The explosion of anger and revolt by the present generation of proletarianised young people in Greece is not at all an isolated or particular phenomenon. It has its roots in the world crisis of capitalism and the confrontation between these proletarians and the violent repression which has unmasked the real nature of the bourgeoisie and its state terror. It is in direct continuity with the mobilisation of the younger generation on a class basis against the CPE law (Contrat Première Embauche - first job contract) in France in 2006 and the LRU (Law on the Reform of the Universities) in 2007, when the students from universities and high schools saw themselves above all as proletarians rebelling against their future conditions of exploitation. The whole of the bourgeoisie in the main European countries has understood all this very well and has confessed its fears of the contagious spread of similar social explosions with the deepening of the crisis. It is significant, for example, that the bourgeoisie in France has retreated by suddenly suspending its programme of "reform" for the high schools. Furthermore, the international character of the protests and the militancy among university students and above all high school students has already been expressed very strongly.

In Italy, two months of mobilisation included massive demonstrations on 25th October and 14th November behind the slogan "we don't want to pay for the crisis" against the Gelmini decree, which is being challenged because it involves budgetary cuts in the education sector, resulting in the non-renewal of the contracts of 87,000 temporary teachers and of 45,000 ABA workers (technical personnel employed by the Ministry of Education) and in reduced public funding for the universities.[1]

In Germany, on 12th November, 120,000 high school students came out onto the streets [1] of the main cities in the country, with slogans like "capitalism is crisis" in Berlin, or laying siege to the provincial parliament as in Hanover.

In Spain, on 13th November, hundreds of thousands of students demonstrated in over 70 towns against the new European directives (the Bolgona directives) for the reform of higher education and universities, spreading the privatisation of the faculties and increasing the number of training courses in the enterprises.  

The revolt of young people against the crisis and the deterioration of their living standards extended to other countries: in January 2009 alone, there were movements and riots in Vilnius in Lithuania, Riga in Latvia and Sofia in Bulgaria, meeting with harsh police repression. In Kegoudou, 700km south east of Dakar, Senegal, in December 2008, violent clashes took place during demonstrations against poverty, where demonstrators had called for a share in the mining profits exploited by ArcelorMittal. Two people were killed. At the beginning of May in Marrakech, Morocco, 4,000 students had risen up after 22 of them were poisoned by food in the university canteen. The movement was violently repressed and was followed by arrests, long prison sentences and torture.  

Many of these movements see their own reflection in the struggle of the Greek students.

The scale of this mobilisation against the same kinds of measures by the state is not at all surprising. The reform of the education system being undertaken on a European level is part of an attempt to habituate young working class generations to a restricted future and the generalisation of precarious employment or the dole.

The refusal, the revolt of the new educated proletarian generation faced with this wall of unemployment, this ocean of uncertainty reserved for them by capitalism in crisis is also generating sympathy from proletarians of all generations.   

Violence by a minority or massive struggle against exploitation and state terror?

The media, which are the servants of the lying propaganda of capital, have constantly tried to deform the reality of what's been happening in Greece since the murder by police bullet of 15 year old Alexis Andreas Grigoropoulos on 6th December. They have presented the confrontations with the police as the action of a handful of anarchists and ultra-left students coming from well to do backgrounds, or of marginalised wreckers. They have broadcast endless images of violent clashes with the police and put across the image of young hooded rioters smashing the windows of boutiques and banks or pillaging stores.   

This the same method of falsifying reality we saw during the anti-CPE mobilisation in 2006 in France, which was identified with the riots on the city outskirts the year before. We saw the same gross method used against the students fighting the LRU in 2007 in France - they were accused of being "terrorists" and "Khmer Rouge"!

But if the heart of the "troubles" took place in the Greek "Latin Quarter" of Exarchia, it is difficult to make this lie stick today: how could this uprising be the work of a few wreckers or anarchists when it spread like wildfire to all the main cities of the country and to the Greek islands of Chios and Samos and even to the most touristy cities like Corfu or Heraklion in Crete? The riots spread to 42 prefectures in Greece, even towns where there had been no demonstrations before. More than 700 high schools and a number of universities were occupied.

The reasons for the anger

All the conditions were there for the discontent of a whole mass of young proletarians, full of disquiet about their future, to explode in Greece, which is a concentrated expression of the dead-end into which capitalism is steering the present generation: when those who are called the "600 Euro generation" enter into working life, they have the feeling of being ripped off. Most of the students have to get paid work in order to survive and continue their studies, most of it unofficial and underpaid jobs; even when the jobs are slightly better paid, part of their labour remains undeclared and this reduces their access to social benefits. They are generally deprived of social security; overtime hours are not paid and often they are unable to leave the family home until they are 35, since they don't earn enough to pay for a roof over their heads. 23% of the unemployed in Greece are young people (the official unemployment rate for 15-24 year olds is 25.2%) as an article published in France indicates: "these students don't feel in any way protected; the police shoot at them, education traps them, work passes them by, the government lies to them".[2] The unemployment of the young and their difficulties in entering the world of work has thus created a general climate of unease, of anger and generalised insecurity. The world economic crisis is going to bring  new waves of massive redundancies. In 2009, 100,000 job-cuts are predicted in Greece, which would mean a 5% increase in unemployment. At the same time, 40% of workers earn less than 1,100 Euros net, and Greece has the highest rate of workers on the poverty line out of the 27 EU states: 14%.   

It's not only the students who have come out onto the streets, but also poorly paid teachers and many other wage earners facing the same problems, the same poverty, and animated by the same spirit of revolt. The brutal repression against the movement, whose most dramatic episode was the murder of that 15 year old, has only amplified and generalised feelings of solidarity and social discontent. As one student put it, many parents of pupils have been deeply shocked and angered: "Our parents have found out that their children can die like that in the street, to a cop's bullet".[3] They are becoming aware that they live in a decaying society where their children won't have the same standard of living as them. During the many demonstrations, they have witnessed the violent beatings, the strong-arm arrests, the firing of real bullets and the heavy hand of the riot police (the MAT). 

The occupiers of the Polytechnic School, the central focus of the student protest, have denounced state terror, but we find this same anger against the brutality of the repression in slogans such as "bullets for young people, money for the banks". Even more clearly, a participant in the movement declared: "We have no jobs, no money, a state that is bankrupt with the crisis, and the only response to all that is to give guns to the police".[4]

This anger is not new: the Greek students were already mobilising in June 2006 against the reform of the universities, the privatisation of which will result in the exclusion of the least well-off students. The population had also expressed its anger with government incompetence at the time of the forest fires in the summer of 2007, which left 67 dead: the government has still not paid any compensation to the many victims who lost houses or goods. But it was above all the wage-earners who mobilised massively against the reform of the pension system at the beginning of 2008 with two days of widely followed general strikes in two months, and demonstrations of over a million people against the suppression of pensions for the most vulnerable professions and the threat to the right of workers to claim retirement at 50.

Faced with the workers' anger, the general strike of 10th December, controlled by the trade unions, was aimed at putting a damper on the movement while the opposition, with the Socialist and Communist parties to the fore, called for the resignation of the present government and the holding of elections. This did not succeed in channelling the anger and bringing the movement to a halt, despite the multiple manoeuvres of the left parties and the unions to block the dynamic towards the extension of the struggle, and despite the efforts of the whole bourgeoisie to isolate the young people from the other generations and the working class as a whole by pushing them into sterile confrontations with the police. For whole days and nights, the clashes were incessant: violent charges by the police wielding batons and using tear gas, beatings and arrests in huge numbers.

The young generation of workers expresses most clearly the feeling of disillusionment and disgust with the utterly corrupt political apparatus. Since the end of the war, three families have shared power, with the Caramanlis dynasty for the right and the Papandreou dynasty for the left taking it in turns to run the country, involving themselves in all kinds of scandals. The conservatives came to power in 2004 after a period in which the Socialists were up to their neck in intrigues. Many of the protestors see the political and trade union apparatus as totally discredited: "The fetishism of money has taken over society. The young people want a break with this society without soul or vision".[5] Today, with the development of the crisis, this generation of proletarians has not only developed a consciousness of capitalist exploitation, which it feels in its very bones, but also a consciousness of the necessity for a collective struggle, by spontaneously putting forward class methods and class solidarity. Instead of sinking into despair, it draws its confidence in itself from the sense of being the bearer of a different future, spending all its energy in rising up against the rotting society around them. The demonstrators thus proudly say of their movement: "we are an image of the future in the face of the sombre image of the past". If the situation today is very reminiscent of May 1968, the awareness of what's at stake goes well beyond it.

The radicalisation of the movement

On 16 December, the students managed to take over part of the government TV station NET and unfurled banners on screen saying "Stop watching the telly - everyone onto the streets!" and launched an appeal; "the state is killing. Your silence arms them. Occupation of all public buildings!" The HQ of the anti-riot police in Athens was attacked and one of their patrol wagons was burned. These actions were quickly denounced by the government as "an attempt to overturn democracy", and also condemned by the Greek Communist Party, the KKE. In Thessaloniki, the local branches of the trade unions GSEE and ADEDY, the federation of civil servants, tried to keep the strikers cooped up in a rally in front of the Labour Exchange. High school and university students were determined to get the strikers to join their demonstration and they succeeded: 4,000 workers and students marched through the town's streets.  On 11th December militants of the KKE's student organisation had tried to block assemblies to prevent occupations (Pantheon University, the school of philosophy at Athens University). Their attempts were a failure and the occupations in Athens took place. In the district of Ayios Dimitrios the town hall was occupied and a general assembly was held, with 300 people of all generations taking part.  On 17th December, the building which houses the main trade union confederation of the country, the GEEE, in Athens, was occupied by proletarians who called themselves "insurgent workers" and issued a call to make this a place for general assemblies open to all wage earners, students and unemployed.

There was an identical scenario, with occupations and assemblies open to all, at the Athens University of Economics and the Polytechnic School.

We are publishing the declaration of these workers in struggle to help break the "cordon sanitaire" of the lying media which surrounds these struggles and presents them as no more than violent riots led by a few anarchist wreckers terrorising the population. This text clearly shows the strength of the feeling of workers' solidarity which animated the movement and which linked different generations of proletarians: 

"We will either determine our history ourselves or let it be determined without us

We, manual workers, employees, jobless, temporary workers, local or migrants, are not passive TV-viewers. Since the murder of Alexandros Grigoropoulos on Saturday night we participate in the demonstrations, the clashes with the police, the occupations of the centre or the neighbourhoods. Time and again we had to leave work and our daily obligations to take to the streets with the students, the university students and the other proletarians in struggle.

WE DECIDED TO OCCUPY THE BUILDING OF GSEE

To turn it into a space of free expression and a meeting point of workers.

To disperse the media-touted myth that the workers were and are absent from the clashes, and that the rage of these days was an affair of some 500 "mask-bearers", "hooligans" or some other fairy tale, while on the TV-screens the workers were presented as victims of the clash, while the capitalist crisis in Greece and Worldwide leads to countless layoffs that the media and their managers deal as a "natural phenomenon".

To flay and uncover the role of the trade union bureaucracy in the undermining of the insurrection - and not only there. GSEE and the entire trade union mechanism that supports it for decades and decades, undermines the struggles, bargain our labour power for crumbs, perpetuate the system of exploitation and wage slavery. The stance of GSEE last Wednesday is quite telling: GSEE cancelled the programmed strikers' demonstration, stopping short at the organization of a brief gathering in Syntagma Sq., making simultaneously sure that the people will be dispersed in a hurry from the Square, fearing that they might get infected by the virus of insurrection.

To open up this space for the first time - as a continuation of the social opening created by the insurrection itself - a space that has been built by our contributions, a space from which we were excluded. For all these years we trusted our fate on saviours of every kind, and we end up losing our dignity. As workers we have to start assuming our responsibilities, and to stop assigning our hopes to wise leaders or "able" representatives. We have to acquire a voice of our own, to meet up, to talk, to decide, and to act. Against the generalized attack we endure. The creation of collective ‘grassroot' resistances is the only way.

To propagate the idea of self-organization and solidarity in working places, struggle committees and collective grassroot procedures, abolishing the bureaucrat trade unionists.

All these years we gulp the misery, the pandering, the violence in work. We became accustomed to counting the crippled and our dead - the so-called ‘labour accidents'. We became accustomed to ignore the migrants - our class brothers - getting killed. We are tired living with the anxiety of securing a wage, revenue stamps, and a pension that now feels like a distant dream.

As we struggle not to abandon our life in the hands of the bosses and the trade union representatives, likewise we will not abandon any arrested insurgent in the hands of the state and the juridical mechanism.

IMMEDIATE RELEASE OF THE DETAINED!

NO CHARGE TO THE ARRESTED!

SELF-ORGANIZATION OF THE WORKERS' GENERAL STRIKE!

WORKERS' ASSEMBLY IN THE ‘LIBERATED' BUILDING OF GSEE

Wednesday, 17th December 2008, 18:00 General Assembly of Insurgent Workers".

On the evening of 17th December, fifty odd union bureaucrats and heavies tried to get the HQ back under their control but they ran away when student reinforcements chanting "solidarity", the majority of them anarchists, came from the University of Economics, which had also been occupied and transformed into a place for meetings and discussions open to all workers. The association of Albanian immigrants, among others, distributed a text proclaiming their solidarity with the movement, entitled "these days are ours as well!"

Significantly, a small minority of those occupying the trade union HQ put out the following message:

"Panagopoulos, the general secretary of the GSEE, has decaled that we are mot workers, because workers are at work. Among other things this reveals a lot about the reality of Panagopoulos' ‘job'. His ‘job' is to make sure that the workers are indeed at work, to do all in his power to make sure that the workers go to work. But for the last ten days, workers haven't just been at work, they are also outside, in the streets. And this is a reality which no Panagopoulos in the world can hide...We are people who work, we are also unemployed (paying with lay-offs for our participation in strikes called by the GSEE while the representatives of the trade unions are rewarded with promotions), we work for insecure contracts in one small job after another, we work without any formal or informal security in training courses or jobs subsidised to keep the unemployment figures down. We are part of this world and we are here.

"We are insurgent workers, full stop. All of our wage cheques are paid for in our blood, our sweat, in violence at work, in heads, knees, hands and feet broken by accidents at work.

"The whole world is made by us, the workers...

"Proletarians from the liberated building of the GSEE"

There were repeated calls for an indefinite general strike from the 18th onwards. The unions were forced to call a three-hour strike in the public sector on that day. 

On the morning of the 18th, another high school student, 16, taking part in a sit-in near his school in a suburb of Athens, was wounded by a bullet. On the same day, several radio and TV stations were occupied by demonstrators, notably in Tripoli, Chania and Thessaloniki. The building of the chamber of commerce was occupied in Patras and there were new clashes with the police. The huge demonstration in Athens was violently repressed: for the first time, new types of weapons were used by the anti-riot forces: paralysing gas and deafening grenades. A leaflet against state terror was signed "Girls in revolt" and circulated in the University of Economics.

The movement began to perceive, in a confused way, its own geographical limits: this is why it welcomed with enthusiasm the demonstrations of international solidarity that have taken place in France, Berlin, Rome, Moscow, Montreal or New York and declared "this support is very important to us". The occupiers of the Polytechnic School called for an "international day of mobilisation against state murder" on 20th December; but to overcome the isolation of this proletarian uprising in Greece, the only way forward is the development of solidarity and of class struggle on an international scale.    

A maturation that points to the future

On 20th December, more violent street fights took place and the vice tightened around the Polytechnic School in particular, with the police threatening to launch a raid. The GSEE occupation handed back the building on 21st December, following a decision by the occupation committee and a vote in the general assembly. On 22nd December the occupation committee of the Polytechnic School then published a communiqué which declared: "We are for emancipation, human dignity and freedom. No need to throw tear gas at us because we are crying enough already".

Showing a great deal of maturity, and following a decision taken at the general assembly of the University of Economics, the occupiers used the call for the demonstration of the 24th against police repression and in solidarity with imprisoned comrades as a suitable moment to effect a mass evacuation of the building and to do it in safety: "There seems to be a consensus on the need to leave the university and to sow the spirit of revolt in society in general". These examples would be followed by the general assemblies of other occupied universities, thus springing the trap of being closed in and pushed towards a direct confrontation with the police, which could only have resulted in a bloodbath. The general assemblies also denounced the use of firearms against a police car, claimed by a so-called "Popular Action" group, as being a police provocation.

The Polytechnic occupation committee symbolically evacuated the last bastion in Athens at midnight on 24th December: "The general assembly and the assembly alone will decide if and when we leave the university...the crucial point is that it's the people occupying the building and not the police who decide on the moment to quit"

Before that, the occupation committee published a declaration: "By bringing the occupation of the Polytechnic School to an end after 18 days, we send our warmest solidarity to everyone who has been part of this revolt in different ways, not only in Greece but also in many countries of Europe, America, Asia and Oceania. For all those we have met and with whom we are going to stay together, fighting for the liberation of the prisoners of this revolt, and for its prolongation until the world social liberation."

In certain areas, residents took over the speakers installed by the municipal authorities for broadcasting Christmas carols to call, among other things, for the immediate freeing of all those arrested, the disarmament of the police, the dissolution of the anti-riot brigades and the abolition of the anti-terrorist laws. In Volos, the municipal radio station and the offices of the local paper were occupied to talk about the events and their implications. At Lesvos, demonstrators installed a sound system in the centre of the town and broadcast messages. In Ptolemaida and Ionnina, Christmas trees were decorated with photos of the young high school pupil killed at the beginning and with the movement's demands.

The feeling of solidarity was expressed again spontaneously and with considerable force on 23rd December, after an attack on an employee of a cleaning firm subcontracted by the Athens metro company (ISAP). Acid was thrown at her face while on the way home from work. Solidarity demonstrations took place and the HQ of the Athens metro was occupied on 27th December, while in Thessaloniki the GSEE HQ was occupied. The two occupations organised a series of demonstrations, solidarity concerts and "counter-information" actions (for example, occupying the loudspeaker system at the metro station to read out communiqués).

The Athens assembly declared in its text:

"When they attack one of us, they attack all of us!

