Two years ago we published "Prospects for the world revolution". The present document – which was discussed and approved at a gathering of Marxists from many different countries in early August – updates the analysis of the Marxist tendency on the world situation in the light of the latest developments.

The whole of history is a process in which contradictions accumulate slowly, until they finally reach a critical point in which quantity becomes transformed into quality. The task of dialectics is to establish when such critical points emerge. For the last 10 or 20 years all the contradictions have been accumulating on a world scale. Now we see the results. In the history of the world since 1945 never have we seen such tremendous convulsions at all levels: economic, social, diplomatic and political. Never have the contradictions of the capitalist system been so clearly expressed in every part of the globe.

The present situation on a world scale resembles what is called a critical state in physics, where particles are subject to the wildest fluctuations. This creates certain difficulties for perspectives, which in the previous period were more predictable. Just as it is relatively easy to predict the laminar flow of a liquid, but difficult to predict the outcome of turbulence, so the world situation, balanced on the edge of chaos, can produce all kinds of surprises, both for the ruling class and for the Marxists.

The critical state in physics can be expressed by a simple experiment, in which the addition of a single grain to a heap of sand triggers a landslide. At the critical point, any accidental factor can trigger a serious crisis. This is known in modern physics as a "non-equilibrium system". This phrase describes very well the present situation on a world scale. It is the fundamental characterisation of the historical epoch through which we are passing. This is what determines our analysis – not this or that event. It is necessary to look beyond the immediate particulars and look for the deeper historical processes.

There are certain historical periods in which nothing much seems to happen. For a long time after the end of the Second World War, the capitalist system succeeded in establishing a relative and temporary equilibrium. The division of the world between mighty Stalinist Russia and US imperialism led to the freezing of international relations for a whole historical period. At the same time, the long period of capitalist upswing led to a reduction of the tensions between the classes, at least in the advanced capitalist countries. Revolution was off the agenda for decades, although even at this stage there was the revolution of May 1968 in France. But now the whole process has been thrown into reverse.

These remarks refer, of course, to the advanced capitalist countries of Europe, Japan and the USA. For two-thirds of the world's population living in the undeveloped countries, there was no respite. This was a period of almost continual upheavals, wars, revolutions and counterrevolutions. But for the developed capitalist countries, this was not the case. For a long time the conflicts and tensions were hidden beneath the surface. The working class was checked by the force of inertia. But now all the old equilibriums have been disrupted. The unseen forces have begun to assert themselves.

What is the main characteristic of the world situation? It is precisely the breakdown of the old stability, the violent disruption of the old equilibrium everywhere. Instead, wherever we look we see colossal and unprecedented instability and volatility at all levels. This is the most unstable period since 1945. Instead of boom, full employment and prosperity, there is crisis, growing unemployment and cuts in living standards, even in the most prosperous countries. The gap between rich and poor is constantly increasing and economic power is concentrated into fewer and fewer hands.

Gone are the old certainties, the "American dream", the conviction that tomorrow will be better than today, just as today was better than yesterday. In the advanced capitalist countries the present generation will be the first generation since 1945 whose living standards and working conditions will be worse than those of their parents. The relations between the classes are increasingly tense and unstable. To the degree that the real situation impresses itself on the consciousness of the masses, the stage will be set for an explosion of the class struggle everywhere. It is true that consciousness lags behind events, but it will catch up with a bang. That is the essence of a revolution.

The old equilibrium has been destroyed, not only between the classes but also between the nations. Not since 1945 has the world situation been so disturbed and chaotic. The relations between the powers are increasingly tense, and the USA's ambitions to world hegemony are leading to one war after another. Thus, the war in Iraq was not an accident but expressed a general tendency. It has all kinds of implications for the general situation in the Middle East and on a world scale.

We explained this a long time ago, when all other tendencies were plunged into despair by the apparent apathy of the masses. We explained that beneath the apparent surface of tranquillity there was a silent accumulation of bitterness, anger, frustration and despair. This is what Trotsky meant when he referred to the molecular process of the socialist revolution. When the situation reaches the critical point, there is a tendency to growing instability and turbulence, which can be set in motion by even the smallest change.

Instability is rooted in the situation itself. Thus, changes that in a different situation would have no effect, or an insignificant result, now set off colossal transformations. The nature of these changes can be economic, political or military. But in every case, the effects are always disproportionate to the causes. Non-dialectical thought, which always skates over the surface of events without ever suspecting the existence of a deeper lawfulness, seeks the explanation in this or that incidental factor – the actions of George Bush, the lunacy of bin Laden etc. These individual factors undoubtedly play a role, but the deeper cause is the fact that the capitalist system on a global plane is coming up against its limits and foundering on its inherent contradictions of private property and the nation state.

The fundamental contradictions express themselves most graphically in the outbreak of wars like the war in Iraq and the invasion of Afghanistan. Here we see how a military event immediately set off a chain of reactions that was not foreseen by its authors. Even before the first shots were fired in Iraq there were huge demonstrations of protest in London, Washington, Rome and Madrid. In London alone there were two million, and in Spain six million. How do we explain this? Certainly not by the skills of the organisers, who were more surprised than anyone else by the results. The only possible explanation was the existence of a deep and widespread discontent among the mass of the population that was waiting for an outlet through which to express itself.

The convulsive character of the present period is no accident. It is merely an expression of the fact that on a world scale the capitalist system has exhausted its potential as a historically progressive force. The development of the productive forces, which achieved impressive results in the period 1945-74, is now being held back by the limitations of private property and the nation state. These now constitute the main barriers in the way of human progress. The future development of the human race depends on the sweeping away of these monstrous barriers and the achievement of a harmonious and rational economic system on the basis of world socialism.

Sudden and sharp turns are rooted in the situation. If ever there was a time when routinism was out of the question, this is it. In such periods it is necessary to expect the unexpected! The events of September 11th were an example of the inevitability of such sudden and sharp changes. The results of this particular action were, as we predicted, reactionary. But the seeds of future revolutionary developments are also being prepared, even by events like this. The pendulum can swing rapidly from left to right and back again, opening up great possibilities for the revolutionary tendency on a world scale, provided we are able to grasp them. This is no time for scepticism and waiting upon events. We must be prepared, and prepare others, for the great events that impend.

World economy

Lenin said that politics is concentrated economics. The vagaries of the world economy find their expression in the psychology of all classes, beginning with the ruling class. The mood of the spokespersons of capital swings between the wildest optimism and the deepest depression. These mood swings are themselves an expression of the general instability. At the moment, the bourgeoisie and its economic spokespersons speak optimistically about an imminent recovery of the world economy. There can, of course, be no doubt that at a certain point, some recovery will take place. There can be no such thing as a final crisis of capitalism. History shows that capitalism can always get out of even the deepest slumps. It will not collapse of its own accord, but must be overthrown by the conscious movement of the working class.

However, in the optimistic declarations of the bourgeois there is a large amount of wishful thinking. They cannot disguise the fact that all the beautiful dreams they had in the 1990s of the elimination of the boom-slump cycle have evaporated, leaving a bad hangover behind. World capitalist leaders are pondering their economic futures. There is little sign of any strong economic recovery in stagnant continental Europe or Japan.

The economies of the USA and Britain are currently growing at 3-4 per cent a year while Europe's big capitalist economies and Japan are hardly managing 2 per cent. Unemployment – according to the official figures, which understate the real position - is 5 percent in the US and the UK, while it is double that in France, Germany, Italy and Spain and now at a record high in Japan. And now there is the danger that record high oil prices could stop in its tracks the short Asian economic boom, pushing China and Japan into recession.

What growth there is concentrated mainly in one country – the USA, and even there it is confined mainly to the sphere of consumption. Even in the USA, despite the recovery, the symptoms are contradictory. The evidence for a significant recovery of productive investment – the real motor-force of any boom – is as yet inconclusive. This is closely linked to the question of profitability. The capitalists are desperately trying to restore the rate of profit at the expense of the working class. The present "recovery" in the USA is accompanied by a growth in unemployment, with further retrenchment, factory closures, sackings, downsizing and cuts. To the great majority of Americans this does not feel like a boom at all. Now the American bourgeoisie has begun to worry about the danger of inflation again – particularly the high price of oil that is threatening the recovery.

