Australasian Spartacist No. 203
Capitalist Rulers Fleece Working People
Financial Crisis: Bankruptcy of Capitalism
Those Who Labour Must Rule!
The economic crisis that exploded on Wall Street over spring has reduced some of the world’s most powerful financial institutions to twisted wreckage. The U.S., Japan, Germany and much of Europe are now officially in recession while Australia teeters on the edge. As it expands and deepens, the economic crash is putting at risk the livelihoods of hundreds of millions of working people around the globe.
In the biggest bailout in U.S. history, the U.S. government voted to allocate some $700 billion to buy out the “toxic assets” of banks and other major financial institutions. Aptly dubbed “cash for trash” by international bankers, under the bailout deal the government would pay a premium for “trash” on bank ledgers, centrally mortgage-backed securities that high-rolling financiers bought en masse in speculative schemes to cash in on the U.S. housing market. Last year when the bubble burst, bankers began to sharply cut back lending to businesses, consumers and even to each other, threatening to trigger an even deeper economic crisis. While cynically decrying Wall Street “greed,” Washington has now expanded its subsidies to compensate the losses of the banking and financial looters to a staggering U.S. $7.7 trillion.
Raising the spectre of the Great Depression, bourgeois economists and media pundits have insisted that the Wall Street bailout was the price that everyone had to pay for restoring stability. But no one really believes that the bailout will do much for the economy; the stock market continues to plunge as credit tightens even further.
Now the U.S. auto giants are seeking a $25 billion bailout while Citibank (previously the world’s biggest bank) is currently being propped up by U.S. government intervention. In Australia, firms such as investment giant Babcock and Brown, and ABC Learning (providing childcare for tens of thousands) are headed to the corporate graveyard along with Allco Finance.
Having previously tried to reassure the public that Australia would be largely immune from the economic meltdown, the Rudd Labor government has been frantically trying to pump-prime the economy. Rudd has already promised to spend in excess of $30 billion. This includes $6.2 billion to buttress the already heavily protected local operations of Toyota, General Motors and Ford, $15.1 billion for state governments, and $10.4 billion in one-off payments to families, pensioners and first-home buyers in an attempt to stimulate spending. All this will likely have a negligible impact. While families struggle under high levels of debt, the elderly subsist on a pitifully low pension that the Rudd government has contemptuously refused to increase. As for the ALP’s enticement to new homebuyers, everyone knows that prices are falling and many workers may not have a job next year.
Regardless of Reserve Bank interest rate cuts, Rudd’s rash of government spending and appeals to spend for “the country,” Australia will be battered as prices for key commodities like coal and iron ore plummet. As Rory Robertson an economist with Macquarie Group Ltd. declared, “While Australia is an island, the Australian economy is not. The extraordinary power of the sudden downshift in the global economy may have made recession in Australia unavoidable” (Bloomberg.com, 3 December).
The Australian capitalist class has accrued enormous wealth on the back of mineral sales to China at extortionate prices. However, growth in the Chinese bureaucratically deformed workers state is slowing as the impact of the financial downturn on exports begins to bite. This, combined with recession in Japan, has led to a reversal in Australia’s minerals export boom, which has propped up the Australian economy for more than a decade. BHP-Billiton, who recently pulled out of a takeover bid for its major competitor Rio Tinto, is now signalling its intention to cut back production. For its part, Rio Tinto is planning to reduce iron ore sales by millions of tonnes while slashing 14,000 jobs worldwide. Meanwhile OZ Minerals could join the growing number of smaller mining companies facing administration. These developments will have significant flow on effects throughout the economy.
The contraction of mineral exports occurs alongside the current frozen state of international credit. Australia carries a large current-account deficit that is funded by heavy overseas borrowing. These factors, combined with falling house prices (said to be overvalued by up to 25 percent) could see the economy rapidly spiral into a deep recession in which workers face losing their jobs, savings and homes. Indeed the working class, poor and oppressed have plenty to fear as this crisis will be played out on their backs.