"Today we are occupying the central offices of the ISAP (Athens metro) as a first response to the murderous acid attack to the face of Konstantina Kuneva on 23rd December as she was coming home from work. Konstantina is in intensive care in hospital. Last week, she was in dispute with the company demanding a full Christmas bonus for her and her colleagues, denouncing the illegal acts of the bosses. Before that, her mother had been sacked by the same company. She herself was moved far away from her first workplace. These are very widespread practices in the cleaning companies which pay the casual workers...Oikomet's owner is a member of PASOK (the Greek Socialist Party). It officially employs 800 workers (the workers say it's double that, while over the last three years over 3,000 have worked there). The illegal, mafia-like behaviour of the bosses there is a daily phenomenon. For example, the workers are forced to sign blank contracts (the conditions are written in by the bosses afterwards) and they have no opportunity of reviewing them. They work for 6 hours and are only paid for 4.5 (gross wage) so that they don't go beyond 30 hours (otherwise they have to be put in the high risk category). The bosses terrorise them, displace them, sack them and threaten them with forced resignations. The struggle for DIGNITY and SOLIDARITY is OUR struggle".

Parallel to this, the assembly of the occupation of the GSEE in Thessaloniki published a text which said: "Today we are occupying the HQ of the trade unions of Thessaloniki to oppose the oppression which takes the form of murder and terrorism against the workers...We appeal to all the workers to join this common struggle...the assembly, open to all occupying the union office, people coming from different political milieus, trade union members, students, immigrants and comrades from abroad adopted this joint decision:

"to continue the occupation;

"to organise rallies in solidarity with Konstantina Kuneva;

"to organise actions to spread information and to raise awareness around the city;

"to organise a concert in the city centre to collect money for Konstantina".

This assembly also declared "Nowhere in the platform of the trade unions is there any reference to the causes of inequality, poverty and hierarchical structures in society...The general confederations and the trade union centres in Greece are an intrinsic part of the regime in power; their rank and file members must turn their back on them and work towards the creation of an autonomous pole of struggle directed by themselves...if the workers take their struggles into their own hands and break with the logic of being represented by the bosses' accomplices, they will rediscover their confidence and thousands of them will fill the streets in the next round of strikes. The state and its thugs are murdering people.

"Self-organisation! Struggles for social self-defence! Solidarity with immigrant workers and Konstanitina Kuneva". 

At the beginning of January 2009, demonstrations were still taking place across the country in solidarity with the prisoners. 246 people had been arrested and 66 were still in preventative prison. In Athens, 50 immigrants had been arrested in the first three days of the uprising, with punishments of up to 18 months, in trials without interpreters; all of them are threatened with expulsion.

On 9th January, young people and police were again confronting each other after a march in the city centre by around 3,000 teachers, students and pupils. On their banners were slogans like "money for education, not the bankers", "Down with the government of murderers and poverty". Large anti-riot forces charged them several times to disperse them, resulting in a number of further arrests.

In Greece as everywhere else, with the insecurity, the redundancies, the unemployment, the poverty wages imposed by the world crisis, the capitalist state can only offer more police and more repression. Only the international development of the struggle and solidarity between industrial workers and office workers, full-time and casual workers, school pupils, university students, the unemployed, pensioners, all generations together, can open the way to a future perspective of abolishing this system of exploitation. 

W (18.1.09)

 

---

[1]. See our article "Noi la crisi non la paghiamo! [2]"

 

[2]. Marianne n° 608, 13/12/08, "Grèce: les leçons d'une émeute"

 

[3]3. Libération 12/12/08

 

[4]. Le Monde, 10/12/08

 

[5]. Marianne, op cit.

 

In the first three parts of our series on the German Revolution of 1918-19 we showed how, after the collapse of the Socialist International faced with World War I, the tide turned in favour of the proletariat, culminating in the November Revolution of 1918, which, like the October Revolution in Russia the previous year, was the high point of an uprising against the imperialist war. Whereas October represented the first mighty blow of the working class against the "Great War", it was the action of the German proletariat which finally brought it to an end.

According to the history books of the ruling class, the parallel between the movements in Russia and Germany ends here. The revolutionary movement in Germany was only that of November 1918, directed against the war. As opposed to Russia, in Germany there was never a revolutionary socialist mass movement directed against the capitalist system as such. The "extremists", who fought for a "Bolshevik" revolution in Germany, would pay with their lives for not having understood this. So it is claimed.

However, the ruling class of the time did not share the nonchalance of the present day historians regarding the unshakeable character of capitalist rule Their programme of the day was: Civil War!

"Dual Power" and the council system

This orientation was motivated by the presence of a situation of dual power resulting from the November Revolution. If the ending of the imperialist war was the main result of November, its principle product was the system of workers' and soldiers' councils, which, as in Russia and Austria-Hungary, covered the whole country.

The German bourgeoisie, in particular Social Democracy, immediately drawing the lessons from what had happened in Russia, intervened from the outset to turn these organs of the revolution into empty shells. In many cases, they imposed the election of delegates on the basis of party lists, divided up between the SPD and the wavering, conciliatory USPD, effectively excluding revolutionaries from these organs. At the first national congress of the workers' and soldiers' councils in Berlin the left wing of capital prevented Karl Liebknecht and Rosa Luxemburg from speaking. Above all, it pushed through a motion declaring the intention to hand over all power to a coming parliamentary government.

Such successes of the bourgeoisie still constitute the basis of the myth that in Germany, as opposed to Russia, the councils were not revolutionary. But this forgets that in Russia too, at the beginning of the Revolution, the councils did not follow a revolutionary course, that most of the delegates initially elected were not revolutionaries, and that the "soviets" there had also initially been in a hurry to give up their power.

After the November Revolution, the German bourgeoisie had no illusions about the supposed harmlessness of the council system. While claiming power for themselves, these councils continued to allow the bourgeois state apparatus to coexist alongside them. On the other hand the council system was by its very nature dynamic and elastic, its composition, attitude and mode of action capable of adjustment to each turn and radicalisation of the movement. The Spartakists, who had immediately understood this, had begun ceaseless agitation for the re-election of delegates, which would concretise a sharp left turn of the whole movement.

Nobody understood the potential danger of this "dual power" situation better than the German military leadership. General Groener, appointed to lead the operations of reaction, immediately activated the secret telephone connection 998 to the new chancellor, the Social Democrat Ebert. And just as the legendary Roman senator Cato, two thousand years before, had concluded every speech with the words "Carthage [(the mortal enemy of Rome] must be destroyed", Groener was obsessed with the destruction of the workers' and above all the soldiers' councils. Although, during and after the November Revolution, the soldiers' councils had partly represented a conservative dead weight holding back the workers, Groener knew that the radicalisation of the revolution would reverse this tendency, with the workers' councils beginning to draw the soldiers behind them. The ambition of the soldiers' councils was above all to impose its own command and to break the rule of the officers over the armed forces. This amounted to nothing less than the arming of the revolution. No ruling class has ever voluntarily accepted having its monopoly of armed force called into question. In this sense, the very existence of the council system put civil war on the agenda.

More than this: The bourgeoisie understood that in the aftermath of the November Revolution, time was no longer on its side. The spontaneous tendency of the whole situation was towards the radicalisation of the working class, the loss of its illusions regarding Social Democracy and "Democracy" and the swelling of its own self confidence. Without the slightest hesitation the German bourgeoisie immediately embarked on a policy of systematically provoking military clashes. Its goal: imposing decisive confrontations on its class enemy before the revolutionary situation could mature. More concretely: the "decapitation" of the proletariat through a bloody defeat of the workers in the capital Berlin, the political centre of the German workers' movement, before the struggles in the provinces could react a "critical" stage.

The open struggle between two classes, each determined to impose its own power, each with its own organisations of class rule, cannot but be a temporary, instable, untenable state of affairs. "Dual power" ends in civil war.

The Forces of Counter-Revolution

As opposed to the situation in Russia in 1917, the German Revolution was faced with the hostile forces of the whole world bourgeoisie. The ruling class was no longer split into two rival camps by the imperialist war. As such, the revolution had to confront not only the German bourgeoisie, but also the forces of the Entente, which gathered on the west bank of the Rhine, ready to intervene militarily should the German government lose control of the social situation. The United States, a relative newcomer to the world political stage, played the card of "democracy" and "the right of nations to self determination", presenting itself as the sole guarantor of peace and prosperity. As such it tried to formulate a political alternative to revolutionary Russia. The French bourgeoisie, for its part, obsessed by its own chauvinistic thirst for revenge, was burning to march deeper into German territory and to drown the revolution in blood in the process. It was Great Britain, the major world power of the day, which assumed the leadership of this counter-revolutionary alliance. Instead of lifting the embargo it had imposed on Germany during the war, it reinforced it. London was determined to starve out the population of Germany as long as that country had not installed a political regime approved by His Majesty's government.

Within Germany itself, the central axis of the counter-revolution was the alliance between two major forces: Social Democracy and the military. Social Democracy was the Trojan Horse of the white terror, operating behind the lines of the class enemy, sabotaging the revolution from within, using the remaining authority of a former workers' party (and the trade unions) to create a maximum of confusion and demoralisation. The military supplied the armed forces, but also the ruthlessness, audacity and strategic capacity which are its hallmarks.

What a wavering, half hearted lot the Russian socialists around Kerensky in 1917 were compared with the cold blooded counter-revolutionaries of the German SPD! What an unorganised mob the Russian officers were compared with the grim efficiency of the Prussian military elite![1]

In the days and weeks after the November Revolution, this alliance of death set out to solve two major problems. Given the disintegration of the imperial armies, it had to weld together the hard core of a new force, a white army of terror. It drew its raw material from two main sources, from the old officers' corps, and from uprooted individuals driven mad by the war, who could no longer be integrated into "civilian" life. Themselves victims of imperialism, but broken victims, these former solders were in search of an outlet for their blind hatred, and of someone who would pay for this service. Out of these desperados the aristocratic officers - politically supported and covered by the SPD - recruited and trained what became the Freikorps, the mercenaries of counter-revolution, the nucleus of what was later to be the Nazi movement.

These armed forces were backed up by a whole series of spy rings and agents provocateurs, coordinated by the SPD and the army staff.

The second problem was how to justify to the workers the deployment of the white terror. It was the Social Democracy which resolved this problem. For four years it had preached imperialist war in the name of peace. Now it preached civil war in the name of... preventing civil war. We don't see anybody here who wants bloodshed, it declared - except Spartakus! Too much workers' blood has already been spilled in the Great War - but Spartakus thirsts for more!

The mass media of the day spread these shameless lies: Spartakus is murdering and plundering and hiring soldiers for the counter revolution and collaborating with the Entente and getting money from the capitalists and preparing a dictatorship. The SPD was accusing Spartakus of what it was doing itself!

The first great manhunt of the 20th century in one of the highly "civilised" industrial nations of Western Europe, was directed against Spartakus. And whereas the capitalists and military top brass, offering enormous awards for the liquidation of the Spartakus leaders, preferred to remain anonymous, the SPD openly called for the assassination of Karl Liebknecht and Rosa Luxemburg in its party press. Unlike their new bourgeois friends, the SPD were motivated in this campaign, not only by (bourgeois) class instinct and strategic thinking, but by a hatred no less boundless than that of the Freikorps.

The German bourgeoisie did not let itself be fooled by the superficial and fleeting impression of the moment; that Spartakus was only a small, sideline group. It knew that the heart of the proletariat was beating there, and got ready to strike its mortal blow.

December 1918: First Victories for the Proletariat

The counter-revolutionary offensive began on 6th December in Berlin with a three-pronged attack. The headquarters of the Rote Fahne, the paper of the Spartakusbund, was raided. Another group of soldiers tried to arrest the leaders of the executive organ of the workers' councils, who were in session. The intention to eliminate the councils as such was clear enough: Around the corner, another group of soldiers was obligingly calling on Ebert to outlaw the Executive Council. And a demonstration of Spartakus was ambushed near the city centre, at the Chausseestrasse: 18 dead, 30 injured. Proletarian bravery and ingenuity was able to prevent the worst. The leaders of the council executive were able to talk the soldiers out of this action, while a group of Russian prisoners of war, coming from behind along the Friedrichstrasse, were able to surprise and overpower the machine gunners from the Chausssestrasse with their bare hands.[2]

The following day an attempt was made to arrest (kidnap) and murder Karl Liebknecht in the offices of the Rote Fahne. His own cool headedness saved his life on this occasion.

These actions provoked the first gigantic solidarity demonstrations of the Berlin proletariat with Spartakus. From now on, all the demonstrations of the Spartakusbund were armed, led by lorries bearing batteries of machine guns. At the same time, the gigantic strike wave which had broken out at the end of November, centred in the heavy industrial areas of Upper Silesia and the Ruhr, intensified in face of such provocations.

The next target of the counter-revolution was the Volksmarinedivision, armed sailors who had come to the capital from the coastal ports to spread the revolution. Its very presence was a provocation to the authorities, all the more so since they had occupied the palace of the hallowed Prussian Kings.[3]

This time the SPD prepared the ground more carefully. They awaited the results of the national council congress, which came out in favour of handing over power to the SPD government and a future national assembly. A media campaign accused the sailors of marauding and plundering. Criminals, Spartakists!

On the morning of 24th December, Christmas Eve, the government presented an ultimatum to the 28 sailors in the palace and their 80 colleagues in the Marstall (Arsenal)[4]: Unconditional surrender. The badly armed garrison vowed to fight to the last man. Exactly ten minutes later (there was not even time to evacuate women and children from the buildings) the roar of artillery began, awakening the great city.

"That would have been, despite all the tenacity of the sailors, a lost battle, since they were so badly armed - had it taken place anywhere else. But it took place in the centre of Berlin. During battles, it is well known, rivers, hills, topographical difficulties play and important role. In Berlin the topographical difficulties were human beings.

When the canons began to roar, proudly and big mouthed, they woke civilians out of their sleep, who immediately understood what the canons were saying." [5]

Unlike Britain or France, Germany had not been a long standing centralised monarchy. Unlike London or Paris, Berlin did not become a world metropolis under the guidance of a government plan. Like the Ruhr valley, it sprawled like a cancerous growth. The result was that the government district ended up being surrounded on three sides by a "red belt" of gigantic working class districts.[6] Armed workers rushed to the scene to defend the sailors. Working class women and children stood between the guns and their target, armed only with their courage, humour and capacity of persuasion. The soldiers threw away their weapons and disarmed their officers.

The following day, the most massive demonstration in the capital since November 9 took possession of the city centre - this time against the SPD in defence of the revolution. The same day, groups of workers occupied the offices of Vorwärts, the daily paper of the SPD. There is little doubt that this action was the spontaneous result of the profound indignation of the proletariat. For decades, Vorwärts had been a mouthpiece of the working class - until the SPD leadership stole it during the World War. Now it was the most shameless and dishonest organ of the counter-revolution.

The SPD immediately saw the possibility of exploiting this situation for a new provocation, beginning a campaign against the alleged "attack against freedom of the press". But the Obleute, the revolutionary delegates, rushed to the Vorwärts headquarters, persuading the occupation group of the tactical wisdom of temporarily withdrawal to avoid a premature confrontation.

The year thus ended with another demonstration of revolutionary determination: the burial of the 11 dead sailors from the Marstall battle. The same day the USPD left the coalition government with the SPD. And while the Ebert government toyed with the idea of fleeing the capital, the founding congress of the KPD began.

The Eichhorn affair and the second Vorwärts occupation

The events of December 1918 revealed that a profound consolidation of the revolution had begun. The working class won the first confrontations of the new phase, either through the audacity of its reactions, or through the wisdom of its tactical retreats. The SPD had at least begun to expose its counter-revolutionary nature in the eyes of the class as a whole. It quickly turned out that the bourgeois strategy of provocation was difficult and even dangerous.

With its back to the wall, the ruling class drew lessons from these first skirmishes with remarkable lucidity. It realised that the direct and massive targeting of symbols and identified figures of the revolution - Spartakus, the leadership of the workers' councils or the sailors' division - could prove to be counter-productive, provoking the solidarity of the whole working class. Better to attack minor figures, who would win the support of only part of the class, thus possibly dividing the workers in the capital, and isolating them from the rest of the country. Such a figure was Emil Eichhorn, who belonged to the left wing of the USPD. A quirk of fate, one of the paradoxes which every great revolution produces, had made this man the president of the Berlin police. In this function, he had begun to distribute arms to workers militias. As such, he was a provocation for the ruling class. Targeting him would help to galvanise the forces of the counter-revolution, still reeling from their first reverses. At the same time, the defence of a chief of police was an ambiguous cause for the mobilisation of the revolutionary forces!

But the counter-revolution had a second provocation up its sleeve, no less ambiguous, with no less potential to divide the class and make it hesitate. It had not gone unnoticed by the SPD leadership that the brief occupation of the Vorwärts offices had shocked social democratic workers. Most of these workers felt ashamed for the content of this paper. What worried them was something else: the spectre of military conflict between social democratic and communist workers - painted in gaudy colours by the SPD - that might result from such occupation actions. This concern weighed all the heavier - the SPD leadership knew this well - because it was motivated by a real proletarian concern to defend the unity of the class.

The whole machinery of provocation was again flung into motion.

Torrent of lies: Eichhorn is corrupt, a criminal, payed by the Russians, preparing a counter-revolutionary putsch!

Ultimatum: Eichhorn must immediately resign, or be removed by force!

Display of brute force: This time, 10,000 troops were posted in the city centre, 80,000 more drawn together in the vicinity. These included the highly disciplined elite divisions of General Maercker, infantry troops, an "iron brigade" from the coast, militias from the bourgeois districts, and the first Freikorps. But they also included the "Republican Guard", an armed militia of the SPD, and important troop contingents which directly sympathised with Social Democracy.

The trap was ready to close. 

The fatal trap of January 1919

As the bourgeoisie expected, the attack against Eichhorn did not mobilise those troops in the capital who sympathised with the revolution. Nor did it arouse the workers in the provinces, where the name Eichhorn was unknown[7].