In the latest report by the US government's Bureau of Census, it is revealed that, under George Bush, the number of Americans living in poverty has risen by nearly 1.5million in 2003, the third straight year of increase. Now nearly 36million Americans live in poverty (as defined very narrowly by the Bureau, meaning that you have to be virtually destitute to qualify as poor, earning just $6,000 each in a year). That is 12.5 percent of the population. Child poverty is even worse. There are 13m American kids in poverty, or 17.6 percent of all children, up from 16.7 percent. These poverty rates, even as defined by the Bureau, are no better than they were in the late 1960s.

In order to appreciate the real state of affairs, it is necessary to resort to an historical analogy. Nowadays the bourgeois begins to cheer wildly if it gets a growth rate of three percent. Yet historically, this is extremely low. Let us consider the figures for the growth of the GDP of the advanced capitalist countries in the ten years prior to the year of the first post-War recession – 1973:

Japan - 146 percent

Canada - 69 percent

France - 69 percent

Italy - 58 percent

West Germany - 54 percent

USA - 48 percent

OECD - 63 percent

From these figures we see that in the period of upswing, the average annual growth of the OECD countries (5 percent) was more than double the figure that they now aspire to (without much success), while Japan actually achieved an annual growth rate of over 9.4 percent.

All the measures adopted by the Japanese capitalists under pressure from Washington have failed to produce the desired effect. This is a clear answer to the Keynesians in the Labour Movement who believe that the way to get out of the crisis is to stimulate the economy by public spending. Japan has, in effect, pursued Keynesian policies for most of the last period. It launched the biggest programme of public spending since 1945. The Japanese bourgeois threw caution to the wind. What was the result? They plunged the Japanese economy into debt, turning a budget surplus of 1.4 percent of GDP in 2000 to a deficit of 4.6per cent of GDP in 2003. Nor has this guaranteed stable long-term growth.

The sickliness of the world economy is shown by the global tendency towards deflation. In the first two quarters of 2003, the nominal GDP growth of the G7 nations was only 2 percent (on an annualised basis). Even this growth is only sustained by US consumer spending, which is increasing at an annual rate of 3per cent, as opposed to 1.8 percent in Japan and 0.8 percent in Germany. Growth in the EU has been even slower than in Japan for the last three years. Consumer confidence in Italy and Belgium has fallen to a nine and ten year low respectively. In Holland it stands at the lowest level since 1958. The forecasted growth for the EU is 0.75 percent.

The USA and the world

The American bourgeoisie has managed to keep its nose above water by using its special position and enormous economic and financial muscle. But from an orthodox bourgeois point of view it has behaved irresponsibly. By attempting to avoid a slump, it has generated a whole series of new contradictions and imbalances that can eventually undermine the whole system of world trade that was put together so painstakingly after World War Two. This poses immense risks for world capitalism. But the dominant group in Washington is unconcerned about this. They are shortsighted money-grubbers who are only concerned with American interests. Their slogan is: "what is good for America is good for the world". Unfortunately, this is not necessarily the case.

At bottom, the global crisis of capitalism is a crisis of overproduction (expressed as over-capacity). The crisis is aggravated by debts and deficits, but they are not the cause, only symptoms of the underlying problem. In order to solve the current account deficit, the USA must import less and export more. But in present conditions this automatically brings America into conflict with the rest of the world. If the present upturn in the US economy is to be maintained, it can only be by finding new markets for its products. This can only be at the expense of Asia and Europe. If the increase in demand in the USA only serves to increase the volume of imports from the rest of the world, it will have been entirely counterproductive from the standpoint of the American bourgeoisie.

A recovery based on the growth of consumer demand does not represent a healthy economic recovery. Despite the high rates of growth registered, the underlying sickness of the American economy is shown by the persistently high rate of unemployment. This has given rise to a noisy protectionist lobby that is demanding measures to protect US industry against foreign competition, especially from China, which has a big trade surplus with the USA, amounting to about half the total US deficit. This situation is producing rising tension between China and the USA. But it does not affect China alone. Taiwan, South Korea and other Asian economies have also been expanding at the expense of the USA, thanks to the fact that they have deliberately kept their currencies low.

In the last three years 3 million jobs have been lost in US manufacturing industry – almost one in six in that sector. A falling dollar is a way of increasing the competitiveness of US exports. In other words, it is a way of exporting unemployment to Europe and Japan. It will put still further pressure on Europe and aggravate tensions between Europe and America. A weaker dollar will undoubtedly help US exports, but at the expense of Europe, China and Japan. It will exacerbate the social tensions and heighten the class struggle in these countries. But this is a matter of indifference to the American bourgeois, who are noisily demanding action against China and other competitors in world markets. This is a measure of the depth of the crisis on a world scale.

China's economy has been growing rapidly, much faster than the rest of the world. It is a colossus and in future will undoubtedly play a key role in world history. In the context of the world economy it has played the role that the West once thought that Russia would play. Despite the accusations that China has been benefiting from her exports to the USA and other markets, in fact China's imports have been growing faster than her exports – 40 percent a year as against about 30 percent. But this does not impress the USA, which has a big deficit in its trade with China. In fact, its bilateral deficit with China is now bigger than its deficit with Japan. The Chinese currency, the yuan, is pegged to the US dollar, and has been fixed at 8.3:$1 since 1994. The Chinese were originally praised for this. Now it is said that the yuan is undervalued by as much as 56 percent, and China is accused of dumping cheap produce on the US market.

Beijing is resisting American pressure to revalue the yuan, because it is terrified of the social and political effects of unemployment. This has led to a hysterical campaign in the USA against China. There are moves to put tariffs on Chinese goods if they are deemed to be causing "market disruption". So much for America's commitment to free trade!

The economies of Asia are dependent on the US market. Exports now represent 64 percent of Asia's GDP, as opposed to 55 percent in the 1990s. The capitalists of Taiwan, South Korea and China bought large amounts of dollars to try to keep the dollar from falling any further and thus boost their exports at the expense of the USA. They need to keep their exports artificially cheap in order to maintain their export-led growth. But this causes severe contradictions with the capitalists of the USA, who wish to keep imports down and increase their share of world trade. There has been a sharp rise in tension, not only between the USA and Europe, but also between Asia and America. In the end, the efforts of the Asian capitalists did not prevent the dollar from falling still further.

This is the central problem: the whole world is now dependent on the economy of one country – the USA. In the past this was not the case. Strong economies like Japan and West Germany acted as locomotives for the world economy alongside the USA and could take the strain if America faltered. But that is no longer possible. After a decade in recession, Japan has at last been showing signs of recovery, but the other former motor of the world economy, Germany continues to stagnate, with 4.4 million unemployed (about ten percent). The main support for the world economy still remains the growth of consumer demand in the USA, which provides the rest of the world with markets for its exports. If this begins to falter, the world economic recovery would soon grind to a halt.

This highlights a fundamental problem. In the past few years, US imports have considerably exceeded US exports.America has been sucking in imports from other countries, thereby keeping them afloat. This is very pleasant for European, Chinese and Japanese manufacturers, but not so pleasant for their American confreres. American industries are forced to close and American workers are losing their jobs. Moreover, the US current account (CA) deficit had been increasing alarmingly. If it had continued to increase at the high rate of last year it had been estimated that it would have reached about $800 billion, or 7 percent of US GDP by the end of 2004. This would be an intolerable situation, resembling a massive haemorrhage, where the huge amount paid in interest would drain away a great part of the wealth of America. But, as we predicted one year ago, things were not allowed to get that far. The "unseen hand" of the market has intervened to introduce a correction through a devaluation of the dollar. This will have serious consequences for the world economy.

The current account deficit of the USA is now the highest in the country's history. In the past the USA was the world's biggest creditor nation. It is now the world's biggest debtor. Even at the end of the 19th century, after the Civil War, America's deficit was normally less than 3 percent of GDP. At the end of the 1970s, after decades in which the current account was always in surplus, the USA possessed a net stock of foreign assets worth about 10 percent of GDP. But in the 1980s, persistent current account deficits turned the USA into a net debtor. Since that time it has got deeper and deeper into debt.

