Report on the international situation

 

THE ECONOMIC EQUILIBRIUM

The tenuous economic equilibrium of world capital has been shattered beyond repair during the past year. The Third World has sunk even further into impoverishment and decay as the prices of the raw materials on which these economies are dependent has collapsed. To take but one example, the index of the world price of metals compiled by The Economist had fallen from 245.8 in May 1974 to 111.8 in September 1975 - a drop which has taken the index practically to the levels prevailing in 1970. Even those apparent latter day eldorados, the oil producing states like Iran and Saudi Arabia, have had to drastically cut back their once ambitious development projects.

In the capitalist metropoles, the crisis has rapidly outgrown its earlier manifestations as a monetary crisis even while the repercussions of the disruption of the international monetary system and galloping inflation grow in intensity. Now the crisis manifests itself in the process of production of material values itself. The statement that we are now fully and openly in the midst of a general crisis of over-production is today incontrovertible.

In the United States 31% of manufacturing capacity now lies idle; in Japan more than a fifth of the industrial capacity is idle. With an annual capacity of 12 million cars, the European automobile industry will produce no more than 8 million in 1975. The following table shows the extent and the breadth of the collapse of industrial production, which has been unprecedented since the world crisis of the 1930s.

PRODUCTION – PERCENT CHANGE FROM SECOND QUARTER 1974 TO SECOND QUARTER 1975

Country	Total industrial production	Iron and Steel	Chemicals	Textiles, clothing and leather
Canada	-5.9	-9.3	-0.9	-10.8
United States	-12.3	-22.3	-13.5	-16.2
Japan	-13.4	-14.7	-13.0	-9.2
Australia	-10.9	-	-12.2	-21.8
Austria	-9.2	-12.9	-9.5	-15.1
Belgium	-12.4	-25.1	-17.5	-16.2
Luxemburg	-23.2	-	-23.5	-
Netherlands	-7.6	-	-17.0	-17.0
France	11.6	-19.9	-18.3	-11.7
West Germany	-10.7	-20.6	-16.5	-7.1
Italy	-14.2	-12.4	-13.3	-10.4
Great Britain	-5.6	-21.7	-12.3	-9.3
Spain	-10.6	-6.0	-13.0	-10.8
Switzerland	-17.0	-	-19.3	-14.2

Source: OECD - Industrial Production, 1975 - 3.

The decline in production is now being felt in the Eastern bloc too, where the Russian planners had to admit in December that output had grown by only 4% in 1975 instead of the planned 6.5%. This latter figure was itself a target which had been drastically revised downwards two years ago when the bureaucrats discovered that they had to 'plan' for the destructive effects of a crisis which makes a mockery of all attempts at capitalist planning.

The slackening in the growth of world trade which followed the collapse of the inflationary 'boom' of 1972-73, has in 1975 produced the first decrease in the volume of world trade since the end of the second imperialist world war. Profits, the most sensitive measure of the health of the capitalist economy, have fallen even further than the catastrophic declines in production and world trade. In Japan, corporate earnings fell 47% during the first six months of 1975; were it not for the substantial sums transferred to reserves during the boom years and now showing up in corporate balance sheets, profits would be down by a staggering 70%! Twenty-five per cent of all companies listed on the Tokyo stock exchange have been operating at a loss this year. In Germany, the big chemical trusts which sparked the 'economic miracle' have seen their once huge profits dissolve: Bayer's half year profits fell by two-thirds, BASF's by half. In Britain, a number of the largest companies have had to be bailed out by the state in order to avoid being shut down or forced into bankruptcy: Burmah Oil, Ferranti, Alfred Herbert, British Leyland, Chrysler UK, as well as the whole of the shipbuilding industry. The Treasury estimates that the rate of return on capital employed in British industry has fallen from 11% in 1964 to 4% in 1974. In Italy, practically all of the big industrial groups (state and ‘private') are losing money while being suffocated by the huge interest payments on the loans contracted in the past year in order to keep them afloat. The Governor of the Central Bank has recommended that part of industry's debts to the banks be converted into shares, a measure which would constitute moratorium on interest payments as the only way to rescue Italian industry.

In the United States, which was the architect of the provisional economic equilibrium established after World War II as well as the main beneficiary of the redivision of world markets affected by the imperialist carnage, profits in all basic industries have collapsed like a house of cards under the impact of the crisis.

Industry	Profits for first 9 months of 1975: percent change from 1974
Appliances	-41%
Automobiles	-33%
Building materials	-25%
Chemicals	-18%
Electrical/electronics	-13%
Metals/mining	-47%
Fuel (oil & coal)	-30%
Paper	-26%
Railroads	-41%
Retailing (food)	-46%
Steel	-29%
Textiles/apparel	-35%
Tyre/rubber	-15%
Trucking	-27%

(Source: Business Week, 17 November 1975

THE CLASS EQUILIBRIUM

The breakdown of the economic equilibrium, so painstakingly reconstructed in the aftermath of the inter-imperialist butchery of 1939-45, has already severely disrupted the fragile class equilibrium which rested upon it and which could not survive its demise. With the sharp decline in production, world trade and profits, capital has moved to rid itself of that part of the labour force which has become superfluous. Throughout the world a huge and rapidly growing army of the unemployed attests to the only future decadent; capitalism has in store for the proletariat: impoverishment! The massive growth of unemployment over the past year has already sounded a warning to the bourgeoisie, whose most intelligent representatives see in this embittered mass of proletarians one of the elements which threatens to coalesce into the army of the world revolution.