But there was one component of the new situation which took everyone by surprise. This was the massive extent and the intensity of the reaction of the proletariat of Berlin. On Sunday, January 5, 150,000 followed the call of the Revolutionäre Obleute[8] to demonstrate in front of the police headquarters at Alexanderplatz. The following day, over half a million workers downed tools and took possession of the city centre. These workers were ready to fight and to die. They had immediately understood that not Eichhorn, but the defence of the revolution was the real issue.

Although taken aback by the power of this response, the counter-revolution was cold blooded enough to go ahead with its plans. Once again Vorwärts was occupied, but also other press offices in the city centre. This time, agents provocateurs from the police had taken the initiative.[9]

The young KPD immediately warned the working class. In a leaflet, and in front page articles in the Rote Fahne, it called on the proletariat to elect new delegates to its councils and to arm itself, but also to realise that the moment for armed insurrection had not yet come. Such an insurrection required a centralised leadership at the level of the whole country. This could only be provided by workers' councils in which the revolutionaries held sway.

On the evening of January 5 the revolutionary leaders came together for consultations in the headquarters of Eichhorn. Around 70 Obleute were present, of whom roughly 80% were supporters of the left of the USPD, the rest supporters of the KPD. The members of the central committee of the Berlin organisation of the USPD turned up, as well as two members of the central committee of the KPD: Karl Liebknecht and Wilhelm Pieck..

At first, the delegates of the workers' organisations were unsure as to how they should respond. But then the atmosphere was transformed, indeed electrified, by reports coming in. These reports concerned the armed occupations in the newspaper district and the alleged readiness of different garrisons to join an armed insurrection. Liebknecht now declared that, under these circumstances, not only the repulsion of the attack against Eichhorn, but armed insurrection had become necessary.

The eye-witness reports of this dramatic meeting indicate that Liebknecht's intervention constituted the fatal turning point. Throughout the war, he had been the political compass and the moral conscience of the German and even the world proletariat. Now, at this crucial moment of the revolution, he lost his head and his bearings. Above all, he prepared the way for the Unabhängigen, the Independents, who were still the dominant political force. Lacking clearly defined principles, a clear long term perspective and a more profound confidence in the cause of the proletariat, this "independent" current was condemned to vacillate constantly under the pressure of the immediate situation, and thus to compromise with the ruling class. But the reverse side of the coin of this "centrism" was the strongly felt need to participate whenever unclear "action" is on the agenda, not least in order to put one's own revolutionary determination on the record.

"The Independent Party had no clear political programme; but nothing lay further beyond its intentions than the idea of toppling the Ebert-Scheidemann government. At this conference, decisions lay in the hands of the Independents. And here it became clear that in particular those wavering figures who were sitting in the Berlin party committee, who normally did not like to put themselves in danger, but at the same time always wanted to participate in everything, turned out to be the wildest bawlers, presenting themselves in the most ‘revolutionary' manner possible."[10]

According to Richard Müller, the situation thus escalated into a kind of competition between the USPD leadership and the KPD delegation.

"Now the Independents wanted to show courage and consequence by outbidding the goals proposed by Liebknecht. Could Liebknecht, in face of the ‘revolutionary' fire of these ‘wavering and hesitant elements' restrain himself? That did not lie in his nature." (ibid).

Warnings, such as those of soldiers' delegates who expressed doubts about the readiness of the troops to fight, were not listened to.

"Richard Müller spoke out in the sharpest possible terms against the proposed goal of the struggle, the toppling of the government. He declared that neither the political nor the military preconditions existed. The movement throughout the country was growing from day to day, so that very soon the political, military and psychological preconditions for the struggle for power would be achieved. A premature, isolated action in Berlin could put the further development of the revolution in danger. Only with difficulty could he present his attitude of rejection in face of objections from all sides.

Pieck as representative of the central committee of the KPD spoke sharply against Richard Müller and demanded in very definite terms an immediate vote and the commencement of struggle."[11]

Three major decisions were voted and adopted. The call for a general strike was taken unanimously. The two other decisions, the calls to topple the government and to maintain the occupation of the press offices, were adopted by a large majority, but with six votes against.[12]

A "provisional revolutionary action committee" was then formed, with 53 members and three chairmen: Liebknecht, Ledebour, Scholze.

The proletariat was now caught in the trap.

The so-called Spartakus Week

There now ensued what was to become a bloody week of fighting in Berlin. The bourgeoisie called this the "Spartakus Week": The foiling of a "communist putsch" by the "heroes of freedom and democracy". The fate of the German and the World Revolution was largely decided in this week, from January 5 to 12.

On the morning after the formation of the revolutionary committee, the strike in the city was almost total. Even more workers poured into the city centre than the previous day, many of them armed. But by midday all the hopes of active support from the garrisons had been dashed. Even the sailors' division, a living legend, declared itself neutral, going as far as to arrest its own delegate Dorrenbach for what they considered his irresponsible participation in the call for insurrection. The same afternoon, the same Volksmarinedivision turned the revolutionary committee out of the Marstall, where it had sought protection. Similarly, the concrete measures taken to remove the government were foiled, or even ignored, since there was no visible armed power behind them![13]

Throughout the day the masses were in the streets, awaiting further instructions from their leaders. But such instructions were not forthcoming. The art of the successful execution of mass actions consists in the concentration and direction of energy towards a goal which goes beyond the point of departure, which advances the general movement, which gives the participants the feeling of collective success and strength. In the given situation, the mere repetition of the strike and mass demonstrations of the previous days was not enough. Such a step forward would have been, for instance, the encirclement and agitation of the barracks in order to win the soldiers over to the new stage of the revolution, disarming the officers, beginning a broader arming of the workers themselves[14]. But the self-appointed revolutionary committee did not propose such measures, not least because it had already put forward a course of action which was much more radical, but sadly unrealistic. Having called for nothing less than armed insurrection, more concrete but far less spectacular measures would have appeared as a disappointment, an anti-climax, a retreat. The Committee, and with it the proletariat, was the prisoner of a misguided, empty radicalism.

The leadership of the KPD was horrified when it received news of the proposed insurrection. Rosa Luxemburg and Leo Jogiches in particular accused Liebknecht and Pieck of having abandoned, not only the decisions of the party congress of the previous week, but the party programme itself.[15]

But these mistakes could not be undone, and as such were not (yet) the question of the hour. The turn of events placed the party before a terrible dilemma: How to lead the proletariat out of the trap it was already caught in?

This task was much more difficult that that mastered by the Bolsheviks during the famous "July Days" of 1917 in Russia, when the party succeeded in helping the class to side-step the trap of a premature military confrontation.

The astonishing, paradoxical response which the party, under the impetus of Rosa Luxemburg's urging found, was as follows. The KPD, the most determined opponent of an armed revolution up till then, must now become its more fervent protagonist. This for a single reason. Taking power in Berlin was the only way of preventing the bloody massacre which was now looming, the decapitation of the German proletariat. Once this danger had been averted, the Berlin proletariat could tackle the problem of holding out or of retreating in good order until the revolution was ripe in the country as a whole.

Karl Radek, the emissary of the Russian Party in hiding in Berlin, proposed an alternative course of action: immediate retreat while keeping their weapons, but if necessary surrendering them. But the class as a whole still had no arms. The problem was that the appearance of an "undemocratic" communist "putsch" gave the government the pretext it needed for a bloodletting. No retreat of the combatants could undo this.

The course of action proposed by Luxemburg was based on the analysis that the military balance of forces in the capital was not unfavourable to the proletariat. And indeed: if January 6th immediately dashed the hopes of the revolutionary committee in "its" troops, it soon became clear that the counter-revolution had miscalculated also. The Republican Guard and those troops who sympathised with the SPD now refused, for their part, to use force against the revolutionary workers. In their accounts of events, both the revolutionary Richard Müller and the counter-revolutionary Gustav Noske later confirmed the correctness of the analysis of Rosa Luxemburg: From the military point of view, the balance of forces at the beginning of the week was in favour of the proletariat.

But the decisive question was not the military but the political balance of forces. And this weighed against the proletariat for the simple reason that the leadership of the movement was still in the hands of the "centrists", the wavering elements, and not yet those of the consequent revolutionaries. According to the Marxist "art of insurrection" the armed rising is the last step in the process of enforcing the revolution, which merely sweeps away the last posts of resistance.

Realising the trap into which it had manoeuvred itself, the provisional committee, instead of arming the proletariat, began to negotiate with the government it had just declared to be ousted, and without even knowing what it wanted to negotiate. Given this attitude of the committee, on 10th January the KPD obliged Liebknecht and Pieck to resign from it. But the damage was already done. The policy of conciliation paralysed the proletariat, bringing all its doubts and hesitations to the surface. The workers of a whole series of major plants came out with declarations condemning the SPD, but also Liebknecht and the "Spartakists", calling for re-conciliation between the "socialist parties".

At this moment, when the counter-revolution was reeling, the Social Democrat Noske saved the day. "Somebody has to be the bloodhound. I am not afraid of the responsibility" he declared. While pretending to "negotiate" in order to gain time, the SPD now openly summoned the officers, the students, the bourgeois militias to drown the workers resistance in blood. With the proletariat divided and demoralised, the way was now open for the most savage white terror. These atrocities included the shelling of buildings with artillery, the murdering of prisoners and even of negotiation delegates, the lynching of workers, but also of soldiers who shook hands with revolutionaries, the molesting of women and children in the workers districts, the desecration of dead bodies, but also the systematic hunting down and murdering of revolutionaries such as Karl Liebknecht and Rosa Luxemburg. We will return to the nature and significance of this terror in the last article of this series.

Revolutionary mass strike, January-March 1919

In a famous article published in the Rote Fahne on 27th November 1918 entitled "The Acheron in Motion" Rosa Luxemburg announced the beginning of a new phase in the revolution: that of the mass strike. This was soon confirmed in a resounding manner. The material situation of the population did not improve with the end of the war. The contrary was the case. Inflation, redundancies and mass unemployment, short term work and falling real wages created new misery for millions of workers, state functionaries, but also for large layers of the middle classes. Increasingly, material misery, but also bitter disappointment with the results of the November Revolution, obliged the masses to defend themselves. Their empty stomachs were a powerful argument against the alleged benefits of the new bourgeois democracy. Successive strike waves rolled across the country above all in the first quarter of 1919. Far beyond the traditional centres of the organised socialist movement like Berlin, the coastal ports or the concentrations of the engineering and high technology sectors,[16]politically less experienced parts of the proletariat were swept into the revolutionary process. These included what Rosa Luxemburg in her Mass Strike pamphlet of 1906 had called the "helot layers"[17] These were particularly downtrodden sectors of the class, who had hardly benefited from socialist education, and who as such were often looked down on by pre-war Social Democratic and trade union functionaries. Rosa Luxemburg had predicted that they would play a leading role in a future struggle for socialism.

And now, there they were. For instance the millions of miners, metal and textile workers in the industrial districts of the lower Rhine and Westphalia.[18] There, the defensive workers struggles were immediately confronted with a brutal alliance of the employers and their armed factory guards, the trade unions and the Freikorps. Out of these first confrontations crystallised two main demands of the strike movement, formulated at a conference of delegates from the whole region at the beginning of February in Essen: All power to the workers' and soldiers' councils! Socialisation of the factories and mines!

The situation escalated when the military tried to disarm and dismantle the solders councils, sending 30,000 Freikorps to occupy the Ruhr. On 14th February the workers' and soldiers' councils called for a general strike and armed resistance. In some areas the determination of the workers' mobilisation was so great that the white mercenary army did not even dare to attack. The indignation against the SPD, which openly supported the military and denounced the strike, was indescribable. To such an extent that on 25th February the councils - supported by the Commuist delegates - decided to end the strike. Unfortunately at just that very moment it was beginning in central Germany! The leadership was afraid that the workers would flood the mines or attack Social Democratic workers.[19] In fact, the workers demonstrated a high degree of discipline, with a large minority respecting the call to return to work -although not agreeing with it.

A second, gigantic mass strike broke out towards the end of March, lasting several weeks despite the repression of the Freikorps.

"It soon became clear that the Social Democratic Party and the Trade Union leaders had lost their influence over the masses. The power of the revolutionary movement of the months of February and March did not lie in the possession and use of military arms, but in the possibility of taking away the economic foundation of the bourgeois-socialist government through paralysing the most important areas of production (...) The enormous military mobilisation, the arming of the bourgeoisie, the brutality of the military, could not break this power, could not force the striking workers back to work."[20]

The second great centre of the mass strike was the region known as central Germany (Mitteldeutschland)[21]. There, the strike movement exploded in mid-February, not only in response to pauperisation and repression, but also in solidarity with the victims of repression in Berlin and with the strikes on the Rhine and Ruhr. As in the latter region, the movement drew its strength from being led by the workers' and soldiers' councils, where the Social Democrats were fast losing influence.

But whereas in the Ruhr area the employees in heavy industry dominated, here the movement engulfed not only miners, but almost every profession and branch of industry. For the first time since the beginning of the revolution, the railway workers joined in. This was of particular significance. One of the first measures of the Ebert government at the end of the war was to substantially increase wages on the railways. The bourgeoisie needed to "neutralise" this sector in order to be able to move its counter-revolutionary brigades from one end of Germany to the other. Now, for the first time, this possibility was put in question.

No less significant was that the soldiers in the garrisons came out in support of the strikers. The National Assembly, which had fled from the Berlin workers, went to Weimar to hold its constitutive parliamentary session. It arrived in the midst of acute class struggle and a hostile soldiery, and was forced to meet behind an artillery and machine gun barrier.[22]

The selective occupation of cities by Freikorps provoked street fighting in Halle, Merseburg and Zeitz, explosions of masses "enraged to the point of madness" as Richard Müller put it. As on the Ruhr, these military actions were unable to break the strike movement.

The call of the factory delegates for a general strike on February 24 was to reveal another enormously significant development. It was supported unanimously by all the delegates, including those from the SPD. In other words: Social Democracy was losing its control even over its own membership.

"From the very onset the strike spread to a maximum degree. A further intensification was not possible, unless through an armed insurrection, which the strikers rejected, and which appeared pointless. The only way to make the strike more effective would be through the workers in Berlin."[23]

It was thus that the workers summoned the proletariat of Berlin to join, indeed to lead the movement which was flaming in central Germany and on Rhine and Ruhr.

And the workers of Berlin responded, as best they could, despite the defeat they had just suffered. There, the centre of gravity had been transformed from the streets to the mass assemblies. The debates which took place in the plants, offices and barracks produced a continuous shrinking of the influence of the SPD and the number of its delegates in the workers' councils. The attempts of Noske's party to disarm the soldiers and liquidate their organisations only accelerated this process. A general assembly of the workers' councils in Berlin on 28th February called on the whole proletariat to defend its organisations and to prepare for struggle. The attempt of the SPD to prevent this resolution was foiled by its own delegates.

This assembly re-elected its action committee. The SPD lost its majority. At the next elections to this organ, on 19th April, the KPD had almost as many delegates elected as the SPD. In the Berlin councils, the tide was turning in favour of the revolution.[24]

Realising that the proletariat could only triumph if led by a united, centralised organisation, mass agitation began in Berlin for the re-election of the workers' and soldiers' councils in the whole country, and for the calling of a new national congress of this organisation. Despite the hysterical opposition of the government and the SPD to this proposal, the soldiers' councils began to declare themselves in favour of this proposal. The Social Democrats played for time, fully aware of the practical difficulties of the hour in realising such plans.

But the movement in Berlin was confronted with another, very pressing question: The call for support from the workers in central Germany. The general assembly of the workers' councils of Berlin met on 3rd March to decide on this question. The SPD, knowing that the nightmare of the January Week stilled haunted the proletariat of the capital, was determined to prevent a general strike. And indeed the workers hesitated at first.. The revolutionaries, agitating for solidarity with central Germany, gradually turned the tide. Delegations from all the main plants of the city were sent to the assembly of the councils to inform it that the mass assemblies at the work places had already decided to down tools. It became clear that there, the Communists and Left Independents now had the majority of workers behind them.

In Berlin too, the strike was almost total. Work continued only in those plants which had been designated to do so by the workers' councils (fire brigade, water, electricity and gas supplies, health, food production). The SPD and its mouthpiece Vorwärts immediately denounced the strike, calling on those delegates who were party members to do likewise. The result: these delegates now declared themselves against the position of their own party. Moreover, the printers, who, under strong social democratic influence, had been among the few professions which had not joined the strike front, now did so - in protest against the attitude of the SPD. In this way, an important part of the counter-revolutionary hate campaign of was silenced.

Despite all these signs of ripening, the trauma of January proved fatal. The general strike in Berlin came too late, just when it was ending in central Germany. Worse still, the Communists, traumatised indeed by the January defeat, refused to participate in the strike leadership alongside Social Democrats. The unity of the strike front began to decompose. Division and demoralisation spread.

This was the moment for the Freikorps to invade Berlin. Drawing lessons from the January events, the workers assembled in the factories instead of the streets. But instead of immediately attacking the workers, the Freikorps marched first against the garrisons and the soldiers' councils, to begin with against those regiments which had participated in suppressing the workers in January; those who enjoyed the least sympathy of the working population. Only afterwards did it turn on the proletariat. As in January, there were summary executions on the streets, revolutionaries were murdered (among them Leo Jogiches), corpses flung into the river Spree. This time, the white terror was even more horrific than in January, claiming well over a thousand lives. The workers' district of Lichtenberg, to the east of the city centre, was bombed by the air force.

Concerning the January-March struggles, Richard Müller wrote: "This was the most gigantic uprising of the German proletariat, of the workers, employees, civil servants and even parts of the petty bourgeois middle classes, on a scale never previously reached, and thereafter only once more attained, during the Kapp-Putsch. The popular masses stood in general strike not only in the regions of Germany focused on here: in Saxony, in Baden and Baveria, everywhere the waves of social revolution pounded against the walls of the capitalist production and property order. The working masses were striding along the path of the continuation of the political transformation of November 1918."[25]

However:

"The curse of the January action still weighed on the revolutionary movement. Its pointless beginning and its tragic consequences were tearing the workers of Berlin asunder, so it took weeks of dogged work to render them capable of re-entering the struggle. If the January putsch had not taken place, the Berlin proletariat would have been able to come to the assistance of the combatants in Rhineland-Westphalia and in central Germany in good time. The revolution would have successfully been continued, and the new Germany would have been given a quite different political and economic face."[26]

Could the revolution have triumphed?