This situation is only maintained by massive inflows of foreign capital. However, what flows in can also flow out when the foreign investors realise that the whole structure is about as sound as a hut built on chicken's legs. In the Reagan era, the deficit peaked at 3.4 percent of GDP. It now amounts to $589.5 billions (June 2004) - the equivalent of 5.2 percent of GDP. If this is allowed to continue unchecked, the interest repayments on the accumulated debts will constitute an intolerable drain on the wealth of the USA. That will not happen, of course, because, as we have explained earlier, long before we get to that point, the foreigner investors would begin to unload dollars, causing a steep devaluation of the US currency. This is already happening.

The charter of the IMF prohibits the manipulation of currencies by countries for the sake of gaining "an unfair competitive advantage" over its trading partners. But all is fair in love and war, as the saying goes, and that is also applicable to trade wars. Unfortunately for the Europeans and the capitalists of Asia, if it comes to a struggle for global markets, America has all the muscle. Bush has already shown that rules and regulations matter very little when it comes to a struggle over vital interests. He no sooner stepped into the White House than he tore up the Kyoto agreement. He then proceeded to ignore or reject other international agreements on disarmament, trade and any other issue that did not suit him – or, more correctly, the interests of the big US corporations.

The whole situation is completely unsound and cannot last. The US dollar is already under pressure. It fell steadily for 18 months and then rallied against the Euro. But this will not last. Since its peak in 2002 the dollar has fallen sharply against the currencies of its trading partners. The Americans hope that this will be achieved through a controlled "correction". However, estimates of how far the dollar must fall vary from 15 percent to as much as 50 percent. A depreciation of 50 percent would push the euro to over $2 and the yen to less than 60 to a dollar. Such a huge devaluation is extremely difficult to control.

Once people start unloading large quantities of dollars onto the world's money markets, it can escalate into a full-scale panic. There is a danger of a vicious downward spiral in which one factor impacts upon another, driving the whole world economy down. Lack of demand leads to falling prices and profits, which, in turn, lead to falling investments, factory closures, and increasing unemployment. These factors serve to undermine consumer confidence, leading to falling demand, and so on. What happened in South East Asia can be repeated with far more devastating effects with the US dollar. This could very easily push the world economy into a deep slump, as The Economist points out:

"That kind of depreciation is hugely risky. The more a currency falls, the greater the danger that it will fall too far, too fast. A sudden dollar crash could roll financial markets and plunge the world into recession." (The Economist, 20th September, 2003.)

It goes on to warn:

"Moreover, the dollar is unlikely to fall evenly against other currencies. The Asian central banks' determination to stop their currencies rising has, so far, concentrated the dollar's fall on the euro, with a 20 percent drop against the European currency since early 2002, compared with 8 percent overall. A further, even bigger drop in the dollar, targeted on the euro, would probably sink Europe's economies." (Ibid.)

It concludes, "The risk of a dollar crash and a subsequent financial meltdown are not negligible." In the words of Ken Rogoff of Harvard University, who was a chief economist of the IMF, "The world is set to jump off the top of a waterfall without knowing how deep the water is below." (Ibid.)

Despite all these warnings, the steep fall of the dollar reflects the unsound position of the US economy and finances. Consumer confidence in the USA has shown a marked decline, reflecting the high level of debt and uncertainty about the future. The growth of prices is outstripping the increase in wages. The high budget deficit (currently 4.7 percent of US GDP) limits the scope for further tax cuts and reductions in interest rates. This means that the world economy cannot continue to depend on the USA for much longer. That process is reaching its limits. The American bourgeoisie is not very concerned about this. It is allowing the dollar to fall in order to obtain an advantage over its rivals. It aims to solve its problems at the expense of China, Europe and Japan, even if the price is to cause chaos on a world scale.

For a number of years the bourgeoisie has been ceaselessly disseminating the idea that the advent of globalisation has eliminated all the old contradictions between nations and laid the basis for a peaceful and prosperous future. The more dim-witted revisionists like Professor Hobsbawm have naturally swallowed these arguments whole. They try to present the movement towards free trade and globalisation as an inevitable and automatic process, leaving out of account all the contradictions and countervailing tendencies. In fact, even the most superficial examination of history shows that periods of greater free trade (such as before the First World War) have alternated with periods of ferocious trade wars and protectionism (such as the 1930s), and that the bourgeoisie will resort to protectionism whenever its interests are threatened. That remains just as true of the present epoch as it was when Marx or Lenin were alive.

Despite a decade or more of "globalisation", none of the old contradictions have been removed. On the contrary, they have been multiplied a thousand-fold and reproduced on a far vaster scale than ever before. The conflicts are being played out before our eyes, passing from one country and continent to another ceaselessly and with incredible speed. The national question, instead of disappearing, as Hobsbawn and others imagined, has assumed an intense and particularly poisonous character everywhere. One war follows hard on the heels of another. And at bottom this reflects the impasse of the world economy, shackled and suffocating in the straitjacket of the "free market economy." This is the epoch of capitalism "red in tooth and claw."

These underlying antagonisms are the real explanation for the change in America's role in the world and its adoption of a more aggressive, thrusting imperialism. The capitalists of all countries are faced with the iron necessity of conquering foreign markets, raw materials and spheres of influence. In the present situation, they will fight over even the smallest markets, like dogs fighting over a bone. In this climate the idea that supposedly impartial international forums can eliminate conflicts between the imperialists is as nonsensical as the idea that one can persuade a man-eating tiger to eat grass. This applies not only to the UN but also to the WTO, the future of which is now in doubt.

The threat of protectionism

What really worries the strategists of Capital is not a slump, but the threat of protectionism. The capitalist system will always get out of even the deepest slump. They did this in 1939 by going to war. Indeed, the contradictions between the capitalist powers are so serious that in the past it would have led to war between the USA, Europe and Japan. But for reasons we have explained in previous documents, a new world war is ruled out, at least in the near future. All the accumulated contradictions in world capitalism must therefore be expressed through different channels. This is shown by the increase in protectionist tendencies that threatens the delicate fabric of world trade that was painfully put together after 1945.

The expansion of world trade (the intensification of the international division of labour) was one of the main factors that enabled world capitalism to avoid a deep slump and achieve the results it has achieved in the last fifty years. Trade barriers, at least between the advanced capitalist countries, have been substantially lowered since the 1960s. In this way, one of the main barriers to economic growth, the nation state, was partially overcome for a temporary period. But there is no guarantee that this situation will continue in the future. Historically, periods of economic upswing and relatively free trade have been followed by periods of downswing accompanied by protectionism, as in the 1930s. That is the main worry for the bourgeois at the present time.

The collapse of the world trade talks at Cancun last year was a warning that the antagonisms between the main capitalist powers – and between them and the underdeveloped world – have reached new and menacing proportions. The Economist commented in an editorial: "Cancun's collapse leaves the whole system in peril. It comes less than four years after a similar flop in Seattle in 1999, where efforts to launch trade talks failed amidst street violence. After two such abject defeats in four years, the WTO is in enormous trouble." (The Economist, 20th September, 2003.)

It goes without saying that the reason why the talks collapsed was not the street demonstrations but the profound antagonisms between the different capitalist powers themselves. The Americans were unwilling to reduce subsidies to cotton producers. The level of support given to farmers in the OECD has remained more or less the same for the past 15 years – about $300 billion. In the USA, 25,000 cotton farmers receive more than $3 billion a year in subsidies. This affects mainly producers in the poor countries. The Economist was quite clear about the reasons for Washington's position: "A presidential election is looming in America: starving peasants are not a pressing constituency." (Ibid., our emphasis) But the USA is not the only country to behave in this way. Japan is not prepared to reduce its subsidies to rice producers. The EU refuses to reduce subsidies to its farmers. One way or another, they are all adopting protectionist measures.

The WTO was formed out of the old GATT, which was run by the rich countries. Poor countries played almost no role. But the attempts by the bourgeois of poor countries to defend their interests have led to the collapse of the talks. The American, Japanese and European imperialists, despite all their hypocrisy, are not interested in the plight of poor countries, but only in grabbing and holding on to markets, raw materials and spheres of interest. The USA in particular took a hard line at Cancun and in effect sabotaged the talks. It is not at all clear that the WTO talks can now be revived.