OFFICIAL UNEMPLOYMENT STATISTICS
COUNTRY	AUGUST 1974	AUGUST 1975
Canada	522,000	736,000
United States	4,925,000	7,794,000
Japan	769,000	966,000
Australia	126,000	299,000
Belgium	105,000	191,000
Netherlands	140,000	207,000
Denmark	49,000	103,000
France	464,000	864,000
West Germany	694,000	1,343,000
Italy	556,000	653,000
Great Britain	626,000	1,025,000
Spain	153,000	231,000

Source: OECD - Main economic indicators, October 1975.

The official statistics, however, give but a pale indication of the true extent of unemployment in the leading capitalist nations. In the US, as even bourgeois politicians and economists attest, a more accurate computation of the number of unemployed would show that there are now more than 10 million workers deprived of their livelihood by the crisis. A study by the Bank of England which tried to unify computations by adjusting the differences in the methods of calculation used by various governments found that in France there were already 1,150,000 unemployed in April (Financial Times, 20 June 1975), a figure which has certainly risen considerably since then. In Germany, the official figures do not take into account the pool of more than 300,000 immigrant workers deported since March 1974 or the one million or so workers who are partially unemployed. Japanese unemployment statistics ignore factors such as seasonal workers who have been laid-off, workers who have been pressured into 'voluntarily' quitting or in part-time employment only, and imposed holidays which hide temporary shut-down of plants. A more realistic picture of the true number of unemployed in Japan would be at least two million. On the basis of reasonably accurate estimates of those out of work in Western Europe, North America, Australasia and Japan, there is at the least a growing army of 21 million unemployed today.

The enormous growth in the number of unemployed is but one sign of the deterioration of the standard of living of the working class. On the one hand, an ever increasing part of the proletariat faces the prospect of being thrown on the scrap heap by the bourgeoisie which seeks to lay-off workers as markets contract, hoping to re-establish higher rates of profit by squeezing ever more surplus value out of ever fewer workers. On the other hand, those workers not ejected from the process of production and whom the crisis condemns to an unremitting intensification of exploitation in the factories, have seen their real wages drastically cut by the prodigious rise in consumer prices. In many countries, despite the growth of unemployment, consumer prices (food, rent, clothing) are rising even faster than in 1974:

Rise in consumer prices: percent changes over the past 12 months

Canada	+11.1%
Australia	+16.9%
Italy	+15.3%
Spain	+17.4%
Great Britain	+26.9%

(Source: Main Economic Indicators, OECD, October 1975)

Throughout Western Europe, North America, Australasia and Japan, consumer prices have risen an average of 11% between August 1974 and August 1975.

The proletariat in the Eastern bloc has also begun to feel the full impact of the world crisis. In Yugoslavia, there are more than half a million workers unemployed, while consumer prices have risen 30% over the past year. In Russia and the rest of the Eastern bloc even if unemployment can still be hidden, nothing can hide from the workers the palpable rise in the rate of exploitation which their capitalist masters are imposing. In addition to this, the proletariat is subjected to a devastating and continual rise in the price of consumer goods while at the same time suffering massive and growing shortages of the basic necessities. In December, Polish workers were told that a "flexible pricing policy" will replace the price freeze on basic foodstuffs. Some food prices have been frozen since the 1970-71 workers' insurrection, though the only effect of these price freezes has long since been to produce acute shortages of many necessary items. The effects of capitalist planning in Poland, which permits the shipment of scarce food items overseas, can also be seen in the sphere of housing where the waiting list for apartments is now more than 1.5 million families long! Also in December, Hungary announced the third large round of price increases this year on a wide range of food and consumer goods.

Under the blows of the deepening world crisis, with its growing impoverishment of the proletariat, the class equilibrium - which had already begun to crack with the onset of the crisis at the end of the 60s - has dissolved. Over the past year the class struggle has grown in intensity and scope, confirming our Current's analysis that the perspective opened up by the crisis is one of class war, proletarian revolution.

In Peru, the February 1975 riots and street fighting in Lima to which the leftist military junta responded with savage repression leading to the death of hundreds, the arrest of several thousand demonstrators,
and the declaration of a State of Emergency, was the climax after a massive wave of class struggle: in August 1974, 15,000 miners struck in the state-owned Centromin-Peru; in September, strikes at the metallurgical plants spread to the copper mines, textile plants and Volvo and Pirelli factories; in December, 25,000 copper miners struck. In Venezuela in the winter of 1975 the miners at the recently nationalized iron mines launched a bitter strike. In Argentina throughout the spring and summer, tens of thousands of workers were on strike from Villa Constitucion to Cordoba, from Rosario to Buenos Aires. The wave of factory occupations and the armed defence of working class neighbourhoods in the face of brutal repression by the army and police are indicative of the growing combativity of the proletariat in response to the crisis.

