class is determined to make the mass of the population pay for the cost of the crisis.

Observing the response of the ruling elite in the United States to the economic crisis, one cannot help but note the parallel to the French aristocracy on the eve of the revolution that erupted in 1789. Every effort to find a rational solution to the financial crisis that confronted France was blocked by the aristocracy, which was determined to exploit the crisis in its own interests. The nobility would not tolerate any measures that threatened to undermine its wealth, status and prerogatives. In the end, their intransigence drove the mass of society, the “Third Estate,” to ever-more radical measures.

The brazen contempt for public opinion displayed by the executives of failed banks and corporations as they reward themselves with multi-milliondollar bonuses, looted from funds provided by taxpayers, exposes the unalterably reactionary and socially destructive character of the American ruling class. It will do anything to protect its wealth and privileges. The AIG affair is typical of a society in which the rich, intoxicated by privilege, believe that they can do what they wish, unencumbered by legal, let alone moral restraints. President Obama’s Treasury Secretary Tim Geithner, a multimillionaire like many other members of the administration, cheated on his taxes—with no legal or professional consequences. Paying taxes, as we were once told by a real estate mogul, “is for little people.”

One is struck by the degree to which the American ruling class has acquired the characteristics of a decadent aristocracy. Self-obsessed and narcissistic, it seems utterly impervious to the feelings and sentiments of that portion of society that is compelled to work for a living. In the midst of the AIG scandal, one of the leading business columnists for the New York Times, Andrew Ross Sorkin, argued that the $160 million bonuses must be paid to AIG, in the interest of preserving the sanctity of contracts! And yet,

The Capitalist Crisis & the Return of History

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the same columnist has called for the ripping up of the contracts of autoworkers and the elimination of benefits and the lowering of wages. Legal standards, as we see, are determined by class interests.

The policies of the Obama administration This basic social fact must be kept in mind as one considers the course that events are likely to take in the months ahead. The policies of the Obama administration are determined entirely by the interests of the corporate and financial aristocracy. In this sense, those who compare Obama to Roosevelt are engaged in either public deception or self-delusion. Despite the gravity of the economic crisis, the immense economic resources of the United States in the 1930s still allowed Roosevelt to experiment with social reforms. That option no longer exists today. Contemporary American capitalism lacks such resources.

However, there is certainly one significant aspect of developments in the 1930s that is highly relevant as one considers the probable course of events in the months to come. There is no doubt that the first “100 days� of the Roosevelt administration, with its barrage of policy initiatives, indicated a significant change in government policy. But the real impulse for a radical change in American society came not from above, not from Roosevelt, but from below—from the great mass of working people who, with increasing militancy and daring, took matters into their own hands. The really significant changes in social conditions in the United States were the product of the great mass strikes of 1934 in Toledo, San Francisco, and Minneapolis; of the founding of the Congress of Industrial Organizations (CIO) in 1935; and of the great sit-down strikes of 1936-1937.

Crisis and class forces The most essential feature of a historically significant crisis is that it leads to a situation where the major class forces within the affected country (and countries) are compelled to formulate and adopt an independent position in relationship to the crisis. That is, the classes are driven to advance a solution to the crisis in which their own social needs and interests are expressed. For the ruling classes, this process takes place rather naturally.

They assume that their interests, political and economic, are the only ones of any importance. Thus, in the present situation, the Obama administra-

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tion—having completed a “seamless transition” from its predecessor—has no doubt that its main priority must be the propping up of the banks, while avoiding any measures that impinge on the wealth and prerogatives of the corporate and financial aristocracy.

For the working class, the formulation of an independent attitude toward the crisis, with the necessary program and policies, is a more protracted social and political process. The masses must work through their experiences and draw their conclusions. But this process is already under way. The chasm between the promises of the election year and the reality of government policy is becoming more evident each day. As the need for action becomes ever more urgent, the working class will lose its patience with purely rhetorical and empty invocations of “change.”

“The history of all hitherto existing society,” wrote Marx and Engels in 1847, “is the history of class struggle.” Underlying all the claims that Marxism had been refuted and that the egalitarian aspirations of socialism were irrelevant to the modern world, was the complacent belief that the “class struggle” belonged to the past. Ironically, the official dismissal of class struggle occurred under conditions in which the ruling class pursued (and continues to pursue) its own interests relentlessly.

The one undoubtedly positive feature of the economic crisis is that it is laying bare the real social relations of modern capitalist society, exposing the irreconcilable conflict between the interests of the working class and the capitalist aristocracy, and therefore preparing the ground for the resurgence of the working class and the resumption of open class struggle on a scale that will eclipse by far the battles of the 1930s. The American working class is being drawn into an international maelstrom of revolutionary class struggle. It is in this sense that the world crisis has set the stage for the “return of history.”

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early eight months have passed since the collapse of the Wall Street investment bank Lehman Brothers began the greatest economic and financial crisis since the breakdown of 1929. A growing number of economic analysts believe that the present crisis may eclipse that of the Great Depression. This crisis will be protracted—lasting years, not months—and its long-term consequences will be far-reaching. History is being made, and the world that emerges from this crisis will be very different from that which existed prior to the Lehman Brothers collapse of September 15, 2008.

The scale of the economic breakdown is difficult to comprehend. No previous event in economic history has involved the sums of money, in the trillions of dollars, that have been squandered by the governments of the United States and Europe to prop up the banks and financial institutions whose reckless activities triggered the global meltdown. If a criminal mastermind had managed to steal all the gold in Fort Knox, the value of his heist would have been far less than the sum of money turned over to the banks under the Troubled Asset Relief Program (TARP) scheme.

The losses of the banks, according to the International Monetary Fund, are in the area of four trillion dollars. Total losses approach $50 trillion, including the $25 trillion to $30 trillion decline in share values on global equity markets.

Report to regional conferences of the WSWS/SEP/ISSE, “The world economic crisis, the failure of capitalism, and the case for socialism” in May 2009

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The Economic Crisis & the Return of History

The rapidity of the global economic downturn is without precedent. Comparing the immediate aftermath of the Crash of 2008 to that of 1929, two wellknown economists, Barry Eichengreen and Kevin O’Rourke, state that the present situation is worse. Production is down 12 percent, as compared to 5 percent in the six months that followed the 1929 Crash. Trade has fallen 16 percent, as compared to 5 percent in the earlier crisis. And though the signal event of the 1929 Crisis was the dramatic fall on Wall Street, the market collapse was far steeper in the final months of 2008 and the opening months of 2009.

The collapse of global manufacturing is without precedent since the end of World War II. As of March 2009, European manufacturing has fallen 12 percent from a year ago; Brazilian manufacturing is down 15 percent; Taiwan manufacturing has dropped 43 percent; and in the United States the drop so far is 11 percent. As for trade, German exports are down 20 percent; Japan’s exports have fallen 46 percent; and US exports are down 23 percent.

The clearest statistical indication of the scale of the economic crisis and its shattering social impact are provided by the figures related to unemployment. The International Labor Organization’s 2009 Global Trends report makes for chilling reading. In 2008 global unemployment increased by 10.7 million over the previous year, the largest increase since the Asian financial crisis of 1998. The total number of global unemployed reached 190 million, of whom 109 million were men and 81 million were women. The number of unemployed youth reached 76 million.

The ILO projections for unemployment in 2009 are based on three different crisis scenarios. The scenario that the ILO itself believes to be the most probable estimates that the number of unemployed will increase between 30 and 50 million people. The actual figure will likely approach the higher number.

The ILO states that the threshold for poverty in less developed countries is an income of $2 per day. For extreme poverty it is $1.25 per day. The organization projects that a severe economic crisis will create an additional 200 million workers living in extreme poverty. Another significant category tracked by the ILO is that of the vulnerably employed—that is, workers who endure extremely low wages, abusive conditions and negligible opportunities. The number of such workers rose, according to the ILO, by 84 million in 2008, to a total of 1.6 billion people.

While the social situation in the less developed regions is already catastrophic, the economic crisis is having a devastating impact on the working class in the advanced capitalist countries. In the 30 richest countries, the economic crisis will increase unemployment by 25 million people.

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The situation in the United States continues to deteriorate. Another 563,000 people lost their jobs in April 2009 alone, and the national unemployment rate rose to 8.9 percent. The total number of workers unemployed is now 13.7 million, the highest in the post-World War II era. Since the onset of the economic crisis, 6,000,000 workers have been thrown out of work.

In March 2009, unemployment increased by 62,000 in California, 51,000 in Florida, 47,000 in Texas, 41,000 in North Carolina, 39,000 in Illinois, and 37,000 in Ohio. The highest regional unemployment rate is in the West, where it now stands at 9.8 percent. It is 9.0 percent in the Midwest.