Thousands of jobs from the finance and manufacturing sectors have already been destroyed. And there are predictions that hundreds of thousands more will be thrown out of work in the New Year. Meanwhile workers have seen their superannuation savings shrink at an alarming rate, leaving many older workers facing the prospect of future poverty on a government pension. Australia’s superannuation pool fell by $72 billion between 30 June and 30 November. Compulsory employer-paid superannuation was introduced in the early 1990s by the then-federal Keating Labor government in lieu of workers receiving a wage rise. This was peddled as building a supposed retirement “nest egg” in the sweet bye-and-bye while providing a giant slush fund for financiers and investors. It also had the aim of transferring responsibility for providing support in old age from the government to individual workers. For those workers who still have a job, it’s another day older and deeper in debt trying to make ends meet—paying the rent or mortgage, groceries, credit card and other debts, while their retirement savings evaporate.
Like all the inevitable economic crises that occur periodically under capitalism, the current crisis reflects at bottom a key contradiction in capitalism identified by Karl Marx and Friedrich Engels: Under capitalism production is socialised, that is, concentrated and organised in vast corporations, but the means of production—and the appropriated, socially produced wealth—remain the private property of a few. In his 1916 study Imperialism, the Highest Stage of Capitalism, V.I. Lenin, leader of the 1917 Russian Revolution, described how imperialism, the system of modern, decaying capitalism, “leads directly to the most comprehensive socialisation of production” under capitalism. Lenin emphasised that the monopolisation of production and the dominant role of finance capital impels the imperialist powers to divide and redivide the world as they strive for markets and spheres of exploitation in more backward capitalist countries. He explained:
“The development of capitalism has arrived at a stage when, although commodity production still ‘reigns’ and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the ‘geniuses’ of financial manipulation. At the basis of these manipulations and swindles lies socialised production; but the immense progress of mankind, which achieved this socialisation, goes to benefit...the speculators.”
The current financial crisis is a compelling argument for a thoroughgoing socialist revolution to seize the banks, the factories, mines, mills and other means of production from the hands of the capitalists who have appropriated and squandered the wealth produced by the working class. Socialised production must be extended to socialised ownership through the producers taking control of society. The way out of the endless cycle of capitalist economic crises and imperialist wars was shown by the Bolshevik Revolution, when the Russian workers took power in their own hands, expropriating the bourgeoisie and establishing a workers state. We fight for international socialist revolution, for the collectivisation of the means of production and for economic planning on an international scale.
The Shackles of Class-Collaboration
Since the counterrevolutionary destruction of the Soviet Union in 1991-92, the American rulers, along with their Australian junior partners, have revelled in the supposed “death of communism” as they increasingly savaged the unions, drove up the rate of exploitation of the working class and made life miserable for the poor. Now the tax dollars of working people around the world are going to line the pockets of those responsible for their ruin.
With its hands on the means of production, the working class uniquely has the social power and interest in sweeping away this deeply inhumane system. However there is a huge disproportion between this necessary perspective and the present consciousness of the working class. It is commonplace for workers in Australia to think that they have a common “national” interest with their exploiters. Such false consciousness is transmitted to the workers by the pro-capitalist trade-union bureaucracy and the ALP social democrats.
In a 1 October speech to the National Press Club, ACTU President Sharan Burrow argued that the economic crisis made clear the need for an industrial relations system that “delivers better job security” while also benefiting “business and the economy.” She continued that any bailouts of the financial sector must include “measures that can rebuild confidence in the system.” In an attempt to do just that, Prime Minister Rudd denounced the excesses of “extreme capitalism,” attributing responsibility for the crisis to bad policy and a few greedy financiers. Rudd has repeatedly used the financial crash to whip up the bosses’ national unity fraud. Addressing “Business and unions, employers, employees, Government and business,” Rudd declared in a 7 December speech in Geelong, “if we as a country stick together, and recognise the fact that we are all in this together, then we will see Australia through” (www.pm.gov.au).