All the talk about the "sacred principle of free trade" has been shown to be completely hollow. America – and every other nation – cynically defends its own interests. It is a question of "every man for himself and let the devil take the hindmost!" They are in favour of protecting American companies and agricultural interests first and last. Therefore, the Americans wanted the Cancun talks to fail. In reality, protectionist sentiment has been on the increase in the USA for at least a decade. The USA, as the engine of the world economy, has been sucking in imports. The trade deficit is soaring as jobs are cut. The anger of those affected is directed against China and other competitors.

China now has a huge surplus in its trade with the USA. The US capitalists are demanding that China revalue the yuan or face reprisals. But China shows no sign of obliging them. The reasons for this are not only economic but social and political. There is an old Chinese proverb: "a man who mounts on the back of a tiger will find it difficult to dismount." With over 150 million unemployed, and a restive working class and peasantry, social tensions are mounting. There are deep divisions and splits in the ruling bureaucracy. One wing wishes to accelerate the movement towards capitalism, closing the big state owned factories and allowing unemployment to soar. But the other wing (the "conservatives") fears that this could produce a social explosion:

"The government is deeply worried about the instability that might result [from a devaluation of the yuan and a slowing down of the economy], writes The Economist. "For some years it has derived its legitimacy, such as it is, from the country's continuing economic boom. It fears that meddling with the currency could raise unemployment, aggravate deflationary pressures and cause a meltdown in the banking system." (The Economist, 20/ 9/ 03)

Despite the rapid growth – in fact, partly because of it – the Chinese economy is balanced delicately on the brink of an abyss. Credit is soaring to dangerous levels. The proliferation of financial scandals and the creation of a property bubble are all symptoms that one associates with the peak of a boom, heralding a collapse. But an economic collapse in China would unleash powerful social forces, threatening the established order. The workers and peasants of China have so far accepted the movement towards capitalism with gritted teeth, in the hope that things will improve. If these hopes are dashed, they can move quickly in a revolutionary direction. There have already been explosive movements, though not yet of a generalised character, which represent early tremors of the earthquake to come in the future. In order to maintain at least the illusion of progress it will be necessary to maintain a fast rate of growth to keep unemployment within more or less tolerable limits.

For all these reasons, Beijing cannot afford to slow down the pace of economic growth to please Washington. And since the capitalists of the other Asian economies are terrified that China will invade their own markets with cheap imports, they will also not allow their exchange rates to rise unless China does so first. Thus, the pressure on America and US manufacturing in particular, continues to grow.

To make matters worse, capital continues to pour into China at an extraordinary rate. In 2002, China was the world's largest recipient of foreign direct investment, with inflows of $53 billion. The economy is now growing at 9.6 percent a year. Chinese industry is working flat out, making use of cheap labour, pouring out immense quantities of commodities of all kinds onto the world market, that is to say, onto the American market. Moreover, according to The Economist, the yuan is undervalued by a staggering 56per cent. China's bilateral trade surplus with America is now bigger than Japan's. This cannot be allowed to proceed indefinitely.

The American bourgeoisie saw China only as a vast market for its products and a profitable field for investment. That is partly why they were so keen to include China in the WTO, the other reason being to tie China firmly into the capitalist world market. But this strategy has backfired. True, China is a huge market that absorbs imports at an annual rate of over 40 percent a year. Car imports to China in 2003 were up more than 60 percent on 2002, for instance. But what the Americans did not grasp is that China would also become a formidable exporter. This was not anticipated!

The pressure for protectionism is becoming irresistible in the USA. On the website called Save American Manufacturing, a cartoon of Uncle Sam urges you to "join the fight stop the de-industrialisation of the United States". China is being blamed for the loss of one in three manufacturing jobs in the USA in the last three years, just as Japan was blamed in the past. Joseph Liebermann, one of last year's contenders for Democratic candidate to the Presidency and a supposed free trader, accused China of "economic attack".

This is already the language of war. America is being invited to "defend itself". Under the terms of China's entry into the WTO, there are a number of "safeguards" that permit countries to impose tariffs on Chinese goods if they are deemed to be causing "market disruption". The expiry of the Multifibre Agreement at the end of 2004 could be the flashpoint for a clash between the two countries. With its vast army of low-paid workers, China would be the main beneficiary of the end of this quota system that has governed the world textile trade for decades. According to some estimates, its share of the US textiles market could increase from 12 percent to 30 percent when restrictions are lifted. The calls for protectionism will become a deafening chorus.

Bush is supposed to be a free trader. He also needs China's assistance in his dealings with North Korea. But all this will turn to dust in the face of the Presidential elections when states like Ohio will demand action against China to protect jobs. If Beijing does nothing to change the situation (and it is hard to see how it can), the outcome will be a trade war between America and China that will have disastrous consequences – above all for China. Such a development would spell the end of the WTO as an effective body and have serious consequences for the entire structure of world trade.

The peak of American arrogance was the defiance of the UN Security Council over the war in Iraq. American imperialism decided to go on a rampage like a wild elephant, trampling underfoot all agreements, resolutions and diplomatic protocol. It was an action replay of the old imperialist policy of the end of the 19th century, when America under McKinley and Theodore Roosevelt first raised the idea of "speak softly and carry a big stick" to rule the world. The real aim of America was to undermine the European imperialists and take over their empires, above all in Asia.

Now, however, the world balance of forces is entirely different. America's road to expansion in Asia is blocked by China, which now represents a colossal and growing force. This is causing concern in Washington. In the past, when American imperialism had its sights set on Asia, China was a weak and decaying empire with a backward semi-feudal economy. The US imperialists were vying with their European rivals to divide the living body of China, seizing slices of territory and "concessions". China was powerless to resist. Now things are very different. The Chinese Revolution, despite the crimes of Maoism, radically transformed the situation, abolished backwardness and established a firm base for spectacular growth. As a result, China is herself emerging as a major force in Asia.

There has been a shift in the balance of forces in Asia. The rising economic power of China is the central element in the equation. Leaving aside Japan, China is now the region's giant, with the fastest growing economy and the biggest reserves. Economic and industrial power is the basis of military power. The recent launching of a Chinese satellite is a warning that China's economic advance has military implications. In the long run the future of Asia will be decided by a titanic conflict between the USA and China. Despite all the public shows of friendship, both sides are acutely aware of this fact. The noisy campaign in the USA against China is an expression of the underlying antagonism that sooner or later must come to the surface.

The failure of the Cancun talks was a mortal blow to the WTO. It is possible that the collapse at Cancun was engineered by the Americans themselves. Congress is now in a protectionist frenzy. It is not certain that the US congress will vote to renew America's membership of the WTO. Instead, the Americans are developing a series of bilateral trade deals with other countries. This fits in with the general tendency of US imperialism to pursue its own interests regardless of the opinions of other states. They are preparing for a showdown in which they will use their muscle power to overwhelm their rivals. It is the economic equivalent of "shock and awe."

However, nothing is ever simple in world economy or world politics. In this complex web of interrelations, dialectically one thing affects another and the whole fragile mechanism of world trade can be irremediably damaged. In the same way that the bungling tactics of the USA in Iraq threaten to destabilise the whole Middle East, so their economic bullying can unravel the whole delicate fabric of world trade.

The world economy is being split up on a regional basis, as each rival imperialist gang hastens to consolidate its control over different parts of the globe. This is shown on the one hand by the formation of the euro-zone and the moves towards a European military force independent of NATO (that is, independent of America), on the other hand by the formation of NAFTA and the growing appetite of the USA for bilateral trade deals. The result will be an inevitable fragmentation of international trade and a growth in protectionism in the next period.

A growth in protectionism is the inevitable consequence of a period of sluggish growth – the best scenario for the world economy in the next period. The Economist warns gloomily: "The WTO is a fragile organisation, less than ten years old. It would not survive a lengthy period of American disengagement." Of course, there will be countervailing tendencies. But the general trend will be towards greater frictions and antagonisms. The bourgeois understand the need for free trade, but they understand it only abstractly. The moment free trade affects their vital national interests, they react against it. We are therefore entering into a period in history that will be more similar to the period of the 1930s than the last half century: a stormy period for the world economy that will be the background for wars, revolutions and counterrevolutions in one country and continent after another.