On a statewide basis, as of March 2009, Michigan’s unemployment rate of 12.6 percent is the highest in the country, followed by Oregon with 12.1 percent, South Carolina with 11.4 percent, California with 11.2 percent, North Carolina with 10.8 percent, Rhode Island with 10.5 percent, Nevada with 10.4 percent, and Indiana with 10 percent.

These levels of unemployment translate into other indices of extreme social distress: a tidal wave of foreclosures and personal bankruptcies, declining college enrollments, rising crime rates, and a general deterioration in the health and well being of the population. Wage cuts of ten percent and higher have been imposed on workers throughout the country, eroding living standards and pushing millions of workers to the very brink of financial disaster.

What is the prognosis for the future? At what point will the “bottom” be reached and a “rebound” begin? The recent rise in global markets from their March 2009 lows is being proclaimed as the beginning of a turnaround. Aside from the direct impact of multi-billion-dollar infusions of public money into the banking system, there is little hard data that justifies various optimistic forecasts of an imminent end of the recession. Let us keep in mind that the most recent US employment statistics showed nothing more promising than a slightly less severe rate of job losses. That is not exactly great news. Moreover, speculation about an imminent “rebound” reflects an incorrect understanding of the present crisis. Of course, it is not entirely beyond the realm of possibility that there may be, at some point, an improvement in the conjuncture. Nor is it difficult to imagine that the economic situation may continue to deteriorate.

However, whatever the short-term fluctuations in the markets and other indices of the global economy, there will not be a return to the status quo ante. The previous conditions are gone and will not return. This is not only because massive damage has been done to the global financial system. This crisis marks the breakdown in the global structure of world capitalism as it

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emerged from the Second World War. It is not an accident that the present crisis originated in the United States. The essential significance of this crisis lies precisely in the fact that it arises out of the long-developing deterioration of the dominant global economic position of the United States.

This crisis is the form in which a fundamental restructuring of the American and global economy, and the social and class relations upon which it is based, is taking place. It can be resolved in only one of two ways: either on a capitalist or on a socialist basis. The first, the capitalist solution, will mean a drastic lowering of the living standards of the working class in the United States, Europe and throughout the world. This solution will require massive internal repression, the destruction of the democratic rights of the working class, and the unleashing of military violence on a scale not seen since World War II. The only alternative to this catastrophic scenario is the socialist solution, which requires the taking of political power by the American and international working class, the establishment of popular democratic control of industrial, financial and natural resources, and the development of a scientifically-planned global economy that is dedicated to the satisfaction of the needs of society as a whole, rather than the destructive pursuit of profit and personal wealth.

The crisis has laid bare the corrupt and parasitical character of the world capitalist system, based on American-inspired “free-market” capitalism that has evolved over the past 30 years. The vast enrichment of a small section of society and the unprecedented growth of social inequality were, as has now become clear, the symptoms of a corrupt and diseased economic system. In the harsh light of this crisis, an increasing number of economic commentators are acknowledging that the policies and practices that led to the present crisis can be traced back to the coming to power of Margaret Thatcher in Britain in 1979 and the election of Ronald Reagan in 1980. Their dual victories led to a repudiation of the managed capitalism advocated by John Maynard Keynes and the introduction of the free-market “fundamentalism” of Milton Friedman.

There is an element of truth in this analysis, but it evades the more basic question: why did this change take place? The shift from Keynesianism to Friedman-style free-market fundamentalism was a response by powerful sections of the ruling class in Britain and the United States to an already far-advanced crisis of the capitalist system. As far back as 1967, there were growing indications that the mechanisms devised by Keynes to stabilize and rebuild capitalism in the aftermath of World War II were breaking down.

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The system of dollar-gold convertibility adopted at the Bretton Woods Conference of 1944, which established the stable international monetary system that provided the basis for the post-war economic expansion, was increasingly unviable by the late 1960s. In August 1971, the system broke down completely when President Richard Nixon ended dollar-gold convertibility.

Three interrelated factors contributed to the breakdown of Bretton Woods. The first was the gradual erosion in the course of the 1950s and 1960s of the dominant economic position that the United States had enjoyed in the aftermath of the Second World War. The second was a general decline in the rate of profit by the mid-1960s that placed considerable pressure on American, European and Japanese corporations and intensified global competitive pressures. Finally, the militancy of the working class throughout the world frustrated efforts by the capitalist class to find a way out of the crisis through the intensified exploitation of the working class.

The period between 1967 and 1975 was characterized by an international eruption of working class militancy and political radicalization. The French General Strike of May-June 1968; the massive strike wave in Italy in 1969; the upsurge of the working class in South America; the powerful strikes in Britain, spearheaded by the coal miners, that eventually forced the right-wing conservative government out of office; the strikes of shipyard workers in Gdansk that staggered the Stalinist regime in Poland; and the resistance of Greek, Portuguese and Spanish workers that ultimately shattered the dictatorships in their countries, were among the most significant manifestations of a global wave of labor militancy that was assuming revolutionary dimensions. This movement extended well beyond the major capitalist centers. Throughout Africa, the Middle East, Latin America and Asia, the popular masses were engaged in mass struggles aimed at eradicating the remaining vestiges of American and European colonialism. The struggle of the Vietnamese masses was the most heroic manifestation of this worldwide movement.

The working class in the United States played a significant role in this global process. The historic struggle for civil rights that shook American society in the 1950s and 1960s was, in essence, a struggle by the most exploited and impoverished sections of the American working class against oppression and discrimination that was rooted, in the final analysis, in the class structure of American society. In cities such as Los Angeles, Newark, and Detroit, these struggles assumed an insurrectionary form. The state governments responded by mobilizing their national guards and imposing

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martial law. In the case of Detroit, President Lyndon Johnson dispatched federal troops to suppress the popular revolt.

Strike activity—the most basic indicator of class militancy—increased dramatically from the mid-1960s on, among broad sections of the industrial working class. After the stormy struggles of the 1930s and late 1940s, there had been a gradual decline in strikes in the 1950s and early 1960s.

An exception was 1959, when a bitter 116-day strike involving hundreds of thousands of steelworkers cost steel companies millions of man-days in lost production time. Between 1960 and 1966, the number of man-days lost as a result of strikes oscillated between 10 and 16 million annually.

The situation shifted radically in 1967, when work stoppages cost employers 31 million man-days. The figure rose to 35 million man-days in 1968.

In 1969 it slipped slightly to 29 million man-days. In 1970 the total mandays lost as a result of work stoppages hit 52.7 million. That was the year of a two-month-long strike of auto workers against General Motors. It was also the year of the massacre by national guardsmen of four students at Kent State University.

Strike levels declined to about 16 million work days lost in 1972 and 1973, in large measure due to the collaboration of the AFL-CIO, Teamsters and UAW on a Government-Management-Labor committee that had been set up to control wage demands. But in 1974, spearheaded by militant coal miners, work stoppages claimed almost 32 million man-days. Strike levels slipped to 17.5 million man-days in 1975. However, for the rest of the decade, from 1976 through 1980, strikes cost employers between 20 and 23 million man-days each year.

These figures testified to the immense combativity of the working class throughout the 1970s. The high point of class militancy was the national coal miners’ strike of 1977-1978. The strikers rejected two sell-out contracts negotiated by the union bureaucracy and defied a back-to-work order issued by President Jimmy Carter, who was acting under the provisions of the notorious Taft-Hartley Act. A review of this history is necessary in order to appreciate the changes in American society over the past 30 years. This year marks the 30th anniversary of three events that signaled the beginning of a vicious counteroffensive by the ruling class against the working class. The conditions for this counter-offensive had been created by the fact that the struggles of the working class in the 1960s and 1970s, despite their militancy, had lacked any independent political perspective. The alliance of the trade union bu-

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reaucracy with the Democratic Party kept the mass movement within the shackles of capitalist politics and capitalist economics. In other words, the movement eventually arrived at a dead end, which provided the ruling class with an opportunity to reverse its retreats of the previous decades and go on the offensive.

Man-­‐Days Lost in Work Stopages Involving 1,000 or More Workers 1947-­‐2008 1.2

70,000,000

60,000,000

1

50,000,000 0.8 40,000,000 0.6 30,000,000 0.4 20,000,000

0.2

2007

2004

2001

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

1962

1959

1956

1953

1950

0

1947

10,000,000

0

The counter-offensive began with the appointment of Paul Volcker as chairman of the Federal Reserve by President Carter, a Democrat. The Bulletin, the forerunner of the World Socialist Web Site, warned on July 27, 1979, that his appointment signified “a declaration of war on jobs and working class living standards.” This analysis was quickly vindicated. Volcker immediately set about to break the back of working class militancy by raising interest rates to unprecedented levels, thus provoking a severe recession and driving up unemployment. Under Volcker, the prime rate eventually went as high as 21.5 percent.

