THE RESTRUCTURING OF CAPITALIST EXPLOITATION AND IMMISERATION ON THE EAST COAST OF CANADA SINCE THE 1970S: THE ‘NEW’ WAR ON THE WORKING CLASS

Jim Sacouman

In the last quarter century, the class structure of the capitalist world has changed substantially. Capitalist concentration and centralization, unfettered by a collapsed socialist bloc and the decline of social democracy as even a modest alternative, is returning to class processes and formations typical of the nineteenth century, although in a dramatically more global context. Direct or unmediated forms of exploitation and immiseration, typical of the nineteenth century and first clearly identified by Marx and Engels, have returned as neoliberal imperialism on a truly global scale.

As a consequence, the political economy both of Canada and of Atlantic Canada have changed ‘back to the future’. And, as a further consequence, ‘what is to be done’ in the Atlantic region has changed.

Class analyses of Atlantic Canadian political economy^[1] that are rooted in older forms of capitalist exploitation and immiseration are, therefore, inadequate to the task of critical understanding the current reality in order to transform it for the betterment of the vast majority. A serious rethinking of the region’s political economy, and in particular its class structure, is now badly overdue.

This paper first briefly reviews key developments in the capitalist restructuring of exploitation and immiseration globally and then Canada wide, in order to identify and place properly major changes in the political economy of the Canadian East Coast. Some implications for class struggle are then outlined.

The central argument in this paper is that since the 1970s the capitalists’ class war on the working class and petty producers in this region has become much more direct and vicious. This war has returned to its classical bases in working class impoverishment identified most clearly and usefully by Karl Marx in the nineteenth century. In the face of this lopsided, divisive assault by capital on labour, working people and their policy proponents in Atlantic Canada must concertedly reassert working class-rooted anticapitalist alternatives that promote and deepen inclusive democracy, equality, and solidarity in ways that recognise and reassert the necessity for working class-led socialism and that consciously build the experiential possibilities for its attainment.

A. Key Changes in Capitalism Globally

During the last quarter century, a large number of interrelated structural changes have occurred in capitalist development:

1. The actual globalization of the capitalist market and of capital together with continuing restrictions on the mobility of human labour power.^[2]

2. The rise and organizational consolidation of transnational finance capital/imperialism through, especially, the World Bank and the World Trade Organization.^[3]

3. The rapid growth in information and other scientific technologies and the associated extension and deepening of corporate control over scientific and knowledge work.^[4]

4. The global extension and intensification of exploitation, superexploitation, and, thus, of both relative and absolute immiseration.^[5]

4. The cancerous spread of neoliberalism as ideology, policy, and enforced practice.^[6]

5. The end of the Second World of state socialism and the general crisis in social welfare and social democratic reformism.^[7]

6. The intensified domination of US imperialism economically, politically, culturally/ideologically, and militarily.^[8]

The net major class effects, so far, of these global structural changes in capitalist development have been twofold. On the one hand, there has been a massive and rapid increase in the proletarianization and semi-proletarianization of the peasant and female segments of the reserve army of labour. On the other hand and at the same time, existing and emergent self-organizations of workers, peasants and women have been massively assaulted -- economically, politically, culturally/ideologically and militarily. The world has, indeed, become more obviously a two-class world of TNCs versus the working class.

But, capital’s one-sided, as yet, war on workers and semi-workers has itself intensified both a global ecological crisis of unprecedented proportions and what appears to be a structural economic crisis of overproduction in capitalism itself. This critical assault on nature and on workers has led to new levels, globally, of resistance to capitalist rule and associated state terrorism.^[9] It has also, of course, also led to further imperialist wars of domination, such as Afghanistan, and has thus further exacerbated the ecological and economic crises.

B. Key Changes in Capitalism in Canada

Associated with these global changes in capitalism, a number of changes over the last quarter century in the Canadian political economy are particularly noteworthy:

1. The heightened exploitation of full-time labour through the extension and intensification of the working day.^[10]

2. The assault on job security and the rise of part-time and other contingent forms of labour.^[11]

3. The privatization and commercialization of significant parts of the public sector.^[12]

4. The diminution of the welfare state, including the dilution of regional development policies and the end of the rhetoric of Canada wide development.^[13]

5. The ongoing anti-democratic imposition of free trade on this hemisphere and the US-ization and imperialization of Canadian internal and foreign policies.

The major class effect of these changes in Canadian political economy is a greatly intensified polarization between the big capitalist and working classes, on the one hand, combined with the uneven immiseration of the working class itself, by gender, ‘race’ and ethnicity, and age. The big question today, of course, is the extent to which the Canadian labour movement and its allies can lead the counter-assault against capitalist self-aggrandizement through heightened exploitation and immiseration and for working class rule.

C. Key Changes in Atlantic Canada

In the light of global and Canada wide changes in capitalism, the following recent changes in the political economy of the East Coast (biased towards Nova Scotia) are of note:

1. The destruction of the industrial proletariat in Cape Breton.

Almost all that is left of Industrial Cape Breton is a human and environmental diaster of massive proportions. “The estuary [around the Sydney tar ponds] contains 700,000 tons of toxic sludge, a witch’s brew of carcinogenic chemicals 35 times worse than New York’s infamous Love Canal .^[14]

The coal and steel industries, created by rapacious finance capital, never developed as a basis for local/regional manufacturing. Under the leadership of Canadian Communists during the 1920s and 1930s, one of Canada’s historically most militant sections of the industrial proletariat^[15] has finally been reduced to begging for better severance pay. Prior to that, the mainland coal miners of Pictou County had been blown away by capitalist greed.^[16]

In place of the militant trade unionism^[17] in the coal and steel industry on Cape Breton Island, a relatively creative, grassroots environmental movement to repair the human and natural diaster that corporate greed has created has emerged. This movement, while of major importance, cannot be expected to replace working class militancy at workplaces, but could keep the flame of struggle alive until the organized working class on the Island and in the province gets better organized on a class struggle basis.

2. The all but ‘final solution’ to the previous persistence of a petty producer class in the inshore fisheries and on woodlots.

The groundfish component of the fisheries has been decimated in Atlantic Canada.^[18] State policies favouring the corporate offshore and promoting overfishing of the resource in both the inshore and offshore components of the ground fisheries has beggared many offshore and fishplant workers as well as petty producers in the ground fisheries, especially in Newfoundland and Nova Scotia.

