Global capitalism at a turning point

Image Credit: Neil Cummings

Our perspectives on the current global situation, League for the Fifth International Congress in Berlin, June 2019

Along with Marx and Engels, we start from the assumption that transcending capitalism is not an automatic process, for example, as a result of its complete collapse in a huge crisis. Rather, the conscious, organised overthrow of its production relations, especially of private ownership of the great means of production, by the exploited in a socialist revolution, is the imperative prerequisite. If the crisis of the bourgeois system is not solved in a revolutionary way because of the weakness of the global proletarian movement and its crisis of leadership, long periods of counterrevolutionary attacks and setbacks are inevitable.

The historical epoch of the bourgeoisie is therefore neither one of its unbroken linear rise nor of an uninterrupted automatic decline. The fundamental contradiction between the productive forces and the relations of production does not lead to a permanent decline of the former, but rather to ever more violent outbursts of this contradiction, which increasingly threaten the survival of humanity, for example, through world war or ecological catastrophe.

Development of the contradictions

Each period of capitalism’s history has produced not only different models of accumulation and organisation of the relationship between capital and wage labour, but also new political constellations and international power relations. The defeats for the working class in the 1980s, the neoliberal rollback of social gains and especially the collapse of the Stalinist states, allowed global capital to temporarily postpone its crisis at the expense of the exploited. At the turn of the millennium, however, neoliberal globalisation proved to be short-lived, the “end of history” had been declared too soon. The so-called Tequila, Asian and Argentine crises and the resistance of the French working class to neoliberal reforms eloquently testified to this, but above all so did the bloody regional conflicts in the successor states of the USSR, in the Balkans and especially in the Near and Middle East.

Moreover, since the early 2000s, China has developed into a new and powerful imperialist challenger to the older great powers. Russia, too, recovered from the horrific shock therapy of the 1990s and was able to re-assert itself on the imperialist stage, based on its raw material and energy reserves and its continued military strength.

The dynamo of development in global capitalism shifted to Asia (60 percent of the world’s population, 26 percent of global GDP, of which China alone accounts for 15 percent in 2017). The G7’s share of global GDP fell from 66.4 percent in 2000 to 46 percent in 2017. After the Asian crisis of 1997-98 and Japan’s long economic stagnation, the conflict over dominance in this crucial region erupted all the more violently.

Latin America and Africa remained on the periphery of this globalisation boom. The USA’s concentration on intervening in political conflicts in other regions of the world, and the dwindling economic importance of its former Latin American backyard, enabled several left-wing governments to come into being which openly rejected and condemned the Washington consensus; Venezuela, Brazil, Bolivia, Ecuador.

Africa has almost as big a population as China but, due to European colonialism, it is divided into 54 states. Neither Nigeria nor South Africa, the economically most powerful countries on the continent, proved able to record dynamic economic development and act as locomotives for the continent. Africa remained on the margins of the major capital flows during the period of globalisation and fell out of the focus of world politics.

Recomposition of the working class

Globalisation and its development of the productive forces led to a significant recomposition of the international working class. In the imperialist centres, the proportion of factory workers sharply declined. Services and employment at the upper end of the value chain; IT specialists, researchers, specialists in marketing, and finance, on the other hand, expanded in number. The lower income and social strata proved to be the losers in this development (précarisation). In some semicolonies and developing imperialist states, especially China, globalisation led to the growth of the wage labour force, whose reserve army consists of the informal sector and the rural population.

Since the Second World War, the increased demand for labour has drawn more and more women into the social work process and undermined classical gender relations. In the wake of the new quality of international capital flows during the period of globalisation, it comes as no surprise that the bourgeois nation-state and its institutions were increasingly plunged into a crisis. This phase has led to accelerated internationalisation of production and trade and an enormous increase in migration at all levels.

On the one hand, the undermining of “national identity” represents a promise for a future cosmopolitan world beyond national narrow-mindedness. On the other hand, it has promoted elements of reactionary phobias and a rise of racist politics.

