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