“Rebuild confidence in the system,” “as a country stick together”: such is the wretched bourgeois perspective pushed by the industrial and parliamentary wings of Laborism. Their program of a partnership between labour and capital in the “national” interest has long served to sap the fighting power of the working class by shackling it to the capitalist class enemy. During the 13 years of the Hawke/Keating Labor government from 1983 to 1996, their union-busting national Accord delivered massive job slashing, wage cutting and dismantling hard-won union gains in the service of dramatically increasing corporate profits. Unions that did not toe the line, including the Builders Labourers Federation and the airline pilots union, were smashed.
The ALP is a bourgeois workers party, thoroughly bourgeois in its program and outlook while based on the trade unions. It has historically been the party of Australian nationalism par excellence, looked to by the bourgeoisie in times of war and crisis. Its ongoing links to the trade unions and influence among the working class make the ALP tops particularly useful to the capitalists for selling to workers the need to make sacrifices in the interests of the “nation” (read: bosses profits). The bourgeoisie are already wielding the economic crisis as a club against worker struggles arguing that such struggles will sabotage the national economy. This will be combined with “divide-and-rule” racist scapegoating of immigrants as affordable housing and jobs evaporate. The ruling class have a loyal servant in the current Labor government. As early as October Rudd flagged possible cutbacks to immigration while the ALP’s new anti-strike legislation is about to become law.
Enough! The situation desperately cries out for class struggle against the capitalist rulers’ onslaughts. The multiracial proletariat needs a fighting leadership that will unleash its power in struggle not only for its own interests but for all the oppressed. First and foremost that means breaking the chains forged by the present trade-union misleaders, which have tied the working class to its exploiters. A revolutionary workers party would give conscious leadership to the struggles of the working class not only to defend and improve its present conditions but to do away with the entire system of capitalist wage slavery. Break with Laborism! For a class-struggle leadership of the unions! Those who labour must rule!
Capitalism: Crumbling Infrastructure, Deindustrialisation
Shunning investment to expand and modernise industrial capacity and to repair crumbling infrastructure, such as bridges, roads and power grids, capitalist rulers from the U.S. to Australia have expended the economic surplus they appropriate through the exploitation of labour on a succession of speculative binges. In the U.S. first came the stock market boom driven by the supposed “revolution” in information technology (the IT/dot-com hoopla) in the mid-late 1990s. This was followed by the housing bubble—subprime mortgages and all that—in the early-mid 2000s.
Today, we are witnessing a classic financial crisis such as described by Marx in Capital (Volume III):
“This confusion and stagnation paralyses the function of money as a medium of payment, whose development is geared to the development of capital and is based on those presupposed price relations. The chain of payment obligations due at specific dates is broken in a hundred places. The confusion is augmented by the attendant collapse of the credit system, which develops simultaneously with capital, and leads to violent and acute crises, to sudden and forcible depreciations, to the actual stagnation and disruption of the process of reproduction, and thus to a real falling off in reproduction.”
The current crisis was conditioned by a broad transformation of the U.S. financial industry since the late 1980s that was exemplified by the repeal, under the Clinton administration, of the Glass-Steagall Act, a Depression-era law that sought to limit speculation by commercial banks. A component of that transformation was the explosive development of derivatives and other forms of “financial engineering.” A major attraction of entering into derivatives contracts for the purpose of speculation is that often very little money needs to be spent up front. In such highly “leveraged” investments, both the risks and the possible payout can be astronomical. “Financial engineering” also allows large banks to offload risk onto others. For example, when a bank issues bonds using mortgages as collateral, the buyers of those bonds take on the risk that the mortgages will default. A 2006 paper from the Reserve Bank stated that Australian mortgage-backed securities went from $3 billion in 1996 to $126 billion in December 2005.
The enormous expansion in the volume of mortgage-backed securities is what Marx called fictitious capital. This is an increase in paper wealth that is not based on an increase in productive capacity (e.g., in factories, electric-power plants, transport systems, communications networks) or in this case even by an increase in the quantity and quality of consumer goods.