The European Union

Even more serious than the conflicts with China are the growing antagonisms between the USA and Europe. The euro continues to rise against the dollar, and this means that these relations will become increasingly embittered. There will be even more trade disputes, to add to the already long list. The WTO has ruled that America’s foreign-sales corporation tax was an illegal export subsidy, and gives the Europeans permission to levy £4 billion in retaliatory tariffs. One British ex-minister has advocated the introduction of tariffs specifically targeted to hit states in the USA where this could adversely affect Bush’s chances for re-election. On the other hand, Europe proposes to introduce new regulations on chemicals that would require manufacturers and users of chemicals to provide detailed information on the health and environmental effects of all their products. Like the regulations on GM foods, this is regarded as a protectionist measure by US producers.

The USA is the strongest imperialist power on earth. The US imperialists are determined to use their economic muscle to serve their own interests, just as they have been prepared to use their military muscle. It is a question of “America first!” Those who stand in their way must be crushed – either by rockets and bombs or by economic pressure and blackmail. This will create massive new contradictions on a world scale. It will lead to a general upswing in the revolt of the masses in Asia, Africa and Latin America. We can already see the beginnings of this in Venezuela and Bolivia. But it will also enormously exacerbate the contradictions between the USA and Europe.

This has far-reaching consequences. The entire world order that was put together so carefully after World War Two is cracking and splintering at the seams. The belligerent behaviour of the clique in the White House is hastening its demise. The USA is preparing to promote its interests at the expense of the WTO by developing a whole network of bilateral trade agreements. This is a dangerous trend from the point of view of free trade. The WTO can be reduced to merely a bureaucratic office for settling secondary disputes – a talking shop, rather like the UN, and just as powerless. This can lead to the fragmentation of world trade, with the consequent increase of protectionism.

There is already plenty of evidence of growing protectionist tensions between the USA and Europe. There have been serious conflicts over steel, textiles and agricultural products. We have already mentioned the case of America’s foreign-sales corporation tax, and the WTO ruling giving Europe permission to levy up to $4billion in retaliatory tariffs. The EU’s proposed regulations on chemicals, which require manufacturers to give detailed information on the health and environmental effects of all their products, will contribute to this new round of protectionism and provoke a response from the US. Given the depth of the crisis, neither the USA nor the EU is in a position to compromise. Although they will make repeated attempts to reach a deal, for fear of the alternative, there will be new disputes all the time, each more serious than the last.

The French and German ruling classes, who between them dominate Europe, fear the power of US imperialism. They see that there is a real clash of interests between them and the USA on a world scale and are preparing for a fight. The war in Iraq, which split Europe into so-called “new” and “old” Europe has long-term consequences for the developments of the European Union. France and Germany have embarked on a so-called “structural cooperation” concerning military and armaments affairs in order to be able to act independently of the USA. The rest of the European states no longer have an independent foreign policy. They are forced to choose between the foreign policy lines of the France-Germany axis on the one hand and those of the United States on the other hand. They are weak capitalist regimes, which vacillate between the main centres of power. The Eastern European countries such as Poland or the Czech Republic are leaning on the United States in order not to become wholly dependent on Germany. The American imperialists are trying to use some of the southeastern and eastern European countries to form a kind of Cordon Sanitaire in an attempt to limit Germany’s “Drang nach Osten” (drive to the East). For that reason the American imperialists are planning to move military bases from Germany to countries like Poland, Bulgaria and Romania. For now Hungary, Slovenia and Croatia on the other hand are gravitating to Germany and Austria. However, the change of government in Spain shows how quickly these alliances can change and how unstable they are. The new situation is particularly dangerous for South-Eastern Europe. If two rival imperialist blocs interfere in the Balkans instead of one relatively united “international community” (of imperialists), the chauvinist revanchists of all nationalities will be enormously strengthened. Unsolved conflicts between the nationalities may develop into proxy wars between the great powers in the future. Sooner or later the tensions within Europe will move beyond the level of diplomacy and onto the level of economic relations. Individual countries with a weak economic base may not be able to stand the pressures involved in abiding strictly by the criteria established to achieve the Euro and may be forced to break away from the monetary union. This would be exploited by US imperialism in its manoeuvres against the main European powers. Thus the dreams of the European bourgeois strategists have proven to be utopian. Instead of one united Europe as a counterweight against the United States, we see the United States manoeuvring against the main European powers through a series of smaller European countries – like so many little Trojan horses in the heart of the European Union.

In two world wars the attempts of the German ruling class to dominate the whole of Europe failed. After the Second World War the French ruling class had the idea that they could dominate Europe through an alliance with Germany. However things turned out differently. Germany emerged as the major power and France was forced to adapt to this new situation. It now realises that on its own it cannot face up to US imperialism and could become like Britain, a puppet of the US. That is the basic reason for the relative stability of the bloc between German and French imperialism, at least until now. However, the Franco-German bloc is nothing more than a cartel of two rival imperialist powers. On the one hand France has to tolerate the economic dominance of Germany, on the other hand Germany turns a blind eye to the state interventionist economic policies of France, which France is trying to use to protect its economy against German capital. The Franco-German military structural cooperation will lack fighting strength because of divergent foreign policy interests. The plans for a European Constitution are once again a desperate attempt on the part of German and French imperialism to unite Europe under their rule after the destabilising effects of the war in Iraq. But even if the European powers are able to reach some kind of compromise agreement, this constitution will not have any real meaning and will not solve the real internal conflicts of Europe. It cannot do so, for the national conflicts between the different European Union member states only allow for a Constitution that does not impinge on the real powers of each national ruling class. Furthermore, the constitution will not reduce the influence of the United States on European politics.

The European bourgeoisie tries to portray the enlargement of the European Union to wards Eastern Europe as a chance for millions of East Europeans to have a better future within a finally united Europe. The picture they present is one of the new members achieving faster growth rates than Western Europe with their living standards catching up within a certain period of time. Reality is looking quite different. The so-called “Baltic tigers” were only able to grow at a rate of 4-6 percent because their economic performance had previously dropped to 59 percent of the level of 1989 as a result of “market reforms”. All the East European countries are extremely dependent on exports to Western Europe and sooner or later they will be hit by the stagnation of demand across the whole of Europe. If we compare the GDP of the East European countries to the GDP of the West European average, we find that, with the exception of Slovenia, all East European countries are worse off than they were in 1989. The South-Eastern European countries experienced a negative average growth of -8 percent between 1991 and 2001. Only in 2002 did they start to recover. But even the moderate growth that we are witnessing now is in danger. It is not only the fall in demand in Western Europe that could lead to trouble. The foreign direct investment in the new member states fell by 50 percent in 2003 and this trend is continuing. The reason for this is the fact that investment in Eastern Europe since the fall of the “iron curtain” has not created new industries but rather it has dismembered the existing ones. Now the market is divided up. That will lead to big problems in the future because until now the trade and budget deficits were financed by money from foreign direct investment. If this source dries up, foreign currency will have to be bought. The East European currencies will come under the pressure of depreciation. But at the same time these currencies are pegged to the Euro and so they are becoming a target for speculation. ‘Financial Times Germany’ has already warned that Eastern Europe, especially Hungary could face a crisis like Argentina in the next few years. Most of these countries are now trying to get new investment by reducing their taxes in an adventurous way. Slovakia has introduced a flat rate tax level of 19 percent and now faces the danger of bankruptcy. Other countries like the Czech Republic are also following this road to ruin. Even the IMF has criticised them for their excessive reduction of tax levels.

The last fifteen years of so-called “market reforms” have lead to a situation, where cities like Bratislava, Prague or Warsaw have indeed reached the levels of West European averages. However this does not show the whole picture. At the same time whole regions, especially the old industrial areas have been reduced to abject poverty. In Poland and Slovakia unemployment has reached 20 percent and is still rising, while in the old industrial regions it stands at 30-60 percent.