In China, 1975 has seen a wave of class struggle in response to austerity measures, to which the state has reacted by sending troops into the affected areas in order to break the strikes and "restore production". In September, it was reported that 10,000 troops had been sent to Hangchow to restore production in 13 factories. The widespread use of the army in coal mines, steel mills and many other industries is indicative of the scope of the Chinese proletariat's response to both the deterioration of its standard of living and conditions of work which the state has tried to impose.

In Eastern Europe, 1975 has also brought new evidence of the proletariat's resistance to the onslaughts of the crisis of world capital. Strikes, work slowdowns, protest actions, and sabotage have increased throughout the region. In Poland, the state has struck back: in November heavy penalties for absenteeism were introduced and it was announced that a whole series of other disciplinary measures would be forthcoming. With memories of the 1970 insurrection still fresh in their minds, party leaders and trade union officials have been touring the factories trying to convince the workers that the 'gains' of the past few years could be jeopardized by 'barren discontent'.

In Western Europe, 1975 brought a dramatic upturn in the scale and intensity of strikes, thus ending the relative lull of 1973-74 which had followed the wave of strikes begun in 1968. Throughout this past winter and spring hundreds of thousands of Spanish workers engaged in mass strikes. In January and February the strike wave spread from Pamplona and Barcelona in the north through the Madrid region to Andalusia in the south. In March, the industrial suburbs of Bilbao were the scene of bitter strikes, while in April the wave momentarily peaked with the strike of 3,000 workers at the Fasa Renault plant at Valladolid. In Italy, the end of April saw the wildcat strike by the conductors on the Milan transit system (ATM), which was directed against the unions as well as the employers. In France, during the spring the working class responded to lay-offs and plant shutdowns in the auto industry, steel, metallurgy, newspapers, transportation and public utilities, with a wave of strikes which the unions only provisionally managed to contain but with growing difficulty. In April, more than fifty factories were occupied, while the number of strikers grew by a hundred thousand a day!

In the United States, a wildcat by West Virginia coal miners this summer directed against the collusion of unions and mine owners spread in only a few days to encompass 80,000 of the 125,000 bituminous coal miners in the country. The combined efforts of the union, the mine owners, the courts and the police were necessary to put an end to the month long strike which completely paralyzed the coal industry.

Throughout the past year the class struggle has continued to grow, spreading from country to country, affecting ever more sectors of industry and encompassing greater and greater numbers of workers. However, despite their scope and intensity which attest to the combativity of an undefeated generation of workers, these struggles have only breached but not yet broken the corporatist, national and trade union ramparts which constitute capital's last bastion against the gathering proletarian storm. A calm has now momentarily settled over the class battlefield as the proletariat assimilates the lessons of its recent struggles and as the bourgeoisie prepares to confront the working class. This calm before the new upheavals which are even now germinating deep within the framework of decaying bourgeois society coincides with talk of an economic recovery.

RECOVERY: REALITY OR MYTH

London's prestigious weekly, The Economist, has pointed to an upturn in production beginning last spring in Japan and over the summer in the United States and West Germany, as the harbinger of a recovery from the worst slump since the crisis of the 1930s:

"The six largest industrial nations - America, Japan, Germany, France, Britain and Italy - between them account for 80% of industrial countries' output. As they meet for the summit-in-a-slump at Rambouillet, all can see some swallows in their sky - and hope that they signal the start of spring." (The Economist, 15 November 1975)

And so The Economist optimistically predicts a rise in real GNP for all six during 1976, and in the case of the US and Japan a hefty rise of 6%. In the United States leading circles of the bourgeoisie speak even more confidently:

"No doubt about it anymore: the recovery in business is vigorous, more vigorous than even the optimists expected." (Business Week, 3 November 1975)

A not inconsiderable segment of the bourgeoisie therefore publicly shares the sentiment of France's Prime Minister Chirac that "we can begin to see the end of the tunnel".

Marxists have never asserted that in a general crisis of over-production - which together with periods of imperialist world war and then reconstruction make up the barbarous cycle of decadent capitalism – output continually falls in a straight downward line. A crisis of over-production will always be punctuated by short weak spurts of rising output or even by a conjunctural upturn for a particular national capital. However, only the bourgeoisie could mistake such a pause in the decline of production for the signs of a recovery. The proletariat - has learned the bitter lesson that in the epoch of capitalist decline the only 'recovery' from a general crisis of over-production that bourgeois society can experience is through the carnage of a new world war.

While the overall control of each national economy, which the capitalist state has increasingly assumed since the world crisis of the 1930s, cannot eliminate the anarchy of production which is the stigmata of the capitalist system, the general tendency towards state capitalism has made it possible to 'phase in’ the crisis. However, if the apparatus of state capitalism makes it possible to avert a total collapse of production by recourse to reflationary programmes, the inevitable result of reflation with its massive budget deficits, is a further weakening of the competitive position of the national capital on the world market and a pronounced tendency towards hyper-inflation. Such a situation will then require a drastic
deflation to avert a collapse, which will in turn quickly produce a liquidity crisis, a spate of bankruptcies and a new breakdown of production. Moreover, just as deflation and the resulting industrial collapse today only slows down but does not halt the galloping inflation, so reflationary programmes only slow the decline in output without reversing it and producing even an inflationary boom. Long before reflation could eliminate idle industrial capacity it would produce hyper-inflation and collapse. Long before deflation could halt galloping inflation it would produce a general collapse of the system through asphyxiation. The world economy is today condemned to oscillate between increasingly severe bouts of hyper-inflation and depression - no matter what 'plan' the capitalist state adopts.