The deterioration in the condition of the working class is directly related to the deindustrialisation of the U.S. and other capitalist countries. Since 1979 the share of the labour force employed in the goods-producing sector in the U.S. has fallen steadily from almost 28 percent to under 15 percent. In Australia more than 100,000 jobs have been lost in manufacturing since 1996. While massive profits have continued to flow to the bourgeoisie, successive Labor and Coalition governments have systematically run down transport and communication infrastructure while slashing education, healthcare and other services.
The U.S. trade deficit, which is equal to more than 5 percent of the gross domestic product, is now far higher, in absolute terms and in proportion to GDP, than in any other major capitalist country. The result is an historical anomaly in which the world’s most powerful capitalist country is also the world’s leading debtor. Consequently, Asian countries and the Persian Gulf states are accumulating an ever-larger stock of U.S. Treasury bonds and bills as a major component of their foreign-exchange reserves. This state of affairs is a potential source of enormous instability for the world economy. Should central banks change their minds about parking their capital in U.S. government debt and begin to diversify quickly out of dollars, it could trigger a quantum leap in interest rates and precipitate an even more profound world economic downturn.
The Myth of “Regulation”
It has now become conventional wisdom to blame the meltdown on Wall Street on inadequate government regulation and then to blame inadequate regulation on the U.S. Republicans’ supposed belief in “free market fundamentalism.” In reality, speculative binges that inevitably crash are endemic to capitalism. An example is the 1720 South Sea Bubble in England, where rampant speculation in the stocks of the South Sea Company led to a financial collapse whose impact was felt internationally. (David Liss’s 2000 novel, A Conspiracy of Paper, is a good read on the subject.) One need only look back to the last major financial crisis, the collapse of the dot-com stock market boom in 2000-2001. In that case, the preceding speculative bubble took place under the Democratic Clinton administration, not a Republican White House. The wild inflation of financial assets was centred on corporate shares rather than newfangled, exotic securities like CDOs (collateralised debt obligations) and CDSs (credit default swaps).
In the U.S., stock market transactions were and are highly regulated by the Securities and Exchange Commission. Nonetheless, at the height of the bubble in 2000, the shares of companies listed on the S&P 500 Index were trading at 36 times their average earnings over the previous five years. The so-called price-earnings ratio was at the highest level in over a century. When the crash came, it wiped out more than a third of the stock market’s paper wealth. And then came a recession as corporate spending on new plants and equipment plunged and employment fell for three straight years.
In all modern capitalist countries, the overall supply of money and availability of credit is regulated through the operations of the central bank. No sustained speculative bubble, whether centring on corporate shares or mortgage-backed securities, can occur behind the back of the central bank. And the Federal Reserve, the U.S. central bank, helped fuel first the stock market boom and then the housing-price bubble through its “easy money” policy. When the former went bust, the Fed flooded financial markets with money. It cut the interest charged on short-term loans to member banks from 6.5 to 1 percent by 2003, the lowest rate in half a century. During most of this period, the so-called federal funds rate was less than the going rate of inflation. In effect, the government was giving away money for free—and as much as they wanted—to Wall Street financiers. No wonder the latter then spent with reckless abandon.
In late 2004, the London Economist warned that America’s “easy money policy has spilled beyond its borders” and “has flowed into share prices and houses around the world, inflating a series of asset-price bubbles.” Almost all European countries were infected with speculative bubbles regardless of the political and ideological character of their governments or the particular laws and practices regulating their financial markets. Countries like Spain, which have been governed by social-democratic parties, experienced an even more extreme inflation of housing prices than did the U.S.