In Poland, where more than 20 percent of the population is working in agriculture, membership of the European Union will lead to severe problems. Contrary to the bourgeois propaganda, the Polish small peasants cannot survive within the European market. Despite the transitional laws they will be crushed by the far more technologically advanced industrial farming in the West. Those small peasants who do manage to survive in the market will be finished off by such things as the EU health and safety regulations. The social contradictions will further aggravate the tensions between the member states, and within the states of Eastern Europe the class struggle will be on the order of the day.

The feeble, effete and degenerate British capitalists, having lost the empire, have also lost all possibility of acquiring a leading place in Europe. They have sunk into the role of a parasitic rentier bourgeoisie, based on services, banking and tourism. British industry has fallen into decline. The “workshop of the world” is only a distant memory of the past. On the international arena they content themselves with the humiliating role of the lackey of US imperialism. They are therefore regarded with suspicion in Paris and Berlin. This has pushed France and Germany closer together – at least for the present – and condemned Britain to further isolation on the world stage.

Inside Britain meanwhile, where events appeared to be lagging behind, there has been a dramatic change in the situation. On the surface, Blair appears to have maintained himself. He was carrying out, with little open opposition, a bourgeois policy of attacks on the working class. He had largely succeeded in carrying out a 'counter-revolution' in the Labour Party. Blair, in an alliance with Aznar and Berlusconi, had put himself at the head of the European right wing, which sought to model themselves on the free-market stance of the United States.

However, these policies were preparing a massive backlash. Blair's apparent victory was about to turn to ashes. The groundswell of opposition over policies at home and abroad is already having profound consequences. Blair has faced massive back-bench revolts in parliament that reflected growing opposition from below. Resignations even affected the cabinet. The Labour Party has suffered a series of shattering defeats in local and European elections. This shows a steady accumulation of discontent in Britain.

The two-million strong demonstration against the Iraq war in February 2003 was a watershed. It represented the biggest demonstration in British history and reflected the opposition to the Blair government not only over the war but all the pro-capitalist policies being pursued.

As we explained previously, the opposition to Blair would be reflected in the mass organisations at a certain point. This has already taken place in the trade unions where there has been a massive shift to the left over the past five years. The victory of left candidates in the elections for the union leaderships has mirrored this mounting opposition. There has been an earthquake, which has resulted in serious defeats for the right wing in a series of unions.

This process in turn will be reflected in the Labour Party in the coming period. Blair's days are numbered. The crises that will unfold in Britain will result in a series of splits in the mass organisations and the eventual spewing out of Blair and the right wing. Although this will not be a straight line, the inevitable victory of the left reformists will usher in a new convulsive period in British society and open up enormous possibilities for the Marxist tendency.

The European capitalists find themselves in a particularly difficult position. They need to cut living standards to restore profitability, but are faced with powerful and undefeated workers’ organizations. The crisis of European capitalism, as we predicted, has been exacerbated by the attempt to force different economies into a rigid straitjacket under the so-called “solidarity and growth pact”. The average deficit in the Euro-zone is 2.8per cent, as against a forecast of 1.8per cent. France, Italy and Germany have all broken the agreed limits for deficits. Both France and Germany face huge fines, although it is not likely that they will ever be paid. Chirac has called publicly for a “temporary softening” of the rules, which, if it is carried out, will naturally not be temporary. In reality, the Maastricht Treaty was an excuse to carry out a permanent austerity policy, with deep cuts in social spending. All over Europe there is a concerted policy of cuts, especially in the area of pensions. This is a finished recipe for class struggle. This represents a profound change in the situation.

Like Germany, France has breached the Maastricht limit of 3per cent for budget deficits. The French bourgeois show extreme indifference on this issue, and in fact have announced a 3 percent cut in income tax, which will further increase the deficit. The only way to “balance the books” is by deep cuts in social spending, which means a further intensification of the class struggle in France. The Raffarin government managed to push through its counter-reform on pensions despite mass protests and strikes. The 35-hour week is under attack. Now they propose a reduction in holidays. This is not the result of the bad will of this or that prime minister, but an expression of a deep social crisis. The same policies are being pursued, with variations, by every government in Europe.

The French economy has been slowing down for the last two and a half years. Unemployment is growing. All this is the background for a period of enormous social and political turbulence. There have been big strikes for the last ten years. Of course, this has not taken place in a straight line. The struggle has proceeded in waves. The struggle peaked in Nov-Dec 1995, then again in March 2000, and again in the summer of 2003. On May 13th 2003, there were 600,000 demonstrators on the streets of Paris, and a total of more than 2 million throughout France. The number of days lost in strikes has been increasing. Every layer has been affected. In the summer of 2002 all big arts festivals in France were cancelled as a result of strikes by artists.

The cuts in living standards provoke the working class and the petty bourgeoisie. In Italy in the last 2 years there has been a whole series of strikes, including two general strikes, as well as dozens of local and national demonstrations involving hundreds of thousands of people. This was a real tidal wave that signified the reawakening of the Italian proletariat. But the Italian bourgeoisie is pressing on with its programme of cuts and attacks on workers’ rights and living standards. This inevitably caused a certain perplexity in the ranks of the workers. However, in the present period, every lull in the struggle is merely the prelude to new and even more furious battles. The lull was followed by a further outbreak of strikes and mass demonstrations – of Alitalia, Fiat-Melfi etc.

In fact, this is a general phenomenon that precisely expresses the seriousness of the crisis. It is a new situation to which the workers are not accustomed. In the past the bourgeoisie would usually make some concessions in the face of mass action. But now they are digging in their heels and refusing to compromise. It was therefore only natural that there should be some hesitations on the part of the workers, who are trying to understand what is happening and work out the best way to respond. But hesitancy on the part of the unions encourages the bosses to make new and ever more insolent demands. The weakness of the union leaders encouraged Berlusconi to demand an increase in the retirement age. This was answered by a general strike called by the unions.

In Germany, Schroeder is also pushing through a programme of counter-reforms. He wants Germans to retire at 67 instead of 65, and to accept 40per cent gross earnings instead of the current 48per cent. There is growing opposition in the ranks of the unions and the Social Democracy, but the leadership is hopelessly inadequate for the tasks posed. The leaders of IG Metal halted the struggle for the 35-hour week in the East before it could succeed.

The underlying social and political instability was shown by the violent swings to the left and the right in elections. This is an expression of the general crisis that creates a feverish volatility in the mood of the middle class. The sects, who always draw the wrong conclusions, have been making a lot of noise about the imminent danger of fascism. At a certain stage the crisis of the regime can certainly lead to a violent swing in the direction of open reaction, although this will be characterised by the emergence of Bonapartist tendencies, not the kind of fascist regimes we saw in the 1940s. But at the present time the class balance of forces rules this out.

Despite the hysteria of the sects, the growth in support for Le Pen and similar movements in Holland and Austria was not an indication of a move towards fascism, but a symptom of profound instability and a frantic search of the petty bourgeoisie to find a way out of the crisis. The so-called Fortuyns Bloc in Holland fell to pieces very quickly after the death of its leader. In Austria the People’s Party is split and in crisis. In any case, none of these were fascist parties, despite their repulsive reactionary character.

In every case the rise of these reactionary parties is the result of the failure and bankruptcy of the reformist leaderships. Since the Labour leaders offer no solution to the crisis, the road is left open to the right wing demagogues to argue that the unemployment and bad housing is the fault of immigrants. This we see most clearly in France, where mass discontent with the SP-CP government led to a heavy defeat for Jospin. The hysteria about Le Pen led the Left parties to a disastrous electoral policy, with the enthusiastic backing of the sects. The decision of the leaders of the Left to back Chirac as the “lesser evil” was an act of great stupidity and myopia. The experience of the right wing Chirac-Raffarin government, with its attacks on living standards, will add further grist to the mill of Le Pen, paving the way for an even greater polarization to the right and to the left in France. To a greater or lesser extent, similar processes will open up in every European country. But the main tendency is to the Left, as we see in the latest elections.

