20 years since May 68: Capitalism in the whirlpool of the crisis

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"1967 left us with the collapse of the pound sterling, and 1968 brings us Johnson's measures (...) the decomposition of the capitalist system, which for a few years, was hidden under the orgy of "progress" that followed the Second World War, now stands revealed (...)

We are not prophets, and we do not claim to know when or how events will unfold in the future. But as far as the process that capitalism is today engaged in is concerned, we are convinced that it cannot be stopped by reforms, devaluations, or any other kind of capitalist economic measures, and that it is heading straight for a crisis." (Internacionalismo, Venezuela, January 1968)

Twenty years ago, we had to convince people that existed. Today, we only have to explain it, and to demonstrate its historic implications.

"The first symptoms appeared clearly in 1967: the annual growth in world production fell to its lowest level in 10 years. In the OECD countries, unemployment and inflation underwent a slow but definite acceleration. The growth in investment slowed down constantly between 1965 and 1967. In 1967, there were officially 7 million unemployed in the OECD countries, and GNP has growing at the rate of 3.5%. These figures seem negligible compared to the level of the crisis today, but they mark nonetheless the end of post-war "prosperity” (…). At its deepest in 1970, the second recession was much worse than that of 1967.It has deeper in the countries of the OECD, and in the rest of the world economy, it lasted longer. It confirmed that the 1967 recession was not a "German" accident, but heralded a new period of economic instability." (see our pamphlet, The Decadence of Capitalism)

It took twenty years -- a generation -- for the first signs of the crisis begun after the period of reconstruction following World War II, to appear openly as the expression of a general and insurmountable crisis of a mode of production spurred on by the quest for profit and the never-slaked thirst for markets, and based on the exploitation of man by man.

From a worldwide, historical standpoint, whether it be in the so-called "communist" countries, in the Eastern bloc or China, in the "developed" countries or those latterly described as "developing", the balance-sheet of these twenty years of crisis is catastrophic, and the perspective for the years to come is still more so.  

First of all, catastrophic in the absolute. Through the misery that throughout the planet has become the daily lot of the immense majority of the world's population. A situation where the future will not be the development of the hardly or non-industrialised countries catching up with the developed ones, but rather the appearance of the characteristics of under-development in the very heart of the industrialised metropoles what the sociologists call the "4th world".

Catastrophic again in relative terms, when we consider the gigantic waste of the present level of scientific and technical knowledge, and of all the material wealth produced by labour; all that which could provide a powerful lever for humanity's emancipation, but which in the straitjacket of the world crisis is systematically orientated towards and transformed into a force of destruction.

The extreme depth and gravity of this crisis are all the more obvious, in that all the economic policies, over the last twenty years, intended to confront it, have without exception been lamentable failures, and that the possibility of escaping the swamp into which the world economy, East and West, is sinking ever deeper, appears today as completely illusory.

In fact this crisis raises fundamental questions which go to the heart of society's organisation and structure, of the relationships within it that condition the future of world society.

On the eve of a new, massive, and inevitable worldwide recession, the anniversary of these twenty years of crisis gives us the opportunity to take an overall look at the world economy's fundamental tendencies and its lack of any perspective other than a still faster degeneration within the framework of' the economic laws dominating the planet.

This retrospective of twenty years of crisis cannot but pass in review all the illusions and myths which at one moment or another over the years have been put out either through official governmental channels, or through left-wing contestation.

What they've said about the crisis

The last twenty years are both the history of the uneven progression of the crisis itself, and of the collapse of the illusions that have marked its passage. Not a stone has been left unturned in the search for a spell to exorcise the demon.

The "oil crisis" and the crisis of over-production

In the first half of the 70's, the "oil crisis", the "energy crisis", and the "scarcity" of raw materials in general were made responsible for the recession of 1974 and the never-surmounted financial crisis. If we are to believe all the experts and world leaders, the "scarcity" of raw materials "which caused their prices to rise" was responsible for the upheavals in the economy. The world economy was in a sense the victim of a "natural" problem, outside and independent of its own fundamental nature.

And yet, a few years later in 1978-79, when the world economy's upheavals had become convulsions, far from a scarcity of raw materials leading to an increase in their price, we saw a generalised over-production, especially of petrol, leading to a collapse in prices.

