London, 1st November 2008

We are publishing here the introduction prepared for the above meeting to make it available to a wider audience. In the introduction to the main speaker one of our comrades outlined the seriousness and the nature of the present crisis.

The seriousness of the crisis is recognised by the main spokesmen of the bourgeoisie, for example the governor of the Bank of England, who, in a speech in late October, put today’s crisis in an historical perspective by informing us that:

“the financial system came closer to collapse in the first week of October that at any time in the past 90 years.”

He confirmed that the bourgeoisie see the crisis as the worst since the end of World War I, worse, that is, than 1929. The crisis does indeed dwarf the previous financial crises. While, for example, the US Savings & Loans crisis in the early 90s saw $600bn of capital values written off, the present crisis has seen at least $2 trillion of write downs so far and these devaluations are by no means over. To date ⁽¹⁾, $7.5 trillion has either been given or pledged to banks and financial institutions. A lot of this is pledged to purchase worthless assets and will also be written off. The globalisation of capitalism in the last three decades, particularly the globalisation of financial services, has ensured that this crisis has rapidly engulfed all the major centres of capitalism around the world. Meanwhile, the states which are taking over the bad debts, are becoming overwhelmed in debt themselves. The US government debt, for example, is now approximately 80% of its gross national product, and in the next few months the government needs to raise $1.3tn through new bond issues. Weaker states, such as Iceland, have proved incapable of supporting their financial institutions, have seen their currencies become valueless and had to turn to the IMF. Even the stronger states, such as the UK, are now under threat, and institutions such as the IMF and World Bank have insufficient funds to deal with a major national collapse.

We consider that today’s crisis is a devastating validation of Marx’s critique of capitalism. The turbulence in the financial sector is simply an expression of the deeper problems in the sphere of production, problems which arise from the changing value relations in capitalism as it accumulates and which cause a tendency for the average rate of profit to fall. As Marx wrote:

“The real barrier to capitalism is capitalism itself.” ⁽²⁾

After the talk there was a wide-ranging discussion which followed a number of themes which were taken up and dropped at different times in the meeting.

A World Marxist Workers’ Party Now?

The first issue raised was the need for the formation of the International Party. Now that the financial crisis has revealed the capitalist system is in total crisis, a comrade asked, was it not now the time to proclaim the formation of the World Marxist Workers’ Party? Our reply was two-fold. In the first place, although we are part of the International Bureau for the Revolutionary Party - as we make clear - we are not that party. Its emergence does not just depend on us and self-proclamation of the party would hardly rally many new forces to us. There have been many such attempts in the past but they have all ended in predictable failure. We did agree that a new period is opening up, but, as we made clear in the talk, this would not lead directly to a revolutionary situation but would arrive piecemeal as the impact of the crisis filtered through to its ultimate victims - the international working class. The meeting seemed agreed that the latest financial meltdown was opening up an unprecedented period of crisis but there was no mechanical guarantee that there would be a revival of working class resistance to its effects. The $62 trillion question was just how the working class would fight back but we expected new forces to emerge which would enter into dialogue with existing revolutionaries. We certainly did not want the party to be “a product of the last minute” (confirming what we have often argued), so we would be looking to work in and with any struggles that did arise in order to prepare the real conditions for the establishment of an internationally centralised proletarian party as soon as possible.

The same comrade also suggested that the IBRP website needed shorter statements and more leaflets on it as many workers (himself included) found it hard to wade through long texts. He wanted these now as he did not think workers would become revolutionary at the point when they were being sacked. We agreed with this, as we had already said in the introduction that historical experience shows that class resistance is not built on unemployment. Some of our comrades were already working on the issue of producing more short statements on the website but we did not think that this would make an immediate impact on class consciousness.

No Growth under Capitalism?

A second issue that was raised was by a comrade who stated that he agreed with everything in the introductory talk but thought that we had exaggerated the amount of stagnation in capitalism since the system entered the downward phase of the accumulation cycle in 1971. He pointed to the extraordinary growth of China and India as just two examples of how the system had grown, arguing that today the great weight of production workers is no longer found in the USA but in countries like Russia, Brazil, India and China (BRIC).

We replied that, despite the cycle of accumulation entering its crisis period 35 years ago, we had not said that there was no growth in this period. Cycles of accumulation in this imperialist phase of capitalism are not like the ten year cycles of nineteenth century capitalism. In those earlier crises, the devaluations required to restart accumulation were relatively small and the market could readjust relatively quickly. Today, devaluations of the swollen mass of capital need to be much greater and typically these have been done by war. Under modern conditions the state also plays a much greater role in capital formation (typically 40%) and this has the effect of making the cycles longer. Capitalism, even at the end of a cycle of accumulation, has to “expand or die” but the key question is has it expanded enough to restart a new cycle of accumulation? We don’t think it has, which is why the crisis has dragged itself out and not yet been resolved. One fact, though, that has been confirmed in the current global financial crisis is that the BRIC economies are not “decoupled” from the capitalist heartlands since they are suffering the pain of the lack of funding as much as the capitalist heartlands. We should also not read too much into the fantastic growth figures in places like China since now even The Financial Times is beginning to question the accuracy of Chinese state statistics. After twenty years of double digit growth China is still not in the top 100 states for per capita GDP earnings, and 66% of world commodity production (by value) is still carried out in the US, UK, the Eurozone and Japan.