Now these and other European countries are also facing the day of reckoning. British banks including the Royal Bank of Scotland and Northern Rock, which specialised in mortgage loans, went bust and had to be taken over by the government. The French, Belgian and Dutch governments have been involved in “rescue” operations for two major banks, Dexia and Fortis. The Union Bank of Switzerland—one of the largest in the world—has been hit by heavy losses and there is now talk of a bailout for this global titan. The German government has announced that it will guarantee all private savings, to the tune of more than U.S. $700 billion, after a group of banks pulled out of a deal to provide more than $48 billion to rescue the large German mortgage lender, Hypo Real Estate. Thomas Mayer, chief economist for Germany’s Deutsche Bank, bemoaned: “In this day and age, a bank run spreads around the world, not around the block.” To maintain that the current international financial crisis could have been prevented by more regulation and better oversight by Washington is like arguing that the destruction caused by a 100-foot-high tidal wave could have been prevented by adding a few feet to a six-foot-high jetty.
At the political level, the West European imperialist ruling classes are conflicted between worrying about the fallout from the Wall Street crash and gloating over the sudden weakening of their American imperialist rival. A recent study by the German economics ministry points to a “noticeably worsened external economic environment.” On the gloating side (which didn’t last too long) is a lengthy piece in the leading German bourgeois journal Der Spiegel online (30 September) titled, “The End of Arrogance: America Loses Its Dominant Economic Role”:
“With its rule of three of cheap money, free markets and double-digit profit margins, American turbo-capitalism has set economic standards worldwide for the past quarter century. Now it is proving to be nothing but a giant snowball system, upsetting the US’s global political status as it comes crashing down.”
End of the “Globalisation” Myth
The current economic meltdown demolishes the notion peddled by various liberal and radical ideologues of a new era of “globalisation,” positing that capitalist rule had transcended the nation state and that agencies like the World Bank and the International Monetary Fund had become some kind of world capitalist government. Currently the national bourgeoisies of various countries, including those in the European Union consortium, are scrambling to shore up their own economic interests. The move by Ireland to guarantee the debts and deposits of its six largest banks provoked the ire of the British New Labour government, which feared a loss of depositors in its banks as people headed for greener pastures.
Noting that the “lack of a unified regulatory structure and a co-ordinated European response has led some governments to act unilaterally to protect their banks, even at the risk of infuriating their neighbours,” an article on the Web site of the Financial Times (3 October) quoted Willem Buiter, a professor at the London School of Economics, writing in his Financial Times blog: “The Irish guarantee is the most ‘in-your-face’ beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging.”
Meanwhile, the Dutch government ripped up its part of the deal with Belgium to bail out Fortis, declaring that it would now spend this money to take full control of the bank’s operations in the Netherlands alone. And here, the Rudd government quickly moved to guarantee saving deposits in Australian banks in order to defend its own banking capital—in the process bleeding hundreds of millions of dollars from local branches of foreign banks and other non-banking financial institutions. Every bourgeois state acts to defend the interests of its own capitalist class.
The “globalisation” myth was premised on the liberal-pacifist notion that the capitalists don’t need state power—i.e., armed bodies of men—to defend their interests both against the exploited at home and against rival capitalists in other countries. As the world today is once again riven by an economic crisis, rivalries among competing imperialist powers that have led to two world conflagrations are once again heating up.
The union bureaucrats’ calls to “defend Australian (or American or German
) jobs” against foreign competition amount to a chauvinist defence of the interests of their “own” imperialist rulers against the working class, both at home and abroad. The leadership of the manufacturing union (AMWU), one of the most vociferous advocates of such protectionism, have long joined with the vehicle bosses in begging for government subsidy of the vehicle industry. Opposing a proposal to cut tariffs, AMWU National Secretary Dave Oliver railed in August that “the proposals to further slash tariffs would put Australia out on a limb” and that “It makes no sense at all to cut tariffs given the collapse of world trade talks, the global financial crisis and the issue of climate change. China, India, Malaysia are not doing it and neither are Canada or the European Union.” Such protectionist poison, combined with endless cap-in-hand lobbying of capitalist governments for subsidies, has been a disaster for car workers leading to the loss of thousands of jobs over the years as the bosses continue to rake in profits.