First of all, the crisis hit directly the raw materials sector (in which we include farm produce), then it was the turn of semi-finished products like steel, textiles, oil derivatives and petro-chemicals, until it struck at the very heart of industrial production: the car industry: shipbuilding, aerospace, as well as the manufacture of day-ta-day consumer goods.

This progression illustrates the stage reached today by world capitalism's overall crisis. But the real nature of the crisis is flagrantly, and caricaturally expressed in the production of raw materials and especially in agriculture: a clear case of crisis of over-production creating scarcity. At the same time as nations all over the world are waging an agricultural trade war of unprecedented bitterness, there is a staggering increase in famine and malnutrition. Thus:

“World agricultural production is adequate to ensure to each individual more than 1000 calories per day, ie 500 more than is required for the health of an average adult, while from 1969 to 1983 agricultural production has grown faster (40%) than the world population (35%).” (L'Insecurite Alimentaire dans le Monde, October 1987, p.4)

This, as the World Bank's latest report tells us, does not prevent malnutrition hitting 700 million people; this has nothing to do with productive capacity, since:

“Hunger persists even in those countries that have reached nutritional independence. In these countries, famine simply hits those who lack sufficient income to have access to the market.” (World Bank: Report on Poverty and Hunger, 1987).

Moreover, although the Western ruling classes complained loudly at the time about this increase in the cost of supplying raw materials and energy which was "strangling" them, they never said a word about the fate of these masses of dollars flowing into the coffers of the raw material producing countries. In fact, these dollars rapidly returned to the pockets of those who spent them, since they increased the raw material producers' importing power. Better still, what the raw material producing countries bought in the 1970's was for the most part neither means of consumption, nor means of production, but weapons.

"Between 1971 and 1985, the Third World bought $286 billion worth of armaments, equivalent to 30% of the debt accumulated by the countries of the Southern Hemisphere during the same period (…). The Middle East accounted for almost half of these exports (…). Between 1970 and 1977, the market grew on average by 13% p.a." (Le Monde Diplomatique, March 1988: "Le grand bazar aux canons dans le tiers monde")

The Middle East's advanced state of barbarism today, ravaged by war and crisis, is a perfect illustration of the close relationship between war and crisis; recent history shows us clearly how the crisis of overproduction is transformed into sheer destruction.

In every lie, there is an element of truth, in every illusion or myth an element of reality; otherwise, neither would be able to find an echo in living brains. This is equally true of the “explanations” of the crisis that have marked the last twenty years.

Firstly, the "oil crisis" had a semblance of reality. The abrupt rise in the price of energy, whose relatively low cost up till then had been one of the conditions of the reconstruction period, was, from 1974 onwards, a bad blow for the Western European economies. Unlike investment costs, which are amortised over a long period, raw material costs are reflected immediately in a commodity's price. The effects of the rise of energy and raw materials prices was thus immediate: greater weakness in relation to foreign competition, and a drop in the rate of profit. Contrary to what was said at the time, these increases were not due to any natural scarcity of raw materials; the only "scarcities" at the time were those organised with a view to speculating on the rise in prices. By contrast, the real reason for the abrupt rise in the cost of energy and raw materials in general was the brutal fall in the dollar since 1971. Given that all sales were measured in dollars, when the producing countries increased the price of oil, they were doing no more than pass on the fall in the value of the dollar.

Here, we are getting to the bottom of the question. The dollar's fall, as a direct result of the Americans' decision in 1973 to let the dollar float, so as to make the US economy more competitive, enshrined the collapse of the Bretton Woods agreement signed in 1944.

"These agreements were designed, once peace was restored, to reconstruct the international monetary system which had fallen apart since the beginning of the 1930’s … They were aimed precisely at preventing a return to the disastrous experience of the "competitive” devaluations and “floating exchange rates" of the inter-war period". (Bilan economigue et social 1987, Le Monde)

In fact, the dollar's "competitive" fall return to the economic conditions of the pre-war crisis.

In a new period of acute, the world economy came face to face with the same that had caused the Second World War, but this time centupled.

This situation was prefaced, in 1967, by the appearance of the US trade deficit.