The second event was the announcement by Chrysler that it would shut down a major production facility in Detroit, the famous Dodge Main plant in Hamtramck that employed several thousand workers. This decision was accepted by the UAW, which ignored demands by rank-and-file workers for action to defend jobs. Opposition was strangled and the factory was closed in January 1980 without resistance.

Finally, in 1979 the UAW bureaucracy decided to grant Chrysler major concessions on wages and work rules. This began a pattern of union-management collaboration that cleared the way for subsequent attacks on the

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jobs, wages, working conditions, and benefits of all sections of the American working class.

All these events took place even before Reagan was elected president.

His accession to the presidency in January 1981 accelerated and intensified the war on the working class that Carter had begun in 1979. The defining event of the Reagan presidency—the firing in August 1981 of 11,000 striking air traffic controllers, members of PATCO—sent a signal to all corporations that strike-breaking and union-busting was legitimate and would enjoy the support of the government. However, Reagan’s destruction of PATCO would not have succeeded had he not received the support of the AFL-CIO bureaucracy, which opposed any action in defense of the victimized air traffic controllers.

In the years that followed, the AFL-CIO bureaucracy sanctioned a wave of government and corporate strikebreaking. There were no shortage of strikes during the 1980s—by Greyhound bus drivers, Continental pilots, Phelps Dodge copper miners, Hormel meatpacking workers, and AT Massey coal miners, to name only a few of the best known struggles of the 1980s. But these and virtually every other strike were isolated by the AFL-CIO and defeated.

In the case of the Hormel strike, the United Food and Commercial Workers Union decertified the local that was at the heart of the strike.

As the unions collaborated with the government, the Democratic Party and big business in smashing strikes, they entered into explicitly corporatist relationships—modeled on the labor-business syndicates established in fascist Italy and Nazi Germany during the 1920s and 1930s—that espoused unrestrained union-management collaboration. In an action that symbolized its corporatist ideology, the UAW adopted the practice of placing a hyphen between its name and that of the Big Three auto companies, as in “UAW-GM,” “UAW-Chrysler,” and “UAW-Ford.”

After a decade of sabotage, the AFL-CIO, UAW and Teamsters were unions in name only. They had ceased to exist as organizations that were in any way associated with the defense of the working class. Rather, they served the financial and social interests of an upper middle-class stratum of right-wing functionaries, policing workers on behalf of and in collaboration with the corporations.

The most telling statistical evidence of the impact of the corporate-controlled unions on the working class is the virtual disappearance of strikes in the United States. Between 1990 and 1999, there was not one year where even six million man-days were lost as a result of strikes. During the present

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decade the situation has been even worse. Except for 2000, when 20 million days were lost—as a result of the protracted strike of actors (which claimed more than 17 million days)—strikes in subsequent years (2001-2008) oscillated from a low of 659,000 days lost in 2002 to a high of 4 million in 2003.

Since 2004, the number of man-days lost due to work stoppages averages out to just about two million days annually.

The consequences of the suppression of class struggle by the rightwing bureaucratic labor organizations are seen in the huge growth of social inequality, the stagnation and decline in working class living standards, the emergence of a financial oligarchy that wields unprecedented political power, the erosion of democracy and, finally, the growth of militarism. The reactionary and socially destructive character of economic development within the United States and internationally depended on the intense and active collaboration of the trade union bureaucracy.

However, it must be stressed that this was not a uniquely American phenomenon. Analogous social processes took place internationally.

Capitalism survived the immense working class upsurge of the period between 1968 and 1975 due to the betrayals of the labor bureaucracies.

The Stalinist and social democratic bureaucracies played, in their own way, no less a reactionary role than the pro-capitalist labor bureaucrats in the United States. The May 1979 election of Margaret Thatcher in Britain cleared the path for the introduction of free-market policies that mirrored those of the US, and with similar social consequences. And, as in the United States, the labor bureaucracy played the decisive role in suppressive working class opposition to the policies of the right-wing government.

Moreover, the decision of the Stalinist regimes to reintroduce capitalism in the countries they dominated during the post war period had an immense impact on global politics and economics during the last 20 years.

The dissolution of the Soviet Union and the reintroduction of capitalism into Eastern Europe opened up enormous new resources for exploitation

by American, European and Japanese capitalism. Even more significant in economic terms was the reintroduction of capitalism into China by the Stalinist regime. The economic transformation of China into a global center of low-cost manufacturing began in the 1980s. This process generated social conflict that culminated in 1989 with the mass protests of student youth and workers. The massacre that occurred in Tiananmen Square in June 1989 was the decisive event in suppressing popular opposition to the right-wing policies of the Stalinist regime.

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The suppression of class struggle in the advanced capitalist countries and the restoration of capitalism in Eastern Europe and China created a favorable environment for the policies associated with the massive growth of the finance industry, laden with debt, during the 1980s, 1990s and the first decade of the twenty-first century. This was an environment that required the suppression of all restraints—social, political and even legal—on the recklessly speculative operations of capital.

A protracted period of social and political reaction signifies the forcible and artificial suppression of social and economic contradictions. The degree to which these contradictions have been suppressed determines the force and intensity of the crisis that follows. It is, therefore, to be expected that the present crisis will give rise to explosive social upheavals.

During its first 100 days, the Obama administration has devoted its energies to protecting the wealth and interests of the financial oligarchy. The recent surge in the stock market—which began after Treasury Secretary Tim Geithner unveiled the administration’s bail-out plan and gained strength after Obama sanctioned a massive restructuring of the auto industry—reflects Wall Street’s confidence in the White House. The bank bailout, funded by taxpayers, made it clear to the financial oligarchy that no expense will be spared to protect its interests.

Obama’s intervention in the auto crisis further demonstrated that the administration saw the broader economic breakdown as an opportunity to drastically restructure social relations within the United States at the expense of the working class. This is what Rahm Emanuel, Obama’s chief of staff, really had in mind when he said, “Never let a crisis go to waste.” As New York Times business analyst Floyd Norris wrote on May 2, 2009: This may come to be seen as Mr. Obama’s “Nixon in China” moment. Just as it took a conservative Republican to open relations with the largest Communist country in the world, it took a liberal Democrat to break the UAW. Of course, it is necessary to add the following crucial caveat: Obama hardly had to “break” the UAW. It had long ago ceased to be a union in any socially and politically meaningful sense of the word. The UAW is an organization that serves the interest of a vast administration that bases its income on a parasitic, exploitative and duplicitous relationship with the organization’s membership.

The Economic Crisis & the Resurgence of Class Conflict in the US

39

The international headquarters of the United Auto Workers employs more than 2,000 people. The printout of UAW International employees runs approximately 130 legal-size pages. Total disbursements to the staff at the UAW’s International Headquarters in 2008, in the form of salaries, allowances and expenses, were, according to the union’s official financial statement, $101,896,200!

UAW Total Membership 800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

Most of the employees are identified as “servicing representatives,” “organizers,” “stenographers,” and “administrative assistants.” In other words, they occupy sinecures, for which they are required to do nothing more than support the top union executives. Approximately one quarter of the staff is paid over $110,000 per year. Most of the several hundred “servicing representatives” receive salaries and additional cash subsidies that run between $120,000 and $140,000 per year. The typical “servicing representative” is a semi-retired right-wing bureaucrat in his late 40s or 50s from a union local—which, due to factory shutdowns, may no longer even exist—who is “responsible” in some rather vague sense for overseeing contract agreements covering a few hundred union members. A large number of UAW International staff members share blood ties, so it is not unusual to find families that are collectively receiving more than $200,000 annually in union payments.

The UAW’s massive loss of membership has had no significant impact on the financial well being of its administration. In 2001, the union had 701,000 members and its total assets were appraised at $1.1 billion. By

The Economic Crisis & the Return of History

40

2008, its membership had fallen to 431,000—a drop of approximately 40 percent.

UAW Interna+onal Assets (in Billions) $1.30

$1.25

$1.20

$1.15

$1.10

$1.05

$1.00

2000

2001

2002

2003

2004

2005

2006

2007

2008

2006

2007

2008

UAW Interna+onal Staff Income $105.00

$100.00

$95.00

$90.00

$85.00

$80.00

$75.00

2000

2001

2002

2003

2004

2005

However, during this same period, the UAW’s assets rose to $1.2 billion.

The increase of assets has made possible a substantial increase in the income of the UAW’s administration. In 2000, the International paid its staff $89.6 million in salaries. In 2008, the salaries had grown to $100.9 million. Looking at these figures in another way, in 2000 the UAW’s central bureaucracy received $133 in income per union member. Just eight years later, the central bureaucracy received $233 in income per union member.