Rather than grovelling to the government to bail out the auto bosses what is needed is a fight to defend jobs and conditions independent of and against the bosses and their state. This poses the need for a political fight to oust the sellout Laborite union tops and replace them with a class-struggle leadership. Such a leadership, linked to a revolutionary party, would fight to organise the unorganised demanding equal pay for equal work, including for women, youth and minorities. As childcare providers like CFK Childcare group and ABC Learning go to the wall, a class-struggle leadership would take up the fight for fully paid maternity and paternity leave and for free 24-hour childcare and free quality healthcare for all. But providing even the basic necessities—decent jobs, free quality education, healthcare and public transport for all—requires a workers state where production is organised for the needs of society not the needs of capitalist profit. We need an internationalist revolutionary party committed to leading the working class to sweep away the capitalist system of wage slavery and exploitation.
Opposition to the protectionism of imperialist countries such as Australia does not mean we are partisans of capitalist “free trade.” The superexploitation of cheap labour abroad and privileged access to markets for the distribution of their goods is intrinsic to the workings of the imperialist system. Promoting nationalist protectionism, as the union bureaucrats do, only serves to tie workers to the exploitative capitalist rulers while pitting them against their international class brothers and sisters abroad. It is the capitalist system at home, not overseas workers, that causes unemployment! The bureaucrats’ nationalist “defence of Australian jobs” poisons the possibility for genuine international working-class solidarity. Serving to scapegoat foreign workers, protectionism also directly fuels the capitalist rulers’ war on immigrants and refugees at home. We say: Down with racist protectionist poison! No deportations! Full citizenship rights for all! A class-struggle fight to win jobs for all, including the heavily exploited immigrant outworkers, would strengthen and unify the working class against the bosses’ attacks. Fight unemployment through reducing the working week with no loss in pay—make the bosses pay!
As the economic crisis escalates there will be increased calls for chauvinist protectionism most particularly against China. In targeting China, the union tops combine anti-Communism with White Australia nationalist xenophobia towards the Asian worker and peasant masses. They serve to line workers up behind the capitalist rulers’ counterrevolutionary crusade against China. The People’s Republic of China is not a capitalist state but a workers state, albeit bureaucratically deformed from its inception. The 1949 Chinese Revolution was a victory against the Chinese capitalists and their imperialist overlords. It resulted in a collectivised economy, which brought enormous social progress for the Chinese worker and peasant masses and represented a historic gain for the international working class. Despite the inroads of “market reforms,” the core of China’s economy remains collectivised.
The aim of the U.S., Australian and other imperialists is to destroy the Chinese workers state and restore bourgeois rule in order to turn the Chinese mainland into one gigantic sweatshop for the generation of capitalist profits. It is in the interests of the international working class to stand for the unconditional military defence of China against imperialist attack and internal capitalist counterrevolution. At the same time, we call for proletarian political revolution to oust the parasitic and nationalist Stalinist bureaucratic caste and to establish a regime based on workers democracy and revolutionary internationalism.
Reform vs. Revolution
The defence of the class interests of the proletariat must be imbued with the program of international solidarity and struggle that Karl Marx and Friedrich Engels inscribed on the banner of the communist movement more than 160 years ago: “Workers of the world, unite.” In sharp contrast the “leftist” opponents of revolutionary Marxism who tail the nationalist Laborite union misleaders have reacted to the financial crisis by seeking to advise their capitalist rulers about how to best patch up their decaying system.
The Democratic Socialist Perspective (DSP) and Socialist Alternative (SAlt), among other fake socialists, have raised the demand to nationalise the banks. For reformist groups, such calls are based on the social-democratic myth of the superiority of state-owned property under capitalism. In the mouths of mass reformist parties like the ALP in days gone by and the old Labour Party in Britain, calls for “socialisation” or nationalisation were nothing other than a prescription for bailing out bankrupt enterprises and financial institutions. This is what is known as socialising losses while profits remain privatised.