In itself, this deficit, though minor compared to today's, marked the end of the reconstruction period. It meant that the now rebuilt European and Asian economies were no longer simply markets, and would moreover be taking an increasingly large part in a world market correspondingly reduced.

Since then, the one aim of every economic policy has been to compensate for the collapse of the economic possibilities offered by the period of reconstruction.

From an economic point of view, the period from 1967 to 1981 is nothing other than the history of the massive and repeated use of Keynesian recipes of artificial support for the economy. Let us recapitulate briefly what these Keynesian recipes consist of:

“Keynes main contribution to bourgeois political economy can be summed up in his recognition, during the slough of the 1929 crisis, of the inanity of the great religious principle of bourgeois economic science invented by the French economist J.B. Say in the 19th century. According to this principle, capitalism can't really experience a markets crisis because “all production is at the same time a market". The Keynesian solution was for the state to create sufficient national demand to absorb its production, and if the markets were also saturated, Keynes proposed that should become the buyer of the mass of products, which it would pay for in paper money printed by itself. Since everyone needed this money, no one would protest that it represented nothing but paper.” (The Decadence of Capitalism, pV)

During this period:

“First, the US became the “locomotive” of the world economy by artificially providing a market for the rest of its bloc through enormous trade deficits. Between 1976-1980, the US bought commodities overseas to a value of $100 billion more than it sold. Only the US – because the dollar is the world's reserve currency -- could run up such a trade deficit without being forced into a massive currency devaluation. Second, the US flooded the world with dollars in an unprecedented credit expansion in the shape of loans to the backward countries and to the Russian bloc (…). This mass of paper values temporarily created an effective demand which allowed world trade to pick up." (International Review, no. 26)

Germany is another example from this period of illusion:

“Germany set itself to play the “locomotive”, yielding to the pressure, it must be said, of the other countries (…) The increase in government spending has nearly doubled, growing 1.7 times the growth in the national product, to the point where half of the latter is centralised by the public sector (…). Thus the growth in the public sector debt has been explosive. This indebtedness, stable at around 18% of GNP at the beginning of the 70's, passed abruptly to 25% in 1975, then to 35% this year [1981]; its share has thus doubled in 10 years. It has reached a level unheard of since the bankruptcy of the inter-war years (…) The German, who have long memories, are again haunted by the spectre of wheelbarrows filled with the banknotes of the Weimar Republic!” (International Review, no 31)

In 1979, the dollar crisis and the threat of general financial collapse gave the signal for a new change in world economic policy under cover of the ideology of "liberalisation", which in 1982 ended in the deepest economic recession since the years preceding World War II.

The liberal revolution

All those over-used explanations, in the 1970's, of the crisis' "natural" causes explained nothing at all. They were quickly forgotten, and nothing more was heard of them. The world crisis, on the other hand, inexorably advanced, growing deeper and more widespread, affecting the very heart of the industrial metropoles. It had to be explained; or at least, an ideological justification had to be found for the painful "therapies" that began to be applied to the working population from 1979 onwards. Unemployment abruptly doubled, wages were frozen, factories and offices were dominated by the prison-warden mentality. Everywhere, workers were expected to transform themselves into soldiers of "the Company" and "the Nation” for an economic war in which they had everything to lose and nothing to win. And where indeed, they lost plenty.

What a relief it was when the pernicious disease eating away economy were at last revealed, and cleared away.

“Society” was suffering from too much “state interference”. It was wasting languorously; away in its “welfare habits”, which had gone along with what were christened for the occasion the "golden 30 years", ie the whole period of post-war reconstruction (1945-75) (sic). This "excess of state intervention" had finally waken; the bounce out of production, destroyed the "spirit of enterprise", and created huge deficits in state treasuries, deficits which themselves were a burden on the productive apparatus.

Fundamentally -- if such simplistic conceptions have a foundation -- this state "interventionism" prevented the world economy's "natural laws" from working and playing their "self-regulating" role. All at once, the economists had put their finger on the causes of the crisis, and their joy was all the greater in that these revelations brought with them at the same time the remedies and solutions to be adopted. The euphoria was still greater, and the relief even more intense, in that the treatments to be administered in massive doses to the working class the world over during the 1980s had a flavour which the bourgeoisie found wholly to its taste: lay-offs, wage cuts, destruction of all kinds of social insurance, taking state employees as scapegoats, and finally strangling the third world and leaving it to die.