The Economic Crisis & the Resurgence of Class Conflict in the US

41

One must keep in mind, as one reviews these figures, that they cover only the staff at the UAW International headquarters. Additional tens of millions are grubbed by the staffs employed by the vast network of local union fleshpots. And beyond the UAW, there are hundreds of other “union” organizations that operate along the same lines, collectively doling out billions of dollars in salaries and benefits to the largest and most expensive corporate-controlled labor-management police force in the world.

Everything that Obama has done has been carried out with the UAW’s approval. The settlement agreement reached between Chrysler and the UAW, prior to the company’s announcement of bankruptcy in April 2009, includes the following provisions: 1) The cost-of-living allowance is being suspended; 2) Previously negotiated performance bonuses are being suspended; 3) Christmas bonuses are being suspended; 4) Relief time for employers is being substantially cut; 5) The use of temporary employees is being extended; 6) All disputes will be submitted to binding arbitration; 7) Retiree health benefits are being cut immediately.

In the aftermath of Chrysler’s bankruptcy announcement, the UAW is claiming that its close ties with the Obama administration will provide significant protection for Chrysler workers. This is a lie. Again, to quote Norris: It is said that the United Auto Workers, which supported Mr. Obama in the election last year, is effectively being paid off by treating the bondholders worse than the retirees. I disagree. The retirees may have a little better chance of getting benefits they were promised, but the current workers are getting little more than being allowed to keep some of their jobs.

The open involvement of the UAW in these massive attacks has destroyed what little was left of the credibility of this reactionary organization among auto workers, who understand that they have been betrayed. The workers’ defense of their basic rights and class interests must and will lead to a rebellion against the UAW and all the other pro-corporate and procapitalist organizations. New forms of class organizations will emerge as workers move into struggle against the capitalist system.

We have already reviewed the extraordinary decline in the number of strikes, and of workers involved in strikes, during the past 20 years. The virtual absence of industrial conflict between 1989 and 2009 sets these two decades apart from any other period in post-Civil War America. A review of

The Economic Crisis & the Return of History

42

every decade between the 1870s and 1980s would demonstrate that each of them witnessed significant levels of industrial class conflict. The 1990s and the 2000s stand out in sharp contrast.

But this anomalous character of the past two decades must be analyzed in the context of another principal characteristic of this period; that is, the staggering increase in wealth accumulation in the very richest sections of the American ruling class. In 1947 the richest .01 percent (one-hundredth of one percent) of the population claimed 1 percent of the national income.

This was significantly less than the 3.61 percent of the national income that it claimed in 1929, prior to the Wall Street crash. The intervening years had been marked by violent class conflict and the rise of the Congress of Industrial Organizations. By 1973 the income share of the richest .01 percent had declined to 0.6 percent of national income. This low point was a consequence, above all, of the preceding two and a half decades of consistently high levels of class conflict.

This process began to move in the opposite direction—toward an evergreater concentration of wealth in the richest .01 percent (and, in fact, in the wealthiest 5 percent) from 1979 on. In that year, the richest .01 percent garnered 0.9 percent of the national income. By 1989 its income share had risen to 2.3 percent. By 1999 the income share of the top stratum reached 2.92 percent. By 2006, the last year for which we have figures (based on the studies of Professors Piketty and Saez), the income share of the richest Americans had reached 3.76 percent.

Income Share Top .01% 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00

1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004

If we now examine the income share of the top 0.1 percent (one-tenth of one percent) of the population, this layer garnered 8.7 percent of the national income in 1929. By 1947 its share had declined to 3.4 percent. At its

The Economic Crisis & the Resurgence of Class Conflict in the US

43

low point in 1973, its income share had fallen to 2.2 percent. In 1979 it had risen to 2.7 percent. In 1989 its share had leapt to 5.5 percent. By 1999 it had reached 8 percent. In 2006 the income share of the top 0.1 percent stood at 9.1 percent.

Income Share Top .1% 25.00

20.00

15.00

10.00

5.00

0.00

1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004

Finally, let us look at the income of those who comprise the top 1 percent. In 1929, this stratum received 19.8 percent of the national income. In 1947 its share had dropped to 11.25 percent. In 1973, the low point, its share of national income was 8.3 percent. By 1979 it had risen slightly to 9 percent. By 1999 its share had more than doubled to 18.4 percent. And in 2006 it stood at 20 percent. That is, the richest one percent of the population received one fifth of the national income.

Income Share Top 1% 25

20

15

10

5

0

1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007

When the graph of the income share of the wealthiest section of the capitalist class between 1947 and 2006 is superimposed on the graph of strike levels during the same period, the relationship between these variables is vividly illustrated. High levels of workplace militancy and open class

The Economic Crisis & the Return of History

44

conflict are associated with a decline in wealth accumulation among the rich and of social inequality. Under conditions in which social conflict is suppressed, wealth accumulation increases rapidly along with the level of social inequality. As the graph of these related phenomena demonstrates, the gap between the lines of wealth accumulation of the richest .1 percent and the level of strike activity has grown dramatically during the past 20 years.

Strikes vs Income For Top 1 Percent of Earners 70,000,000

25

60,000,000 20 50,000,000

15

40,000,000

30,000,000

10

20,000,000 5

Man-­‐days lost

2007

2004

2001

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

1962

1959

1956

1953

1950

0

1947

10,000,000

0

Share of income of top 1 percent

This gap—which can be defined as a potential “zone of conflict”—has reached dimensions that are not compatible with social “peace.” In terms of social inequality, the United States is now back to where it was in 1929, prior to the Great Depression and the ensuing social upsurge of the working class. There are limits to the ability of the Obama administration and the trade union apparatus to suppress social conflict. The social contradictions of the United States have reached a point where an explosive renewal of the class struggle is unavoidable.

But the coming struggles will not merely repeat the patterns of the past.

At the beginning of the year, the SEP stated: The tasks of the SEP proceed from the logic of the socioeconomic and political crisis of American and world capitalism. The party anticipates that the deepening crisis will lead to the social and political radicalization of the working class in the United States and internationally. This radicalization will find expression in the development of mass struggles that strive to break free of the bu-

The Economic Crisis & the Resurgence of Class Conflict in the US

45

reaucratic shackles of the reactionary trade unions and assume an increasingly political and anti-capitalist dimension.

History has once again taken a sharp turn. The past 12 months have witnessed an extraordinary transformation of the objective situation. Mankind is entering into a new period of political upheavals and social struggles, on a world scale, which will decide the fate of humanity. The objective prerequisites for world socialist revolution are emerging with extreme rapidity. Thus, the role of the subjective factor, the revolutionary party, assumes decisive historical significance. The chasm between the maturity of the objective situation and the present consciousness of the working class must be overcome. This requires, above all, the recruitment of workers and youth into the SEP and their political education on the basis of Marxist theory and the history of the Fourth International. This is the task to which the International Committee of the Fourth International and the Socialist Equality Party must direct all its efforts in 2009.

Nothing that has occurred during the past five months leads us to believe that this analysis and perspective should be revised. Rather, the singleminded and unrelenting efforts of the Obama administration to resolve the crisis in the interests of the financial oligarchy will exacerbate class tensions.

Whatever the immediate impulse for the renewal of open class conflict, its form, character and goals will, in the final analysis, be determined by the advanced stage of the crisis of American and world capitalism. The coming battles of the American working class, unfolding as part of an emerging movement of the international working class, will assume the form of a political struggle for power and for socialism.

Seventy Years Since the Outbreak of World War II: Causes, Consequences and Lessons

T

he main concern of this lecture is not the specific conflicts and events that triggered World War II, but rather the war’s more general causes.

Given the massive scale of the cataclysm that unfolded between 1939 and 1945, it is simplistic, even absurd, to seek the causes of the war primarily in the diplomatic conflicts that led up to the hostilities—such as the dispute over the Danzig Corridor—apart from their broader historical context.

Any consideration of the causes of World War II must proceed from the fact that the development of global military conflict between 1939 and 1945 followed by only 25 years the first global military conflict, which occurred between 1914 and 1918. That is, only 21 years passed between the end of World War I and the beginning of World War II. Another way of looking at it is that within the space of just 31 years, two catastrophic global wars were fought.

To put this in a contemporary perspective, the time span between 1914 and 1945 is the same as that between 1978—the midpoint of the Carter administration—and 2009. To maintain this sense of historical perspective— making the necessary shift in historical time—let us consider that someone Lecture given at San Diego State University on October 5, 2009

47

The Economic Crisis & the Return of History

48

born in 1960 would have been 18 years old in 1978, that is, old enough to be drafted to fight in a war. If he or she survived, that person would have been only 22 at the end of the war. He or she would have been just 43 when the second war began and only 49 when it was over.