The failure of the world proletariat to prevent World War I created difficult conditions for the triumph of the revolution. In comparison with a revolution primarily in response to an economic crisis, a revolution against world war has considerable drawbacks. Firstly, the war killed or mained millions of workers, many of them experienced and class conscious socialists. Secondly, unlike an economic crisis, the bourgeoisie can bring such a war to a halt when it sees that its continuation menaces its system. This happened in November 1918. It created a division within the working class in each country between those satisfied with a ceasefire  and those for whom only socialism could resolve the problem. Thirdly, the international proletariat was divided, first by the war itself, and then between workers in the "defeated" and in the "victorious" countries. It is no coincidence that a revolutionary situation arose where the war had been lost (Russia, Austria-Hungary, Germany) - not among the main powers of the Entente (Great Britain, France, the United States).

But does this mean that a successful proletarian revolution, under such circumstances, was an impossibility from the outset? We recall that this was one of the main arguments advanced by Social Democracy to justify its counter-revolutionary role. But in reality, this was far from being the case.

Firstly, although the "Great War" physically decimated and psychologically weakened the proletariat, this did not prevent the class from unleashing a powerful revolutionary assault against capitalism. The carnage imposed was immense, but less than that inflicted by World War II; no comparison to what a Third World War with thermonuclear weapons would signify.

Secondly, although the bourgeoisie could bring the war to a halt, this does not mean that it could eliminate its material and political consequences. To these consequences belonged the exhaustion of the productive apparatus, the disorganisation of the economy and the overexploitation of the working class in Europe. In the defeated countries in particular, the ending of the war did not lead to a rapid restoration of the pre-war standard of living of the mass of the population. The contrary was the case. Although the demand for the "socialisation of industry" contained the danger of diverting the class away from the struggle for power towards the kind of self management projects favoured by anarchism and syndicalism, in 1919 in Germany the main driving force behind this demand was the concern for the physical survival of the proletariat. The workers, more and more convinced of the inability of capitalism to produce enough foodstuffs, coal etc at affordable prices to get the population through the winter, began to realise that an undernourished and exhausted work force, periled by an explosion of disease and infection, would have to take these questions into its own hands - before it was too late.

In this sense, the struggle against the war did not end with the war itself. Moreover, the impact of the war on the consciousness of the class was profound. It robbed modern warfare of its heroic image.

Thirdly, the breach between the workers in the "defeated" and the "victorious" countries was not insurmountable. In Great Britain in particular, there had been powerful strike movements both during and at the end of the war. The most striking aspect of 1919, the "year of revolution" in central Europe, was the relative absence of the French proletariat from the scene. Where was that sector of the class, which from 1848 to the Paris Commune of 1871 had been the vanguard of proletarian insurrection? To a large extent it had been infected by the chauvinist frenzy of the bourgeoisie, which promised "its" workers a new era of prosperity on the basis of the reparations it would impose on Germany. Was there no antidote to such nationalist poison? Yes, there was. The victory of the proletariat in Germany would have been this antidote.

In 1919 Germany was the vital link between the revolution in the East and the slumbering class consciousness in the West. The European working class of 1919 had been educated by socialism. Its conviction as to the necessity and possibility of socialism had not yet been undermined by the Stalinist counter-revolution. The victory of the revolution in Germany would have weakened illusions in the possibility of a return to the apparent "stability" of the pre-war world. The resumption by the German proletariat of its leading role in the class struggle would have enormously strengthened confidence in the future of socialism.

But was the triumph of the revolution in Germany itself ever a realistic possibility? The 1918 November Revolution revealed the power and the heroism of the class, but also enormous illusions, confusions and vacillations. But this was no less the case in February 1917 in Russia. In the months which followed, the course of the Russian Revolution reveals a progressive ripening of an immense potential, leading to victory in October. But in Germany, from November 1918 onwards - despite the ending of the war - we see a very similar ripening. In the first quarter of 1919, we have seen the development of the mass strike, the drawing into combat of the whole class, a growing role of the workers' councils, and of revolutionaries within them, the beginnings of the effort to create a centralised organisation and leadership of the movement, the progressive exposure of the counter revolutionary role of the SPD and the trade unions, as well as the limits of the effectiveness of state repression.

In the course of 1919, local risings and "council republics" in the coastal cities, in Bavaria and elsewhere, were liquidated. These episodes are full of examples of proletarian heroism and of bitter lessons for the future. For the outcome of the Revolution in Germany, they were not decisive. The determining centres lay elsewhere. The first was the enormous industrial concentration in what today is the province of North-Rhine-Westphalia. In the eyes of the bourgeoisie, this area was populated by a sinister species from a kind of underworld, which never saw the light of day, which lived beyond the bounds of civilisation. It was horrified when it saw this enormous grey army in sprawling cities, where the sun rarely shone, and where the falling snow was black, emerge from the mines and furnaces. Horrified, even more horrified, when it became acquainted with the intelligence, the human warmth, the sense of solidarity and discipline of this army, no longer the cannon fodder of imperialist wars and production battles, but the protagonists of its own class war. Neither in 1919 nor in 1920 was the combined brutality of the military and the Freikorps able to crush this foe on its own terrain. It was only vanquished when, after repelling the Kapp Putsch in 1920, these workers made the mistake of sending their "Red Army of the Ruhr" out of the cities and the coal stacks to fight a conventional battle.

The second lay in central Germany with its very old, highly qualified working class steeped in socialist traditions.[27] Before and during the World War, ultra-modern industries such as chemicals, and aircraft production were established there, attracting tens of thousands of young workers, inexperienced, but combative, radical, full of a sense of solidarity. This sector too, would engage in further massive struggles in 1920 (Kapp) and 1921 (March Action).

But if Rhine and Ruhr and central Germany were the lungs, the heart and the digestive organs of the revolution, Berlin was the brain. The third largest city in the world (after New York and London), Berlin was something like the silicon valley of Europe of the day. The basis of its economic rise was the ingenuity of its highly skilled work force. The latter also had a long-standing socialist education, it was the heart of the process of the formation of the class party.

The conquest of power was not yet on the agenda in the first quarter of 1919. The task of the hour was to gain time for the maturation of the revolution in the whole class, while avoiding a decisive defeat. Time, at this decisive moment, was on the side of the proletariat. Class consciousness was deepening. The proletariat was striving to create its necessary organs of victory - the party, the councils. The main battalions of the class were joining the struggle.

But through the defeat of January 1919 in Berlin time switched, going over to the side of the bourgeoisie. The Berlin defeat came in two parts: January and March-April 1919. But January was decisive because it was a moral and not only a physical defeat. The unification of the decisive sectors of the class in the mass strike was the force capable of foiling the strategy of the counter-revolution and opening a pathway leading towards insurrection. But this process of unification - similar to what took place in Russia at the end of the summer 1917 in face of the Kornilov Putsch - depended above all on two factors: The class party and the workers in the capital. The bourgeoisie succeeded in its strategy of pre-emptively inflicting serious wounds on these decisive elements. The failure of the Revolution in Germany in face of its "Kornilov Days" was above all the result of its failure in face of the German version of the July Days.[28]

The most striking difference to Russia is the absence of a revolutionary party capable of formulating and defending a coherent and lucid policy in face of the inevitable storms of revolutions and the divergences in its own ranks. As we said in the previous article, the revolution could triumph in Russia without the constitution of a world class party - but not in Germany.

This is why we devoted a whole article of this series to the founding congress of the KPD. This congress understood many questions, but not the most burning issues of the hour. Although it formally adopted the analysis of the situation presented by Rosa Luxemburg, in reality too many delegates underestimated the class enemy. Although insisting heavily on the role of the masses, their vision of revolution was still influenced by examples from the bourgeois revolutions of the past. The bourgeoisie's seizure of power was but the last act of its coming to power, prepared in advance by the ascent of its economic might. Since the proletariat, as an exploited class without property, cannot accumulate wealth, it must prepare its victory by other means. It must accumulate consciousness, experience, organisation. It must become active, learning to take its fate into its own hands.[29]

Time economy of the revolution

The capitalist mode of production determines the nature of the proletarian revolution. The proletarian revolution reveals the secret of the capitalist mode of production. Going through the stages of cooperation, manufacture and industrialisation, capitalism brings forth the productive forces which are the precondition for classless society. It does this through the establishment of associated labour. This "collective labourer", the creator of this wealth, is enslaved by capitalist property relations, by the private, competitive, anarchic appropriation of the fruits of associated labour. The proletarian revolution abolishes private property, bringing the mode of appropriation into line with the associated character of production. Under the command of capital, the proletariat has from the onset been creating the material conditions for its own liberation. But the gravediggers of capitalist society can only complete their historic mission if the proletarian revolution itself is the product of the "associated labourer"; of the workers of the world acting so to speak as a single person. The collective of toil of wage labour must become the conscious collective association of struggle.

This welding together in struggle both of the class as a whole, and of its revolutionary minorities, takes time. In Russia it took over a dozen years, from the struggle for a "new kind of class party" in 1903, through the mass strikes of 1905-06 and on the eve of World War One, to the heady days of 1917. In Germany, in the Western countries as a whole, the context of world war and the brutal acceleration of history it embodies granted little time for this necessary maturation. The intelligence and determination of the bourgeoisie after the armistice of 1918 further reduced the time available.

We have repeatedly spoken in this series about the shaking of the self confidence of the class and its revolutionary vanguard through the collapse of the Socialist International faced with the outbreak of war. What did this mean?

Bourgeois society conceives of this question of self-assurance as the confidence of the individual in his or her own powers. This conception forgets that mankind, more than any other known species, depends on society for its survival and development. This is all the more true for the proletariat, associated labour, which produces and struggles not individually but collectively, which brings forth not individual revolutionaries but revolutionary organisations. The powerlessness of the individual worker - which is much more extreme than that of the individual capitalist or even the individual small property owner - reveals itself in struggle as the real, hidden strength of this class. Its dependence on the collective prefigures the nature of the future communist society, where the conscious affirmation of the community will for the first time permit the development of full individuality. Self-confidence of the individual presupposes confidence of the parts in the whole, the mutual confidence of the members of the community of struggle.

In other words, it is only by welding a unity in struggle that the class can develop the courage and confidence necessary for victory. Only in a collective manner can its theoretical and analytical weapons be sufficiently sharpened. The mistakes the delegates of the KPD made at the decisive moment in Berlin were in reality the product of the still insufficient maturity of this collective strength of the young class party as a whole.

Our insistence on the collective nature of the proletarian struggle in no way denies the importance of the role of the individual in history. Trotsky, in his History of the Russian Revolution, wrote that, without Lenin, the Bolsheviks in October 1917 might have been too late in recognising the right moment for insurrection. The Party came close to missing its "rendezvous with history". Had the KPD sent these clear sighted analysts Rosa Luxemburg and Leo Jogiches to the headquarters of Emil Eichhorn on 5th January, instead of Karl Liebknecht and Wilhelm Pieck, the historic outcome might have been different.

We do not deny the importance of Lenin or Rosa Luxemburg in the revolutionary struggles of the time. What we deny is that their role was above all the product of their individual genius. Their importance flowed above all from their capacity to be collective, to concentrate and direct like a prism all the light radiated by the class and the party as a whole. The tragic role of Rosa Luxemburg in the German Revolution, the fact that her influence on the party at the decisive moment was not great enough, is linked to fact that she embodied the living experience of the international movement at a moment when the movement in Germany still suffered from its isolation from the rest of the world proletariat.

We want to insist that history is an open process, and that the defeat of the first wave of world revolution was not a foregone conclusion. It is not our intention to tell the story of "what might have been". There is never a way back in history. There is only a way forward. With hindsight, the course taken by history is always "inevitable". But here we forget that the determination - or lack of determination - of the proletariat, its capacity to draw lessons and to unite its forces internationally, are part of this equation. In other words, that which becomes "inevitable" depends also on us. Our efforts towards a conscious goal are an active component of the equation of history.

In the next, concluding chapter of this series, we will examine the enormous consequences of the defeat of the German Revolution and consider the relevance of these events for today and tomorrow. 

Steinklopfer

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[1] This alliance between the military and the SPD, which proved decisive for the victory of the counter-revolution, would itself not have been possible without the support of the British bourgeoisie. The smashing of the power of the Prussian military caste was one of London's war goals. This goal was abandoned in order not to weaken the forces of reaction. In this sense, it would be no exaggeration to speak of an alliance between the German and the British bourgeoisie as the pillar of the international counter-revolution of the day. We will return to this question in the last part of this series.

[2] Thousands of Russian and other prisoners of war were still held by the German bourgeoisie and condemned to forced labour, despite the end of the war. They participated actively in the revolution alongside their German class brother and sisters.

[3] This monumental baroque building, which survived World War II, was blown up by the GDR and replaced by the Stalinist "Palace of the Republic". The balcony where Liebknecht had proclaimed the Socialist Republic on the day of the November Revolution, was removed beforehand and integrated into the adjacent façade of the "State Council of the GDR". In this way, the spot where Liebknecht summoned to World Revolution was transformed into a symbol of the nationalist "Socialism in one country".

[4] This building, located behind the palace, still exists.

[5] This is the formulation of the author Alfred Döblin in his book Karl and Rosa, the last part of his novel in four volumes: November 1918. As a sympathiser of the left wing of the USPD, he was an eye witness of the revolution in Berlin. His monumental account was written in the 1930s, and is marked by the confusion and despair of the triumphant counter-revolution.

[6] In the course of rebuilding in the city centre after the Berlin Wall fell, escape tunnels of different governments of the 20th century were excavated, unmarked on any official map, monuments to the fear of the ruling class. It was not reported if new tunnels have been built.

[7] There were sympathy strikes, demonstrations and occupations of buildings in a number of cities, including Hamburg, Stuttgart and Düsseldorf.

[8] Revolutionary delegates in the factories (see the previous articles in this series).

[9] This development, already amply documented by Richard Müller in his history of the German Revolution, written in the 1920's, is today an accepted fact among historians.

[10] Volume 3 of Müllers History of the German Revolution: Civil War in Germany. pp35, 36.

[11] Müller ibid p33. Richard Müller was one of the most experienced and talented leaders of the movement. There are certain parallels between the role Müller played in Germany and that of Trotsky in 1917 in Russia. Both were chairman of the action committee of the workers' councils in the capital city. Both went on to become the historian of the revolution they directly participated in. It is painful to see the summary way in which Wilhelm Pieck brushed aside the warnings of such an experienced and responsible leader.

[12] The six opponents were Müller, Däumig, Eckert, Malzahn, Neuendorf and Rusch.

[13] The case of Lemmgen, a revolutionary sailor, is legendary, but unfortunately true. After the failure of his repeated attempts to confiscate the state bank, the Reichsbank (a civil servant called Hamburger disputed the validity of the signatures under his order), poor Lemmgen was so demoralised that he went home and crept into his bed.

[14] Precisely this course of action was proposed in public by the KPD, in particular in its central press organ the Rote Fahne.

[15] In particular the passage of the programme which declared that the party would assume power only with the support of the great mass of the proletariat

[16] Such as Thuringia, the Stuttgart area or the Rhine valley, long standing bastions of the Marxist movement.

[17] The helots were an unfree population group that formed the main population of Laconia [5] and the whole of Messenia [6] (areas of Sparta [7]). Tied to the land, they worked in agriculture [8] as a majority and economically supported the Spartan [7] citizens. They were ritually mistreated, humiliated and even slaughtered: every autumn, during the crypteia [9], they could be killed by a Spartan citizen without fear of repercussion.

[18] Centred around the rivers Ruhr and Wupper.

[19] On 22nd February communist workers in Mülheim on the Ruhr attacked a public meeting of the SPD with machine guns.

[20] R.Müller Vol. 3. pp141, 142.

[21] The provinces of Saxony, Thuringia and Saxon-Anhalt. The centre of gravity was the city of Halle and the near by chemical belt around the giant Leuna plant.

[22] The term "Weimar Republic", covering the period of German history from 1919 to 1933, originates from this episode.

[23] Müller, ibid. p146.

[24] In the first weeks of the revolution, the USPD and the Spartakusbund between them were backed by only a quarter of all delegates. The SPD dominated massively. The party membership of the delegates voted in Berlin at the beginning of 1919 was as follows.

February 28th: USPD 305; SPD 271; KPD 99; Democrats:95.

April 19 th: USPD 312; SPD 164; KPD 103; Democrats 73.

It should be noted that the KPD during this period could only operate in secrecy, and that a considerable number of the USPD delegates in reality sympathised with the Communists and were soon to join their ranks.

[25] Müller ibid p161

[26] Ibid p154.

[27] No coincidence that the childhood of the Marxist movement in Germany is associated with the names of Thüringian cities: Eisenach, Gotha, Erfurt.

[28] The July Days of 1917 were one of the most important moments, not only of the Russian revolution but in the history of the workers' movement. On 4th July an armed demonstration, half a million strong, besieged the leaders of the Petrograd Soviet, calling on them to take power, but dispersed peacefully in the evening in response to an appeal from the Bolsheviks. On 5th July counter-revolutionary troops retook the city and began hunting down the Bolsheviks and the most militant workers. However, by avoiding a premature struggle for power when the class as a whole was not yet ready for it, the proletariat as a whole kept its revolutionary forces intact. This made it possible for the workers to draw the essential lessons from events, in particular their understanding of the counter-revolutionary nature of bourgeois democracy and the new left of capital: the Mensheviks and Social-Revolutionaries, who had betrayed the cause of the workers and poor peasants and passed into the enemy camp. Never was the danger greater than during these dramatic 72 hours, of a decisive defeat for the proletariat and the liquidation of the Bolshevik Party. At no other time was the profound confidence of the proletariat's most advanced battalions in their class party, the communist vanguard, of such importance.