But just as the supposed scarcity of raw materials quickly revealed itself as being in fact their over-production, so this new "less state" rapidly appeared as being "more state". If only through its intervention in every aspect of social life, beginning with the repression of every expression of revolt provoked by this policy. Or again in orienting a growing share of productive, scientific, and technological effort towards arms production, and of productive investment towards the stock exchange.

Nonetheless, in 1984-85, the myth of a recovery in the American economy made a lot of noise. Reagan's recipes seemed to be having a good effect on the health of the economy. All the indices of inflation and production had regained their health. Throughout the world, financiers, industrialists, and statesmen were dazzled by this "revolution", and everyone henceforth wanted to "liberalise", even in .... Russia and China.

As we know, the adventure failed in the spectacular stock exchange crash of October 1987, the threat of a major recession and renewed inflation.

In a few years, budget and trade deficits, far from declining, reached new and giddy heights, especially in the soil where this ideology had first taken root:· the United States. This is the balance-sheet that we drew as early as 1986:

"American growth is built on credit. In 5 years, the USA, which has the principal creditor in the world, has become the principal debtor, the most indebted country in the world. The cumulative debt of the USA, internal and external has reached the prodigious sum of $8000 billion, when it was "only" $4600 billion in 1980, and $1600 billion in 1970. That means that in order to play its role as locomotive of the world economy, US capital, in the space of 5 years, has accumulated as much debt as in the previous 10 years." (International Review, no 48)

Instead of gaining a new lease on life, industrial production has never been so anaemic, only to end up by going into retreat, in the US once again. The "spirit of enterprise" and "creation", which was supposed to take to its wings once liberated from its constraints, has instead fled en masse from the sphere of industrial production, to take refuge in that of financial and stock market speculation -- the only aspect of capital whose activity in recent years has been feverish, and whose lamentable end is common knowledge.

This is true for all the great industrial powers, and especially for the most powerful of them, the United States. The fall in unemployment has been cited as one of the greatest gains of this "liberal revolution" in the US: in fact, one million jobs have disappeared definitively in the industrial sectors, more than 30 million people now live below the official "poverty level ", and the only jobs created have been part-time jobs in the service sector:

“Whereas in the 1970’s, one new job in five has paid at less than $7000 a year, from 1979 onwards this has the case for six new jobs in ten (… ). Between 1979 and 1984, the number of workers earning a wage equal to or above the national average fell by 1.8 million... The number of workers earning less rose by 9.9 million." (Le Monde Dossiers et Documents, Bilan Eronomigue et Social, 1987)

As for the nations of the so-called "third world" which were supposed to been stimulated by the "liberation" of the natural laws of the market and free competition, in the last few years they have reached the bottom of the abyss. Far from being "liberated" 'from the hegemony of the great industrial powers, they have never been so dependent on them, crushed by the weight of debts and interest payments that doubled with the value of the dollar, at the same time as raw material exports -- their main source of revenue and which the world productive apparatus could no longer absorb -- collapsed. In November 1987, Mexico, to take only one example, devalued its currency by 50%.

As in the case of the oil crisis, there is an element of truth in the "liberal critique" of "excessive state intervention". Not in the analysis -- far from it -- and still less in the solutions, but in the plain observation: state intervention in every domain of economic and social life, from being a vital support for economic activity pushed to bursting point by its own internal forces, has precipitated the crisis of over-production it has supposed to avoid.

.At the beginning of the 1980's, we analysed this changed situation, emphasizing its major characteristics which involved not merely a quantitative development of the crisis, but also a qualitative change in the historic conditions of its development.

Among these characteristics, we distinguished one essential aspect: contrary to the pre-war years of crisis, when Keynesian measures of the “new Deal" type were taken once the worst of the crisis held passed, this "kind of measure to support the economy is no longer before but irremediably behind us, while the worst of the crisis is still to come.