The predominant neoliberal ideology of globalisation is: “There Is No Alternative”, TINA. The defeats and transformation of the working class in the 1980s had an ideological effect on the left, leading many to “say goodbye to the proletariat” and capitulate to postmodern ideologies. The loss of strength and numbers of the trade unions, the emergence of what was apparently a “new middle class”, pushed the “western” social democratic parties even further to the right (Britain’s New Labour, Germany’s New Centre). The collapse of the Soviet Union and the Eastern bloc drove many leftist organisations to abandon the “October Revolution Model” and any revolutionary ambitions. At best, they oriented themselves towards a “social transformation”, which they justified with Gramsci’s “war of position” that is, a long period of “transformative” measures, safeguarded by the establishment of ideological “hegemony”. More “radical” leftists discovered new revolutionary subjects in movements against gender oppression, racism, the environmental crisis or in the so-called précariat.

Consequently, many emerging protest movements are characterised by postmodernism, including a strong dose of reformism and populism. “Identity politics” led to a fragmentation of movements against different forms of oppression rather than the “discovery” of a common denominator in class societies. “Intersectionality”, and the tactic of building alliances between various autonomous currents, however, proved incapable of uniting them. This does not mean that the development of struggles and movements against racist, national or gender oppression is a distraction or diversion from the class struggle. Rather, this notion itself is an economistic distortion that equates class politics with “pure trade union” and economic struggles. In fact, the victory of the working class is impossible if it is not led by a revolutionary workers’ party that responds to every rebellion against tyranny and oppression and links it to the struggle to overthrow capitalism’s exploitative society. However, as the contradictions of globalisation condensed into a crisis at the end of the first decade of the new millennium, the left found itself severely weakened and disoriented.

The period of crisis since 2008

The clearest expression of the “Great Recession” was the financial crash of 2007-2008 and the deep recession that followed in 2008-2009, marking a historic turning point as its crisis-ridden contradictions culminated and imperatively demanded new relationships between capital and wage labor as well between the bourgeois classes and their nation-states and blocs. Since then, we have entered a phase in which the current world order is eroding and the struggle to redivide the world is taking on an ever more open form.

Thanks to the specific weight of the US economy since World War II, the long-term tendencies of capital accumulation and the rate of profit in its industry, that is, excluding the financial sector, are approximately paralleled by the “Western” imperialist centres.

With the onset of overaccumulation, evidenced by the Asian crisis of 1997-98, the deregulated financial markets turned out to be boomerangs. Supported by the central banks’ low-interest-rate policies, the dwindling prospects for returns on investments in the industrial sector led to such investments moving into the financial sphere, with the result that the volume of fictitious capital was greatly inflated.

The collapse of the US investment bank Lehman Brothers on September 18, 2008 triggered a domino effect. In October 2008, capitalism was threatened with “running out of money”. Several huge banks, faced with insolvencies, halted extending credit to one another. World trade threatened to come to a standstill. Calls for the state, long reviled by the ideologues of neoliberalism, to step in mounted. In 2009 alone, $20 trillion were doled out for the socialisation of a large part of the total losses of some $34 trillion. The crash of the G7 economies was five times as bad as the one after the so-called “oil crisis” of 1973/1974. The over-accumulation crisis that had emerged 10 years earlier on the horizon in East Asia now began in a concentrated and global form.

However, the intensification of the economic crisis was only an expression of a more general and deeper problem of globalisation The expansion of foreign investment affected only part of the world (see above). The failure of the USA to succeed in policing the trouble spots of Afghanistan, Pakistan, Somalia, the Balkans, Latin America and the Gulf Wars made it clear that, despite being the only remaining superpower, it was not capable of imposing a “new world order”.

Downfall of US supremacy

In the long run, the economic dominance of the USA had been disintegrating since the end of the 1960s. Its seemingly comfortable global economic position was based on the US dollar, which effectively functioned as world money. Increasing foreign trade deficits could be absorbed by debts denominated in dollars but, nonetheless, undermined US hegemony. In the 1970s and 1980s, Germany and Japan grew into serious competitors, then China in the 1990s. Cheap Chinese imports and rising private debt in the USA formed the combination that seemed to guarantee long-term world economic growth – but aggravated the crash and made it felt worldwide. During the “Great Recession” of 2007-2009, China, with its huge state infrastructure programmes and as a major lender, became the main factor for recovery and the great power that began to challenge the US globally.