Many small coastal communities in the region have thereby been forced into decline as active production sites. In many cases, ‘development’ is being redefined as the tourism of the ‘quaint’.^[19] In these rural areas, from a class perspective, seasonal productive work has been replaced by chronic unemployment or, at best, seasonal unproductive work. A major redefinition of the rural coastal class structure towards intensified immiseration is currently in process.

On the other hand, the market value of the shell fisheries (lobster, scallops, crabs, mussels) has substantially increased over the last decade.^[20] Within the minority of coastal communities in the principal shell fisheries subregions (such as southern Nova Scotia and the Acadian zone of the Northumberland Strait area), a transformation of the rural class structure from petty producers to small capitalists is occurring, coupled with corporate expansion in marketing and the immiseration of those who were unable to expand.

Over the last decade, the indigenous peoples in the Maritimes (primarily Mi’kmaq) have won/reclaimed their legal rights to participation in the fisheries. Many Reserves, often themselves as capitalist enterprises, are now entering the fisheries, especially the shell fisheries, in sufficient numbers (greater than 2%) to be perceived as threatening to the primarily white inshore small capitalists.

With respect to class-rooted organizations, the Maritime Fishermen’s Union (MFU), for example, has dramatically changed from a militant, petty producer- based, primarily Acadian, union fighting for both economic and cultural survival^[21] to a small business interest group attempting to co-manage the fisheries with the state and big capital. Thus, a formerly militant organization of petty producers in the inshore fisheries has become, like successful farmer organizations in agriculture, much more like a chamber of commerce than a union.

The MFU, in fact, has recently led the attack on newly recognised aboriginal fishing rights in both New Brunswick and Nova Scotia. On the other hand, the state-induced leadership structure on many of the indigenous people’s Reserves, has facilitated a tendency for corrupt family-rooted leaderships to siphon off, away from the community, the profits from their new fisheries enterprises.

In forestry on the East Coast, the stubborn persistence of rural petty producers reliant on either a ‘farm’ woodlot or on leasing stumpage from the pulp corporations is currently threatened. In the main, these petty producer families are being immiserated in two ways. Pulp companies are gradually changing towards using more of their ‘own’ crown land stock clear-cut and processed by ‘their’ workers. Also, there is an increasing tendency for the pulp companies to cut and sell directly the hardwoods on ‘their’ crown lands to other big corporations (often ‘from away’). Thus, many petty producers who cut, split and deliver hardwoods for home fuel are being thrown into chronic unemployment.

3. The emergence and expansion of a contingent corporate service sector; proletarianization without traditional proletarians.

Throughout Atlantic Canada, as in the rest of Canada, the “McWorld”^[22] of low-paying, precarious, highly mobile and, therefore, difficult to unionize service sector jobs continues apace. Like other parts of Canada a clear case of such ‘McDonaldization’ is the rush on the East Coast to attract call centres.^[23] A further instance is the cancerous growth in corporate casinos.

The class implications of such growth is, on the one hand, the proletarianization or, perhaps better, working-classization of many, especially young and often female, people. The classical proletariat which is being thrown out of productive activity in the region is certainly not being re-employed in this type of work.

On the other hand, this proletarianization is occurring under rigid conditions of low pay and no or poor benefits. Additionally, there is an overwhelming tendency of such employment to be fleeting. Because of high likelihood of capital flight to cheaper labour areas as far away as India, and also because of high turnover (both chosen and enforced), the McDonaldized working class is always on the knife edge of immiseration.

4. The proletarianization of and heightened attack upon the public sector.

Not unlike the rest of Canada,proletarianization in the form of unionization has advanced, along with the well-documented privatization process.^[24] Certainly, a solid proportion of the increasingly militant unionization-privatization class struggles in Canada have been waged on the East Coast.

5. The consolidation of the illegal informal economy.

Marijuana production in the region has, at a minimum apparently, kept pace with the slightly better known British Columbian situation. An important contribution to the political economy of actual production in the region would be a class analysis of the change from overwhelmingly petty commodity production to becoming, at least in terms of hydroponics, semi-proletarianized production under centralized control by biker gangs.

6. The ‘zoo-ification’ of Atlantic Canada.

Over the last quarter century, tourism has expanded its role throughout the region as a major holding pen for the seasonally employed and the Atlantic Canadian reserve army.^[25] As elsewhere, casinos add to the ‘authentic flavour’ of romanticized, dead, virtually dead, or never-existing cultures and subcultures.^[26] What is comparatively important is its importance to the regional and Canada-wide class structure.

The ‘culture industry’ has expanded to encompass significant movie and television production while the music industry has discovered that the East Coast is undoubtedly^[27] a major Canadian base of production.

7. The extension and intensification of impoverishment.

Throughout the region, the above factors have substantially extended and intensified the immiseration of those near or below the low income cut-offs. Especially significant for women and, in particular, single mothers have been the twin impact of the federal-provincial down loading and de-‘universalizing’ of social assistance programs.^[28] Severe cutbacks in other social services, in workers’ compensation, in unemployment insurance and in its accessibility, in health and in its accessibility, and in education and in accessible education has impacted most directly on the entire working class and petty producer population in this region of century-long, often severe, under- and unemployment.^[29]

D. In Conclusion

To repeat, since the 1970s the capitalists’ class war on the working class and petty producers in this region has become much more direct and vicious manner as understood by Marx and Engels in the nineteenth century, though in a now globally imperialised world. The relative uniqueness of the Atlantic Canadian class structure and class struggles to the rest of Canada has lessened over the past quarter century. The relative and absolute impoverishment has not.

Working class rooted responses to this intensified and increasingly more obvious class war are definitely emerging and re-emerging. These responses and their programmatic direction need to be carefully analysed and discussed by working class-interested organizations.