The facts of economic life since the beginning of the 1980's have amply confirmed this observation. Moreover, the accelerated concentration of the activity of different states in the military domain, and in the field of arms production, world strategy, increased military interventions and presence, whose "social" facade no longer fools anybody and tends to disappear altogether, only emphasizes the seriousness of the present historic situation.

The technological revolution

Our too brief review of what has passed for analysis over the last twenty years would not be complete were we not to mention here the famous "third industrial revolution". In the watershed between two historic phases of development, these economic "hiccups" were supposedly nothing other than the inevitable and necessary crisis in the passage from one epoch to another. What has not been said -- and imposed -- in the name of this famous "technological revolution"? Redundancies for a start. The main point of this historical "analysis" was entirely contained in the idea that the capitalist crisis, which no one could deny any longer – embarrassing enough in itself -- was in fact only a crisis of growth. Beyond this difficult patch, blue skies were supposedly shining. But only on condition, of course, that we submitted to the painful, but necessary imperatives of the present birth. This "revolutionary" analysis also had the advantage of depicting all revolt against the measures involved in this "revolution" (redundancies, restructuring, etc), as "retrograde", or even "reactionary".

Unfortunately for the ideologues who defended these theses, the "third industrial revolution" explanation of the crisis has today disappeared without trace, going the same way as the "oil crisis" or the "liberal revolution": it has collapsed in the face of stubborn fact.

Quite apart from the social and industrial involution that has marked this period, contrary to all the "industrial revolutions" which have always been accompanied by great advances in production, it is necessary to emphasize here that all the advanced technological and scientific techniques of the last two decades have been spurred on by and applied in the military field of armaments production; the civilian spin-off has always remained extremely limited.

“The world devotes to military greater than the whole of world in 1900 (…) Moreover, the military field absorbs two thirds of world spending on research and development". (La Documentation Francaise, no 4456, p. 13, "Armement et desarmement a l’age nucleaire”)

For an end to myths and illusions about the crisis

If the economic crisis is difficult to understand it is because of its nature. This is the first time in its history that humanity has been subjected to a crisis of generalised over-production. All the crises of preceding modes of production -- slavery, feudalism, etc were expressed as widespread crises of under-production. This is expressed by Marx in the Communist Manifesto:

"In these crises a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity: the. epidemic of over-production". (Selected Works, Lawrence & Wishart, p.40)

And Karl Marx during his lifetime had never seen anything but crises of over-production limited in both time and space. Limited to particular sectors, and preceded by long periods of capitalist expansion throughout the world.

Not only is the crisis of over-production more incomprehensible a priori because of its apparent absurdity, the fact that the economic crisis is one of over-production has for years made possible all kinds of manipulation to push back the day of reckoning. In a crisis of under-production, there is no alternative: when there's not enough, there's not enough. The crisis of over-production, which is too much production in relation not to human needs, but to the world market's ability to absorb it, can be put off and hidden by a whole series of financial and commercial manipulations; recent economic history is nothing other than the history of these manipulations. But these manipulations, in which today's states are past masters, only feed the crisis of over-production still further, and finally make it even worse. Inevitably, the moment must arrive when the crisis must take its course, because the whole structure of society threatens to collapse under its weight.

Our own epoch is nothing less than the day of reckoning. And, leaving the last twenty years aside, the present crisis is nothing but the prolongations and the conclusion of a whole historic period that began at the turn of the century with the First World War. A period where:

“Between 1914 and 1980 lie 10 years of world war (without counting the permanent local wars), 39 years of depression (1918-22. 1929-39. 1945-50, 1967-87), ie a total of  of 49 years of war and crisis as against only 24 years of reconstruction (1922-29 and 1950-67). And the cycle of the crisis is not yet finished! …" (International Review, no 48)

There are not any number of ways for the crisis to run its course. Either it must end in an immense destruction, as is the case in wars, or by a radical transformation in worldwide relations of production, there the aims, means, and conditions of productive activity will at last be freed from the straitjackets of the market, profit, exploitation and the division of labour between manual and intellectual work.

Nothing could be more useless in the face of the worldwide economic crisis than the injunctions of
all the national ruling classes, wanting to transform the working population into soldiers of the economy, to make them clash in an economic war where whole generations will be sacrificed, and which in the end -- as the tragic experience of two world wars proves can only lead to outright war.



May 1968