At the same time, Russia had recovered from the shock therapy of the 1990s and resolved its internal conflicts in an authoritarian, bloody way (Chechnya). In both the Georgian and Ukrainian conflicts, its army, and the militias it supported, proved more powerful than their pro-Western adversaries. It began to exploit the weaknesses of US and EU imperialisms, mostly in alliance with China, and returned to the stage of great world political events, shattering the US dream of a new unipolar world order in Crimea and Syria, the alliance with Iran, an increasingly active role in Africa and support for Venezuela, Nicaragua and Cuba.

Economically and politically, globalisation has failed. The hegemonic position of the USA is threatened not only by China and Russia, but even by the EU, which is itself in crisis. The globalised world has again fallen into various imperialist blocs and their spheres of influence as before the First World War.

Social consequences

In the imperialist countries, the neoliberal period of globalisation undermined the post-war social partnership. Conflicts over pensions, health and education systems and, above all, social security took on explosive proportions. Despite the weakening of the trade unions, class struggles intensified, taking on political forms in Greece, Spain, Portugal, in defence of the social wage and as a result of the debt crisis.

In the semi-colonies, this type of movement was joined by those against the sale of public property to multinationals (water, energy, seed patents) or the ruin of domestic subsistence agriculture through cheap agricultural imports (often highly subsidised as in the case of the EU). The financial bubble led to speculation on world agricultural markets from 2006 and to massive increases in food prices from 2008 onwards. Dissatisfaction with long-standing authoritarian regimes and unresolved social conflicts turned hunger riots in North Africa into democratic revolutions, the Arab Spring. The fact that the imperialist countries exported their environmental problems such as plastic waste, electronic scrap and “compensation areas” for CO2 emissions to the semi-colonies also contributed to this environmental imperialism.

The anti-globalisation movement formed against the contradictions of globalisation at the turn of the millennium. Hundreds of thousands took to the streets at the outbreak of the second war against Iraq. Summit protests and social forums were the scene of the struggle for hegemony within them. The trade unions and left-wing parties formed the reformist pole and various Latin American governments a left-wing, populist one but anti-capitalist regroupings also fought for influence. At the height of the 2007-2009 crisis, however, the movement broke apart. Trade union leaders made every possible concession to capital. The loosely knit anti-globalisation network had nothing to offer against this capitulation.

Rescue measures

The imperialist leaders took advantage of the weakness of the resistance in overcoming the crisis from 2009. An internationally concerted action to support ailing banks, government stimulus programmes and the revival of interbank lending prevented the slide into depression as in the 1930s. This was accompanied by severe defeats for the workers’ movement:

a) Mass redundancies in the USA and the EU, accompanied by social partnership music, e.g. in Germany.

b) Increasing national debt through the socialisation of debt, especially that of private banks, from 2010 onwards. This particularly affected the weaker links in the imperialist chain or semi-colonial countries, such as southern Europe from 2012, with capital flight and speculation against their government bonds, which triggered a permanent crisis in the EU.

c) 2014/2015 marked the end of the Arab Spring. The old elites regained power, often confronted by a renewed rise of reactionary political Islam. 2015 saw the onset of a major refugee movement.

The Occupy movement in southern Europe, rejecting the need to develop leadership, to draw in the workers’ movement and to adopt class struggle tactics, ran into the sand. All that remains is the populism of Podemos in Spain. Its pseudo-democratic structures, with a charismatic, media-star leader avoiding all political clarity also proved to be a dead end. The same applies to the helplessness of the “Radical Left” in the face of the Greek Syriza-led government’s capitulation to the Troika’s ultimatum – whether as a result of opportunistic adaptation or passive capitulation in the face of the struggles in Syriza.