Such a policy programme that could build the working class as a whole against the capitalist onslaught might well include a number of components which can be fought for nationally, regionally and provincially, such as:

(1) A substantial reduction in the working day and working week, with no reductions in pay, or loss of services to the public;

(2) significant increases in minimum rates of pay, pensions, and other employment related benefits for all full- and part-time workers;

(3) a massive jobs program to put millions of unemployed and under-employed Canadians back to work, to ensure that unemployment is substantially reduced, and that all workers enjoy unemployment benefits for the full duration of joblessness;

(4) the enforcement of laws guaranteeing complete pay equity for women workers, the guarantee of full reproductive rights, and the provision of universal, free child care and other vital services to ensure that women can play a full and equal role in all aspects of economic, political and social life;

(5) the provision of complete, free, and universally-accessible services to all Canadians, including health care, primary, secondary and post-secondary education, livable pensions, housing and other basic services; and

(6) the extension and protection of workers’s rights to unionization, free collective bargaining, and the right to strike.^[30]

Such a policy programme is not, in and of itself, socialist. But, building the working class as a whole in Canada and Atlantic Canada, when done in tandem with building solid alliances with petty producer, women’s, anti-sexist, anti-racist and immigrant, disabled, and environmental movements, can provide a solid basis for the eventual collective and concerted attainment of a massively self-conscious, fully democratic and empowering worker-led socialist project. That would be a credible, if only preliminary, working class response to the capitalist class’ vicious war on the working class and petty producers of our country and region.

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[1]. The best source of left analyses of the previous period is the now defunct New Maritimes. Academic sources include Robert J. Brym and R. James Sacouman, eds., Underdevelopment and Social Movements in Atlantic Canada (Toronto, New Hogtown Press, 1979) and Bryant Fairley, Colin Leys, and James Sacouman, eds., Restructuring and Resistance: Perspectives from Atlantic Canada (Toronto, Garamond Press, 1990).

[2]. Osvaldo Martinez, Neo-liberalism in Crisis (Havana, Editorial Jose Marti, 1999).

[3]. Steven Shrybman, The World Trade Organization (Ottawa, CCPA, 1999).

[4]. Scott Sinclair, GATS: How the World Trade Organization’s New “Services” Negotiations Threaten Democracy (Ottawa, CCPA, 2000).

[5]. Michel Chossudovsky, The Globalisation of Poverty (London, Zed, 1997).

[6]. See, for instance, Tony Clarke and Maude Barlow, MAI: The Multilateral Agreement on Investment and the Threat to Canadian Sovereignty (Toronto, Stoddart, 1997).

[7]. Communist Party of Canada, Canada’s Future is Socialism (Toronto, CPC, 2001), Ch. 5 and Ch. 7.

[8]. James Petras and Henry Veltmeyer, Globalization Unmasked: Imperialism in the 21st Century (Halifax, Fernwood, 2001).

[9]. Maude Barlow and Tony Clarke, Global Showdown: How the New Activists are Fighting Global Corporate Rule (Toronto, Stoddart, 2001) and Jen Chang et al., eds., Resist! (Halifax, Fernwood, 2001).

[10]. See, for instance, Andrew Jackson and David Robinson, Falling Behind: The State of Working Canada, 2000 (Ottawa, CCPA, 2000).

[11]. Henry Veltmeyer and James Sacouman, “The Political Economy of Part-Time Work”. Studies in Political Economy, 1998, No. 56, pp. 115-143; and Dave Broad, Hollow Work, Hollow Society? Globalization and the Casual labour Problem in Canada (Halifax, Fernwood, 2000).

[12]. James L. Turk, ed., The Corporate Campus: Commercialization and the Dangers to Canada’s Colleges and Universities (Toronto, James Lorimer and Co., 2000); Monica Townson, Pensions Under Attack: What’s Behind the Push to Privatize Public Pensions (Ottawa, CCPA, 2001); and Paul Leduc Browne, Unsafe Practices: Restructuring and Privatization in Ontario Health Care (Ottawa, CCPA, 2000).

[13]. Colin Mooers and John Shields, eds., Restructuring and Resistance: Canadian Public Policy in an Age of Global Capitalism (Halifax, Fernwood, 2000).

[14]. Maude Barlow and Elizabeth May, Frederick Street: Life and Death on Canada’s Love Canal (Toronto, HarperCollins Canada, 2000), p. 2.

[15]. See, for instance, David Frank, J.B. McLachlan: A Biography (Toronto, James Lorimer and Co., 1999).

[16]. Cris O’Neill and Ken Schwartz, Westray: The Long Way Home (Winnipeg, Blizzard, 1997).

[17]. Militant trade unionism in Cape Breton has, in fact, been declining since the 1960s. For instance, The general pattern in trade union leadership has been from communist to social democratic to Tory.

[18]. See, for instance, Rick Williams, “Reflections on 25 Years of Fisheries Co-Management.” Paper presented at the CCPA-Nova Scotia Branch Conference on Underdevelopment in Atlantic Canada: Renewing the Debate, Saint Mary’s University, October, 2001.

[19]. See the seven volumes of the magazine of the Coastal Community Network, Coastal Community News. For further discussion of tourism as ‘development’ see the section on ‘zoo-ification’ below.

[20]. See, again, Williams, “Reflections...”.

[21]. See the books referred to in Endnote 1.

[22]. See, for instance, Tony Clarke and Sarah Dopp, Challenging McWorld (Ottawa, CCPA, 2001).

[23]. Tom Good and Joan McFarland, “Call Centres: Solution to and Old Problem?” Paper presented at the CCPA-Nova Scotia Branch Conference on Underdevelopment in Atlantic Canada: Renewing the Debate, Saint Mary’s University, October, 2001.

[24]. Public sector, CCPA documents.

[25]. For more information on the Nova Scotian case, see CCPA-NS’s Alternative Provincial Budget (Halifax, 2000 and 2001). For more on class processes, see my “Semi-Proletarianization and Rural Underdevelopment in Atlantic Canada”. Canadian Review of Sociology and Anthropology, 1980, Vol. 17, No. 3, pp. 232-245.

[26]. Consider, for instance, Anne of Green Gables.

[27]. In my biased opinion.

[28]. See, Barbara Moore, “‘Please Don’t Bury Me!’” RECAP Report (Halifax, RECAP, 1997).

[29]. See the CCPA’s Monitor (Ottawa, recent years) as well as references in Endnote No. 1.

[30]. Communist Party of Canada, Canada’s Future is Socialism (Toronto, CPC, 2001), p. 77.