What does this mean in very human and personal terms? By the time such an individual reached the age of 50, he or she would have witnessed, either directly or indirectly, a staggering level of violence. This individual would have probably known very many people who were killed in the course of these wars.

Of course, the scale of one’s personal acquaintance with death during the two wars depended on where one happened to live. The experience of the average American was not the same as that of the average person in England, France, Germany, Poland, Russia, China or Japan.

Deaths in World War I and II For World War I, estimates of total deaths range from 9 million to over 16 million. Combat-related deaths accounted for 6.8 million of the total number. Another 2 million military deaths were caused by accidents, disease and the effect of POW camp incarceration.

Figures 1 and 2 give a breakdown of the death toll by country for World War I. Figure 1. Deaths in World War I by country, Allied power Country

Deaths

% of population

Australia

61,928

1.38%

Canada

66,944

0.92%

Britain

994,138

2.19%

Belgium

120,637

1.63%

France

1,697,800

4.29%

Greece

176,000

3.67%

Italy

1,240,000

3.48%

Romania

680,000

9.07%

Russia

3,311,000

1.89%

Serbia

725,000

16.11%

United States

117,465

0.13%

Seventy years since the outbreak of World War II

49

Figure 2. Deaths in World War I by country, Axis powers Country

Deaths

% of population

Austria-Hungary

1,567,000

3.05%

Bugaria

187,500

3.41%

Germany

2,476,897

3.82%

Ottoman Empire

2,921,844

13.72%

These were staggering losses. The millions of deaths that were directly caused by the war were followed almost immediately, after the Armistice, by the deaths of another 20 million people as a result of the influenza epidemic that devastated the physically weakened populations.

The human cost of World War II exceeded by far that of the First World War. Estimates of the total number killed range from 62 million to 78 million. Of these, military deaths totaled 22 to 25 million, including the deaths of 5 million prisoners of war. The number of civilian deaths is estimated at 40 to 52 million.

Let us examine the death tolls suffered by a number of countries most directly involved in the maelstrom.

Figure 3. Deaths in World War II by country Country

Deaths

% of population

China

10,000,000-20,000,000

2% to 4%

Dutch East Indies

3,000,000-4,000,000

4.3% to 5.76%

French Indochina

1,000,000-1,500,000

4% to 6%

Greee

800,000

11.7%

Japan

2,700,000

3.78%

Germany

5,600,000-6,500,000

7.8% to 9.4%

Poland

5,800,000

16.5%

Soviet Union

24,000,000

14%

United States

418,000

0.32%

Other countries that lost at least 10 percent of their populations were Lithuania and Latvia. Other countries that lost at least 3 percent of their people were Estonia, Hungary, the Netherlands, Romania, Singapore and Yugoslavia.

50

The Economic Crisis & the Return of History

Included in this horrifying catalog of death is the genocidal annihilation of European Jewry. Six million Jews were murdered between 1939 and 1945.

This includes three million Polish Jews and nearly one million Ukrainian Jews.

In terms of percentages, 90 percent of the Jews in Poland, the Baltic countries and Germany were killed. More than 80 percent of Czechoslovakian Jews were murdered. More than 70 percent of Dutch, Hungarian and Greek Jews were exterminated. Approximately 60 percent of Yugoslav and Belgian Jews were killed. More than 41 percent of Norwegian Jews were exterminated.

More than 20 percent of French, Bulgarian and Italian Jews were murdered.

In every instance, this genocidal campaign was conducted with the substantial support of local authorities. The only Nazi-occupied country in which there was a concerted effort by the local population to save its Jewish citizens was Denmark. In that country, despite the fact that it bordered Germany, only 52 Jews out of a pre-war population of 8,000 fell victim to the Nazi terror—that is, less than one percent.

According to the best estimates, the human cost of World War I and II taken as a whole is between 80 and 90 million people. One must add to this the additional hundreds of millions who were, to some degree, physically injured or emotionally scarred by the two wars—those who lost parents, children, siblings and friends; who were displaced, forced to flee their homelands, and who lost irreplaceable and priceless links to their personal and cultural heritage. It is not possible to adequately imagine, let alone comprehend, the horrifying scale of the tragedy that occurred in the 31 years between 1914 and 1945.

As one considers these events, please bear in mind that this massive and unprecedented tragedy occurred, in historical terms, only a relatively short time ago. There are still tens of millions of people alive today who lived through the Second World War. And for people of my generation, the events of World War I occurred during the lives of our grandparents—who were, in many cases, veterans of that war.

In other words, World War I and World War II belong to modern history. The world in which we live is, to a very great extent, the product of these twin catastrophes.

Moreover, the contradictions—political and economic—out of which these wars emerged have not been resolved. This historical fact alone is sufficient reason to see in the seventieth anniversary of the outbreak of World War II an opportunity for a reexamination of its origins, consequences and lessons.

Seventy years since the outbreak of World War II

51

The origins and causes of World War I and II Of course, within the space of a single lecture, it is only possible to provide a regrettably sparse outline of the principal causes of the war. For the purpose of clarity, but without unnecessary over-simplification, this outline will treat World War I and World War II as inextricably related episodes.

The speed with which the crisis unfolded in the summer of 1914 took many by surprise. Few suspected that the assassination of Austrian Archduke Franz Ferdinand in Sarajevo on June 28, 1914 would lead, within only five weeks, to a full-scale European War—which would ultimately assume, with the entry of the United States into the conflict in April 1917, global dimensions.

And yet, the conditions for a disastrous military conflagration had been maturing during the previous 15 years, and these conditions were bound up with dramatic changes in world economy and, consequently, world politics.

Prior to the eruption of 1914, there had been no generalized war between the “Great Powers” of Europe since the end of the Napoleonic Wars in 1815. The Congress of Vienna created a relatively stable framework of inter-state relations that was sustained for the rest of the century.

It is true that the nineteenth century was not entirely pacific. The nation-state system in its modern form emerged out of a series of significant military conflicts, of which the most bloody was the American Civil War. In Europe, the consolidation of the modern German state under the political hegemony of Prussia was achieved by Bismarck with the calculated use of military force against Denmark (1864), Austria (1866) and, finally, France (1870). Earlier, in the 1850s, the British and the French countered the geopolitical ambitions of the Russian Empire in the Crimean conflict. But these military conflicts were relatively contained, and did not lead to a breakdown of the entire framework of European and global politics.

However, by the 1890s, it began to become increasingly clear that the nature of world politics was undergoing a profound change under the impact of the massive expansion of capitalist finance and industry, particularly in Europe and North America, and the growing influence of global economic interests in the calculations of national states.

From the 1890s on, the conflict between major capitalist states—or, to be somewhat more precise, the most powerful and influential financial and industrial forces exercising influence over the formulation of foreign

52

The Economic Crisis & the Return of History

policy—for dominance within certain “spheres of influence” became the foundation of world politics. This development found its most ruthless and brutal expression in the struggle for colonies, whose local populations were reduced to a semi-slave status.

The age of imperialism had dawned. This development entailed a significant and ever-more dangerous destabilization of the structure of global inter-state relations. In the decades that followed the end of the Napoleonic Wars, Britain had enjoyed a position of virtually unchallenged supremacy.

Its empire, based on vast colonial possessions, was the dominant fact of international politics in the nineteenth century. As was commonly said, the sun never set on the British Empire, and the wages never rose! France also enjoyed a privileged status in the world system as an old colonial power, but was considerably behind Britain.

However, the emergence of new bourgeois national states, developing on the basis of rapidly expanding capitalist industry and finance, placed immense stresses on the existing geo-political relations. The two most important “new” capitalist states, which were rapidly acquiring imperialist interests and appetites, were Germany and the United States.

The entry of the United States into the imperialist club occurred in 1898, when the McKinley administration, with unsurpassed cynicism, hypocrisy and dishonesty, concocted a pretext for war against Spain. Within just a few months, Cuba had been turned into a semi-colony of the United States. At the same time, the United States, through the occupation of the Philippines, established the foundations for its imperialist domination of the Pacific. Having justified its occupation of the Philippines with the promise of freedom and democracy for its inhabitants, the United States honored its commitments by slaughtering 200,000 local insurgents who opposed American occupation.

The United States was blessed with a precious geographical advantage.

It developed on a vast continent and was protected from foreign meddling in its affairs by two vast oceans. Most European powers were amazed by the crudeness of McKinley’s dishonest war-mongering, but could do absolutely nothing about it.

The growing ambitions of Germany, on the other hand, immediately collided with its imperialist neighbors in Europe—first of all France and Russia, and then, and most seriously, Britain.