After the workers' defeat in July, the bourgeoisie thought they could put an end to the nightmare of revolution. Thanks to a division of labour between Kerensky's "democratic" bloc and the openly reactionary bloc of the army leader Kornilov, between August and early September the ruling class organised the latter's coup d'Etat which tried to use the Cossack and Caucasian regiments which still seemed to be reliable, against the Soviets. The attempt was a fiasco. The massive reaction of the workers and soldiers, their firm organisation by the Committee for the Defence of the Revolution - which was later to become the Petrograd Soviet's Military Revolutionary Committee in charge of the October insurrection - meant that Kornilov's troops either surrendered without even mobilising, or more often deserted to the side of the workers and soldiers.

[29] Unlike Luxemburg, Jogiches or Marchlewski, who were in Poland  (then part of the Russian Empire ) during the revolution of 1905-06, most of the those who founded the KPD, lacking direct experience of the mass strike, had difficulties  understanding its indispensability for the victory of the revolution.

In this issue of the International Review, we are continuing the publication of our internal debate on the explanation of the post-war boom during the 1950s and 60s. Our readers will remember that this debate was originally prompted by a critique of the analysis of this period contained in our pamphlet on The decadence of capitalism, and in particular its analysis of the role played by the destruction during World War II in opening an outlet to capitalist production through the creation of a market based on reconstruction. One position (under the name "War economy and state capitalism"), "still basically adheres to the idea that the prosperity of the 1950s and 60s is determined by the global context of imperialist relations and the establishment of a permanent war economy in the wake of the Second World War". Two other positions, which at the outset shared the critique of the analysis in The decadence of capitalism, nonetheless disagreed on the analysis of the workings of the prosperity of the post-war decades: this was attributed to Keynesian mechanisms in the case of the "Keynesian-Fordist state capitalism" thesis, and to the exploitation of the last extra-capitalist markets and the beginnings of a massive expansion of debt in the case of the "Extra-capitalist markets and debt" thesis.

In the International Review n°133, we published a presentation of the framework of the debate [20] as well as a brief explanation of the different positions in the debate. An article on "The origins, dynamics, and limits of Keynesian-Fordist state capitalism [21]" in International Review n°135 developed a more complete account of the "Keynesian-Fordist state capitalism" thesis.

In this issue, we open our pages to the other two positions, with the following articles: "The bases of capitalist accumulation" (which defends the "Extra-capitalist markets and debt" thesis), and "War economy and state capitalism". Before doing so however, we feel it necessary to comment on the evolution of the positions under discussion, and on the rigour demanded by the debate.

The evolution of the positions in the debate 

During a considerable period following the opening of the debate, the different viewpoints all considered themselves to be based on the ICC's analytical framework,[1] which moreover often served as a reference point for the different positions' criticisms of each other. This is no longer the case today. That such an evolution should take place is inherently possible in any debate: differences which seem minor at the outset may appear, with the discussion, deeper than at first appeared, to the point where they call into question the initial theoretical framework. This is what has happened in our own debate, notably as regards the "Keynesian-Fordist state capitalism" thesis. This position, as can be seen in the afore-mentioned article in International Review n°135, now clearly calls into question some of the ICC's positions. Future articles will come back to this article's reassessment of our positions, and inasmuch as it will be taken up by the debate itself, we will limit ourselves here to pointing out the existence of three disagreements in particular:

• Capitalism[2] "generates a growing social demand through the employment of new workers and reinvestment in extra means of production and consumption" whereas for the ICC "Contrary to what the idolaters of capital claim, capitalist production does not create automatically and at will the markets necessary for its growth" (ICC Platform).
• Capitalism's apogee corresponds to "a certain stage [of] the extension of wage labour and its domination through the formation of the world market", whereas for the ICC on the contrary its apogee corresponds to the world's division between the major powers and the fact that "capitalism reached a point where the outlets which allowed it to grow so powerfully in the nineteenth century became saturated" (ICC Platform).
• The evolution of the rate of profit and the size of the market are completely independent, whereas for the ICC "the growing difficulty encountered by capital in finding a market for the realisation of surplus value accentuates the fall in the rate of profit, which results from the constant widening of the ratio between the value of the means of production and the value of the labour power which sets them in motion" (ICC Platform).

It is characteristic of proletarian debate to take the systematic and methodical clarification of disagreements to their roots, without fear of whatever re-evaluation may result. Only such a debate can really strengthen the theoretical foundations of organisations that claim to defend the proletarian cause. Consequently, the debate imposes the strictest possible scientific and militant clarity, in particular in referring to the texts of the workers' movement in support of this or that position or demonstration. Unfortunately, the article on "The origins, dynamics, and limits of Keynesian-Fordist state capitalism" poses certain problems at this level. 

A lack of rigour in debate

The article in question begins with a quotation taken from Internationalisme n°46 (the press of the Gauche Communiste de France), as follows: "In 1952, our predecessors of the GCF brought their group's activity to an end because ‘The disappearance of the extra-capitalist market leads to a permanent crisis of capitalism (...) it can no longer expand its production. We can see here the striking confirmation of Rosa Luxemburg's theory (...) In fact, the colonies are no longer an extra-capitalist market for the colonial homeland, they have become new capitalist countries. They therefore cease to be outlets. (...) the perspective of war (...) is falling due. We are living in a state of imminent war...'. The paradox is that this incorrect perspective was announced on the eve of the post-war boom!".[3]

Two ideas emerge from this passage:

1. That in 1952 (when the article was written), the GCF considered that the extra-capitalist markets had disappeared, whence the "permanent crisis of capitalism".
2. The GCF's belief that war was imminent springs directly from the exhaustion of the extra-capitalist market.

However, this does not reflect the reality of the GCF's thinking at the time but on the contrary deforms it through the construction of a quote (reproduced above) which draws respectively from pages 9, 11, 17, and 1 of Internationalisme.

The first passage quoted, "The disappearance of the extra-capitalist market leads to a permanent crisis of capitalism" is immediately followed in the original by this, which is omitted from the quote: "Moreover Rosa Luxemburg demonstrates that the crisis opens long before this disappearance becomes absolute". In other words, for both Rosa Luxemburg and for Internationalisme, the crisis that reigned when the article was written in no way implies that the extra-capitalist markets are exhausted since "the crisis opens well before this deadline". This alteration of the GCF's thinking is not without its consequences for the debate since it supports the idea (defended by the "Keynesian-Fordist state capitalism" thesis) that the extra-capitalist markets are a negligible element in the prosperity of the 1950s and 60s.

The second idea attributed to Internationalisme, that "The disappearance of the extra-capitalist market leads to a permanent crisis of capitalism" and to "a state of imminent war", was not in fact defended by the GCF as such but by certain members of the group in an internal discussion. This is clear when we look at the passage from Internationalisme which is used in the article, but in an amputated form (the cuts are in bold in the passage that follows): "For some comrades indeed, the perspective of war, which they have always considered as imminent, is falling due. We are living in a state of imminent war and the question that demands analysis is not to study the factors that would drive us towards a worldwide explosion - these factors are given and are already in action - but on the contrary to examine why war has not yet broken out on a world scale". This second alteration of Internationalisme's thinking tends to discredit the position defended by Rosa Luxemburg and by the GCF since a Third World War, which should supposedly have been the consequence of the saturation of the world market, has not taken place, as everyone is aware.

Our aim in setting the record straight here is not to undertake a discussion of Internationalisme's analyses, which were undoubtedly mistaken on certain points, but to point out a tendentious interpretation of this analysis in the pages of our Review. Nor do we wish to prejudice the foundation of the analysis in the article on "The origins, dynamics, and limits of Keynesian-Fordist state capitalism", which is entirely distinct from the arguments we have just criticised. Now that we have undertaken this necessary clarification, it remains to us to continue calmly with the discussion of the points of disagreement in our organisation.

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[1] As we pointed out in the presentation of the debate's framework in International Review n°133.

[2] The quotes that follow in these three points, are drawn from the article in International Review n°135 or from the ICC Platform [22].

[3] This passage is drawn from the original, longer version of the article which has been published on the web in French [23]. The passage cited in the English version of the article (and published in French in the print edition of the International Review) is somewhat more truncated.

The thesis we have titled "Extra-capitalist markets and debt", as its name suggests, considers that the outlets which made it possible to realise the surplus value necessary for capitalist accumulation in the 1950s and 60s were constituted by extra-capitalist markets and credit. During this period, debt gradually took over from the world's remaining extra-capitalist markets as these became inadequate to absorb all the commodities produced under capitalism.

Two questions have been posed about this thesis:

• Can its validity be verified by an analysis of trade between different economic zones, which represent different levels of integration into capitalist relations of production? Can it also be verified by an analysis of debt during this period? A later article will look at this problem more closely.
• In what way is this thesis different from the other two? How far is it compatible with them, or not? The present article intends to undertake a critical analysis of the "Keynesian-Fordist state capitalism" thesis, while a later one will undertake to comment on the positions defended under the title "War economy and state capitalism".

As we have already suggested in the text presenting the "Extra-capitalist markets and debt" thesis which appeared in International Review n°133, neither the increase in the purchasing power of the working class, nor state spending - much of which is unproductive, as we can see in the case of the armaments industry - can contribute to enriching global capital. This article will be essentially devoted to this question which we believe reveals a serious ambiguity in the "Keynesian-Fordist state capitalism" thesis, in particular as far as the virtues for the capitalist economy of increasing workers' wages are concerned.

According to the latter, "The system was thus able temporarily to square the circle of increasing the production of profit and markets in parallel, in a world where demand was henceforth largely dominated by that coming from wage labour".[1] What does it mean to increase the production of profit? It means producing commodities and selling them, but to satisfy what demand? That of the workers? The following sentence in the article just cited is equally ambiguous and does not take us much further: "The guaranteed growth in profits, state spending and the rise in real wages, were able to guarantee the final demand so vital if capital were to continue its accumulation".[2] If the growth of profits is guaranteed then so is capitalist accumulation, and in that case it becomes pointless to invoke a rise in wages and state spending to explain how capitalism can continue accumulating!

This vagueness in the formulation of the problem leaves us no option but to interpret the argument, at the risk of making mistakes in the interpretation. Does it in fact mean, as the text as a whole seems to suggest, that final demand is guaranteed by state spending and rising wages which make it possible to increase the profits which are the foundation of capitalist accumulation? If this is the case, then this text presents a real problem since in our view such an idea calls into question the very foundations of the marxist analysis of capitalist accumulation, as we will see. If, on the other hand, our interpretation is incorrect, then it is necessary to show us which demand guarantees the realisation of profit through the sale of commodities.

Capitalists accumulate what is left of the surplus value drawn from the exploitation of workers, after subtraction of unproductive costs. Since an increase in real wages can only be to the detriment of total surplus value, it is therefore also necessarily to the detriment of the share of surplus value destined for accumulation. In practice, an increase in wages comes down to paying the workers a part of the surplus value derived from their exploitation. The problem with this part of surplus value which is paid back to the workers is that, since it is not destined to reproduce labour power (which is already ensured by a "non-increased" wage) it cannot either be a part of enlarged reproduction. In fact, whether the workers use it to buy food, housing, or leisure, it can never be used to increase the means of production (machines, wages for new workers, etc.). This is why increasing wages beyond what is necessary for the reproduction of labour power is - from the capitalist standpoint - nothing other than a pure waste of surplus value which cannot become a part of the accumulation process.

It is true that the bourgeoisie's statistics hide this reality. The calculation of GDP (Gross Domestic Product) cheerfully includes everything relative to unproductive economic activity, whether this be spending on weapons or advertising, the wages of priests and policemen, the consumption of the exploiting class or the wage increases granted to the workers. Like the bourgeoisie's statistics, the "Keynesian-Fordist state capitalism" thesis confuses the "growth of production" measured by the growth in GDP, and the "enrichment of capitalism"; these two terms are far from being equivalent since the "enrichment of capitalism" is founded on the increase of real accumulated surplus value, and excludes surplus value sterilised by unproductive spending. This difference is by no means unimportant, especially in the period under consideration which is characterised by a massive rise in unproductive spending: "The creation by Keynesianism of an internal market capable of providing an immediate solution to finding outlets for massive industrial production gave the illusion of a lasting return to the prosperity of the ascendant phase of capitalism. But since this market was totally disconnected from the needs for the valorisation of capital, its corollary was the sterilisation of a significant portion of capital."[3]

The idea that an increase in workers' wages could, in certain circumstances, be a favourable factor in capitalist accumulation completely contradicts this basic position of marxism (and not only that!) according to which "the aim of capital is not to minister to certain wants, but to produce profit".[4]

And yet - those comrades who defend the "Keynesian-Fordist state capitalism" thesis will reply - this latter is itself based on Marx. Its explanation of the success of state capitalist measures aimed at avoiding over-production is indeed based on Marx's idea that "the mass of the people can never consume more than the average quantity of goods of primary necessity (...) its consumption therefore does not increase at the same rhythm as the increase in labour productivity".[5] Through this formulation of Marx, the thesis sees a way to explaining how the capitalist economy was able to overcome a contradiction: as long as there are gains in productivity sufficient for consumption to increase at the same rhythm as labour productivity, the problem of overproduction can be resolved without preventing accumulation since profits, which are also increasing, are enough to ensure accumulation. During his lifetime, Marx never witnessed an increase in wages at the same rhythm as the productivity of labour, and moreover thought that this was impossible. Nonetheless, this has happened at certain moments in the life of capitalism; however this fact in no way allows us to deduce that it could resolve, even temporarily, the fundamental problem of overproduction that Marx highlighted. Marxism does not reduce this contradiction of overproduction simply to the proportion between increasing wages and increasing productivity. The fact that Keynes saw such a mechanism of sharing out wealth as a means to maintain temporarily a certain level of economic activity in a context of sharply rising labour productivity is one thing. That the "outlets" created in this way make possible a real development of capitalism is something else, and is moreover an illusion.

Here we need to examine more closely the repercussions on the mechanisms of the capitalist economy of such a means of "regulating" the question of overproduction through workers' consumption. It is true that workers' consumption and state spending make it possible to sell the products of an increase in production, but as we have seen this results in a sterilisation of the wealth produced since it is unable to be usefully employed to valorise capital. Indeed the bourgeoisie has tried out similar expedients to contain overproduction: the destruction of agricultural surpluses, especially during the 1970s (when famine was already widespread in the world as a whole) quota systems at the world or even the European level of steel or oil production, etc. In fact, whatever the means used by the bourgeoisie to absorb overproduction or make it disappear, in the end they all come down to a sterilisation of capital.

Paul Mattick,[6] who is quoted in the article on "The origins, dynamics, and limits of Keynesian-Fordist state capitalism",[7] also notes an increase in wages keeping pace with an increase in productivity during the period which concerns us here: "It is undeniable that wages have risen in the modern epoch. But only in the framework of the expansion of capital, which presupposes that the relationship of wages to profits should remain constant in general. Labour productivity should therefore rise with a rapidity which would make it possible both to accumulate capital and to raise the workers' living standards".[8]

But it is unfortunate that the "Keynesian-Fordist state capitalism" thesis goes no further in its use of Mattick's work. For Mattick, as for us, "True prosperity, in contrast, depends on the increase in surplus value for the further expansion of capital".[9] In other words, it does not increase through sales to markets created by increasing wages or state spending: "The whole matter finally comes down to the simple fact that what is consumed cannot be accumulated, so that the growth of ‘public consumption' cannot be a means to transform a stagnating or declining rate of accumulation into a rising one".[10] This particularity of the prosperity of the 1950s and 60s has gone unnoticed by both official bourgeois economics and by the "Keynesian-Fordist state capitalism" thesis: "Since the economists do not distinguish between economy in general and the capitalist economy, it is impossible for them to see that "productive" and "capitalistically productive" means two different things and that public, like private investments are capitalistically productive only if they create surplus value not because they supply material goods or amenities".[11] Consequently, "The additional production made possible by deficit financing does appear as additional demand, but as demand unaccompanied by a corresponding increase in total profits".[12]

It follows from what we have just said that the real prosperity of the 1950s and 60s was not as great as the bourgeoisie likes to pretend, when it proudly shows off the GDP of the major industrialised economies of the time. Mattick's observation in this respect is completely valid: "In America, however, it remained necessary to keep the level of production stable by means of public spending, which led to slow but sure growth of the national debt. The growth of the public debt can also be traced to America's imperialistic policy and, later, to the war in Vietnam in particular. But since unemployment did not fall below 4 percent of the total labor force and production capacity was not fully utilized, it is more than plausible that without the ‘public consumption' of armaments and human slaughter, the number of unemployed would have been much higher than it actually was. And since about half of world production was American, despite the upswing in Western Europe and Japan, one cannot really speak of a complete overcoming of the world crisis, particularly not when the underdeveloped countries are taken into consideration. However brilliant the prosperity was, it was nevertheless confined to no more than a part of world capital and did not result in a general upswing encompassing the world economy".[13] The "Keynesian-Fordist state capitalism" thesis underestimates this reality.

For us, the real source of accumulation is not to be found in the Keynesian measures put into effect during this period,[14] but in the realisation of surplus value through sales both to extra-capitalist markets and on credit. If we have understood it correctly, the "Keynesian-Fordist state capitalism" thesis makes a theoretical mistake on this level which opens the door to the idea of the possibility for capitalism of overcoming the crisis, as long as it is able to continue increasing labour productivity in the same proportion as workers' wages.

At the beginning of this debate, the "Keynesian-Fordist state capitalism" thesis considered itself in continuity with the theoretical framework for understanding capitalism's contradictions, developed by Marx and later enriched by Rosa Luxemburg. In our view however, whether this thesis accepts or rejects Luxemburg's theory makes no difference to its inability to account for the contradictions which undermined capitalist society during the period of the post-war boom. As we can see from the various quotations from Mattick, on which we have based our critique, the debate with this thesis has nothing to do with the more classical opposition between the theory of the necessity of extra-capitalist markets for capitalism's development (defended by Rosa Luxemburg), and the analysis based on the falling rate of profit as sole explanation for the crisis of capitalism (as defended by Paul Mattick).