The recovery which the bourgeoisie today tries to convince itself is real, is condemned to be stillborn. The signs of apparent recovery are due to two factors. First, a temporary halt to the drastic inventory reduction which industry undertook more than a year ago in the face of super-saturated markets, and the subsequent upswing in production as industry rebuilt its depleted stocks. Second, the tax cuts and public spending increases which the several leading capitalist states carried out in a desperate effort to prop-up production and prevent even more massive unemployment (with the social upheavals which would be its inevitable result).

Neither of these factors provides the basis for a real recovery. The inventory rebuilding will shortly run its course as stocks are brought into line with the realities of a contracting world market, and without some new impetus a further round of inventory liquidation will begin. The unprecedented budget deficits necessary to finance the various reflationary programmes have already reached the point where they will provoke a hyper-inflation unless they are quickly reduced.

ESTIMATED BUDGET DEFICITS FOR THE CURRENT FISCAL YEAR

	$ billion	% of GNP
Great Britain	19-28	10-15%
United States	Over 90	Over 6%
West Germany	28-32	7-8%
France	Over 9	Over 3%
Japan	33	8%

(Source: The Economist, 4 October 1975)

The coming year will be characterized by a systematic effort in the leading capitalist countries to significantly reduce bloated budget deficits by slashing public spending and by a new lurch into deflation. Thus, the 'recovery' will necessarily run afoul of the impending curbs on public spending. With no conceivable increase in global effective demand, with industry throughout the world slashing its capital spending and with the 'planned economies' all planning to slow down industrial growth, the spurious nature of the much ballyhooed recovery will become evident.

THE BOURGEOISIE RESPONDS TO THE CRISIS

In order to compete on a saturated world market each national faction of capital must try to reduce the price of its commodities in order to grab its competitor's markets. However, in the face of collapsing profits this cannot be done through investments in new plant and machinery which would raise the productivity of labour and so make it possible to undercut one's competitors. Moreover, the costs of production consisting of the constant capital which is utilized are relatively inflexible and resistant to cuts; if the cost of raw materials (circulating capital) does tend to fall somewhat the burden of idle plants and machines (fixed capital) grows at an ever-increasing rate. There is only one way in which each national capital can attempt to make its commodities more competitive: by making the proletariat absorb the brunt of the crisis.

The massive assault on the working class which the bourgeoisie is presently unleashing takes two forms. First a deterioration in the working conditions of the proletariat in order to raise the rate of profit without any new investments in constant capital: huge reductions in the labour force on the one hand, and speed-up and longer hours for those workers who remain on the other. In the midst of an open crisis, decadent capitalism reverts to the barbarous methods for the extraction of surplus value characteristic of its infancy: absolute surplus value. It is the only characteristic of its youthful visage which capital in its death throes can recapture.

Second, a sharp reduction in the proletariat's standard of living, a direct attack on the wages of workers. Wages, which represent the equivalent of the cost of producing and reproducing the workers' labour power (and of making it possible for the worker to raise a family, a new generation of proletarians), are under the prevailing conditions of state capitalism 'paid' to the workers in two forms. One part is paid directly to the worker by his employer in the form of his pay cheque; the other part is given to the worker by both his employer and the state in the form of 'social services'. The draconian austerity measures (wage freezes, incomes policies, cuts in social services) which the bourgeoisie everywhere is now trying to impose have as their object the ruthless slashing of the workers' wages in both its forms.

However, confronted by an undefeated and combative working class the bourgeoisie must proceed with the greatest of care; it dare not yet try to impose its will on the working class through violent repression lest it provoke the class war for which it is still unprepared. Thus, the bourgeoisie must first try to divert the proletariat from its class terrain, to mystify it, to fragment it and to dissolve it among the 'people’, (that most odious word in the bourgeois lexicon!). What the bourgeoisie must try to impose at all costs is national unity. This means that the left will be brought in to 'manage' the crisis, to impose the austerity measures on the working class, to convince the workers that the state is 'their' state and that they must make the necessary sacrifices on its behalf. We will see the, flowering of nationalist, anti-fascist, and anti-imperialist ideologies in the, highest circles of the capitalist state apparatus. Any opposition to the state will be pictured as objectively aiding the ever lurking 'fascist threat' which must be crushed by the 'democratic people' mobilized behind their 'popular state'. Class conscious and militant workers and revolutionaries will be denounced by all the organs of propaganda as 'fascist agents' and ‘tools of reaction'. Before each national faction of the bourgeoisie can hope to attenuate the devastating effects of the world crisis and try to patch up the shattered economic equilibrium, it must first restore the class equilibrium. It is this which constitutes the political objective of state capitalism. Thus, the economic crisis of dying capitalism has today, pushed to the centre stage the acute political crisis of its ruling class.

THE CLASS STRUGGLE

Because of the extremely convulsive nature of the crisis, which escapes the control of even the behemoth capitalist state, and because of the growing sacrifices which that state must exact, the possibility of restoring even a tenuous class equilibrium dims and the outbreak of new and more powerful waves of class struggle becomes practically certain.