The Leninist Heritage of the Socialist Market Economy

C.J. Atkins

Just as China’s socialist market economy is today dismissed by many in academia and the bourgeois press as a return to capitalism, it is important to recall that Lenin too faced similar criticism during the early years of Soviet power. His New Economic Policy (NEP) was often characterized by critics, both outside and inside the Communist movement, as an abandonment of socialism and Marxist ideology. While the conditions which necessitated the NEP in 1920’s Soviet Russia and those which brought about the need for economic reform in China following the chaos of the Cultural Revolution were quite different, the ideological challenges the Russian Communist Party faced in the aftermath of the civil war and those that Chinese Communists were forced to address in the late 1970s do share some similarities.

Lenin understood there could be no successful advance to socialist relations of production without highly-developed productive forces to sustain socialist methods of distribution. Addressing the Tenth Congress of the Russian Communist Party in March of 1921, referring to the necessity of cooperation with foreign and domestic capitalist elements, Lenin stated:

“We are now in a transitional stage, and our revolution is surrounded by capitalist countries. As long as we are in this phase, we are forced to seek highly complex forms of relationships.” (1977a, 189)

A component of these “highly complex forms of relationships,” of course, was the institution of market methods of distribution in, first, the agricultural sector (and later other sectors) of the economy. In further remarks to the Congress, Lenin assured delegates that the gravest problem in the immediate period was not the policy of concessions to capitalism as some, particularly those on the left, warned. Rather, it was the very low level of the productive forces that threatened the survival of the October Revolution:

“We must not be afraid of the growth of the petty bourgeoisie and small capital. What we must fear is protracted starvation, want and food shortage, which create the danger that the proletariat will give way to petty-bourgeois vacillation and despair.” (1977b, 237-8)

Many of Lenin’s writings from the early 1920s demonstrate the conclusion that in a predominantly peasant country with low levels of productive forces and education there could be no leap to socialist or communist lines of production and distribution. Instead, the transition would have to take place in stages. These kinds of measures were intended to build up the material-technical foundations for socialism that Marx and Engels had envisioned being already developed by capitalism in advanced industrial societies, where they had predicted the first socialist revolutions would take place. The proletarian revolution was expected to occur in the most technologically and economically advanced capitalist countries because of the development of a large industrial working class and the acute contradictions of advanced capitalist development which would serve as a catalyst for raising class consciousness.

The socialist revolutions of poor, underdeveloped, and usually overwhelmingly agrarian countries created a new challenge; once the working class succeeded in capturing state power, it was confronted with the task of trying to develop socialism in economies that were in no way prepared to support socialist relations of distribution. Lenin and the Soviet Communists were the first to face the real-life situation of building a socialist system on an underdeveloped base. Lenin proposed what has recently been described as a “socialist market economy in embryonic form.” (Sargis; 2004, 33) Shortly after the victory of the October Revolution, Soviet Russia became embroiled in a civil war and came under attack by interventionist armies from fourteen nations, among them the United States, Britain, Canada, France, and Japan. Under these conditions, with food and industrial shortages plaguing the country, a harsh system of surplus extraction from the peasants was introduced and wages were levelled – the policy of “war communism.” After the civil war was won by the Red Army and the foreign interventionists were pushed out of the country, the Soviet economy was in ruins. The productive capacity of the nation had dwindled; agriculture was below even pre-1914 levels. There was an urgent need to raise capital and jumpstart the development of the productive forces.

In 1921, Lenin introduced the New Economic Policy to replace the extreme measures of war communism, “with which,” in Lenin’s words, the country had been “saddled by the imperative conditions of wartime.” (1977a, 187) The NEP allowed limited denationalization, foreign-domestic joint ventures, some foreign-owned enterprises, cooperatives running on market principles, and the use of economic administrators who had been trained in capitalist management methods. State-owned enterprises, which for the most part only occupied the commanding heights of the economy, had to be self-reliant and operate on profit/loss principles. The “commanding heights” referred to the lifeline sectors of the economy, such as energy, transport, finance/banking, and steel – those sectors that effectively control or support most other areas of the economy. Under the NEP, the state still formulated an overall plan for the economy, but it was achieved primarily through market, not administrative, means. Production of individual goods and services would be based on supply and demand, not on the decree of a central planning authority. Economic competition defined relations between public and private sectors. Of primary importance in this competition was which sector would win out. Addressing the Second Congress of Political Education Departments in the fall of 1921, Lenin stated the matter bluntly:

“We must face this issue squarely – who will come out on top? Either the capitalists will succeed… Or the proletarian state power, with the support of the peasantry, will prove capable of keeping a proper reign on these gentlemen, the capitalists… The question must be put soberly.” (1980a, 66)

Lenin admitted that such an arrangement was not fully socialist. “Retreat is a difficult matter, especially for revolutionaries who are accustomed to advance.” (1980b, 280) He realized, however, that market relations were necessary until the capacity and infrastructure of a fully socialized economy could be constructed and secured. This was a task which he foresaw as encompassing years, even decades of transition. Lenin spent much time trying to explain what the New Economic Policy was and why it was an absolute necessity:

“What is free exchange? It is unrestricted trade, and that means turning back towards capitalism… How then can the Communist Party recognize freedom to trade and accept it? Does not the proposition contain irreconcilable contradictions? The answer is that the practical solution of the problem naturally presents exceedingly great difficulties… How this is to be done, practice will show.” (1977b, 218)

“Since the state cannot provide the peasant with goods from socialist factories in exchange for all his surplus, freedom to trade with this surplus necessarily means freedom for the development of capitalism. Within the limits indicated, however, this is not at all dangerous for socialism as long as transport and large-scale industry remain in the hands of the proletariat.” (1977d, 457)

The development of such a form of capitalism controlled and regulated by the state, which Lenin time and again referred to as “state capitalism,” if directed carefully by a socialist state, would be not only advantageous, but even necessary, in an underdeveloped country.

Like Soviet Russia in the years following the October Revolution, China today also finds itself facing a world economy dominated by and structured in the interests of the most powerful imperialist countries. Just as Lenin did in the 1920s, the Communist Party of China (CPC) has, since 1978, reached the conclusion that the development of the productive forces is the key to building the foundations for a transition to socialism. The rapid development of China over the past three decades has demonstrated the benefits of the CPC’s overall approach, though of course there are contradictions and new challenges which remain to be overcome.