As for the other question - whether sales on credit can provide a lasting basis for real accumulation - this takes us back to the debate between the falling rate of profit and the saturation of extra-capitalist markets. The answer to this question is to be found in capitalism's ability or otherwise to repay its debts. In fact, the continued increase in debt since the end of the 1950s is a sign that the present open crisis of debt has its roots precisely in the period of "prosperity" of the 1950s and 60s. But this is another debate to which we will return when we consider the verification in real life of the "Extra-capitalist markets and debt" thesis.

Silvio

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[1] "The origins, dynamics, and limits of Keynesian-Fordist state capitalism" in International Review n°135.

[2] Ibid.

[3] International Review n°133, "Internal debate: the causes of the post-1945 economic boom", in the section "Extra-capitalist markets and debt".

[4] Capital Vol. III Part III, "The Law of the Tendency of the Rate of Profit to Fall", Chapter 15 "Exposition of the Internal Contradictions of the Law", Section III, "Excess capital and excess population".

[5] Marx, Théories sur la plus-value (Grundrisse), Editions Sociales tome 2, pp559-560. The translation is ours'. 

[6] Mattick was a member of the Communist Left and a militant in the KAPD during the German revolution. After emigrating to the USA in 1926 he joined the IWW and wrote on many political subjects, including economics. Two of his works are particularly noteworthy: Marx and Keynes - the limits of the mixed economy (1969) and Economic crisis and crisis theory (1974). Fundamentally, Mattick derives the capitalist crisis from the contradiction pointed out by Marx, of the tendency of the rate of profit to fall. He thus disagrees with the Luxemburgist explanation of crises which - while not denying the falling rate of profit - insists essentially on the need for markets outside capitalist relations of production if capitalism is to develop. We should point out Mattick's ability in Economic crisis and crisis theory to summarise brilliantly the contributions to Marx's crisis theory by his successors, from Rosa Luxemburg to Henryk Grossmann, including Tugan-Baranovsky and not forgetting Pannekoek. His disagreements with Luxemburg do not prevent him from explaining the great revolutionary's work on economics in a perfectly objective and intelligible manner.

[7] International Review n°135.

[8] Paul Mattick, Intégration capitaliste et rupture ouvrière, EDI, p151, our translation.

[9] Mattick, Economic Crisis and Crisis Theory, "Splendor and Misery of the Mixed Economy".

[10] ibid.

[11] ibid.

[12] ibid.

[13] ibid.

[14] As Mattick points out, the Keynesian policies which were originally conceived as a means of escaping from the crisis are fundamentally only an aggravating factor: "The compensatory state-induced production thus changes from the means of easing the crisis it originally was to a factor deepening the crisis, as it divests an increasing part of social production of its character as capital, namely its ability to produce additional capital" (ibid.).

The principal purpose of this article is to develop some of the groundwork for the analysis of the post-1945 economic boom that was sketched out in International Review n°133 under the title "State capitalism and the war economy".[1] In doing so, it also seems to us useful to examine briefly some of the objections to this analysis raised by other participants in the debate.

As the introductory remarks in International Review n°133 rightly point out, the importance of the debate goes well beyond the analysis of the post-war boom as such to more fundamental aspects of the marxist critique of political economy; it should in particular contribute to a better understanding of capitalist society's main driving forces. These driving forces determine both the extraordinary dynamism of capitalism's ascendant period which impelled it from its beginnings in the city-states of Italy and Flanders to the creation of the first planetary society, and the enormous destructiveness of capitalism's decadent period that has subjected humanity to two world wars whose barbarity would have made Genghis Khan blench, and which today threaten our species' very existence.

What underlies the dynamic expansionism of the capitalist economy?

The key to capitalism's dynamism lies at the very core of capitalist social relations:

• the exploitation of the producing class by the ruling class takes the form of the purchase of labour power as a commodity;
• the product of the exploited class' labour must necessarily take the form of commodities (commodity capital) which in turn means that the expropriation of surplus labour by the ruling class necessarily involves the sale of these commodities in the market.[2]

To express this more simply through an example: the feudal lord took surplus produce from his serfs and used it directly to maintain his household estates. The capitalist takes surplus value from the workers in the form of commodities which are of no use to him as such, but which must be sold on the market to be transformed into money capital.

This inevitably creates a problem for the capitalist: who is to buy the commodities that represent the surplus value that the workers' labour has created? Very schematically, two answers have historically been given to this question in the workers' movement:

• According to some theories, there is no problem: the process of capital accumulation and the normal operations of credit allow the capitalists to invest in another round of production which, being on a larger scale, absorbs the surplus value produced by the previous round and the whole process simply begins again.[3]
• For the majority of the ICC, this explanation is inadequate.[4] After all, if capitalism can expand indefinitely on its own foundations without any problem, why was the capitalist class seized with the mania for foreign conquest? Why did the bourgeois not stay quietly at home and get on with expanding their capital without the risky, expensive, and violent business of constantly expanding their access to new markets? Luxemburg answers this question as follows in the Anti-Critique: "[There] have to be consumers who receive their means of purchase on the basis of commodity exchange, i.e. also production of goods, but taking place outside of capitalist commodity production. They must be producers, whose means of production are not to be seen as capital, and who belong to neither of the two classes - capitalists or workers - but who still have a need, one way or another, for capitalist commodities".[5]

Until the publication of his latest article in International Review n°135, it seemed reasonable to suppose that comrade C.Mcl shared this basic view of capitalism's expansion in its ascendant phase.[6] In this article, entitled "Origin dynamic and limits of Keynesian-Fordist state capitalism" the comrade seems to have changed his opinion on the subject. If nothing else this shows that ideas change in the process of debate - however it seems to us necessary to pause for a moment to consider some of the new ideas that he puts forward.

It has to be said that these ideas are not at first sight very clear. On the one hand C.Mcl tells us - and we would agree - that the extra-capitalist environment provided capital with a "series of opportunities" amongst other things for the sale of excess goods.[7] On the other hand, however, C.Mcl tells us that these "external opportunities" were not only unnecessary, because capitalism is perfectly capable of developing its own "internal regulation", but that the external expansion of capitalism actually puts a brake on its development; if we understand comrade C.Mcl correctly, this is because the commodities sold in extra-capitalist markets cease to function as capital and do not therefore contribute to accumulation, whereas commodities sold within capitalism both allow the realisation of surplus value (through the conversion of commodity capital into money capital) but also themselves function as elements of accumulation, whether in the form of machines (means of production, constant capital) or as consumer goods (means of consumption for the working class, variable capital). To validate this idea, C.Mcl informs us that the non-colonialist capitalist countries experienced higher growth rates in the 19th century than the colonial powers.[8]

This view seems to us profoundly mistaken both empirically and theoretically. It is an essentially static vision in which the extra-capitalist market is nothing but a sort of overflow pipe for the capitalist market when it gets too full.

The capitalists do not just sell to the extra-capitalist market they also buy from it. The ships that carried cheap consumer goods to the markets of India and China[9] did not come back empty: they returned laden with tea, spices, cotton, and other raw materials. Until the 1860s the main source of cotton for the English textile industry was the slave economy of the American South. During the "cotton famine" caused by the Civil War replacement sources were found in India and Egypt.

In reality, "Within this process of circulation, in which industrial capital functions either as money or commodities, the circuit of industrial capital, whether as money-capital or commodity-capital, crosses the commodity circulation of the most diverse modes of social production, so far as they produce commodities. No matter whether commodities are the output of production based on slavery, of peasants (Chinese, Indian ryots), of communes (Dutch East Indies), of state enterprise (such as existed in former epochs of Russian history on the basis of serfdom) or of half-savage hunting tribes, etc. - as commodities and money they come face to face with the money and commodities in which industrial capital presents itself and enter as much into its circuit as into that of the surplus-value borne in the commodity-capital, provided the surplus-value is spent as revenue (...) The character of the process of production from which they originate is immaterial. They function as commodities in the market, and as commodities they enter into the circuit of industrial capital as well as into the circuit of the surplus-value incorporated in it".[10]

What of the argument that colonial expansion puts a brake on capitalism's development? In our opinion there are two mistakes here:

1. As the ICC (following Marx and Luxemburg) has repeatedly pointed out, the problem of the extra-capitalist market is posed at the level of global and not individual or even national capital.[11]
2. Colonisation is not the only form of expansion into extra-capitalist markets.

The history of the United States provides a particularly clear - and important given the rising role of the US economy during the 19th century - illustration of this point.

First of all, the absence of a US colonial empire during the 19th century was due, not to some kind of "independence" from an extra-capitalist environment, but to the fact that this environment was contained within the frontiers of the USA.[12] We have already mentioned the slave economy of the American South. Following the latter's destruction in the Civil War (1861-65), capitalism expanded for the next thirty years across the American West in a continuous process which can be represented as follows: slaughter and ethnic cleansing of the indigenous population; installation of an extra-capitalist economy through sales and grants of the newly acquired "government land" to homesteaders and small ranchers;[13] extermination of this extra-capitalist economy through debt, fraud, and violence and the extension of the capitalist economy.[14]

In 1890 the US Bureau of the Census officially declared the internal frontier closed. In 1893 a severe depression hit the US economy and during the 1890s the US bourgeoisie was increasingly preoccupied with the need to expand its national frontiers.[15] In 1898 a State Department document explained: "It seems to be conceded that every year we shall be confronted with an increasing surplus of manufactured goods for sale in foreign markets if American operatives and artisans are to be kept employed the year around. The enlargement of foreign consumption of the products of our mills and workshops has, therefore, become a serious problem of statesmanship as well as of commerce".[16] There followed a rapid imperialist expansion: Cuba (1898), Hawaii (also 1898), the Philippines (1899),[17] the Panama Canal Zone (1903). In 1900 Albert Beveridge (a leading member of the US "imperialist interest") declared in the Senate: "The Philippines are ours forever (...) And just beyond the Philippines are China's illimitable markets (...) The Pacific is our ocean (...) Where shall we turn for consumers of our surplus? Geography answers the question. China is our natural customer...".[18]

Decadence and War

For Europeans, the imperialist frenzy at the end of the 19th century is often seen in terms of the "Dash for Africa". In many ways, however, the US conquest of the Philippines was of greater importance inasmuch as it symbolises the moment when European imperialist expansion eastwards met US expansion to the West. The first war of this new imperialist epoch was fought between Asian powers as Russia and Japan contended for control of Korea and access to Chinese markets. That war in turn was a key factor in the 20th century's first revolutionary uprising, in Russia in 1905.

What does this new "epoch of wars and revolutions" (as the Third International described it) imply for the organisation of the capitalist economy?

Put very schematically, it implies the inversion of the relationship between the economy and war: whereas in capitalism's ascendant period warfare is a function of economic expansion, in decadence on the contrary the economy is at the service of imperialist war. The capitalist economy in decadence is a permanent war economy.[19]

This is the fundamental problem that underlies the whole development of the capitalist economy since 1914, and in particular the economy of the post-war boom that followed 1945.

Before we go on to examine the post-war boom from this perspective, it seems necessary to consider briefly some of the other positions present in the debate.

1) The role of extra-capitalist markets after 1945

It is worth remembering that the ICC's pamphlet on Decadence... already attributes a role to the continued destruction of extra-capitalist markets in this period,[20] and it is possible that we have underestimated their role during the post-war boom; indeed, the destruction of such markets (in the classic sense described by Luxemburg) continues to this day in the most dramatic forms, as we can see in the tens of thousands of recent suicides among Indian peasants, unable to repay the debts they contracted to buy seed grain and fertiliser from Monsanto and others.[21]

Nonetheless it is difficult to see how these markets could have contributed decisively to the post-war boom if we take into account:

• the enormous destruction visited on the small peasant economy in many countries between 1914 and 1945 as a result of war and economic catastrophe;[22]
• the fact that all the Western economies were massively subsidising agriculture during the post-war boom: in these economies the peasant economy was a cost for capitalism rather than a market.

2) Rising debt

Here we are on much more solid ground. It is true that when compared to the astronomical levels that it has reached today after more than thirty years of crisis, the increase in debt during the post-war boom may seem trivial at first sight. Compared to what went before however, its rise was spectacular. In the USA, Gross Federal debt alone rose from $48.2 billion in 1938 to $483.9 billion in 1973, ie a ten-fold increase.[23]

 

US consumer debt rose massively, from about 4% of GDP in 1948 to more than 12% in the early 1970s:

 

Real estate loans also rose, from $7 billion in 1947 to $70.5 billion in 1970 - a tenfold increase which largely understates the real situation since massive lending by the government at cheap rates and easy conditions meant that by 1955 the Federal Housing Administration and the Veterans Administration between them handled 41% of all mortgages.[24]

 

3) Rising wages

For comrade C.Mcl, the prosperity of the post-war boom was due in large part to the fact that wages increased in line with productivity as part of a deliberate Keynesian policy designed to soak up excess capacity and allow a continued expansion of the market.

It is quite true, as Marx had already pointed out in Capital, that wages can rise without threatening profits as long as productivity is also rising. It is also true that mass production of consumer goods is impossible without mass consumption by the working class. And it is also true that there was a deliberate policy of raising workers' wages and living standards after World War II in order to ward off social revolt. None of this, however, solves the basic problem identified by both Marx and Luxemburg: that the working class cannot absorb the full value of what it produces.

Moreover, C.Mcl's hypothesis lies on two major assumptions which in our view are unjustified empirically:

1. The first, is that rising wages were guaranteed by indexing them to productivity; yet we can find no evidence for this as a general policy except in a few minor cases such as Belgium.[25] To take just two counter-examples, the Italian scala mobile introduced in 1945 tied wages to inflation (a different matter altogether of course) and the "Social Contract" introduced by Wilson's Labour government in Britain at the end of the boom was a desperate attempt to reduce wages in a period of high inflation by indexing them to productivity.
2. The second is the assumption that Western capital did not seek to call on cheap foreign labour until the beginning of the period of "globalisation" in the 1980s. This is simply wrong: in the USA migration to the cities reduced the rural population from 24.4 million in 1945 to only 9.7 million in 1970.[26] In Europe the phenomenon was even more spectacular: some 40 million people migrated from the countryside or from outside Europe to the major industrial areas.[27]

The fruits of war

World War II - even more than World War I - proved a striking demonstration of the fundamental irrationality of imperialist war in decadence. Far from paying for itself by the conquest of new markets, the war left both vanquished and victors ruined and exhausted. With one exception: the United States, the only belligerent to have suffered no destruction on its own territory. This exception laid the foundation for the equally exceptional - and so unrepeatable - post-war boom.

One of the main defects of the other positions present in this debate is that a) they tend to pose the problem in purely economic terms, and b) they consider only the post-war boom itself and so fail to see that this boom was determined by the situation created by the war.

What, then, was this situation?

Between 1939 and 1945, the US economy doubled in size.[28] Mass production techniques were applied to existing industries (like shipbuilding). Whole new industries were created: mass production of aircraft, electronics and computing (the first computers were used to calculate ballistic trajectories), pharmaceuticals (with the discovery of penicillin), plastics - the list goes on and on. And although government debt peaked massively during the war, for the US bourgeoisie much of this development was pure capital accumulation as they bled the accumulated wealth of the British and French empires through arms orders.

Despite this overwhelming superiority, the United States was not without its problems at the end of the war, to say the least. We can summarise them as follows:

1. Where to find outlets for the doubling of US industrial production that had taken place during the war?[29]
2. How to uphold US national interests - now for the first time truly world wide - against the threat of Soviet expansionism?
3. How to avoid major social upheavals and the potential threat from the working class - no fraction of the world bourgeoisie had forgotten October 1917 - especially in Europe.[30] 

Understanding how the United States set about attempting to resolve these problems is the key to understanding the post-war boom - and its failure in the 1970s. This will have to wait for a future article, however it is worth pointing out that Rosa Luxemburg, writing before the full development of the state capitalist economy during the First, and above all the Second World War, had already given a brief indication of the economic effects of the militarization of the economy: "...the multitude of individual and insignificant demands for a whole range of commodities, which will become effective at different times and which might often be met just as well by simple commodity production, is now replaced by a comprehensive and homogeneous demand of the state. And the satisfaction of this demand presupposes a big industry of the highest order. It requires the most favourable conditions for the production of surplus value and for accumulation. In the form of government contracts for army supplies the scattered purchasing power of the consumers is concentrated in large quantities and, free of the vagaries and subjective fluctuations of personal consumption, it achieves an almost automatic regularity and rhythmic growth. Capital itself ultimately controls this automatic and rhythmic movement of militarist production through the legislature and a press whose function is to mould so-called ‘public opinion'. That is why this particular province of capitalist accumulation at first seems capable of infinite expansion. All other attempts to expand markets and set up operational bases for capital largely depend on historical, social and political factors beyond the control of capital, whereas production for militarism represents a province whose regular and progressive expansion seems primarily determined by capital itself.".[31]

Less than fifty years after the Accumulation was written, the reality of imperialist militarism was described in the following terms: "[The] conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence - economic, political, even spiritual - is felt in every city, every State house, every office of the Federal government (...) we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

(...) Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades.

In this revolution, research has become central; it also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of, the Federal government". These words were spoken in 1961, not by some left-wing intellectual, but by US President Dwight D. Eisenhower.

Jens, 10th December 2008

---

[1]    For reasons of space it is impossible to do justice to the whole period from 1945 to 1970. We propose therefore to go no further than to introduce an analysis of the foundations of the post-war boom which we hope to treat in more detail later.

[2]    It is no accident that the first chapter of Capital is titled "Commodities".

[3]    We are leaving aside for the moment the question of the cyclical crises through which this evolves historically.

[4]    We will not repeat here what the ICC has already written on many occasions to support our view that for Marx and Engels - and for Luxemburg in particular among the marxists of the generation that followed - the problem of the inadequacy of the capitalist market is a fundamental difficulty standing in the way of the process of capital's enlarged accumulation.

[5]    www.marxists.org/archive/luxemburg/1915/anti-critique/ch01.htm [26]

[6]    See in particular the article written by the same comrade in International Review n°127 where, under the sub-heading "Rosa's analysis identical to Marx" he demonstrates in a very clear and documented manner the continuity between Marx's analysis and that of Luxemburg.