Thus, the expanding conflicts of powerful national capitalist states, seeking dominance within an increasingly integrated global economy,

Seventy years since the outbreak of World War II

53

formed the real basis for the accumulation of geo-political tensions that finally exploded in the summer of 1914.

Who was responsible?

During and especially after World War I, there was a great deal of discussion about “who started” the war, who “fired the first shot” and, therefore, who was to blame. These questions always play a major role in the propaganda of the states involved in war, as their ruling cliques are always anxious to absolve themselves of responsibility for the disastrous consequences of their military pyromania.

Studied in isolation from broader historical circumstances, there is plenty of evidence that Germany and Austria-Hungary were principally responsible for the outbreak of war in August 1914. Their governments chose, with incredible recklessness, to exploit the assassination of Franz Ferdinand to achieve longstanding geo-political objectives. They took decisions that set into motion the disastrous chain of events that led to the outbreak of hostilities. But beyond demonstrating the criminality of which capitalist regimes are capable—as we have seen more recently in the launching of the wars in Iraq and Afghanistan on the basis of out-and-out lies—the evidence of German and Austrian premeditation is inadequate as an explanation for the broader and deeper causes of the war.

It is true that France and Britain did not necessarily want war in August 1914. But that is not because they “loved” peace. Britain, it should be remembered, had waged a brutal counter-insurgency war against the Boers in South Africa only a decade earlier. If Britain and France did not necessarily “want” war in 1914, it was because they were more or less satisfied with the geo-political status quo that favored their global interests. However, when confronted with actions by Germany and Austria-Hungary that threatened the status quo and, therefore, their interests, they accepted war as a political necessity. War, from the standpoint of the imperialist interests of France and Britain, was preferable to a peace that altered the prevailing status-quo along lines sought by Germany.

Thus, in the final analysis, the cause of the war was not to be found in the actions of one or another state that precipitated the shooting. The causes lay in the essential nature of the imperialist system, in the logic of the struggle of powerful capitalist national states to maintain—or achieve, depending on the circumstances—a dominant position in an increasingly integrated global economic order.

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The Marxist analysis In the years preceding the war, the international socialist movement had held a series of congresses in which it had warned of the deadly consequences of developing imperialism and the militarism it encouraged. The Second International, which had been founded in 1889, declared again and again its unrelenting opposition to capitalist militarism and pledged to mobilize the working class against war. It warned the European ruling class that if war could not be stopped, the International would use the crisis created by war to hasten the overthrow of capitalism.

But in August 1914 these pledges were betrayed by virtually all the leaders of European socialism. On August 4, 1914, the German Social Democratic Party—the largest socialist party in the world—voted in the Reichstag in support of credits to finance the war. The same patriotic position was taken by socialist leaders in France, Austria and Britain. Only a handful of major socialist leaders took a clear and unequivocal stand against the war, among whom the most important were Lenin, Trotsky and Rosa Luxemburg.

I would like to focus briefly on the analysis made by Trotsky of the causes of the war. He rejected with contempt the deceitful and hypocritical claims of pro-war socialist leaders that they had sided with their capitalist rulers to defend their countries against foreign aggression. Trotsky exposed the blatant lies with which the warring governments sought to cover up the real political and economic motivations that underlay their decisions to go to war.

He insisted that the cause of the war lay deeper, in changes in the structure of world economy and the very nature of the capitalist nation-state system.

Forced to leave Austria with the outbreak of the war, Trotsky first went to Zurich, where he wrote in 1915 a brilliant pamphlet, War and the International, in which he explained the essential significance of the war.

The present war is at bottom a revolt of the forces of production against the political form of nation and state. It means the collapse of the national state as an independent economic unit.

The nation must continue to exist as a cultural, ideological and psychological fact, but its economic foundation has been pulled from under its feet. All talk of the present bloody clash being the work of national defense is either hypocrisy or blindness. On the contrary, the real objective significance of the War is the breakdown

Seventy years since the outbreak of World War II

55

of the present national economic centers, and the substitution of a world economy in its stead. But the way the governments propose to solve this problem of imperialism is not through the intelligent, organized cooperation of all of humanity’s producers, but through the exploitation of the world’s economic system by the capitalist class of the victorious country; which country is by this War to be transformed from a Great Power into a World Power.

The War proclaims the downfall of the national state. Yet at the same time it proclaims the downfall of the capitalist system of economy. By means of the national state, capitalism has revolutionized the whole economic system of the world. It has divided the whole earth among the oligarchies of the great powers, around which were grouped the satellites, the small nations, who lived off the rivalry between the great ones. The future development of world economy on the capitalistic basis means a ceaseless struggle for new and ever new fields of capitalist exploitation, which must be obtained from one and the same source, the earth. The economic rivalry under the banner of militarism is accompanied by robbery and destruction which violate the elementary principles of human economy. World production revolts not only against the confusion produced by national and state divisions but also against the capitalist economic organizations, which has now turned into barbarous disorganization and chaos.

The War of 1914 is the most colossal breakdown in history of an economic system destroyed by its inherent contradictions. …

Capitalism has created the material conditions of a new Socialist economic system. Imperialism has led the capitalist nations into historic chaos. The War of 1914 shows the way out of this chaos by violently urging the proletariat on to the path of Revolution.

This analysis was vindicated in the eruption of the Russian Revolution, which brought the Bolshevik party, led by Lenin and Trotsky, to power in October 1917.

The outcome of World War I After four years of unprecedented conflict and bloodshed, the war ended somewhat abruptly in November 1918. What brought the war to an end was related more to changing political conditions within the belliger-

56

The Economic Crisis & the Return of History

ent countries than to results on the battlefield. The October Revolution led rapidly to Russia’s withdrawal from the war. The French army, staggered by soldiers’ mutinies in 1917, came close to collapse. Only the infusion of American men and materiel on the side of the allies staved off military defeat and restored, at least to some extent, morale. Anti-war opposition grew rapidly in Germany, especially in the aftermath of the Bolshevik victory in Russia. In October 1918, a naval mutiny in Germany triggered broader revolutionary protests that led to the abdication of Kaiser Wilhelm II. Unable to continue the war, Germany sued for peace.

Despite the defeat of Germany, the war did not produce the results that Britain and France had originally envisioned. In the east, the war had led to socialist revolution in Russia and the radicalization of the working class throughout Europe. In the west, the war created the conditions for the emergence of the United States—which had suffered relatively few losses—as the dominant capitalist power.

Moreover, the Versailles settlement of 1919 set the stage for the eruption of new conflicts. The vindictive terms insisted upon by French imperialism did little to ensure stable relations on the European continent. The breakup of the Austrian-Hungarian Empire resulted in the creation of a new set of unstable national states, torn by deep-rooted and explosive sectional rivalries. Above all, the Versailles settlement failed to create a foundation for the restoration of the economic equilibrium of Europe. Rather, the world capitalist economy, as it emerged from the war, was riven by imbalances that led to the unprecedented collapse that began on Wall Street in October 1929.

Another major factor in the re-emergence of international tensions that was to lead to a renewal of global war in 1939 was the new role of the United States in world affairs. Though Wilson was hailed—especially in the aftermath of the US entry into the war and the victory of socialist revolution in Russia—as the savior of capitalist Europe, it was soon to become clear to the European bourgeoisie that the interests of the United States were not entirely in alignment with its own. The American bourgeoisie was not willing to accept European dominance in world affairs. It viewed the privileges enjoyed by Britain within the framework of its Empire as a barrier to the expansion of its own commercial interests.

While the steady expansion of American power gave British diplomats sleepless nights, it thoroughly unnerved the most ruthless representatives of German imperialism. In Wages of Destruction, a new study of the origins of World War, the respected scholar Adam Tooze writes:

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America should provide the pivot for our understanding of the Third Reich. In seeking to explain the urgency of Hitler’s aggression, historians have underestimated his acute awareness of the threat posed to Germany, along with the rest of the European powers, by the emergence of the United States as the dominant global superpower. On the basis of contemporary economic trends, Hitler predicted already in the 1920s that the European powers had only a few more years to organize themselves against this inevitability. …

The aggression of Hitler’s regime can thus be rationalized as an intelligible response to the tensions stirred up by the uneven development of global capitalism, tensions that are of course still with us today.

Trotsky’s analysis in 1934 The years that followed the conclusion of World War I witnessed the hey-day of pacifism. Wilson had proclaimed upon declaring war on Germany in 1917 that the United States was waging war “to end all wars.” The League of Nations—which the US refused to join—was set up by the European victors. In 1927, France and the United States negotiated the Kellogg-Briand Pact, which declared war illegal. And yet, international tensions became increasingly acute, especially after the Wall Street collapse, the onset of the global depression, and the resulting political destabilization of Europe—of which the coming to power in Germany of Hitler’s Nazi party in January 1933 was the most ominous expression.