For the socialist market economy to truly be a means of navigating the transition to socialism (whether in China, Vietnam, or anywhere else), there must be a workers’ state led by a proletarian party to promote a trajectory toward socialism. This has been recognized as a necessity since the days of Lenin’s NEP. In his pamphlet, The Tax in Kind, Lenin stated without reservation that “…socialism is inconceivable unless the proletariat is the ruler of the state.” (1977c, 334) There is always the danger in a socialist economy which contains a substantial capitalist sector that bourgeois ideology could threaten socialist development. As referenced above, Lenin warned his fellow Bolsheviks of such a possibility.

The main function of the state in a socialist market economy must be to maintain a path directed toward socialism and uphold the dominance of the working class. For contemporary China, with such a high level of foreign and domestic capitalist investment, this is a multi-faceted challenge. Particularly necessary are a concerted effort to quicken the development of the trade union movement and to increase the level of rank-and-file participation of the working class in formulating Party policy. Both of these, among many other measures, are necessary to maintain the socialist orientation of the reform program and of the Party itself.

The socialist market economy, however, should not be viewed as the end result of socialist development; the purpose of this article is not to advocate “market socialism” or the permanent desirability of a mixed economy. As Lenin said, mixed economic forms are transitional. Though the economic model of socialism based on the centralized plan and total public ownership of all sectors may have been instituted prematurely in the past, advances in technology and computer accounting makes a highly-efficient central plan a greater possibility for the future (assuming the productive forces are in place to support it). It is difficult to predict what the exact characteristics and details of socialist economies may be in the future, though public ownership, working class power, and planned development figure highly in any projection. However, under current conditions, there is no reason to conclude that the socialist-oriented market economy is necessarily a departure from the socialist path. Changing conditions necessitate new strategies for development.

References:

Lenin, Vladimir I. 1977a. Report on the Political Work of the Central Committee of the R.C.P. (B.). In vol. 32 of Collected Works, 170-91. Moscow: Progress Publishers.

------. 1977b. Report on the Substitution of a Tax in Kind for the Surplus-Grain Appropriation System. In vol. 32 of Collected Works, 214-38. Moscow: Progress Publishers.

------. 1977c. The Tax in Kind. In vol. 32 of Collected Works. 329-65.

------. 1977d. Theses for a Report on the Tactics of the R.C.P. In vol. 32 of Collected Works, 453-61.

------. 1980a. The New Economic Policy and the Tasks of the Political Education Departments. In vol. 33 of Collected Works, 60-79. Moscow: Progress Publishers.

------. 1980b. Political Report of the Central Committee of the R.C.P. (B.) In vol 33 of Collected Works, 263-309. Moscow: Progress Publishers.

Sargis, Al L. 2004. Unfinished Business: Socialist Market Economy. Political Affairs, January, 32-34.

The World Economy since World War II, and the Manifesto of the Communist Party

Wadi’h Halabi

(Comrade Wadi’h Halabi is a member of the Economics Commission of the Communist Party USA; however, he wishes to emphasize that this article is in no way an official statement, but just a personal contribution to discussion. The article is partially based on presentations made in Havana and in New York to commemorate the 150th anniversary of the Manifesto and in San Juan, Puerto Rico, as part of the 1998 May Day celebrations.)

In 1848, two brash youths pointed out that capitalism overcomes its periodic crises with methods that “pave the way for more extensive and more destructive crises.” The depressions in the century that followed publication of the Manifesto of the Communist Party certainly seemed to confirm Marx and Engels’ analysis. The crises that hit the capitalist world from 1873 through 1897 were unprecedented, ‘more extensive and more destructive’ than in the first half of the nineteenth century. And the crises and wars punctuating the first half of the twentieth century were the greatest and most destructive in capitalism’s bloody history, indeed in all of human history.

But then, following World War II, a relative stability seemed to settle in. From 1950 to 1990, global output grew year after year without interruption. And the imperialist countries, above all the U.S.A., capitalism’s capital since World War I, suffered recessions but avoided general crisis, such as the Great Depression of the thirties.

Bourgeois theorists proclaimed not only the end of capitalist cycles but of Marx’s spectre, even history itself. They will soon be forgotten.

But a certain confusion also emerges within the working class movement. Perhaps Keynes had indeed resolved certain problems of capitalist cycles. Maybe military spending or adjustment of interest rates leads to stabilization. Perhaps monopolies have learned to plan. Maybe the exploiting class has developed some regulation of capitalism’s rhythms and tempos. Perhaps Marx and Engels erred on this one question, although surely not on the increasing misery of the working class. Maybe...

But as we shall see, Marx and Engels had not erred.

Unraveling the secret of the relative, and purely temporary, post-war stability, requires a historical, materialist, class analysis of one world economy. Because, for far longer than a century now, there has been but a single global economy.

To be sure, our “one world economy” today embraces extraordinary unevenness and inequality. And above all, since 1917 and to this day, it has also embodied two mortally antagonistic social systems, one capitalist, the other based on working class rule. And it is only in the complex interrelation and mortal struggle between these two social systems that we can develop an assessment of post–war world economy – and of today’s developments – consistent with the Manifesto.

After World War II, indeed as a consequence of the war and the global economic crisis that impelled imperialism into war, the working class seized power in more than a dozen states, from Albania to China, Czechoslovakia to northern Vietnam, Yugoslavia to northern Korea to Poland and eastern Germany. This development was entirely lawful, entirely consistent with the Manifesto – as Marx and Engels put it, the “overthrow of the bourgeois supremacy, conquest of political power by the proletariat.” It also changed the physiognomy of world economy.

Internally, the two social systems are regulated by different economic laws. Where capitalism still rules, production is ever more governed by the boom-bust laws of commodity exchange, ever more choked by the narrow limitations of private ownership, national borders, top-down rule, indeed all capitalist forms.

But where capitalist rule was overthrown, the law of planning predominates, in however flawed a form, however mixed with continuing commodity production. Here the economy is fundamentally non-cyclical.

Most importantly, the two antagonistic social systems are not islands unto themselves. They relate and conflict within one global economy. And that is essential.

So the Soviet Union was part of one world economy. China, Cuba, Vietnam, Laos and the Democratic People’s Republic of Korea, all non-capitalist states where planning predominates to this day, are part and parcel of one world economy. (The working class took power in these states, a historic step forward. But I believe it was premature to call them socialist; capitalist restoration will no longer be a historical possibility when socialism sets in.)