The ruling class does not move to reaction lightly. It will only turn to Bonapartist reaction when it feels it is threatened with immediate overthrow, and as a last resort when all other options have been exhausted. It knows that such a move will provoke the working class and is therefore a risky throw. We are still a long way from such a situation. It will require a whole period of class struggle before we reach this stage. And long before the perspective of Bonapartist dictatorships in Europe is posed, the working class will have had many chances to take power. At the present time the pendulum is swinging to the left, not to the right, and much less in the direction of fascist reaction.

The recent mobilizations that have taken place all over Europe – from Spain to Austria, from Italy to Germany, from Portugal to France – represent the reawakening of the masses after a relatively long period of inactivity. And just as an athlete needs a period of warming-up exercises, so the workers need to stretch their limbs and test the ground. The present movement is only an anticipation – a preparation for more serious things to come. In some ways it lacks maturity. The demonstrations have, in part, a cheerful, good-natured atmosphere, like a carnival. That is always the case at the beginning of the revolution, before the masses have grasped the seriousness of the situation. In the future the mood will be altogether different.

In the massive demonstrations at the beginning of the Iraq war, the general idea was: “Look how many of us there are! Surely they cannot ignore this! Something must change!” But ignore it they did, and the war went ahead anyway. This fact led to the speedy demoralization of the petty bourgeois elements, who fell into a state of despondency and passivity. But the working class is slowly coming to understand that things are not so easy, that more serious methods of struggle will be necessary. They are coming to understand that in future, the only way to get concessions is through all-out struggle. Brief strikes and carnival rallies and parades are not enough.

The main problem is the subjective factor. With a half serious leadership the general strikes and demonstrations could have been the starting point for a counter-offensive of the labour movement. This is the only way to compel the bosses to give concessions. The ruling class will always give something if they fear they might lose everything. Serious reforms are usually the by-product of revolutionary struggles. That is why the reformist leaders are weakest precisely where they believe themselves to be strongest – in the fight for reforms.

In their reformist blindness they believe it is possible to gain concessions by negotiating pacts with the employers and showing themselves to be “responsible”. That gives the green light to the bosses to press on with their attacks. That is why the colossal strikes and demonstrations have gained almost nothing. The leaders threw away the possibility of winning even a partial victory. In fact, despite the organic incapacity of the reformist leaders, the impact of the mass movement that has developed in the last year and a half in Europe has been enormous. We have witnessed important changes in the political situation. In the case of Spain we have a very striking example of how the situation can be completely transformed in the space of 24 hours. This shows precisely how sudden and sharp changes are implicit in the situation.

The right wing PP seemed to be in complete control. This situation provoked perplexity and disorientation amongst a layer of activists and especially amongst the leadership of the traditional left-wing organisations who blamed the situation on an alleged “shift to the right of the working class”. In fact they had understood nothing. The inability of these reformist leaders to connect with the aspirations of the masses was in fact the main obstacle to them being able defeat the PP decisively on the electoral plane.

Despite the reformist leadership, the process of political radicalisation and social polarisation was developing beneath the surface. This burst dramatically to the surface after the terrorist attacks on March 11 which killed 200 workers. The working class and the youth correctly understood the political nature of this criminal attack and they blamed the PP for their involvement in the imperialist war. In a sudden change, hundreds of thousands of people came out onto the streets to protest against the terrorist attacks, against the imperialist war and, above all, against the campaign of lies and manoeuvres carried out by the government and the PP in the 48hour period after the terrorist attacks. Aznar tried to blame ETA for the massacre in order to secure an advantage in the elections. But the magnificent movement of the masses led to the electoral defeat of the PP on March 14 and the victory of the PSOE which won 11 million votes, beating the PP by more than one million votes.

The Spanish events demonstrated the colossal strength of the working class. This explains the defeat of the PP government and the withdrawal of Spanish troops from Iraq. The problem is that the working class does not find an adequate vehicle to express their aspirations to change society. The problem is the leadership of the mass organizations. The trade union and Labour leaders are the most conservative force on the planet. They are always looking backwards, not forwards, to the past, not the future. Though they consider themselves to be the greatest realists in the world, in fact they are ignorant and narrow-minded empiricists, completely out of step with reality. They hope that the past period of capitalist upswing will return – the good old days of compromise and class collaboration, which relieved them of the painful necessity of leading a struggle. But this is impossible. Their allegedly “realistic” policies guarantee defeat after defeat under present conditions. For every step back they make, the bosses will demand ten more. Such policies always led in the end to victories for the reaction. But under present conditions the electoral victories of the right wing will not be long lasting and will prepare the way for a further move to the left.

Growing inequality

This is a period of tremendous and growing polarization between rich and poor. There has been an unprecedented increase in inequality. The gap between rich and poor has become an abyss, and the gap between rich and poor countries has also increased dramatically. About half the population of the world lives on $2 a day, while on the other hand there is an obscene concentration of wealth and luxury in a few hands. In a period in which they are discussing the possibility of travelling to Mars, seven million children die each year from diseases linked to the lack of clean drinking water.

The whole planet has been torn apart by the rapacious greed of the multinationals. The living conditions of the masses in the so-called developing countries are not improving but deteriorating. This decline is not even halted by periods of boom. According to a recent report of the United Nations, during the 1990s, income per head fell in 54 “developing countries”. In the 1980s the Human Development Index – a summary of health, longevity, education and living standards – fell in four poor countries. In the 1990s, in the middle of a boom, it fell in 21 countries.

Sub-Saharan Africa is a nightmare in which barbarism is gripping one country after another. Here Lenin’s statement that “capitalism is horror without end” acquires its full force. Sierra Leone, Congo, Rwanda, Liberia – all have been the scene of terrible slaughter, mutilation and cannibalism. These horrible convulsions are an indication of the complete inability of capitalism to solve the problems of these peoples, despite the colossal mineral wealth they possess, or rather because of it. Rival groups of gangsters ally themselves with one or another state to lay their hands on the diamonds or other mineral wealth, and always the hand of one or other imperialist power or multinational company, is to be seen pulling the strings. In the civil war in the Congo alone, at least 4.5 million people have been slaughtered – mostly innocent villagers. A further quarter of a million people were killed in the civil wars in Liberia, Sierra Leone, Guinea and Cote d’Ivoire. Now we have the catastrophe of Darfur, destroying the lives of millions of poor people.

The AIDS epidemic in Africa is causing death and misery on a scale that is comparable with the Black Death in the Europe of the Middle Ages. Medicines exist that could provide considerable relief to these unfortunate people, but the greed of the big pharmaceutical companies prevents these medicines from being made available to the sufferers in poor countries at affordable prices. The bourgeois contemplate this ghastly ocean of human misery with supreme indifference. In any case, even if the medicines were made available at affordable prices, most of these people would die of hunger. Even in countries that have experienced some improvement, growth does not mean increasing living standards for the masses. Uganda’s GDP grew by 6per cent a year for the last ten years, but income per capita is less than $250 a year. However, the revolutionary potential of the working class was shown by the magnificent general strike in Nigeria last year. The working class could easily have taken power, but once again the union leaders acted as a block on the movement. They saved the ruling class, which then expressed its thanks by having them arrested.

The so-called aid provided by the imperialists is a joke in bad taste. It is insignificant, and is usually linked to profitable trade deals, often in arms. But these miserable amounts of “aid” are dwarfed by the vast amount of plunder that the imperialists extract from the so-called developing nations through unequal trade and interest on debts. The “aid” of the USA is barely 0.1per cent of its GDP, which is half the average aid of other countries, and compares to 0.9per cent donated by little Denmark. Even the tiny amount of aid paid by the USA is not really aid. A lot of it is food and is really a disguised subsidy to American farmers.

The polarization between rich and poor is not a geographical phenomenon, as the petit bourgeois groups in the western countries affirm. At the same time as they squeeze the life blood from the hungry millions in Asia, Africa and Latin America, the same giant corporations are intensifying the exploitation of the workers of their own countries. In 1970 the real annual compensation of the top hundred chief executives was (in today’s money) $1.3 million – 39 times the pay of the average worker. But in 2000, the figures had increased to $37.5 million – a thousand times more than the pay of the average worker. Never in history was the gap between workers and bosses so great. Never was so much power and wealth concentrated in the hands of so few.