[7]    "(...) this environment continued to supply a whole series of opportunities throughout the ascendant period (1825-1914) as a source of profit, an outlet for the sale of commodities suffering from overproduction, and as an extra source of labour power".

[8]    "During the 19th century, when colonial markets were most important, ALL the NON-colonial capitalist countries grew more rapidly than the colonial countries (71% more rapidly on average). This observation is valid throughout the history of capitalism. Sales outside pure capitalism certainly allow individual capitalists to realise their commodities, but they hinder the global accumulation of capitalism since, as with armament, they correspond to material means leaving the circuit of accumulation"

[9]    Notably opium in China's case, the highly "virtuous" British bourgeoisie fighting two wars to force the Chinese government to continue to allow their population to poison themselves with British opium.

[10]  Marx, Capital (Lawrence and Wishart), Book II "The process of circulation of capital", Part I, Chapter IV, "The circuit of commodity capital", p113.

[11]  Schematically, if German industry (no colonies) outstrips British industry (with colonies) on the world market, and thus enjoys a higher growth rate, then German industry is also profiting from the extra-capitalist markets conquered by British imperialism.

[12]  When the US stripped Mexico, by force and fraud, of California (1845-1847) and Texas (1836-1845), these states were not incorporated into an empire but into the national territory of the USA.

[13]  For example, the "Oklahoma Land Rush" of 1889: the land run started at high noon on April 22, 1889, with an estimated 50,000 people lined up for their piece of the available two million acres (8,000 km²).

[14]  The history of capitalism's development in the USA during the 19th century merits a series of articles in itself, and we do not have the space to go into it here. It is worth pointing out moreover that these mechanisms of capitalist expansion were not limited to the USA but - as we can see in Luxemburg's Introduction to Political Economy - were also present in Russia's expansion to the East and in the incorporation into the capitalist economy of China, Egypt, and Turkey, none of which were ever colonised.

[15]  This preoccupation had already found expression in the Monroe Doctrine adopted in 1823 which clearly stated that the US considered the entire American continent, North and South, to be its exclusive sphere of interest - and the Monroe Doctrine was enforced by repeated US military intervention in Latin America.

[16]  Quoted in Howard Zinn, A people's history of the United States.

[17]  The conquest of the Philippines, whereby the US first evicted the Spanish colonial power and then conducted a ferocious war against the Filipino insurrectos, is a particularly revolting example of capitalist hypocrisy and barbarism.

[18]  Zinn, op.cit.

[19]  An example will help to illustrate this. In 1805, the industrial revolution was already well under way in Britain: both the use of steam power and mechanised textile production had been expanding rapidly since the 1770s. Yet in the same year, when the British destroyed the French and Spanish fleets at the battle of Trafalgar, Nelson's flagship HMS Victory was nearly fifty years old (the ship was built to designs drawn up in 1756 and finally launched in 1765). Compare this to the situation today where the most advanced technologies are dependent on the armaments industry.

[20]  The Decadence... pamphlet - rightly in our view - associates this phenomenon with the increasing militarism of "Third World" countries.

[21]  One could also cite the elimination of small tradesmen in the advanced economies by the spread of supermarkets and the mass marketing of the most ordinary household items (including of course, food), both phenomena which really got under way in the 1950s and 1960s.

[22]  Stalin's forced collectivisation programme in the USSR during the 1930s, Chinese warlordism and civil war during the inter-war years, the conversion of peasant to market economies in countries like Romania, Norway, or Korea to meet German and Japanese imperialism's demands for food autonomy, the disastrous effects of the Depression on small farmers in the US (Oklahoma dust bowl), etc.

[23]  Unless stated otherwise the figures and graphs are drawn from the US government statistics available on https://www.economagic.com [27]. We are concentrating in this article on the US economy partly because its government statistics are more readily available, but above all because of the overwhelming weight of the US economy in the world economy during the period.

[24]  James T Patterson, Grand Expectations, p72.

[25]  Indeed, according to one study (cedar.barnard.columbia.edu/~econhist/papers/Hanes_sscale4.pdf) "sliding scale" wage agreements had already existed in certain industries in the USA and Britain from the mid-19th century right up to the 1930s, only to be abandoned after the war.

[26]  Patterson, op.cit. This was "one of the most dramatic demographic shifts of modern American history".

[27]  "In Italy, between 1955 and 1971, an estimated 9 million people moved from one region of their country to another (...) Seven million Italians left their country between 1945 and 1970. In the years 1950-1970 a quarter of the entire Greek labour force left to find work abroad (...) It is estimated that between 1961 and 1974, one and a half million Portuguese workers found jobs abroad - the greatest population movement in Portugal's history, leaving behind in Portugal itself a workforce of just 3.1 million (...) By 1973 in West Germany alone there were nearly half a million Italians, 535,000 Yugoslavs and 605,000 Turks" (Tony Judt, Postwar: a history of Europe since 1945, pp334-5).

[28]  The United States accounted for something like 40% of world industrial production: in 1945 the United States alone produced half the world's coal, two-thirds of its oil, and half of its electricity. In addition, the USA held more than 80% of the world's gold reserves.

[29]  Zinn (op.cit.) quotes a State Department official in 1944: "As you know, we've got to plan on enormously increased production in this country after the war, and the American domestic market can't absorb all that production indefinitely. There won't be any question about our needing greatly increased foreign markets".

[30]  But also in the USA. According to Zinn, (op.cit., p417): "During the war there were fourteen thousand strikes [in the US], involving 6,770,000 workers, more than in any other comparable period in American history (...) When the war ended, the strikes continued in record numbers - three million on strike in the first half of 1946".

[31]    Luxemburg, The accumulation of capital, written in 1913, chapter on "Militarism as a province of accumulation" (the emphasis is ours).

The bourgeoisie is afraid, very afraid. Between August and October, a real gale of panic was blowing over the world economy. The noisy declarations of the politicians and economists were testimony to it. "At the edge of the abyss", "An economic Pearl Harbor" "A Tsunami on the way", "A September 11 for finance"... only the allusion to the Titanic was missing[1].

It has to be said that the biggest banks on the planet were about to go bust one after another and that the stock exchanges were plummeting, losing $32,000 billion since January 2008, or the equivalent of two years annual US production. Iceland's stock exchange fell by 94% and Moscow's by 71%. 

In the end, the bourgeoisie, going from ‘salvage' plan to ‘recovery' plan, managed to avoid the total paralysis of its economy. Does this mean that the worst is now behind us? Certainly not! The recession we are only just entering is going to be the most devastating since the Great Depression of 1929.

The economists admit it clearly: the present "conjuncture" is "the most difficult for several decades", as the HSBC "the biggest bank in the world" put it on 4th August[2].

"We are facing the most difficult economic and monetary policy environments ever seen" said the president of the American Federal Reserve, going one better, on 22nd August[3]. 

As for George W Bush televised speech on 24 September?

"We're in the midst of a serious financial crisis....The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold: more banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession".

And now this "distressing scenario" of a "long and painful recession" is coming true, hitting not just the "American people" but the workers of the whole world.

A brutal recession...

Since the famous sub-prime crisis of the summer of 2007, bad news about the economy has not stopped coming.

The hecatomb in the banking sector for the year 2008 alone is impressive. There are those that have been taken over by a rival, propped up by a central bank or quite simply nationalised: Northern Rock (the eighth British bank); Bear Sterns (the fifth bank on Wall Street); Freddy Mac and Fannie Mae (two American loan companies that together weigh about $850 billion); Merril Lynch (another American star); HBOS (Scotland's second bank); AIG (American International Group, one of the world's biggest insurers) and Dexia (the Luxemburg, Belgian and French finance company). Shattering, historical bankruptcies have also marked this year of crisis. In July, Indymac, one of the biggest American loan companies, was put under the control of the Federal authorities. It was the most important American banking establishment to go bust for 24 years. But its record didn't last long. A few days later, Lehman Brothers, the fourth bank in America, also declared bankruptcy. The sum total of its debts amounted to $613 billion. Bang went the record! The biggest failure of an American bank up until then, the Continental Illinois in 1984, was six times smaller ($40 billion). Two weeks after that, another record! Now it was the turn of the Washington Mutual (WaMu), the most important savings company in the USA, to close its doors.

After this heart attack at the very centre of capitalism, the banking sector, the health of the whole body began to vacillate and decline: now the "real economy" was brutally struck. According to the National Bureau of Economic Research, the USA has officially been in recession since December 2007. Nouriel Roubini, now the most respected economist on Wall Street, thinks that a contraction of economic activity in America of around 5% in 2009 and again 5% in 2010 is probable![4] We don't know whether this will be the case, but the mere fact that one of the most reputable economists on the planet can envisage such a catastrophic scenario reveals the deep anxiety of the bourgeoisie. The Organisation for Economic Cooperation and Development (OECD) expects the whole of Europe to be in recession in 2009. For Germany, the Deutsche Bank foresees a drop in GNP of up to 4%![5] To get an idea of the scale of such a recession, you have to remember that the worst year since the Second World War up to now was 1975, when Germany's GNP fell by ‘only' 0.9%. No continent is spared. Japan is already in recession and even China, that capitalist Eldorado, is not escaping the brutal slow-down. Result: demand has collapsed to the point where prices, including that of oil, are tumbling. In short, the world economy is doing very badly.

....and a wave of pauperisation unprecedented since the 1930s

The first victim of this crisis is obviously the proletariat. In the USA, the deterioration of living conditions has been particularly spectacular. 2.8 million workers, incapable of repaying their debts, have lost their homes since the summer of 2007. According to the Association of Mortgage Banks nearly one out of ten mortgage-paying Americans is under the threat of eviction. And this phenomenon is beginning to hit Europe, especially Spain and Britain. 

Lay-offs are also multiplying. In Japan, Sony has announced an unprecedented plan of 16,000 job-cuts, 8,000 of them on permanent contracts. This company, an emblem of Japanese industry, has never before laid off people on permanent contract. With the housing crisis, the building sector is slowing right down. The Spanish building trade expects to lose 900,000 employees between now and 2010! For the banks, it's a veritable massacre. Citigroup, one of the biggest banks in the world, is going to get rid of 50,000 jobs having already shed 23,000 since the beginning of 2008. In 2008, for this sector alone, 260,000 jobs have been cut in the US and Britain. On average, one job in finance generates four directly linked jobs. The collapse of the financial organisms therefore means unemployment for hundreds of thousands of working class families. Another sector that has been hit very hard is the car industry. Sales of vehicles have crashed everywhere this autumn by over 30%. Renault, France's foremost car manufacturer, has more or less stopped production since mid-November: no more cars are coming off its assembly lines, and this on top of the fact that these lines had already been running at only 54% of their capacity for months. Toyota is going to cut 3000 out of 6000 temporary jobs in its Japanese factories. But once again the most alarming news comes from the USA: the famous Big Three of Detroit (General Motors, Ford and Chrysler) are on the verge of bankruptcy. The hand-out of $15 billion from the American state won't be enough to keep them out of it for long[6] (the Big Three were actually asking for $34 billion). Massive restructuring will be taking place in the months ahead. Between 2.3 and 3 million jobs are under threat. And in the US workers who are laid off lose their health insurance and their pensions.

The inexorable consequence of this massive destruction of jobs is obviously the explosion of unemployment. In Ireland, "the economic model of the last decade", the number of unemployed has more than doubled in a year, which represents the highest increase ever recorded! Spain finished the year with 3.13 million unemployed, more than a million more than in 2007[7]. In the US, 2.6 million jobs were axed in 2008, something never seen since 1945[8].The end of the year was particularly disastrous with more than 1.1 million jobs lost during November and December. At this rate, there could be another 3 or 4 million unemployed between now and the summer of 2009.

And for those who survive, those who see their colleagues being laid off, the future is "work much more to earn less"[9]. Thus, according to the latest report by the International Labour Organisation, entitled ‘World report on wages 2008/9', "For the 1.5 billion wage earners in the world, difficult times are ahead....the world economic crisis will lead to painful cuts in wage levels".

How the bourgeoisie explains this crisis

The economic mechanisms which have engendered the current recession are relatively well known. Television has provided us with all sorts of reports which claim to give us all the background to the affair. To keep it simple, for years, the consumption of "American households" (in other words, working class families) has been supported artificially by all sorts of credits, in particular one which met with huge success: risky mortgage loans or ‘subprimes'. The banks, the financial organs, the pension funds...all gave out loans without any concern for the real capacity of these workers to pay them back, as long as they had a mortgage. The worst that could happen, they thought, was that they would be repaid by the sale of houses by debtors who couldn't repay their debts. This had a snowball effect: the more the workers borrowed - above all to buy their houses - the more the price of houses went up; the more house prices went up, the more they could borrow. All the speculators on the planet then joined the dance: they rushed into buying properties, which made them even more expensive and they then started selling each other these subprimes through the mechanism of ‘securitisation' (i .e. the transformation of loans into assets exchangeable on the world market like other shares). Over the decade, the speculative bubble grew to huge proportions; all the financial institutions on the planet were involved in it to the tune of trillions of dollars. Put another way, households which were known to be insolvent became the world economy's goose that laid the golden eggs.

Obviously, in the end the real economy forced this idyllic world to face reality. In ‘real life', all these hyper-indebted workers were also facing rising living costs and frozen wages, unemployment, falling unemployment benefits....In a word, they were getting considerably poorer, so that a growing number of them were less and capable of meeting their repayments. The capitalists then started to forcibly eject the bad debtors so that their houses could be sold...but there were so many houses coming onto the market[10] that prices began to come down and...hey presto, in the sunshine of summer 2007, the whole vast snowball melted away! The banks found themselves with hundreds of thousands of insolvent debtors and all those houses worth nothing. It was bankruptcy, the crash. 

Summarised like this, the whole thing seems absurd. Loaning money to people who don't have the means to pay you back goes against capitalist common sense. And yet the world economy based the essentials of its growth over the last decade on this nonsense. The question is then why? Why such madness? The answer given us by the journalists, the politicians, the economists is simple and unanimous: It's the fault of the speculators! It's the fault of greedy bosses who behave like thugs! It's the fault of irresponsible bankers! Today, everyone is joining the traditional choir of the left and the extreme left, singing about the evils of ‘deregulation' and ‘neo-liberalism' (a kind of unbridled liberalism) and calling for a return to state intervention....which shows up the real nature of the ‘anti-capitalist' proposals of the left and the extreme left. Thus France's right-wing president Sarkozy proclaims that "capitalism must found itself anew on an ethical basis". Germany's Angela Merkel insults the speculators. Spain's ‘socialist' Zapatero points an accusing finger at the "market fundamentalists". And Chavez, the illustrious knight of ‘21st century socialism', commenting on the emergency nationalisations pushed through by Bush, told us that "comrade Bush is about to take certain measures which are the same as those taken by comrade Lenin"[11]. They all tell us that hope today lies in ‘another kind of capitalism', more human, more moral... more state-controlled!

Lies! In the mouths of all these politicians, everything is false, including their so-called explanation of the recession. 

Today's economic catastrophe is the fruit of a hundred years of decadence

In reality, it's the state itself which was the first to organise this generalised household debt. To provide an artificial support to the economy, the state opened the floodgates of credit by reducing the lending rates of the central banks. By giving out cheap loans, sometimes at less than 1%, the flow of money was greatly increased. World debt was thus a deliberate choice of the bourgeoisie and not the result of some kind of ‘deregulation'. How else are we to understand Bush's declaration in the aftermath of September 11 2002 when, facing the beginnings of a recession, he called on the workers to "be good patriots, consume". The American president was giving a clear message to the whole financial sphere: multiply consumer credit or the national economy would fold![12]

In fact, capitalism has been surviving on credit for decades. The graph in figure 1[13], which presents the evolution of total US debt (i.e. the combined debt of state, companies and households) since 1920, speaks for itself. To understand the origins of this phenomenon and go beyond the simplistic and fraudulent story about the ‘madness of the bankers, speculators and bosses', we have to go to the "great secret of modern society: the creation of surplus value", to use Marx's words[14]

Figure 1: Evolution of total US debt since 1920

Capitalism carries within itself, and has done since its birth, a sort of congenital illness: overproduction. It produces more commodities than its market can absorb. Why? Let's take a totally theoretical example: a workers on an assembly line or in front of a computer and who, at the end of the month, is paid 800 euros. In fact, he has produced not the equivalent of 800 euros, which he receives, but a value of 1200 euros. He has carried out unpaid labour, or, to put it another way, he has produced surplus value. What does the capitalist do with these 400 euros he has stolen from the worker (providing that that he manages to sell his commodities)? He puts some of it in his pocket, let's say 150 euros, and the remaining 250 euros he invests in his company's capital, most often by buying more modern machinery etc. But why does the capitalist proceed in this way? Because he has no choice. Capitalism is a competitive system; you have to sell your goods more cheaply than the rival selling the same products. As a result, the boss is forced not only to lower his production costs, i.e. wages, [15], but also to use a growing part of the unpaid labour he has extracted for reinvestment in more efficient machines[16] in order to increase productivity. If he doesn't do this, he can't modernise, and sooner or later, his rival, who has done so, will be able to sell more cheaply and conquer the market. The capitalist system is thus affected by a contradictory phenomenon: by not paying back the workers the equivalent of what they have supplied to him as labour, and by forcing the bosses to give up consuming a large part of the profit extorted in this way, the system produces more value than it can distribute. Neither the workers nor the capitalists put together can ever absorb all the commodities produced. Who is going to consume this surplus of commodities? The system has to find outlets outside the framework of capitalist production - the extra-capitalist markets, in the sense of economies than don't function in a capitalist manner.

This is why in the 18th and above all the 19th century, capitalism conquered the globe: it had to find new markets all the time, in Asia, in Africa, in South America, to realise profit by selling its surplus commodities, on pain of seeing its economy paralysed. And this is what regularly happened when it could not make new conquests quickly enough. The Communist Manifesto of 1848 contains a masterly description of this kind of crisis:

"In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity - the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce".