Today, the Russian Federation and the Ukraine, Poland and Romania – i.e. the products of the post-1989 counter-revolutions – as well as the U.S.A. and Japan and India and Nigeria and all capitalist countries, are part of one world economy.

The only Source of Stability in Post-War Economy

In the four decades after 1950, the non-capitalist states as a group show no sign of cycles. Growth rates are steady, though slowly declining, throughout the entire period; there’s not even one boom-bust cycle. (Individual states, such as Poland in the political crisis year of 1980-81, did suffer falls.) Their performance is in sharp contrast with the world’s capitalist countries taken as a group, which are decidedly cyclical. The Soviet Union and China and the other non-capitalist, non-cyclical states are the only verifiable source of stability in the post-war world economy. All indications are that they helped prevent the world economy from plunging into depressions worse even than the Great Depression of the 1930s. How?

In the “bust” phase of a capitalist cycle, paying demand for commodities collapses in an avalanche of bankruptcies, debt defaults and unemployment. This is particularly true under monopoly capitalism, when imbalances in an economy can grow rapidly and debt servicing becomes particularly onerous and inflexible. “Clots” develop throughout the system, circulation breaks down.

But each time capitalism begins a slide into crisis in the post-war years, such as in 1975, 1980 and 1982, paying demand from the non-capitalist states remains steady or grows. Although not very large, this demand acts as an “anti-clotting” agent that keeps the capitalist circulation system from congealing. For example, Soviet trade with capitalist countries more than doubled between the crisis years of 1975 and 1982, from $30 billion to $73 billion. Other Warsaw Pact states’ trade with capitalist countries – some of it unofficial or in barter – was larger and grew faster. Furthermore, while many capitalist countries and corporations defaulted on their debts in those years, the non-capitalist states punctually serviced theirs. This too helped prevent a capitalist crisis from ballooning.

In 1990, capitalism begins yet another slide into crisis. But non-capitalist China’s purchases from the capitalist world do not collapse; in fact, they more than double in seven years. By 1997, official purchases total over $140 billion, plus $32.4 billion paid to capitalist institutions to service China’s $131 billion foreign debt. (At the same time, collapsing Thai, Indonesian, South Korean, Russian and other banks effectively defaulted on their debts.) In 1993, Wall Street brokerage Morgan Stanley’s chief international economist admitted that without China, “there would be world chaos.” China’s stabilizing role notwithstanding, imperialism is relentlessly driven by its class antagonism and inescapable contradictions to undermine working class rule in China (Vietnam, Cuba, etc.), as it did in the USSR and other Warsaw Pact states. There is but one world economy, and ultimately either the bourgeoisie or the working class must rule it.

To summarize, it is the working class, primarily through the states where it seized power, which is responsible for any post-war economic stability. This represents a genuine step forward for humanity. The working class has no interest whatsoever in crisis, which only brings misery to the masses.

No Post–War Stability for Majority

The imperialist countries suffered recessions but no general crisis in the post-war period. But can we speak of post-War stability, even relative stability, for Argentina? Bangladesh? Chad? For Latin America, Africa, south Asia? Absolutely not. Nor can we speak of stability for the Ukraine or Yugoslavia or the Russian Federation, i.e. the states where capitalism took back power beginning in 1989. Nor, since 1997, can we speak of stability even for capitalism’s fabled “Asian tigers.” So we can’t talk even of relative stability for the overwhelming majority of people living under capitalist rule. The U.S.A. may have enjoyed relative stability – though with declining wages, especially after 1973 – but for the majority post-War capitalism has spelled profound crises, growing hunger and unemployment, wars and social decomposition. What is going on?

If Keynesian mechanisms, military spending and interest-rate adjustments, i.e. genuine self-regulatory capitalist mechanisms, really explained the relative stability of the U.S. economy, then surely the Mexicos, Brazils, Indias and Nigerias of the world could also use them to avoid crisis and lift their economies. Surely, the imperialist centre could have found an institution and mechanisms to develop the capitalist economy worldwide and avoid bankruptcies and defaults. But it has not, it cannot. Rather, it resorts to institutions, such as the IMF and the Pentagon, that choke economies or even destroy them altogether. Even Japan, now in the eighth year of recession, finds itself completely incapable of “stimulating” its economy. On the contrary, both imperialist and Japanese government actions are worsening problems, and Japan is now tottering helplessly into general crisis. What is happening?

What is happening is that capitalism’s contradictions never stopped accumulating throughout the decades of ‘relative stability.’ On the contrary, they grew, measurably, year after year. Yes, the imperialist countries escaped general crisis – until now. But they cannot be seen in isolation. For one thing, there was the Soviet Union and China and the other non-capitalist states, growing without boom-bust cycles, the stabilizing force in global economy.

On the other hand, there was and remains the exploitative relation between the imperialist center and the rest of the world, above all the oppressed capitalist countries but also the non-capitalist states. When we group the United States and England together with Puerto Rico and Haiti and Ireland and Nigeria and India and Pakistan, i.e. the capitalist countries as a whole – a grouping imperialism does not encourage – a different picture of post-War capitalism emerges. Sharp cycles are evident. The capitalist countries as a group suffer several years of absolute decline, such as a 4.1% fall in output in 1981-82, a 5.7% drop in 1974-75, and sharper tumbles after 1990. On a per-capita basis – another measurement imperialism discourages – the declines are steeper, the growth even less pronounced. And entire countries suffer devastating failures. For “oil-rich” Nigeria, per-capita income has fallen from $1,000 in the early eighties to $300 in 1996, i.e. below the “absolute poverty” line.

And problems with overproduction and overcapacity can be seen growing. In the United States, by the 1980s, more than 30% of practical industrial capacity lies consistently idle, above all “for lack of market.” In 1982, a recession year, 41% of U.S. practical capacity lay idle. In wide areas of Africa, such industry as was not destroyed was found to operate at barely 10% of capacity.