As active opponents of revolutionary Marxism, long-time leaders of SAlt were virulently hostile to the collectivised economy of the Soviet degenerated workers state. Along with DSP cadre they took their side with imperialist-backed counterrevolutionary forces in the Soviet Union and Eastern European bloc, just as today they treacherously take up the cudgels for counterrevolutionary forces against the Chinese deformed workers state. These fake socialists are for state-owned enterprises as long as the state is capitalist and preferably administered by a Labor government.
The DSP were quick to counsel the capitalist Rudd government to “nationalise the banks (for a start) and run them in the community interest; give pensioners and the unemployed a living wage now; and immediately invest the $64.18 billion ‘Future Fund’ and the entire forecasted $22 billion budget surplus (and borrow at least the equivalent again into renewable energy conversion, public transport, public health, public education and public housing.” The DSP consistently push the delusion that, with sufficient pressure from the “people,” the capitalist state can be made to serve the interests of the working class and oppressed.
Having for years sung the praises of Latin American bourgeois-nationalist populism, the DSP are elated that “the idea of nationalisation is getting an airing again in the West” (“Nationalisation—a key demand in the socialist program,” Green Left Weekly, 3 December). Writing of the need to bring “the ‘commanding heights’ of the economy under state ownership and control,” DSP cadre Dave Holmes bemoans the failure of the attempts by ALP prime minister, Ben Chifley, to nationalise the banks in the late 1940s. In doing so, he disappears Chifley’s use of the army to break the 1949 coal miners’ strike and defend the capitalist order.
Holmes tries to give his talk of nationalisations a left gloss by citing a 1930s call by Russian Revolutionary leader Leon Trotsky to “merge all the banks into a single national institution” and “create a unified system of investments and credits, along a rational plan corresponding to the interests of the entire people.” Holmes’s slimy attempt to misuse Trotsky in the service of the DSP’s banal reformism is easily exposed.
Pointing out that “imperialism means the domination of finance capital,” Trotsky did indeed call for expropriation of the banks but, unlike the DSP, he argued that this would produce “favourable results only if the state power itself passes completely from the hands of the exploiters into the hands of the toilers” (Transitional Program). Needless to say, this is not what the DSP and the other fake-socialist proponents of nationalisation have in mind.
While Holmes writes that “ultimately, only the installation of a workers’ government based on the mobilisation of the working class and its allies can solve the problems of society,” nowhere in his screed does he so much as mention the need to overthrow the capitalist state through workers revolution. Instead, Holmes poses the need for a “full-blooded attempt by a radical-minded government to nationalise the banks” under capitalism and presents a pot-pourri of demands crowned by the call for a “revitalised and massively expanded public sector.”
Reformist calls for “public ownership” divorced from demands for the overturn of capitalist property relations through workers revolution, amount to recommendations on how to improve the running of the bosses’ profit system. A particularly wretched example of such abject defence of the capitalist order can be seen in the Communist Party of Australia’s 19 October CC executive resolution on the financial crisis. It includes a list of demands beginning with the call to nationalise the banks and ending with the demand for an “immediate ten percent cut in the current $60 million a day military budget”! In counterposition, genuine communists stand in principled opposition to their “own” capitalist rulers to demand: not one person, not one cent for the imperialist military!
V.I. Lenin, leader of the 1917 Bolshevik Revolution, wrote nearly a century ago: the working people “never decide important questions under bourgeois democracy, which are decided by the stock exchange and the banks.” For the working class and the poor to get their hands on the money that will provide jobs, education and healthcare requires breaking the power of the bourgeoisie. Capitalism cannot be defeated short of the proletarian seizure of state power, which will abolish the private ownership of the means of production and institute a planned socialist economy. Only then will the wealth and productive capacity of society be used to serve the needs of the majority, not the profits of the few.