No one grasped the implications of the unfolding crisis of world capitalism with greater foresight and clarity than Leon Trotsky. In June 1934, having been exiled from the Soviet Union by the reactionary bureaucratic regime led by Stalin, Trotsky wrote: The same causes, inseparable from modern capitalism, that brought about the last imperialist war have now reached infinitely greater tension than in the middle of 1914. The fear of the consequences of a new war is the only factor that fetters the will of imperialism. But the efficacy of this break is limited. The stress of the inner contradictions pushes one country after another on the road to fascism, which, in its turn, cannot maintain power except by preparing international

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The Economic Crisis & the Return of History explosions. All governments fear war. But none of the governments has any freedom of choice. Without a proletarian revolution, a new world war is inevitable. [Writings of Leon Trotsky (1933-34), p. 300]

Trotsky insisted, as he had in 1914, that the principal source of global tensions lay in the contradiction “between the productive forces and the framework of the national state, in conjunction with the principal contradiction—between the productive forces and the private ownership of the means of production…” [p. 304] The defense of the national state served no politically or economically progressive function. “The national state with its borders, passports, monetary system, customs and the army for the protection of customs has become a frightful impediment to the economic and cultural development of humanity.” [p. 304] With Hitler in power, liberal and reformist apologists for the imperialist bourgeoisie in Britain, France and the United States had begun to argue that a new war would be a fight against dictatorship. This argument would eventually be adopted by the Soviet Stalinist regime. Trotsky emphatically rejected this claim. “A modern war between the great powers,” he wrote, “does not signify a conflict between democracy and fascism but a struggle of two imperialisms for the redivision of the world.” [p. 307] Within the context of this political perspective, Trotsky analyzed the global ambitions of the United States.

US capitalism is up against the same problems that pushed Germany in 1914 on the path of war. The world is divided? It must be redivided. For Germany it was a question of “organizing Europe.”

The United States must “organize” the world. History is bringing humanity face to face with the volcanic eruption of American imperialism. [p. 302] These words were to prove extraordinarily prescient.

The outbreak and course of World War II Trotsky insisted that only the revolutionary struggle of the working class, leading to the overthrow of capitalism, could prevent the eruption of a new world war, even bloodier than the first. But the defeats of the working class in Spain and France—the product of the combined treachery of the

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Stalinist, social democratic and reformist bureaucracies—made war inevitable. It finally began on September 1, 1939.

As in 1914, German imperialism was the principal instigator of the conflict. But the Second World War, like the first, had more profound causes.

Trotsky wrote: The democratic governments, who in their day hailed Hitler as a crusader against Bolshevism, now make him out to be some kind of Satan unexpectedly loosed from the depths of hell, who violates the sanctity of treaties, boundary lines, rules, and regulations. If it were not for Hitler the capitalist world would blossom like a garden.

What a miserable lie! This German epileptic with a calculating machine in his skull and unlimited power in his hands did not fall from the sky or come up out of hell: he is nothing but the personification of all the destructive forces of imperialism. … Hitler, rocking the old colonial powers to their foundations, does nothing but give a more finished expression to the imperialist will to power. Through Hitler, world capitalism, driven to desperation by its own impasse, has begun to press a razor-sharp dagger into its own bowels. [Writings of Leon Trotsky (1939-40), p. 233] Lest one think that Trotsky is here being unjust to the leaders of the wartime opponents of Hitler, it is worth recalling the words of Winston Churchill. In January 1927, sometime before he became British prime minister, Churchill visited Rome, met with the Italian dictator Mussolini, and wrote: “I could not help being charmed by Signor Mussolini’s gentle and simple bearing, and by his calm, detached poise in spite of so many burdens and dangers.” Italian fascism provided the “necessary antidote to the Russian virus.” Churchill told the Italian fascists: “If I had been an Italian I am sure I should have been entirely with you from the beginning to the end of your victorious struggle against the bestial appetites and passions of Leninism.” [Cited in Human Smoke: The Beginnings of World War II, the End of Civilization, by Nicholson Baker, p. 16.]

A historian of the period notes, “To many Conservatives, and business groups, Hitler’s Germany and Mussolini’s Italy, dedicated to impeding the spread of communism, were objects of some admiration. As a result, there was a strong opposition—especially in Britain—to an alliance with the Soviet Union aimed against the fascist powers.” [Frank Mc-

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Donough, Hitler, Chamberlain and Appeasement (Cambridge University Press, 2002), p. 33] Hitler invaded Poland on September 1, 1939, and Britain and France declared war on the Third Reich two days later. After Hitler completed the conquest of Poland within a few weeks, no further military action was taken by Nazi Germany until the spring of 1940, when German armies swept across Western Europe. In June 1940, France—whose ruling class was more concerned with the revolutionary threat posed by its own working class than with the danger of a Nazi takeover of the country— surrendered.

Stalin had hoped that he could avoid war with Germany through his cowardly and treacherous non-aggression pact. But the fascist regime had always viewed the destruction of the Soviet Union as the essential component of its plan for domination in Europe. In June 1941, the German invasion of the USSR began. Despite Stalin’s disastrous miscalculations and the massive defeats initially suffered by the Red Army, the Nazi forces encountered unyielding resistance.

On December 7, 1941, the Japanese attack on Pearl Harbor brought the United States into the war. Four days later, on December 11, 1941, Germany declared war on the United States, which immediately replied with a declaration of war on Germany. For the next three-and-a-half years, the war was waged with unrelenting ferocity—though it must be stressed that the war in Western Europe, at least until the Allied invasion in June 1944, was a relatively minor side show in military terms, in comparison to the horrific carnage of the struggle between Nazi Germany and the Soviet Union. The war in Europe finally came to an end on May 8, 1945, with the unconditional capitulation of Nazi Germany, just one week after Hitler’s suicide.

The war in Asia continued for another three months, though there was never any doubt of its outcome. There had never existed even a remote possibility that Japan—with its much smaller population, underdeveloped industrial base, and limited access to key raw materials—could prevail against the United States. The Japanese, as the United States government knew very well, were seeking from the spring of 1945 acceptable terms for surrender. But the tragedy was played out to the bloody end. In August 1945, the United States dropped two nuclear devices on the defenseless and militarily insignificant cities of Hiroshima and Nagasaki. The death toll from the two bombs was approximately 150,000 people. As the American historian Gabriel Jackson later observed:

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In the specific circumstances of August 1945, the use of an atomic bomb showed that a psychologically very normal and democratically elected chief executive could use the weapon just as the Nazi dictator would have used it. In this way, the United States—for anyone concerned with moral distinctions in the conduct of different types of government—blurred the difference between fascism and democracy. [Civilization and Barbarity in 20th Century Europe, pp. 176-77]

The consequences and significance of World War II Viewing World War I and World War II as interconnected stages in a single historical process, what can we conclude was the source and purpose of the conflict which cost approximately 90 million people their lives?

Let us recall that the eruption of the First World War arose out of interimperialist antagonisms generated by the emergence of powerful capitalist states that were dissatisfied with the existing geo-political relations. Specifically, Germany was dissatisfied with its inferior position in a world colonial system dominated by Britain and France, and by the restraints placed on the pursuit of its interests by these powerful rivals. At the same time, the United States, whose unsurpassed economic power filled it with confidence and ambition, was unwilling to accept restrictions on the penetration of American capital into foreign markets, including those governed by the protective rules of the British Empire.

The conclusion of the Second World War brought to a conclusion a distinct period of global conflict that had begun with the dawn of the Imperialist epoch in the late 1890s. Germany’s bid for its “place in the sun” had suffered a decisive defeat. Similarly, Imperial Japan’s dream of establishing its dominance in the Western Pacific, China and Southeast Asia was shattered by its decisive defeat in World War II. The British and the French emerged from the half-century of carnage desperately weakened, lacking sufficient financial resources to sustain their old empires.

Whatever illusions they may have had about preserving their status as the premier imperialist powers were given their deathblow within a decade of the end of World War II. In 1954, the French suffered a devastating military defeat in Dien Bien Phu at the hands of the Vietnamese liberation forces, which forced French

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withdrawal from Indochina. In 1956, the British government was forced by the United States to call off its invasion of Egypt—a public humiliation that confirmed Britain’s subservience to American imperialism. As foreseen by Trotsky decades earlier, the struggle among the main imperialist powers for global dominance, the brutal redivision of the world that cost the lives of tens of millions of human beings, had ended with the victory of American imperialism.

The aftermath The world that emerged in 1945 from the carnage of two wars was profoundly different from that which existed in 1914. Though the United States had replaced bankrupt Britain as the pre-eminent imperialist power, it could not recreate in its own image the old British Empire. The age of colonial empires, at least in the form they had previously existed, had passed.