Whenever the next wave of mass strikes erupts, the workers - if they are to prevent their struggle from being led into a dead-end - will immediately have to break the stranglehold that the unions have with increasing difficulty maintained over the class struggle. The break with the unions will assume a concrete expression through the formation of general assemblies in the factories which will have control of the struggle, and the creation of elected and revocable strike committees. However, it is clear that if even the most militant and combative strike is to avoid being isolated and then crushed, it must quickly overcome the local and corporate character which the very structure of the capitalist system tries to impress on it at birth. What is necessary is the GENERALIZATION of the struggle: its extension to other factories, to other branches of industry and to other cities. This process will be accompanied by the constitution of coordinating committees, consisting of delegates from the various factories which will be the embryos from which the workers councils will be formed.

The experience of the past sixty years has amply demonstrated that even the most generalized wave of mass strikes in which the workers have occupied the factories in the leading industrial cities (Germany 1918-19, Italy 1920, Spain 1936), is doomed to defeat if the POLITICIZATION of the struggle, the attack on the bourgeois state does not occur. Until they completely smash the bourgeois state, the workers can never be the masters of the productive process. It is with the politicization of the struggle that the workers' councils, the politico-military and not simply economic - organs of the proletariat, make their appearance.

With just the first hint of the development of an autonomous workers movement, as struggles begin to break out of the union straightjacket and to generalize, the left political apparatus of capital also comes forward speaking of the need for the 'politicization' of the burgeoning struggles. When the proletariat marches through the streets, 20,000 strong, demonstrating against unemployment, lay-offs and compulsory overtime, as did the workers of Lisbon in February 1975; when the workers occupy their workplace, denounce the unions and send delegates to other factories to co-ordinate the struggle, as did the workers at Portugal's TAP airline a little over a year ago, the left terrified by even the beginnings of real class struggle advocates official strikes and work stoppages to demonstrate the proletariat's hatred for 'fascism' and its commitment to the 'democratic state'. When the left urges the transformation of economic struggles into political struggles it is really advocating the transformation of proletarian struggles into struggles to defend the capitalist state and preserve the bourgeois order! The struggle for higher wages, against lay-offs, etc, is an indisputably proletarian struggle, the very basis and soil from which a revolutionary struggle arises. The anti-fascist strike or democratic strike, advocated by the left, is just as indisputably an anti-working class strike, a strike directed against both the historical and immediate class interests of the proletariat. In their appeals for anti-fascist and democratic strikes, the Stalinists, Maoists, Trotskyists, anarchists and left socialists, once again reveal that they are the rightful and legitimate heirs of the Social Democracy of 1914: the enthusiastic tools and active agents of the tottering bourgeois order, the executioners of the proletariat.

Confronted by an autonomous class movement which it cannot simply side-track, the bourgeoisie can at first react in only one way: attempt at all costs to divert the proletariat from a direct attack on the capitalist state. Any temporary concessions in the economic sphere can and will be made so long as the bourgeois state apparatus is left intact: factories will continue to operate, at however big a loss and even be turned over to the workers; wage increases will be granted. At the same time, the government will move further to the left - like the chameleon, taking on a protective red colouring when in danger.

If in the face of a mounting wave of mass strikes the bourgeoisie appears to give way, devoting all its energy to the preservation of its state apparatus, its strategy is to wait for the proletariat's rage to spend itself and be consumed by the frustrations and responsibilities of factory management in a capitalist society - and then to act to re-establish its direct authority and control at the point of production itself. However, the combativity of the workers is not the only factor that will affect the bourgeoisie's response to the coming wave of mass strikes. The very depth of the crisis robs the bourgeoisie of any real margin of manoeuvre: if on the one hand concessions have to be made, then equally the catastrophic nature of the crisis demands that they be just as quickly withdrawn. The capitalist state will have to promptly act to restore order in the factories and win the 'battle of production', lest the waning strength of the national capital be completely drained and its competitiveness on the world market irremediably damaged.

In its effort to restore production on a profitable basis and impose its will on the proletariat after a wave of mass strikes has temporarily subsided, the bourgeoisie can have recourse to either mystification or violent repression. Extreme caution in the face of a still undefeated working class will dictate that the bourgeoisie utilize mystifications: organs of 'popular democracy', self-management, base committees, etc. However, the nature of the sacrifices that the capitalist state must impose and the very combativity of the workers in the face of the crisis are such that even the leftist mystifications which the bourgeoisie finds most effective today are rapidly losing their power to influence and mobilize the class. Thus, if the attempt to restore the economic equilibrium by putting a gun to the head of the proletariat will completely destroy the last shreds of class equilibrium and precipitate the all-out class war, the bourgeoisie's inability to restore the class equilibrium through mystification will completely destroy any possibility of even temporarily patching up the economic equilibrium. Such is the dilemma facing the capitalist state on the eve of a new proletarian offensive.