The Necessity of Revolutionary Leadership
The discrediting of neo-liberalism in the wake of financial crisis by no means indicates the demise of bourgeois ideology. We can now expect a return to the “left” wing of the bourgeois political spectrum, including at least lip service to the program of deficit spending associated with the British liberal bourgeois economist John Maynard Keynes. Indeed overnight we have seen the conversion of the ALP government from self-declared fiscal conservatives to Keynesian-style spenders. But Keynesian fiscal policies never did, and never could, stop the cyclical crises of overproduction which are inherent in the capitalist system.
It is a liberal myth that Franklin Delano Roosevelt’s (FDR) “New Deal” with its Keynesian fiscal policies pulled the U.S. out of the 1930s Depression. The American economy did not recover its pre-1929 level until the imperialist slaughter of World War II set the war industries running in high gear. The New Deal was, however, successful in heading off a proletarian socialist movement. During the 1930s, American workers waged hard-fought class battles to organise for the first time in mass industrial unions. However, thanks in large part to the Stalinists and social democrats at the head of these unions, the incipient radicalisation of labour was diverted into FDR’s Democratic Party.
Today’s financial crisis has exposed the bankruptcy of the capitalist mode of production for all who would wish to see. But the capitalist system cannot be defeated and overthrown without proletarian revolutionary consciousness and leadership. Speaking in July 1920 at the Second Congress of the Communist International, which took place during revolutionary upheavals in capitalist Europe as well as a global economic crisis, Lenin stressed that “There is no such thing as an absolutely hopeless situation” for the capitalists:
“The bourgeoisie are behaving like barefaced plunderers who have lost their heads; they are committing folly after folly, thus aggravating the situation and hastening their doom. All that is true. But nobody can ‘prove’ that it is absolutely impossible for them to pacify a minority of the exploited with some petty concessions, and suppress some movement or uprising of some section of the oppressed and exploited. To try to ‘prove’ in advance that there is ‘absolutely’ no way out of the situation would be sheer pedantry, or playing with concepts and catchwords.”
“Report on the International Situation and the Fundamental Tasks of the Communist International”
The destruction of the Soviet Union in 1991-92 has led to a profound, though uneven, regression in political consciousness internationally, with most advanced workers no longer identifying their struggles with socialism. Unlike when Lenin spoke in 1920, there is today a vast disproportion between the rottenness of the imperialist system and the atomisation, disorganisation and false consciousness of the proletariat, which is at a level not seen since the formation of the mass workers parties in Europe in the 1880s, many of them nominally socialist and in some cases Marxist. Thus working people today are at a particularly difficult pass.
In the Transitional Program, the founding document of the Fourth International, written on the eve of World War II, Bolshevik leader Leon Trotsky put forward a series of demands aimed at bridging the struggles of the working class to the understanding of the need to overthrow the decaying and anarchic capitalist profit system. To unmask the exploitation, robbery and fraud of the capitalist owners and the swindles of the banks, he argued that the workers should demand that the capitalists open their books “to reveal to all members of society that unconscionable squandering of human labor which is the result of capitalist anarchy and the naked pursuit of profit.” In the face of mass unemployment, he called for working-class struggle for a shorter workweek with no loss in pay to spread the available work, for a massive program of public works and for wages to rise with prices to guard against the ravages of inflation.
In opposition to the capitalists and their reformist agents, Trotsky argued:
“Property owners and their lawyers will prove the ‘unrealizability’ of these demands. Smaller, especially ruined capitalists, in addition will refer to their account ledgers. The workers categorically denounce such conclusions and references. The question is not one of a ‘normal’ collision between opposing material interests. The question is one of guarding the proletariat from decay, demoralization and ruin. The question is one of life or death of the only creative and progressive class, and by that token of the future of mankind. If capitalism is incapable of satisfying the demands inevitably arising from the calamities generated by itself, then let it perish. ‘Realizability’ or ‘unrealizability’ is in the given instance a question of the relationship of forces, which can be decided only by the struggle. By means of this struggle, no matter what its immediate practical successes may be, the workers will best come to understand the necessity of liquidating capitalist slavery.”
Adapted from Workers Vanguard Nos. 921 and 922, 26 September and 10 October.