Nevertheless, in this period, because capitalism was a rising system, because it really could conquer new territories, each crisis gave way to a new phase of prosperity:

"The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere (...) The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians' intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image".

But already Marx could see in these periodic crises something more than just an eternal cycle which would always lead to a new phase of prosperity. He saw them as the expression of profound contradictions which would undermine capitalism. By conquering new markets, the bourgeoisie was "paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented". Or, as he put it in Wage Labour and Capital: crises "become more frequent and more violent, if for no other reason, than for this alone, that in the same measure in which the mass of products grows, and there the needs for extensive markets, in the same measure does the world market shrink ever more, and ever fewer markets remain to be exploited, since every previous crisis has subjected to the commerce of the world a hitherto unconquered or but superficially exploited market".

Throughout the 18th and 19th centuries, the main capitalist powers were engaged in a race to conquer the world; they increasingly divided the planet up into colonies and created veritable empires. From time to time, they found themselves in dispute over the same territory; a short war broke out, and the loser quickly moved on to find another corner of the earth to conquer. But by the beginning of the 20th century, the great powers had completed the domination of the world. It was no longer a matter of scrambling for new areas of Africa, Asia or America, but of engaging in a pitiless struggle to defend their spheres of influence and to seize areas from their rivals at the barrel of a gun. This was a real question of survival for the capitalist nations: they had to be able to pour enough of their overproduction into non-capitalist markets. It was thus not by chance that it was Germany, which had very few colonies and was dependent on the good will of the British Empire to trade in the areas under its control (a dependence which is intolerable for any national bourgeoisie) proved to be the most aggressive power and was the one which unleashed the First World War in 1914. This butchery cost more than 11 million lives, caused terrible suffering and inflicted moral and psychological traumas on entire generations. This horror announced the opening of a new epoch, the most barbaric epoch in history. Having gone past its zenith, capitalism now entered its period of decadence. The 1929 crash strikingly confirmed this.

And yet, after more than a hundred years of slow agony, this system is still standing - ill, certainly, but still alive. How has it survived? Why has its body not been totally paralysed by the poison of overproduction? It is here that the resort to debt enters into the picture. The world economy has managed to avoid a shattering collapse by resorting more and more to debt.

As Figure 1 shows, since the beginning of the 20th century, the total American debt has literally exploded, starting in the 1920s. Households, enterprises and banks crumpled beneath a pile of debt. And the brutal fall in the debt curve in the 1930s and 40s is in fact deceptive. The Great Depression of the 1930s represented the first great economic crisis of decadence. The bourgeoisie was not yet prepared for such a shock. At first it did not respond or responded badly. By closing off frontiers (through protectionism), it accentuated overproduction and the toxins did their worst. Between 1929 and 1933, America's industrial production fell by 50%[17]; unemployment hit 13 million workers and the level of poverty was truly terrible. Two million Americans were made homeless[18]. Initially, the government didn't come to the aid of the financial sector: of the 29,000 banks registered in 1921, there were only 12,000 left at the end of March 1933; and this hecatomb continued until 1939[19]. All these bankruptcies meant a pure and simple disappearance of mountains of debt[20]. On the other hand, what isn't shown on this graph is the growth of public debt. After four years of doing nothing, the American state finally began to take measures: this was Roosevelt's New Deal. And what did this plan, so talked about today, actually consist of? It was a policy of great works based on... a massive, unprecedented increase in state debt (from $17 billion in 1929, the public debt rose to $40 billion by 1939)[21].

After that, the bourgeoisie drew the lessons of this misadventure. At the end of the Second World War it organised monetary and financial institutions on an international level (via the Bretton Woods conference) and above all it systematised the resort to credit. Thus, having hit a low point in 1953-54 and despite the short calm in the years 1950 and 1960[22], total American debt began again slowly but surely to increase from the mid-50s on.  And when the crisis came back on the scene in 1967, this time the ruling class didn't wait four years before doing something. It immediately resorted to credit. These past 40 years can in fact be summarised as a succession of crises and and an exponential rise in world debt. In the USA, there were officially recessions in 1969, 1973, 1980, 1981, 1990 and 2001[23]. The solution of the American bourgeoisie in the face of these difficulties is also visible on the graph: the axis of debt goes up sharply after 1973 and even more sharply during the 1990s. All the bourgeoisies in the world have acted in the same way.

But debt is not a magical solution. Figure 2[24] shows that, since 1966, debt has been less and less effective in creating growth[25]. It's a vicious circle: the capitalists produce more commodities than the market can normally absorb; next, credit creates an artificial market; the capitalists then sell their commodities and reinvest their profits in production and... then you need more credit to sell the new commodities. Not only do debts accumulate, but with each new cycle, you need more and more debts to maintain an identical rate of growth (since production has been enlarged). Furthermore, an increasingly large part of all this credit is never injected into the circuit of production but disappears immediately into the abyss of deficits. Over-indebted households often take out new loans to pay back their old debts. The state, companies and banks work in the same way. Finally, over the past 20 years, with the ‘real economy' in perpetual crisis, a growing part of the money created goes to fuel speculative bubbles (the Internet bubble, the housing bubble, etc...)[26]. It is more profitable and in the end less risky to speculate on the stock exchange than to invest in the production of commodities which will be extremely difficult to sell. Today five times more money circulates in the stock exchange than in production[27].

Figure 2: Weakening effect of the growth of debt on the growth of GNP

But this headlong flight into debt is not simply less and less effective, it inexorably and systematically results in a devastating economic crisis. Capital can't simply pull money out of a hat. It is the ABC of commerce: every debt must one day be paid back or the lender will get into serious difficulties and eventually bankruptcy. We then go back to the beginning: capital can only gain time in the face of its historic crisis. Worse: by putting off the effect of the crisis till tomorrow, it is paving the way for even more violent economic convulsions. This is exactly what is happening to capitalism today.

Can the state save the capitalist economy?

When an individual becomes bankrupt, he loses everything and is thrown out onto the street. A company locks its gates. But a state? Can a state become bankrupt? After all, we have never seen a state shut up shop. Not exactly. But being in cessation of payment, yes!

In 1982, 14 deeply indebted African countries were forced to officially declare themselves in cessation of payment. In the 1990s, countries in South America and Russia were also in default. More recently, in 2001, Argentina crumbled in its turn. Concretely, these states did not cease existing, and the national economy didn't just stop either. On the other hand, each time it happened there was a sort of economic earthquake: the value of the national currency fell, the lenders (in general, other states) lost all or part of their investment, and above all the state drastically reduced its expenses by laying off a large number of civil servants and by temporarily ceasing to pay those who remained. 

Today, numerous countries are at the edge of this abyss: Ecuador, Iceland, Ukraine, Serbia, Estonia... But how goes it with the great powers? The governor of California, Arnold Schwarzenegger, declared at the end of December that his state was in a "fiscal state of emergency". The richest of all the American states, the "Golden State", was ready to lay off 235,000 of its public employees (and those who are left are going to have to take two days of unpaid holiday a month starting on 1st February). Presenting this new budget, the ex-Hollywood star warned that "everyone will have to agree to make sacrifices". This is a very powerful symbol of the profound economic difficulties of the world's leading power. We are still far away from a cessation of payments by the American state but this example shows clearly that the great powers' economic room for manoeuvre is today very limited. World debt seems to be reaching saturation point (it stood at $60,000 billion in 2007 and has swollen by several trillion dollars since); obliged to continue in the same direction, the bourgeoisie is thus going to provoke devastating economic shocks. The FED has lowered lending rates for 2009 to 0.25% for the first time since its creation in 1913. The American state is thus loaning money almost for nothing (and even at a loss if you take inflation into account). All the economies of the planet are calling for a "New Deal", dreaming about Obama as the new Roosevelt, capable of re-launching the economy, like in 1933, through an immense programme of grand public works financed... by credit[28]. The bourgeoisie has been regularly launching plans based on state debt equivalent to the New Deal since 1967, with no real success. And the problem is that such a policy of forward flight can lead to the collapse of the dollar. Today there are many countries who doubt the ability of the US to repay their loans and are being tempted to withdraw all their investments. This is the case with China which, at the end of 2008, threatened, in very diplomatic language, to stop propping up the American economy by buying Treasury Bonds: "Every error about the gravity of the crisis will cause problems both for lenders and borrowers. The country's apparently growing appetite for American Treasury Bonds does not mean that they will remain a profitable investment in the long term or that the American government will continue to depend on foreign capital". And this, in a few words, is how China threatened the American state with cutting off the flow of Chinese dollars which has been feeding the US economy for several years. If China carried out its threat[29], the international currency chaos that would ensue would be apocalyptic and the ravages on working class living standards gigantic. But it's not only China which is beginning to have doubts: on Wednesday 10th December, for the first time in history, the American state had all sorts of difficulties in finding a loan of $28 billion. And since the coffers of all the great powers are empty, staggering under the weight of interminable debts and ailing economies, on the same day the same problem hit the German state: for the first time since the 1920s, it had the greatest difficulty in finding anyone willing to loan it 7 billion euros.

No doubt about it: debt, whether household, company or state, is just a palliative and it doesn't cure capitalism of the disease of overproduction. At best it allows the economy to get out of jail but only by preparing ever more violent crises. And yet the bourgeoisie is going to carry on with this desperate policy because it has no choice, as was shown, for the umpteenth time, by Angela Merkel's declaration on 8th November 2008 to the international conference in Paris: "There is no other way of struggling against the crisis except by accumulating a mountain of debts", or again by the IMF's chief economist Olivier Blanchard's latest statement: "we are in the presence of a crisis of exceptional breadth whose main component is a collapse in demand (...) It is imperative to re-launch private demand if we want to prevent the recession turning into a Great Depression". How is this to come about? "Through an increase in public expenditure".   

But if not through these recovery plans, can the state still be the saviour by nationalising a good part of the economy, such as the banks or the car industry? Once again, no. First, and contrary to the traditional lies of the left and the extreme left, nationalisations have never been good news for the working class. At the end of the Second World War, there was a big wave of nationalisations aimed at putting the apparatus of production on its feet again after all the destruction and at increasing the tempo of work. We should not forget the words that Thorez, General Secretary of the French Communist Party, and then vice president in the De Gaulle government, threw at the working class in France, especially those in the nationalised industries: "If miners have to die at their post, their wives will replace them", or "Roll up your sleeves for national reconstruction!" or again "strikes are the weapon of the trusts". Welcome to the wonderful world of nationalised enterprises! There is nothing surprising about any of this. Since the experience of the Paris Commune in 1871, revolutionary communists have always shown the viscerally anti-proletarian role of the state:   

"The modern state (...) is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over the productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The capitalist relation is not done away with. It is rather brought to a head.".[30]

The new wave of nationalisations will bring no benefit to the working class. Nor will it allow the bourgeoisie to return to long-term growth. On the contrary! These nationalisations presage ever-more violent economic storms on the horizon. In 1929, the American banks that went bust took with them the savings of a large part of the American population, plunging millions of workers into poverty. After that, to avoid such a debacle happening again, the banking system was divided in two: on the one hand, business banks which financed companies and worked in all kinds of financial operations; on the other hand, savings banks which took the money of their customers and put them in relatively safe investments. Now, swept away by the wave of bankruptcies in 2008, these American business banks no longer exist. The American financial system has gone back to what it was like before 24th October 1929! When the next storm breaks, all the banks which have so far been kept going thanks to partial or complete nationalisations risk disappearing, but this time taking with them the meagre savings of working class families. Today, if the bourgeoisie nationalises, it's not to put through a new economic recovery plan but to avoid the immediate insolvency of the mastodons of finance and industry. It's a matter of avoiding the worst and saving the furniture[31].

The mountain of debts that has been building up over the last four decades has become a veritable Everest and nothing can now prevent capital from sliding down its slopes. The economy is truly in a disastrous state. That doesn't mean that capitalism will collapse overnight. The bourgeoisie will not let its world disappear without reacting: it will try desperately and with all possible means at its disposal to prolong the agony of its system, without concern for the ills that this will inflict on humanity. Its mad flight into debt will continue and here and there may still be short moments of growth. But it is certain is that the historic crisis of capitalism is changing its rhythm After forty years of slowly descending into hell, the future will be one of violent convulsions, of recurrent economic spasms shaking not only the countries of the Third World but also the US, Europe, Asia...[32]

The slogan of the Communist International in 1919 is more relevant today than ever: "for humanity to survive, capitalism must perish!" 

Mehdi 10.01.09 

---

[1] Respectively: Paul Krugman (the last Nobel Prize winner in economics); Warren Buffet (an American investor, nicknamed the ‘oracle of Omaha', so much is the opinion of this billionaire from small town Nebraska respected in the world of high finance); Jacques Attali (economic adviser to French president Nicolas Sarkozy) and Laurence Parisot (president of the French bosses' association.

[2] Libération 4.08.08

[3] Le Monde, 22.08.08

[4] Source : contreinfo.info/article.php3?id_article=2351

[5] Les Echos, 05.12.08

[6] This money was found in the funds of the Paulson plan, which is already insufficient for the banking sector. The American bourgeoisie is obliged to "robbing Peter to pay Paul", which shows the disastrous state of the finances of the world's leading power.

[7] Les Echos, 08.01.09

[8] According to the report published on 9 January by the American Labour Department (Les Echos, 09.01.09)

[9] In France, President Sarkozy waged a campaign in 2007 whose main slogan was "Work more to earn more!" (sic!)

[10] In 2007, nearly three million American households were defaulting on their payments (‘Subprime Mortgage Foreclosures by the Numbers', www.americanprogress.org/issues/economy/news/2007/03/26/2744/subprime-mortgage-foreclosures-by-the-numbers [32]).

[11] For once, we agree with Chavez. Bush is indeed his comrade. Even if they have been engaged in a bitter imperialist battle between their two countries, they are nonetheless comrades when it comes to defending capitalism and the privileges of their class... the bourgeoisie

[12] Today Alan Greenspan, the former president of the FED and the conductor of the whole orchestra of economic credit, is being lynched by all the economists and doctors of the dismal science. This fine crowd has short memories and forget that not long ago they were calling him the ‘financial guru'.

[13] Source : eco.rue89.com/explicateur/2008/10/09/lendettement-peut-il-financer-leconomie-americaine

[14] Marx, Capital Vol 1

[15] Or in other words, variable capital

[16] Fixed capital

[17] A Kaspi, Franklin Roosevelt, Paris, Fayard, 1988, p 20

[18] These figures are all the more significant given that the American population at the time was only 120 million. Source: Lester V Chandler, America's Great Depression 1929-1941, New York, Harper and Row, 1970, p24f

[19] According to Frédéric Valloire, in Valeurs Actuelles 15.02.08

[20] To complete the picture, this fall in debt can also be explained by a complex economic mechanism: monetary creation. The New Deal was not financed fully by debt but simply by creating money. Thus on 12 May 1933, the President was authorised to increase the credit of the federal banks by three billion dollars and to print bills without any counterpart in gold to the tune of another $3 billion. On 22nd October of the same year, the dollar was devalued 50% in relation to gold. All this explains the relative moderation of debt levels.

[21]Source: www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo3.htm [33].

[22] From 1950 to 1967, capitalism went through a phase of major growth, sometimes known as the ‘Golden Age'. The aim of this article is not to analyse the causes of this parenthesis in the economic swamp of the 20th century. There is a debate going on in the ICC in order to reach a better understanding of what underlay this period, a debate which we have begun to publish in our press (see ‘Internal debate in the ICC: the causes in the period of prosperity after the Second World War in International Review n°133, second quarter of 2008). We strongly encourage all our readers to participate in this discussion at our public meetings, by letter or by e-mail

[23] Source: www.nber.org/research/business-cycle-dating [34]

[24] Source : eco.rue89.com/explicateur/2008/10/09/lendettement-peut-il-financer-leconomie-americaine

[25] In 1966, a dollar of supplementary debt produced another $0.80 of wealth, whereas in 2007 the same dollar only created an extra $0.20 of GNP

[26] Shares and housing are not included in GNP

[27] Thus, contrary to everything the economists, journalists and other experts tell us, this ‘speculative madness' is the product of the crisis, not the other way round!

[28] Just after this article was written, Obama announced his long-awaited recovery plan. In the words of the economists it was "rather disappointing": $775 billion would be released, allowing a "fiscal gift" of $1,000 dollars to every American household (95% of households were concerned) in order to encourage spending, and to launch a programme of grand public works in the sphere of energy, infrastructure and schools. Obama promises that this plan will create three million jobs in the course of the next few years. Since the American economy is currently destroying over 500,000 jobs a month, this new New Deal (even if its most hopeful expectations are fulfilled, which does not seem very likely) is thus far below what is required.

[29] In itself, this threat reveals the impasse and the contradictions facing the world economy. For China, massively selling its dollars would be like cutting off the branch on which it's sitting since the USA is the main outlet for its commodities. This is why up till now it has continued to help prop up the American economy. But at the same time, it is aware that the branch is rotten, and it has no desire to be sitting on it when it cracks.

[30] Engels, 1878 Anti-Dühring

[31] In doing so, it is laying the ground for the development of the class struggle. By becoming their official boss, the state confronts the workers' struggle directly. In the 1980s, the big wave of privatisations (under Thatcher in Britain for example) brought an extra difficulty for the struggle. Not only were the workers called on by the unions to fight to save the nationalised industries, in other words, to be exploited by one boss (the state) instead of another (private), but also they no longer confronted the same boss (the state) but a series of different private bosses. Their struggles were thus often dispersed and ineffective. In the future, by contrast, the ground will be more fertile for a united workers' struggle against the state.

[32] Since the economic terrain is so unstable, it's difficult to see what will be the next bomb to go off. But in the pages of the economic journals, a term often crops up in the worried jottings of the economic experts: CDS. A CDS - ‘Credit Default Swap' - is a sort of insurance which a financial establishment uses to protect itself from the risk of a default in payment. The total market in CDS was estimated at $60 trillion in 2008. In other words if there were to be a CDS crisis on the model of the sub-prime crisis it would be absolutely devastating. It would swallow up all the American pension funds, and thus shatter workers' retirement plans.