Overproduction of Commodities and the Falling Rate of Profit

At this point a member of the International Communist Current (ICC) spoke to agree that the crisis was not the result of greedy bankers or deregulation or any other culprit. The problem was the system itself. The present crisis was not a cyclical one. There were no capitalist solutions which would work and the question of whether this was the end of capitalism was precisely what the capitalists were asking. He asserted that the real explanation of the crisis was overproduction and that this demonstrated that the crisis was terminal and capitalism was in its death agony.

We replied that the present apparent overproduction of commodities was simply how the real problems of capitalism, located in the tendency for the rate of profit to fall, expressed themselves. The expansion of credit generally precedes capitalist crises and is used to try and sustain production levels in the face of declining profitability. However, profits are only made through exploitation of workers in production, and credit, which goes into stimulating consumption, will not affect the profitability of capital. In fact, it decreases profitability since this capital demands interest which must be paid out of existing profits from industrial capital. When this credit is withdrawn, as is happening at present, consumption collapses and it appears as if there is an overproduction of commodities. Credit, for example, was extended in the US for the purchase of houses or cars and when this credit was no longer available, it appears as if there is an overproduction of houses and cars. The real problem is the decline in average profitability which affects industrial production and makes the production of houses or cars unprofitable or only marginally profitable. The ICC thinks extra-capitalist markets are required to realise all the surplus products destined for capitalist accumulation3. This is because, they think, the working class cannot provide a sufficient market to realise this surplus. Yet, how the system has managed to accumulate since 1914, when extra-capitalist markets were supposedly exhausted, has never been explained and indeed cannot be explained. The major wars which precede recoveries, and which we argue increase profitability by devaluing constant capital, cannot create any extra-capitalist markets. The ICC believes that credit is the means by which the bourgeoisie has managed to make up for the lack of extra capitalist markets ⁽⁴⁾. Yet credit can only create capitalist markets, not non-capitalist markets. How this could possibly solve what they regard as the key problem of non-capitalist markets is incomprehensible.

Another member of the ICC spoke and appeared to agree with the point about non-capitalist markets but did not pursue this. Instead, he took up the question of the crisis and stated that capitalism had been in a permanent crisis since 1914 and the present crisis was the continuation of this. We replied that permanent crisis was something of a contradiction. It made discussion of capitalism’s crises meaningless since the recovery period after World War II in which capitalism achieved the largest growth and capital expansion in its entire history were just as much part of its crisis as today’s financial meltdown. Such “analyses” were simply ways of avoiding analysing the specifics of capitalism and avoiding direct questions which the non-capitalist markets theory cannot answer, but must answer if it is to be taken seriously.

In 1967, the ICC maintained that the crisis had arrived in all the fullness of its contradictions and now, four decades later, they are saying the same again. Yet how is the intervening period to be explained if the crisis is caused by lack of non-capitalist markets which lead to overproduction? How, for example, can one explain that world trade has grown at just under 8% per annum over the last five years, whilst world production has grown at just over 4%, if accumulation depends on non-capitalist markets which were all exhausted in 1914, or was it 1929, or was it 1967, or perhaps 2008?

Only the World’s Workers Can Finish Capitalism

In conclusion, the meeting demonstrated substantial agreement that the measures that the capitalist state could take to liquidate debt were limited. There was already a mountain of both private and public debt, so the idea of a New “New Deal” was a non-starter, since the New Deal in 1933 came after years in which state debt had been reduced. Now, private debt was being converted into state debt. There could only be one way this would be repaid, and that was by increasing exploitation and a reduction in living standards of the working class. The real solution was in the hands of the working class who create the surplus value which the capitalists want. The key will be in how organised the working class can be in fighting the inevitable attacks to come. Our task as communists is to ensure that we are rooted in the working class wherever we can be in order to be part of that fight and to bring back to the working class the lessons of its own previous history. Only when that process begins can we even think about proclaiming the world proletarian party.

(1) This was on 1st November 2008. Since then, a further $1tn has been pledged by the US Federal Reserve and European Central Bank alone.

(2) Capital, Vol. 3, Chapter 15.

(3) This is the position put forward by Rosa Luxemburg in her major work, The Accumulation of Capital.

(4) This is explicitly stated in International Review 133, p13.