The Great Depression and World War II led to enormous monopolization and centralization of capital worldwide. The imperialist centre – Wall Street above all – has been using its monopoly on capital and technology, and improvements in transport and communications, not to raise the general standard of living, but to facilitate pushing off capitalism’s toxins onto weaker countries and weaker capitalists, while sucking them dry of surplus value and “human capital” (the so-called “brain drain”). Wall Street’s instruments for achieving this are numerous and complex. Debt and unequal exchange are surely primary. But one must also include the allocation or denial of capital, import quotas, tariffs and other means of regulating access to imperialist markets, the manipulation of currencies, the vicious exacerbation of the opposition between intellectual and manual labour and the cheapening of physical labour, war, and out-and-out plunder.

The U.S. and other imperialist economies unquestionably gained a certain stability from their “Keynesian” borrowings, war expenditures, interest rate regulations and currency manoeuvres. But for every measure of ‘Keynesian’ spending in an imperialist country, Wall Street imposed ten measures of ‘anti-Keynesian’ austerity and destruction on oppressed countries, whether by I.M.F. or Pentagon dictates. Keynes was but the theorist of finance (monopoly) capital. The imperialist centre gained, but at the expense of the Nigerias and Mexicos and Indonesias, even of the Soviet Union and China, enslaving (and relentlessly devaluing) labour in the oppressor nations, super-exploiting and looting that of the oppressed.

In a sense, then, the imperialist centre did not achieve even ‘relative stability.’ But it did develop the mechanisms to “export” its toxic wastes, beginning with the plague of unemployment, to the Caribbean and Latin America, to Asia, Africa and the profoundly oppressed African-American nation... In a sense, then, the “American Depression” was pushed onto Africa and the African American ghetto, onto Asia and Latin America – and now onto Russia and Romania and the Ukraine as well. The benefits from the relative stability provided by the non-cyclical economies went overwhelmingly to the imperialist centre. At the same time, the Soviet Union, China, Cuba, Vietnam, and the other non-capitalist states suffered from the ever-growing anarchy of world capitalism.

Capitalism Destabilizes Non-Capitalist States

In fact, is there any doubt that a world capitalism in ever-deepening crisis helped destabilize the Soviet Union, GDR, Poland, Hungary, Warsaw Pact? How? In innumerable ways. Both social systems are part of one world economy. The growing chaos in capitalist economy unquestionably played top-down havoc with planned economy. For example, planned sales of steel and coal by Poland to capitalist countries could not be realized. Or the revenues from Soviet oil sales were suddenly less than expected. Consequently, planned purchases of machinery and other necessary inputs from capitalist countries could not be carried out. Imperialism’s very real military threat helped disrupt and distort the economy and society, making it more difficult to meet domestic needs. The list goes on and on.

To be sure, it is how failing capitalism’s pressures played themselves out internally, within the non-capitalist states, which were decisive. Otherwise, Cuba or Vietnam would have long ago collapsed. The fall of the GDR, of the Soviet Union and other Warsaw Pact states was hardly predetermined. Nor does their collapse indicate a failure of socialism. Perhaps it is easier to see this by analogy with a trade union. If a union collapses in the face of capitalist pressure – and it happens – that does not signify a failure of trade unionism. The union may have been inadequately organized. The leadership may have failed. The workers may have been insufficiently prepared. But they were insufficiently prepared for the attacks of capitalism. It is world capitalism that is demonstrably in crisis, economically and socially. The working class alone can point the way out. And it will.

The Epidemic of Disproportionality

To understand what is happening today, it is necessary to understand how capitalist crises arise. For an economy, any economy, capitalist or socialist, to develop without crisis, proportionality must be maintained. By proportionality, Marx means a balance, most broadly, between the economy’s two great departments, those producing the means of production and of consumption. Ultimately it means a balance throughout the economy, of steel and cotton, cement and corn, transistors and resistors, housing, shoes, shirts and toys. This is one of Marx’s great lessons, developed in Theories of Surplus Value. It is elaborated in outstanding works by Bukharin (in Imperialism and the Accumulation of Capital) and, especially, Preobrazhensky (in The Decline of Capitalism).

The truth is, no economy has ever achieved, no economy will ever achieve perfect proportionality, not even under communism. Changes in technology and tastes alone assure perpetual imbalances. But under working class rule and even more so under socialism and communism, a planned economy, balanced with genuine control from below, permits the prompt correction of disproportionalities before they balloon and disrupt the economy’s ability to satisfy human need.

Not so under capitalism. The system is congenitally antagonistic to both genuine planning and control from below. Economic activity is necessarily unplanned, necessarily controlled from above, for the sole aim of realizing individual profit and no other purpose. Imbalances appear to the capitalists as “overproduction” – more has been produced than the capitalist can sell to realize profit. Nothing else matters. “Overproduction” of food thus arises side by side with mass hunger. “Overproduction” and “under-consumption” (and unemployment) are manifestations of disproportionality under capitalism. The decline in the rate of profit accelerates processes, such as the cheapening of labor and introduction of new technologies, which inevitably worsen disproportionalities.

The accumulation of imbalances and ensuing losses ultimately lead to crisis. The Manifesto refers to this crisis as “the epidemic of overproduction.” For the exploited and oppressed, it is an epidemic of want. Based on Marx’s subsequent work, there is justification for calling this crisis “the epidemic of disproportionality,” if only to emphasize the necessity for the working class to seize control of economy and thereby assure lasting proportionality. Furthermore, because there is but one world economy, it will continue to suffer crises until proportionality is achieved in at least its greater part.

Capitalism’s two Great Weaknesses

Imperialism never ceases to remind us of its military might, its technological prowess. It is unquestionably capable of mass destruction. But the reality is that, in spite of its temporary political victory over the Soviet and Eastern European working class, capitalism has never been more powerless economically, and consequently never weaker socially. How?

Capitalism’s congenital incapacity to correct disproportionalities before they balloon has guaranteed periodic crises from its earliest days. But the combination of monopolization with advances in technology and productivity has the effect of inexorably accelerating and magnifying imbalances. The microcomputer industry suffered its first problems with overproduction before it could even celebrate its fifth birthday. Despite the stabilizing role of the non-capitalist states, the indications are that 35% or more of capitalism’s worldwide productive capacity lay idle by the mid-1980s for lack of paying demand. The proportion of world productive capacity that is idle is another statistic that the capitalists do not encourage. But it is known that the world’s major capitalist auto manufacturers currently have the capacity to produce 30% – 22 million – more cars and trucks every year than they can sell. And their accounting ignores the vehicle plants in the former Warsaw Pact states, now under capitalist rule, whose productive capacity has been idled in the past decade. Similarly, there is reason to believe that the world capitalist oil industry is operating at barely half its practical capacity. For some months now, this industry has been actually producing a million barrels a day that the market cannot absorb, even as several hundred million people spend two hours or more a day looking for firewood.