THE INTERNATIONAL EQUILIBRIUM

The crisis, which has so devastatingly shattered the economic and class equilibrium of world capital, has also severely dislocated its international equilibrium. In the face of economic collapse, every national faction of capital is confronted with the necessity to cut imports to the bone and encourage exports; in other words to export or die! Yet, faced with a super-saturated world market one national capital can only improve its trade balance at the expense of its rivals since it is obvious that all countries cannot import less and export more at the same time. The concrete manifestations of the breakdown of the provisional international equilibrium established after World War II include the pronounced tendencies toward trade wars, autarky, economic nationalism, protectionism and dumping which have become part of the daily life of capital since the late 1960s. To these must be added the very significant tendency for localized inter-imperialist confrontations to move from the peripheries of the capitalist world (Indo-China, Kashmir, Bengal) towards its vital centres (The Middle East, the Mediterranean basin, the regions of Africa astride the major trade routes linking Europe with Asia and the Americas).

As the crisis deepens over the next few years, and as the trade wars become more bitter and the localized conflicts even more fierce, the necessity for yet another forcible redivision of world markets, for the violent elimination of competitors, will impose itself with an implacable logic on each of the imperialist blocs. For more than sixty years marxism has insisted that the bourgeoisie ultimately has only one answer to the crisis: imperialist world war! There is no question here of a theory of a conspiracy by war-mongering generals, but of the recognition of an ineluctable tendency to which the whole of rotting bourgeois society - pacifist and jingoist - must inevitably bow:

"In the decadent phase of imperialism, capitalism can only guide the contradictions of its system in one direction: war …… Whichever way it turns, whatever means it tries to use to get over the crisis, capitalism is pushed irresistibly towards its destiny of wa ….. Humanity can only escape such an outcome through the proletarian revolution.” (Mitchell, Bilan, 1934)

However, quite apart from the fact that the crisis has not yet reached a depth where the bourgeoisie would be constrained to unleash a new world conflagration, there is a far more compelling reason why we insist today it is not imperialist world war but class war, proletarian revolution, which is on the agenda. In order to launch a world war, capital must have a proletariat sufficiently crushed and mystified so that it will make the ultimate sacrifices in the interests of 'national defence'. Today, however, a militant and combative proletariat confronts the bourgeoisie and bars the way to war. Before capital could impose its 'solution' to the crisis, it would have to first defeat and crush the proletariat. Whether the present crisis is to end in the bourgeois solution of world war or the proletarian solution of communist revolution, will be decided by the outcome of the decisive class battles which lie ahead.

While world war is not on the agenda today and while the bourgeoisie is preoccupied with the class struggle, nonetheless as the crisis inexorably deepens inter-imperialist antagonisms grow sharper. In order to have a clear idea of the way in which international tensions will become more acute over the
coming year we must look at both the equilibrium within the Russian and American blocs, as well as the equilibrium between the imperialist blocs.

Recent events may appear to indicate the disintegration of the two big imperialist blocs, the destruction of their unity and cohesion. The tendency towards trade wars, the growth of economic nationalism and even the general tendency for capital to be centralized in the hands of each national state, all seem like so many harbingers of the dissolution of the big imperialist blocs. Certainly events such as the decision of Canada's Saskatchewan province to nationalize the predominantly American-owned potash industry, Canadian limitations on the export of oil to the US, Venezuela's nationalization of oil and iron ore (also largely American-owned), and Britain's recourse to import controls, attest to genuine nationalist and autarkic tendencies among the nations which constitute the American bloc. Similar tendencies are apparent in the relationship of Romania and the Indo-Chinese states to Russia.

Such tendencies which would, if they became predominant, lead to the fragmentation of the imperialist blocs are, however, counteracted by the far more powerful and profound tendency towards the strengthening of each imperialist bloc on the basis of the increasingly unchallengeable domination of a continental state capitalism: Russia and the United States. Thus within each bloc all of the lesser powers, despite their efforts to pursue an aggressively nationalistic policy, are compelled by their very weakness on the world market to adapt their policies to the needs of the dominant imperialist power. In the final analysis the economic nationalism and autarkic tendencies of the smaller countries are condemned to be little more than ideological window-dressing used to drum up popular support for the extremely harsh austerity measures that the stranglehold of American or Russian capital imposes on their client states.

Both American and Russian capital responded to the first blows of the crisis by successfully deflecting its worst effects onto their weaker satellites. Thus the famous 'oil crisis' provoked by the price increases which accompanied the Yom Kippur war, was a smoke-screen hiding the reality of a massive transfer of wealth from Western Europe and Japan to the United States by way of Iran and the Arab producer states. Militarily and financially dependent on the US, and incapable of taking independent action in the Middle East, Europe and Japan had to accede to an arrangement whereby billions of additional dollars flow into the treasuries of the OPEC countries and are then 'administered' by Wall Street or used to pay for American military equipment, capital goods and agricultural products, thus strengthening the American trade balance. Besides this considerable transfer of wealth to the US, European and Japanese goods have become less competitive on the world market as their prices have had to reflect the huge increases in the price of imported oil on which their economies are totally dependent. American capital has been the beneficiary of this additional 'handicap' to which her competitors are subject.

