Meeting of the ICT Bureau Milan December 2010 - Life of the Organisation

The meeting dealt with a number of organisational matters as well as undertook the task of editing a new common documents which will appear in 2011. It began with a discussion of the current state of the crisis which the Italian comrades were asked to introduce. The following is a brief account of what was discussed.

They began by saying they were not going to repeat all that we have said at length about the origin and nature of the present crisis following the collapse of the speculative bubble but to focus very much on the present situation starting from the USA as still central to the international economy particularly that of finance capital.

Three elements characterise the current situation. The first is that the USA (as every other country) is trying to escape from the crisis by attacking the working class. Obama declared his aim to end the speculative and paper money economy and return to the real economy (i.e. get back to producing real commodities) His exit strategy though depends on an attack on the working class through the reduction in welfare, lower (real) wages, more exploitation (in two ways, through both the intensification of exploitation via the introduction of new technology and by increasing the working day [i.e.

the extraction of absolute surplus value]. This also means imposing the maximum of “flexibility” on the working class. This has two aspects, internal or external. Workers are sent from one factory to another (sometimes in the same company, sometimes not, called in Italian “delocalisation”, [for which there is no decent English equivalent].

Flexibility also demands accepting a wide variety of hours of work (whether 20 or 60 a week) depending on the precise demands of capital. In some countries [e.g. Greece] the 13th month has been cancelled (the CWO comrades pointed out that some countries had never had it!) which is equivalent to a 10% wage reduction.

There has also been an attack on the non-productive and tertiary sectors with job cuts of 300,000 in Italy and 500,000 in the UK (recently reduced to 350,000) in the state sector.

The second aspect is a trade war. The US has been lowering the cost of the dollar (interest rates are virtually zero).

This cuts the cost of US commodities and thus makes them more competitive. The banks have been given a new bill of health (“re-sanitised” was the word used in Italian) as their debts have been cleared up via the use of government loans. This has allowed the banks to function once again.

Obama’s government has allocated a further $150 billions to them as well as introduced more quantitative easing (known as QEII) The third aspect is the struggle over currencies to lower them and thus make economies more competitive.

The US accused China of a kind of dumping because they refuse to allow the renminbi to rise and call this unfair competition. Obama in Beijing even asked the Chinese officially to raise the renminbi but was refused and he was told that it would lead to thousands of Chinese factories closing. The Fed are trying to keep the dollar as low as possible via the printing press and $3 trillion have been printed. The Federal Reserve also buys US state treasury bonds to add liquidity to the market and this (as the Chinese noted) also lowers the value of the dollar. The aim of the policy is clearly to lower the cost of US commodities on the world market but a lower dollar means less inward investment (less capital) entering the US economy. This is the usual problem of the financial sector versus the trade (or commodity producing) sector of the economy.

This currency battle has also hit the euro which is under attack via the weaker economies in the eurozone.

Some of these are the PIGS who are loaded with debt. Germany is the only truly self-financing eurozone economy and the weaker economies are now in great danger as they have to pay high interest rates in order to issue Eurobonds. They are heading for disaster. In the last week of November 2010 Standard and Poor (the credit rating agency) reduced Portugal to a single A (as happened last year to Greece). US-based credit agencies, which did nothing whilst stoking the speculative bubble, are now doing their bit to undermine the euro.

Inevitably the euro has had to respond and this turmoil has led to the setting up of a fund for Europe which claims to be ready to intervene to protect weaker eurozone countries. This is to show that the eurozone will respond to bail out countries in dangerous positions. The European Central Bank is thinking of raising its own treasury bonds (offering good rates) and guarantees that the weaker economies won’t default.

The clashes are obvious, e.g. the dollar v the euro, the dollar v the renminbi.

And new developments are taking place. Already Russia and China have signed a trade agreement not to us either the $ or the € so that their trade will be in roubles and renminbi. The $ is now too weak to be worth holding (and China already holds two thirds of US debt). We now have currency wars which have both financial and trading aspects. Germany is behind the euro stabilisation plan for its own ends as it stands to lose most as it is the main lender in Europe.

Returning to the US, it is in a serious situation. Its policy is to have its money cost about zero (with zero interest rates) so banks are refusing to buy US bonds instead allocating 20% of their capital to buying those of the likes of Turkey and Brazil as they have found in this a new form of speculation.

The GIS added that we should discuss the European Union as an imperialist bloc and the role of Germany within it. The bailout of Greece was not just economic. Greece has had to agree to buy German weapons for 20 years as part of the deal. The explanation for Germany’s narrow approach to the eurozone crisis is that it intends to unconditionally lead the EU challenge to the US. This seems to be born out by the fact that it is alone the most dominant economy in the EU.

Portugal and Spain are also in trouble and may soon be joined by Italy and even the UK. The GIS said they would add more in their section report but were content for now to quote Henkel (former chairman of the German CBI) who now claimed that joining the euro was his biggest mistake and called for the return of the Deutschmark. This is a direct challenge to France and would lead to a new northern EU (the Benelux, Scandanavia) dominated by Germany. The UK would be invited too but only if it accepted the German terms (join common currency and abandon mid-Atlantic position) The discussion then dealt with how the crisis is stimulating international rivalries and national self-interest everywhere, especially as the US is now weak since the financial dimension has created a situation in which “emerging countries” [which we can divide into two types - those who have energy resources - Russia, Venezuela and Brazil - and those with low labour costs (China and India) which have attracted investment now challenge its previous domination. It is also having a negative effect on every one of the old capitalist countries (like Japan) with the exception of Germany. There has been a huge transfer of capital from the old capitalist countries with their high organic composition to those with a relatively low organic composition.

40% of Chinese exports are by foreign companies (so-called joint ventures) and this explains China’s boom. The emerging countries are doing so well because of the crisis in the old capitalist centres. The decline of the USA is opening up financial, economic and political space for others.

Until the end of the 1990s the dollar was absolute (90% of world trade was in dollars) today it is 30% (the yen, rouble and euro have taken 30%).

Previously the USA absorbed 90% of all speculative capital, today it is at 50% (the other 50% being in Europe). Now gold is back ($35 in 1971 it is now over $1300 an ounce). At the same time there is also a war to dominate not the sources of oil but the pipelines which carry it (there followed a discussion of the various oil pipeline projects such as Nabucco, South Stream etc which repeated the things which we have said in our press).

The CWO was asked to prepare a report on the discussion, and a longer document on the crisis in 2011 based on it.