In a historical fact pregnant with profound irony, Woodrow Wilson delivered his war message to Congress in April 1917, just as Vladimir Ilyich Lenin was making his way back to revolutionary Russia. Two great historical lines of development intersected at this critical juncture. Wilson’s speech marked the decisive emergence of the United States as the dominant imperialist force on the planet. Lenin’s arrival in Russia marked the beginning of a massive wave of socialist and mass anti-imperialist struggles that were to sweep across the globe.

By the time the United States achieved its victory over Germany and Japan in 1945, hundreds of millions of people were already in revolt against imperialist oppression. The task that confronted the United States was to stem the tide of global revolutionary struggle. It is not possible within the framework of this survey to provide even an outline of post-war developments. This would require at least some explanation of the political dynamics of the so-called Cold War, which defined international politics between 1945 and 1991.

However, in bringing this lecture to a conclusion, it is necessary to stress that the United States viewed the dissolution of the Soviet Union in 1991 as an opportunity to finally establish the unchallenged hegemony of American imperialism.

In 1992, the US military adopted a strategic doctrine that declared that it would not permit any country to emerge as a serious challenger to the dominant global position of the United States. In 2002, this expansive mili-

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tary doctrine was supplemented with the promulgation of the doctrine of “preventive war,” which declared that the United States reserved the right to attack any country that it believed to pose a potential threat to its security. This new doctrine was directed specifically against China, which was warned against building up its own military forces.

It should be pointed out that the new US military doctrine is illegal from the standpoint of international law. The legal precedents established at the Nuremberg War Crimes Trials held that war is not a legitimate instrument of state policy, and that preventive war is illegal. A military attack by one state upon another is legal only in the presence of a clear and immediate threat. In other words, military action is justified only as an inescapably urgent measure of national self-defense. The attack on Iraq, which followed by only a few months the promulgation of the 2002 doctrine of preventive war, was a war crime. Had the United States been held accountable under the precedents established at Nuremberg in 1946, Bush, Cheney, Rumsfeld, Powell and many others would have been placed on trial.

The lessons The critical question that flows inescapably from any examination of World War I and World War II is whether such catastrophes could ever happen again. Were the wars of the twentieth century some sort of horrifying aberration from a “normal” course of historical development? Is it possible to imagine the reemergence of international disputes and antagonisms that would make the outbreak of World War III possible?

The answer to this question does not require far-fetched speculation.

The real question is less whether a new eruption of global warfare is possible, but how long do we have before such a catastrophe occurs? And, flowing from that second question, the next and most decisive question is whether anything can be done to stop it from happening.

In weighing the risk of war, bear in mind that the United States has been engaged repeatedly in major military conflicts since 1990, when it first invaded Iraq. During the past decade, since 1999, it has waged major wars in the Balkans, the Persian Gulf and in Central Asia. In one way or another, all of these wars have been related to the effort to secure the dominant global position of the United States.

It is highly significant that the increasing use of military force by the United States takes place against the backdrop of its steadily deteriorating

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global economic position. The weaker the United States becomes from an economic standpoint, the more inclined it is to offset this weakness through the use of military force. There are, in this specific respect, disturbing parallels to the policies of the Nazi regime in the late 1930s.

Moreover, keeping in mind the 2002 Strategic Doctrine, the United States confronts an expanding array of powers whose economic and military development are viewed by State Department and Pentagon strategists as significant threats. As the balance of economic power shifts away from the United States to various global competitors—a process that has been accelerated by an economic crisis that erupted in 2008 and which continues to unfold—there is an ever greater temptation to employ military force to reverse the unfavorable economic trend.

Finally, if we recall that World War I and II arose out of the destabilization of the old imperialist order dominated by Britain and France as a result of the emergence of new competitors, it is not unlikely that the present international order—in which the dominant power, the United States, is already riven with internal crisis and hard-pressed to maintain global dominance—will break down beneath the pressure exerted by emerging powers (such as China, India, Russia, Brazil, the EU) dissatisfied with existing arrangements.

Add to that the growing intra-regional tensions that threaten at any moment to erupt into military confrontations that could trigger interventions from extra-regional forces and lead to a global conflagration. One need only to recall the tense situation which arose in the summer of 2008 as a result of the conflict between Georgia and Russia.

The world is, in other words, a powder keg. It is not necessarily the case that the ruling classes want war. But they are not necessarily able to stop it.

As Trotsky wrote on the eve of World War II, the capitalist regimes toboggan to disaster with their eyes closed. The insane logic of imperialism and the capitalist nation-state system, of the drive to secure access to markets, raw materials and cheap labor, of the relentless pursuit of profit and personal riches, leads inexorably in the direction of war.

What, then, can stop it? History shows us that the frightful mechanisms of imperialism can be jammed only by the active and conscious intervention of the masses of the world’s people—above all, the working class—into the historical process. There is no means of stopping imperialist war except through international socialist revolution.

In 1914, Lenin, opposing the betrayal of the Second International, declared that the imperialist epoch is the epoch of wars and revolution. That

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is, the global economic, social and political contradictions that gave rise to imperialist war also create the objective foundations for international socialist revolution. In this sense, imperialist war and world socialist revolution are the responses of different and opposed social classes to the historical impasse of capitalism. The correctness of Lenin’s assessment of the world situation was confirmed with the eruption of revolution in Russia in 1917.

For all the changes that have occurred since the beginning of World War One 95 years ago and World War Two 70 years ago, we still live in the imperialist epoch. Thus, the great questions that confront mankind today are: Will the development of political consciousness in the international working class counteract the accumulating destructive tendencies of imperialism? Will the working class develop sufficient political consciousness in time, before capitalism and the imperialist nation-state system leads mankind over the abyss?

These are not questions for purely academic consideration. The very posing of these questions demands an active response. The answers will be provided not in a classroom, but in the real conflict of social forces. Struggle will decide the matter. And the outcome of this struggle will be influenced, to a decisive degree, by the development of revolutionary, that is, socialist consciousness. The struggle against imperialist war finds its highest expression in the fight to develop a new political leadership of the working class.

Only a few months after the outbreak of World War II—a catastrophe made possible by the betrayals of the reactionary Stalinist, social democratic and reformist labor bureaucracies—Trotsky, the supreme political realist, wrote: The capitalist world has no way out, unless a prolonged death agony is so considered. It is necessary to prepare for long years, if not decades, of wars, uprisings, brief interludes of truce, new wars, and new uprisings. A young revolutionary party must base itself on this perspective. History will provide it with enough opportunities and possibilities to test itself, to accumulate experience, and to mature. The swifter the ranks of the vanguard are fused, the more the epoch of bloody convulsions will be shortened, the less destruction will our planet suffer. But the great historical problem will not be solved in any case until a revolutionary party stands at the head of the proletariat. The question of tempos and time intervals is of enormous importance; but it alters neither the general historical

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The Economic Crisis & the Return of History perspective nor the direction of our policy. The conclusion is a simple one: it is necessary to carry on the work of educating and organizing the proletarian vanguard with tenfold energy. Precisely in this lies the task of the Fourth International. [Writings of Leon Trotsky, 1939-40, pp. 260-61]

This analysis, written at an earlier stage of global imperialist crisis, resonates in the existing situation. The very survival of human civilization is at stake. It is, above all, the responsibility of the youth to stop the drive toward war and secure the future of mankind. This is why I must conclude this lecture by appealing to you to join the Socialist Equality Party.

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Also by David North In Defense of Leon Trotsky Leon Trotsky (1879-1940)—the leader of the Russian Revolution and Stalin’s unyielding opponent—remains an immensely controversial figure seventy years after his assassination in Mexico City. In this penetrating analysis and comprehensive refutation of three recently-published biographies of Leon Trotsky by well-known British historians—Professors Robert Service, Ian Thatcher and Geoffrey Swain— David North raises troubling questions about the state of contemporary historical scholarship.

Four lectures with contemporaneous analysis of the 2000 and 2004 US Presidential elections.

Through a detailed historical analysis, North establishes that behind the breakdown of democracy in the United States lies the deterioration of the global economic position of American capitalism, and the development of unprecedented levels of wealth concentration and social inequality.

This polemical essay defends the foundations of scientific socialism against pseudoMarxist conceptions prevalent among various philosophical tendencies influenced by the Frankfurt School and contemporary neo-utopianism. www.mehring.com

These three lectures by David North and SEP National Secretary Joe Kishore provide a concise account of the historical origins of the present economic crisis and its implications. They explain how the policies of the ruling classes throughout the world have exacerbated the underlying contradictions of the world economy and intensified social and national tensions.