The extent to which the equilibrium within the American bloc has shifted to reflect the growing and unchallenged command of the US is observable in the comparative trade balances of the countries within the bloc. The US went from a trade deficit of $5.3 billion in 1974 to a trade surplus of $11 billion in 1975. The excess $15 billion in additional exports in 1975 over 1974, which could only barely attenuate the effects of the crisis in the US, came for the most part directly or indirectly at the expense of America's client states. Britain's acceptance at Rambouillet of America's diktat on import controls, France's bowing to the US on gold policy, West Germany's toleration of an over-valued currency at a time of falling exports and Tokyo's acquiescence to American 'recommendations' on foreign investments in Japan, all further indicate the indefensible character of the theory of the disintegration of the American bloc.

Within the Eastern bloc the equilibrium has also shifted, reflecting Russia's incontestable sway over her 'partners'. Over the past two years Russia has imposed staggering increases in the price of oil and other raw materials on her client states, while recently demanding that they also provide extra capital for mammoth investment projects in Siberia.

The utter powerlessness of the weaker states to resist the demands of the continental state capitalisms which dominate the world is today manifest. Indeed, even where a country does succeed in asserting its 'independence' and withdrawing from one imperialist bloc, it is condemned by the very structure of decaying capitalism to immediately fall under the domination of the rival imperialist bloc. This has been the fate of Egypt which has extricated itself from the hegemony of Moscow only to fall under the sway of Washington. Moreover, what is involved here is in no way a disintegration of the imperialist blocs, but rather a manifestation of the bitter inter-imperialist rivalries between the blocs!

Nonetheless, the fact that Russia and the US have actually strengthened: their control over their respective blocs during the past two years, has only momentarily made it possible for them to moderate some of the worst effects of the crisis. However much the US and Russia count on each of their blocs continuing to absorb, ever greater masses of their commodities, their prospects for success on the export front are exceedingly dim. The lesser powers of the American bloc, already crippled by the crisis, will not be able to continue to absorb American goods at the present rate over the coming year. In 1976, as effective demand ebbs in Europe and as attempts to prevent a complete economic breakdown lead to frantic efforts to slash imports, the American trade balance will sharply deteriorate. Similarly, the Russian planners who are desperately trying to expand their foreign trade by 13.6% this year - most of it to their East European 'allies' - will also run up against the contraction of effective demand, and in this domain as in so many others they will undoubtedly fail to reach their goals.

Just as over the past year or two the equilibrium within each bloc has shifted in favour of the dominant imperialist power, so the equilibrium between the blocs has also shifted - in favour of the American and at the expense of the Russian bloc! It is not in areas of relatively marginal importance such as Vietnam, but in areas which, by their proximity to the industrial centres of world capital, their wealth of raw materials, their markets, and their strategic location dominating the world's trade routes, are vital, to the imperialist blocs, that the dramatic shift in the balance of power can be clearly seen.

Thus, the significant gains which Russian imperialism had made in the Middle East during the sixties have been reversed over the past two years. The counter-attack of American imperialism in this crucial region has already brought Egypt and the Sudan back into the American orbit. During the past year a solid Teheran-Jeddah-Amman-Cairo-Washington axis has been forged which, together with her Israeli client state assures American domination of the Middle East. The huge arms sales to Iran, the shipment of new weaponry to Israel, and the project for an Arab arms industry linked to the American bloc, which was initiated by Egypt, Saudi Arabia, Qatar and the United Arab Emirates, constitute significant moments in the ongoing military build-up which the US has successfully undertaken in this region. The fruits of this bellicose policy are already apparent in the winding down of the Russian sponsored Dhofari rebellion against the pro-western Sultan of Oman, which was crushed with the aid of Iranian troops and sophisticated Anglo-American weaponry.

In response to this shift in the international equilibrium in favour of the American bloc, Russian imperialism has launched a concerted drive to oust the US from a number of strong points close to the very nerve centres of world capital. In Yugoslavia, Russian backed anti-Tito 'Kominformist' and Croat nationalist groups have considerably increased their activity over the past few months. A Russian initiative in Yugoslavia, with its naval facilities on the Adriatic Sea and its proximity to Italy, is shaping up. The American bloc has acted to counter any Russian thrust in the Balkans through the Greek regime's project for a Balkan pact that would be based on the anti-Russian, Albanian, Yugoslav, Greek and Turkish regimes, and which would seek to further erode Russian influence in Romania.

Russian imperialism is also attempting to recapture lost ground in the Middle East through its intervention in Lebanon; military aid is being channelled through Iraq - Moscow's one remaining strong point on the Arabian peninsula - to the United Forces under Ibrahim Koleilat, who are engaged in a bloody struggle for control of this important area of the Mediterranean littoral.

The US, while supplying the opposing Phalangist forces, is trying - through the Arab League, Egypt, Syria and the PLO - to restore the status quo in Lebanon. Failing that, and in the event of a complete break-down of the pro-western Lebanese state, the US could intervene to retain the strategic points either through an Israeli invasion or a partition of Lebanon in which a Christian state, totally dependent on the American bloc, would emerge.