These successes of global capital in coping with the crisis, however, did not herald a new upswing. Overaccumulated capital was protected from destruction for the time being by state intervention. With the exception of China, the imperialist core countries of 2010-2015 were characterised by general stagnation, underutilised capacities, low profitability and a lack of expansion investment. In the US, only the major players in the high-tech and IT sectors are profitable; Google, Amazon, Apple, Facebook, Netflix and Microsoft. Trump’s main task is therefore to cement its technological lead over the emerging Chinese competition. This is more than a trade conflict, as the tug-of-war over Huawei and ZTE shows.

The economic stimulus programmes and the policy of easing of the money supply (QE) not only benefited the IT grandees, but also the raw material suppliers (Brazil, Russia, Venezuela). With the cooling of the Chinese boom after 2013, however, Brazil and Venezuela in particular faced economic dangers, and political crisis quickly followed on its heels. After its failure in the face of the “Great Recession”, the “Left” is also now on the retreat in Latin America.

These defeats led to a steadier, but mild, upswing after 2016, again with state support (Trump’s tax reform, protectionism, more favourable investment conditions; Xi Jinping’s economic reforms). This included all OECD countries in 2016-2019.

The next crisis is certain to come

Opinions differ as to when this mini recovery will be over and how deep and comprehensive the next trough will be. However, most analysts expect the slump to occur in 2020. The following factors will be decisive for its extent:

a) Emerging market crisis
Capital reflux from countries that benefited from QE investments from 2010 onwards, and took on heavy debts in the belief that such capital imports would continue, are now facing a capital reflux that will affect them as hard as those that once benefited from the commodity boom: Argentina, Egypt, Pakistan, Turkey.

b) EU crisis
The EU is the weakest link in the chain of the G7 countries: the Southern European debt crisis is unresolved, as is the question of Brexit. The tensions between core Europe and the Baltic and Visegrad states are escalating, France is weakening as one of the two top powers in the axis with Berlin.

c) Growing nationalism
The political effects of “Make America Great Again!” are shattering the system of post-war institutions (WTO, IMF, UNO, NATO, World Bank…). A joint intervention of the major powers will become unlikely in the next crisis. This will not only have an impact on the coming economic downturn, but will also exacerbate the regional trouble spots in the Middle East, Indian subcontinent, East and Southeast Asia and the socio-ecological crisis.

d) “Trade War”
Strengthening US industry, blackmailing to reformulate trade agreements (NAFTA) and aggressive protectionism are all elements of a multifaceted rejection of the previous relationship with China, including a call for other G7 powers to match Trump, for example, to exclude Huawei and ZTE from G5 licences excluding.

e) Financial market crisis
QE and the emergence of new, even bigger, gamblers in the form of asset and fund managers such as BlackRock, have once again shot a pyramid of fictitious capital into the sky. While in the last crisis it was private real estate, now corporate debt is the main target for speculators.

f) Profit rate
Even the recent mini-upswing does not prove a recovery of profit rates in the productive sector. Technical innovations will only be fully profitable if the next crisis destroys massive amounts of investment capital.

In contrast to 2008-09, we do not expect any concerted action, such as economic stimulus from governments and central banks, by the G7 countries, because national debts are already so high, QE has little effect and interest rates are already low. Instead of a transition to paralysis as in 2010, there will probably be a decisive struggle over which imperialist powers will have to bear the brunt of the destruction of their national social capital.

Counterrevolutionary phase

Against the background of the defeat of the workers’ movement and the failure of the democratic revolutions and currents, it is not surprising that masses of petty bourgeoisie and parts of the working class turned to populist movements. For millions, bourgeois democracy seems like an empty shell. It is therefore easy for right-wing populists to demagogically set them in motion against the “elite”. But their ultimate goal is to mobilise the petty bourgeoisie and middle classes alongside demoralised workers as foot soldiers for capitalist interests – in extreme cases as a bridge to the formation of a militant, organised fascist mass movement. The coming crisis will reinforce these tendencies. This great danger for the proletariat and all the oppressed must not be trivialised by the left, as large sections have done with regard to the Gilets Jaunes movement in France.