There are two sides to capitalism’s economic weakness of fundamental importance. On the one hand, capitalism is powerless to prevent the growth of productive forces from devastating the masses. For example, the growth in productivity, including agricultural productivity, since World War II has been accompanied by a relentless growth in chronic hunger. There is reason to believe that more than 40% of the world’s population under capitalist rule is now suffering from chronic hunger or worse, up from less than 10% in the 1950s. A 1994 survey of children entering the first grade in the Philippines found that 80% showed the signs of chronic hunger or worse. Capitalism is powerless to find a cure for hunger! In the U.S.A., the proportion of the population at risk of chronic hunger has grown from 8% in 1985 to an estimated 17% in 1995. Women and children, considered property under capitalism, are suffering the greatest blows. Unemployment is a social expression of growing disproportionality. 1989-90 is a turning point in global unemployment, with the number of people unemployed and underemployed nearly doubling to exceed one billion by 1996. The masses’ constant insecurity – about today’s bread and tomorrow’s job – is a profoundly revolutionary factor that the Communist Parties can and will channel. Capitalism is absolutely powerless to allay this insecurity. And therein lies one of capitalism’s fundamental weaknesses.

But for occasional worries about revolution, the capitalists hardly care that the masses are hungry. However, they most violently care about capitalism’s second, fatal weakness. And that is an inability to prevent the losses that accompany the growth of disproportionalities. A crisis of disproportionality spells a crisis of profits, an epidemic of bad debts and outright losses. For example, there is reason to believe that worldwide losses in capitalist agriculture alone may be exceeding $100 billion yearly in the 1990s, masked only by massive government subsidies. A financial crisis could result in the rapid shifting of those subsidies to prop up banks, starkly revealing the actual losses and resulting in a sudden world food crisis. This has been happening in Indonesia since crisis broke out in 1997.

More generally, bad debts are a measure of growing disproportionality in the world economy. In Japan alone, the bad debts held by the largest Japanese banks rose from some $40 to $50 billion in 1988-90 to $1,400 billion by the end of 1995! Similar growth in bad debts in this decade can be cited for French and Brazilian banks, and now for Thai and South Korean and Indonesian banks as well. Wall Street, which ultimately sits above these bad debts, is absolutely powerless to prevent them. It attempts to shift their burden onto weaker capitalists and above all the masses. And that is what fundamentally is behind the deregulation, privatization, “trade” pacts, pension “reforms” and similar schemes sweeping the entire capitalist world.

1998 Maybe a Little Like 1912

There is a brief, sometimes overlooked sentence in the Manifesto that provides a clue to the historical possibilities we are entering. “The essential condition for the existence, and for the sway, of the bourgeois class,” that is, for its continued rule, Marx and Engels wrote, “is the formation and augmentation of capital....” At the rate that bad debts and bankruptcies are growing, it is possible that there will soon be no ‘formation and augmentation of capital’ worldwide, perhaps even before end of the twentieth century. The bad loans and bankruptcies in Japan and the rest of capitalist Asia are beginning to approach the combined profit, rent and interest income of the U.S. and European monopolies.

It could be argued that 1998 is a little like 1912, indeed that with 1989-90 the world entered a period like 1907-1923. How? As in 1990, there was a capitalist crisis in 1907. This crisis impelled the capitalists into relentless attacks on workers and the oppressed, and ultimately into the First World War. Blood flowed freely, workers and their organizations suffered terrible defeats, the Second International splintered. But the crisis and war gave birth to the Russian Revolution! And to the Communist International and Communist Parties around the world, to the revolution in Hungary in 1919, short-lived though it was, and near-revolution in the West, in Germany in 1923. 1929 through 1949 marks a similar historical period, from depression to wars to overturning of capitalist rule across eastern Europe, in parts of Vietnam and Korea and above all in China.

How World Economy Today Differs from the Post-War Era

By the 1980s, the non-capitalist economies had come to account for somewhat more than 40% of the world’s industrial and agricultural output. Since 1989-90, when the Warsaw Pact states began to fall, the proportion of world production that is non-cyclical has fallen to a little more than 10%.

A violently unstable world capitalism now claims nearly 90% of world output. In this sense, the world economy of the 1990s differs sharply from that of the four preceding decades. The “gyroscope” of the post-war world economy has been profoundly damaged. Certainly, there is absolutely nothing capitalism can do to prevent the growing disproportionalities from spiraling into general crisis in the imperialist centre itself. Only the working class can bring a halt to crisis.

The Years Ahead

What then can we expect in the years ahead? Is there any doubt that as the crisis grows, that capitalist attacks will escalate against the working class and its states, trade unions and all of its organizations, indeed on all the exploited and oppressed? Is there any doubt that imperialism, choking in overproduction, will engage in the ‘enforced destruction’ of productive forces, by both peaceful and military means? Is there any question that a bankrupt imperialism will engage in ever greater racism and national chauvinism, will back the most extreme right wing and even fascist forces, not least to “lubricate” and facilitate its nefarious wars? Is there any doubt that China and Cuba, Vietnam, Laos and People’s Korea will face ever-greater challenges, economic and political, social and military, internal and external?

Of course, what these escalating attacks, these wars, these challenges reflect is – an escalating crisis of the old system. The very sway of the old ruling class is at stake. The struggle for democratic rights, for jobs for all, for “peace, bread and land,” (Bolshevik slogan in 1917) indeed for the most elementary needs, for housing, clean water, cooking fuel, has never been more necessary. The capitalist class, constrained by debt and growing losses, has never been less capable of meeting those needs.

With Communist Party leadership, the international working class will struggle for those needs and emerge triumphant from the coming tests. We can make no greater mistake than to underestimate the proletariat. But victory will require the utmost in organization, in preparation, in scientific assessment of the great economic and political developments such as we are already witnessing, and the drawing of the necessary conclusions.

More than ever, the Manifesto retains its validity. Its closing call, for “Workers of the World to Unite!” truly points the way towards an extraordinary liberation, in our lifetime.

Spark! #11, pp. 5-14