American and Russian imperialism also confront each other around the horn of Africa and the vital Babel-Mandeb straits which dominate the access to the Red Sea, and through which trade between Europe and Asia will flow as the Suez Canal re-opens. While the Russians are desperately trying to break the American control of this region through their support of the Eritrean Liberation Front and by their huge military build-up in Somalia, the Americans may react in anyone of three ways as the struggle in that part of the world intensifies: support the military regime in Ethiopia, if it seems capable of controlling the situation and shows itself to be a faithful watchdog of American imperialism; create an Afar client state out of Ethiopia's Wollo province and the French Territory of the Afars and Issas to guard the important trade routes; or come to terms with the 'moderate' wing of the ELF and with the backing of its Arab 'friends', Egypt and the Sudan, support the creation of an Eritrean state which would guarantee American domination of the region. On the other side of Africa, Morocco and Algeria are on the verge of war over the phosphate-rich former Spanish colony of the Sahara. While Moroccan troops assert their control over the region, the Algerian-backed Front Polisario has launched a bitter guerrilla war against King Hassan's army; at the same time the bulk of the Algerian army has been concentrated on the Sahara frontier, and both Algeria and Libya have repeatedly warned that Morocco's annexation of the Sahara is unacceptable to them. Behind Morocco and Algeria stand the two great imperialist blocs, whose armaments and supplies can alone make a war possible. Beyond the question of raw materials it is the strategic location of the former Spanish colony which is of primary concern to the US and Russia. The US hopes to check Russian naval ambitions in the Atlantic through the Sahara's incorporation into its Moroccan client state; an 'independent' Sahara on the other hand, which would be dependent on Algerian and Russian support, might provide the Russian navy with its first base on the Atlantic Ocean.

Russia's need for such a base becomes apparent as her war fleet steams through the Atlantic towards Angola - where a powerful American task force is also being concentrated. It is in Angola that the inter-imperialist butchery presently reaches its greatest heights: the rival 'liberation fronts', amply supplied with the most modern tools of mass death by their Russian and American masters have turned the country into a veritable slaughter-house. In Angola, Russia through the MP LA and a Cuban expeditionary force, and the US through the FNLA, UNITA and contingents of South African troops, are fighting over Angola's rich storehouse of raw materials (oil, iron ore, diamonds etc), control of the transport of copper and uranium from Zaire and Zambia which passes through Angolan ports, and domination of the trade routes which link Europe with South Africa and which span the South Atlantic between Europe and South America.

China, a minor imperialist power vainly trying to construct a bloc of her own, is condemned by her weakness to seek the support of one of the two big imperialist blocs. If for the moment China is allied with the US against Russia, and is strenuously trying to counter Moscow's expansionary thrust throughout South-Asia and the Far East, a shift of alliances as circumstances dictate cannot be precluded.

In all of the growing inter-imperialist struggles, the two blocs confront each other through their local client states and the many national 'liberation fronts' which each bloc arms, supplies, finances and ultimately controls. The bourgeoisies of the continental state capitalisms cannot yet confront each other directly, because it is the confrontation with the proletariat which is today on the agenda.

CLASS WAR

The break-down of economic, class and international equilibrium of world capital in the face of the general crisis of over-production has brought the decaying bourgeois order to the verge of generalized class war. Today Portugal and Spain have become the decisive arenas in which the proletariat and the bourgeoisie measure their strength and prepare for the gigantic struggles to come; it is on the basis of the lessons drawn from the events now unfolding in the Iberian Peninsula that the working class and its communist vanguard will arm itself for the impending violent struggle for the destruction of the capitalist state and the establishment of the dictatorship of the workers' councils.

In Portugal, in the face of a wave of mass strikes the bourgeoisie succeeded in diverting the working class from a direct assault on the capitalist state, through the nationalist, democratic, and anti-fascist mystifications which accompanied the move of the successive governments to the left during 1974-75. However, the Fifth Government, in which the Stalinists and Copcon played the dominant role, completely failed to win the 'battle of production', to restore order and discipline in the factories and to impose the necessary sacrifices on the proletariat. Nonetheless, the momentary fragmentation and demoralization which the mystifications of democracy, national unity and anti-fascism had brought about within the class, was sufficient to produce a temporary lull in the class struggle - and it was to this lull that the Sixth Government corresponded. The combination of impending economic collapse and an undefeated working class, however, will soon unleash a new strike wave. In the face of the bourgeoisie's further move to the left in response to a new upsurge of class struggle, it is imperative that revolutionaries mercilessly denounce the programmes for popular democracy, self-management, base and neighbourhood committees with which the ruling class will attempt to stem the violent thrust of the proletariat and create the basis for its later counter-attack.

Now, even more than Portugal, it is Spain which has become the testing ground for the contending classes. An advanced industrial country which, by its history of proletarian militancy and its proximity to France and Italy, may ignite the revolutionary flame throughout Europe, Spain has become the preoccupation of the bourgeoisie which is desperately trying to ready its arsenal of mystifications before the powder-keg explodes.

The wave of strikes which have now brought Madrid to a virtual standstill indicates the magnitude of the explosion with which capital will soon have to contend. The preparation of revolutionaries for active intervention in the struggle of their class on this crucial battlefield demands a thorough understanding of the march to the left which the Spanish bourgeoisie - at the urging of its European and American mentors - is now undertaking. It is on the class battlefields that the analyses, perspectives and practical orientation for struggle which emerge from this Congress of the International Communist Current will be tested in the coming year.

Mac Intosh

December 1975-January 1976