In various countries today we already see a strengthening of Bonapartist tendencies (Brazil, India, Philippines, Poland, Hungary, USA). Liberals and, above all, left-wing bourgeois Greens, some of them social democrats, present themselves as a respectable counterforce by invoking democracy, justice and the combination of a partially controlled market and reformed bourgeois parliamentary democracy, the “Green New Deal”.

The ability of petty bourgeois ideologies and programmes to find support far beyond their regular clientele and into the working class is the result of the defeats of the proletariat, the crisis of its traditional parties and organisations and, to a lesser extent, the failure of the “radical” left and the decline of the anti-crisis and anti-globalisation movements in the face of the Great Recession. The fact that right-wing and left-wing populists, as well as liberal and green currents, can dominate the discourse in times of erosion of the bourgeois party system points to the crisis of the workers’ movement.

Crisis of the workers’ movement

The trade union bureaucracy and reformist mass parties, especially social democratic ones, proved to be defenders of globalisation, calling for reduced regulation, moderate minimum social standards and a Keynesian “redistribution policy” to wage earners as much as the “reasonable” wing of the ruling class in return for a social partnership “reform” policy. The requirements of monopoly capital are to be combined with some social and political concessions to save “social cohesion”. This policy is diametrically opposed to current historical trends! If they evolve to the left, as Labour has under Corbyn in Britain, they will quickly reach their limits, leading to conflict and division and provide an opportunity for revolutionary intervention. The same applies to the Brazilian PT and the left-wing populist Venezuelan PSUV. Left-wing populism is a dangerous step towards open subordination to the bourgeoisie. How far this can go to the right is demonstrated by the Five-Star Movement in Italy.

The more left-wing reformist parties face fundamental problems comparable to those of social democracy. The European Left Parties (ELP) are divided on the issue of left reformism and populism, the latter clearly embodying a right-wing development in an effort to loosen the organic ties to the working class in favour of an orientation towards “the people”. Ironically, this division is taking place at a time when the showcase projects of Left Reformism, Brazil’s PT and Venezuela’s Left Populism, PSUV, have fallen into a historic crisis!

The crisis of proletarian leadership also means that progressive movements that have mobilised millions against the shift to the right are often led by non-proletarian forces, even when they articulate serious working class issues. This applies to the feminist, anti-racist, ecological currents as well as to the national liberation movements. The organised workers’ movement is less and less able to play a leading role. Reformist parties and trade unions fight for bureaucratic control at best. Instead of independent proletarian class politics, ideologies such as (post-)feminism, queer theory, identity politics or postmodernism prevail in the movements.

The Left must therefore not only intervene actively, but also bring in a proletarian perspective. The latter is indispensable. Every spontaneous rebellion in capitalism remains first and foremost a reflex of bourgeois consciousness. This also applies to the proletarian, economic, trade union struggle. The proletarian class standpoint must first and foremost be established through a revolutionary organisation and party.

In contrast to the turn of the millennium, when a spontaneous internationalist tendency became visible in the social forums, today in large parts of the “radical” left there is a rejection of revolutionary class politics, a restriction of one’s own politics to the national or even local framework. The uncritical adaptation to movements such as the Gilets Jaunes, the adoption of fashionable anti-Marxist ideologies (postmodernism, deconstructivism, identity politics, postcolonialism…) have left deep traces.

This also applies to post-war Trotskyism. At its last World Congress, the Fourth International (formerly the United Secretariat) dropped any claim to represent an international current with a Leninist-Trotskyist perspective and programme. The other centrist organisations that stand in the traditions of Nahuel Moreno like the LIT, Tony Cliff, the SWP in UK, the ISO in the USA and Ted Grant, the CWI, are also in a crisis.

For revolutionaries, this makes even clearer the death agony of degenerated, post-war Trotskyism: Break with these collapsing traditions! There is no way around building a revolutionary current with a clear Marxist programme! Forward to building a new, Fifth International!


Red Flag is a socialist organisation campaigning within Labour for a democratically planned and owned economy. We campaign for grassroots democracy in the labour movement, militant defence of the oppressed and an anticapitalist programme for the Labour Party. Against Brexit, for free movement. Anticapitalist and internationalist.

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