World relations

The general crisis of capitalism expresses itself in the violent upheavals in world relations. All kinds of cracks and fissures are opening up in the institutions put together so carefully after 1945 to ensure the capitalist world order and the hegemony of the USA over its “allies”. In a few weeks in the run-up to the Iraq war, one after another, these international institutions were in crisis with every sign of breaking up: The UN, NATO, the EU, and G7 – all were rent by splits and dissention. At the same time, relations between Europe and America deteriorated to an all-time low. There was even an open split between the USA and Turkey, which had backed every US invasion since 1945 without question.

These are not secondary matters, not mere “corrections”, but represent a serious crisis in world relations – the most serious crisis since 1945. We may draw upon a geological analogy. Minor adjustments (“corrections”) take place in the earth’s crust all the time in response to the stresses that build up beneath the surface. But under certain circumstances these minor adjustments produce unusual and dramatic results. What began as a minor adjustment ends up as a dramatic change – an earthquake.

The fall of the USSR has produced a sudden and fundamental shift in the balance of forces on a world scale, resembling a seismic shift in the tectonic plates. And as in any such shift, earthquakes result. What we have witnessed in the period following the 11th September is the equivalent in diplomacy of an earthquake in geology. The general picture is one of convulsions and one explosion after another. This reflects the impasse of capitalism on a world scale. It is expressed by a ferocious struggle for markets, raw materials and spheres of influence, resulting in one war and diplomatic crisis after another.

Like the earth’s crust, the fabric of world politics and world economy is quite a fragile mechanism, subject to cataclysms. That is why the method of empiricism that tries to base itself on what is immediately known, or is familiar to us on the basis of previous experience, is hopelessly inadequate to interpret such complex and contradictory phenomena. In order to understand recent events on a world scale, it is not enough to take note of this or that twist or accidental phenomenon. It is necessary to see the underlying processes and to lay bare their inner contradictions and fundamental tendencies.

It is generally assumed that the global situation, economic, diplomatic and military, is more or less fixed, and that it always tends towards equilibrium. There is some truth in this, but this “equilibrium” is constantly being disturbed. The conduct of US imperialism at the present time resembles the period of its first great imperialist expansion at the end of the 19th century, when it first flexed its muscles in the war with Spain over Cuba, the seizure of the Philippines and Puerto Rico etc. This new policy is reminiscent of the imperialism of Theodore Roosevelt and the first period of American expansion, when the USA organised provocations like the sinking of the Maine to justify its armed intervention in Cuba in 1898.

The real intention at that time was to drive Spain out of the western hemisphere and seize its colonies. The difference is that at that time it was a young imperialism, struggling to assert itself on a world scale, challenging the old established powers of Britain, France and Germany. Now US imperialism is doing the same thing all over the terrestrial globe, seizing territory, raw materials and spheres of interest at the expense of its rivals. It is confronting France in particular, but it is also clashing with Germany and challenging Russia. After the collapse of the USSR, the USA has established itself as the dominant world power and the sole super-power. This is a major factor in the general instability.

America is leading the world in the new arms race. US defence spending is expected to increase by nearly $700 billion more than was assumed in Bush’s budget projections. These are truly staggering amounts of money that, if put to productive use, would be enough to transform the lives of the peoples of the world. Instead, they are being used for the purpose of killing large numbers of people and wrecking and destroying the means of production. This is a further expression of the general crisis of capitalism and its terminally sick character.

The contradictions between the imperialist powers have been exacerbated in the extreme. America is intervening everywhere: in Iraq, Afghanistan, Palestine, Iran, North Korea, Colombia, Venezuela and elsewhere. It is challenging France in the Middle East and Africa. Bush went on a tour of Africa, where he visited Senegal – a satellite of France, and Nigeria (where there are large reserves of oil), as well as Botswana and Uganda. Other imperialist powers are interfering in Africa: Britain in Sierra Leone and France in Cote d’Ivoire and the Congo. In a situation of economic crisis, it is necessary to grab even the smallest markets.

In such a situation, organizations like the United Nations can play no role. We have explained many times that the UN, even in the last period, was only a forum where the main imperialist powers and the Moscow bureaucracy could settle secondary matters. All serious matters were settled by the traditional means – that is, war. That was the case with Korea, which ended as a draw, and Vietnam, where the USA suffered its first defeat in a war. Israel has systematically ignored the resolutions of the UN, and so on. The left reformists do not understand this. They imagine it is possible to abolish wars and eliminate national antagonisms through an international organism (a “world parliament”) without abolishing capitalism.

This is an even more absurd illusion than the reformists’ dream of abolishing the class struggle and arriving at a reasonable agreement between workers and capitalists. The problem is, as Hegel explained long ago, that it is not reason that dictates the conduct of nations, but interests. This is as true in foreign policy as in domestic policy, and the one thing is only the continuation of the other. The foreign and domestic policies of the Bush administration are dictated by the voracious and insatiable appetite of the big US corporations for surplus value. The colossal power of US imperialism means that it can, and does, tear up any treaties and agreements that do not suit its interests.

Now even the minor role that was played by the UN in the past is denied to the Security Council. Far from eliminating or lessening the antagonisms between states and thus preventing wars, it is the scene of fierce conflicts between the rival imperialist powers of the USA, Britain, Germany, France, and now also Russia. As if to mock the pathetic appeals of the reformists, the UN displayed its complete impotence over the war in Iraq. The American imperialists and their British puppets merely ignored the Security Council when they were unable to obtain a majority in their favour.

This announces a new and stormy period in world relations. Just as in the relations between the classes the capitalists have thrown aside the veil of reformism and class collaboration to reveal the ugly and rapacious face of class war, so in international relations, they have dispensed with the services of the UN and torn up one pact and agreement after another. In particular, the US imperialists resort to war, not as a last resort, but as an almost automatic reaction. In place of the old, polished diplomacy of the Europeans (which in any case was just a fig-leaf to disguise their own aggressive policies) the Bush administration has adopted a crude and blatant stance that defies world opinion and admits no mediation. Its watchword is: Might is Right.

America has seized control of Russia’s old spheres of influence in Eastern Europe and the Balkans – in the latter case through a war that was deliberately provoked with the intention of removing Milosevic from power. The arguments about democracy, humanitarianism and self-determination for the Kosovar Albanians were only a smoke screen, a fairy story fit only for little children and sectarians who have never been noted for their capacity to think. The result has been endless misery, death and chaos for the people, and the consolidation of the grip of US imperialism in the Balkans. However, here we see already the limits of the power of imperialism.

Nothing has been resolved by the US intervention in the Balkans. As we predicted, there is chaos with the potential for new wars and ethnic conflicts. The reactionary nationalists in Kosovo and Macedonia have embarked on a campaign for a “Greater Albania”. This is a finished recipe for new wars and upheavals in the Balkans. The imperialists now belatedly realise they have burnt their fingers. One British brigadier in Macedonia describes the Aksh [the Albanian National Army active among the Albanian speaking minority in Macedonia, better known by its Albanian-language initials, AKSh] as “criminals flying a political flag of convenience in the hope of finding legitimacy.” This is a fairly accurate description, but it is a little late to lament the results of the imperialist intervention in Yugoslavia, which encouraged and supported these elements. We also recall that these so-called “freedom fighters”, who are linked not only to right wing reaction but also to organized international crime, were enthusiastically backed by the sects.

This is typical of the mess one gets into when one abandons a class position on the national question. The break-up of Yugoslavia was a reactionary development that acted against the interests of all the peoples. It was a crime with not a single atom of progressive content. Yet this crime was defended by the sects, allegedly on the grounds of “self-determination”.

The Russian ruling clique has looked on helplessly as the USA has occupied one country after another that had belonged to the Soviet Bloc. The Russian generals have gritted their teeth while NATO expanded up to the borders of Russia. This weakness is a sign of the rottenness of the Russian bourgeoisie. US forces have even been installed in the Caucuses. In the days of the USSR such a thing would have been inconceivable. Now they are puffed up with arrogance. The so-called “bloodless revolution in Georgia” is yet another example of US imperialism expanding its influence in Russia’s former satellites.

They are behaving in a similar way to the past, when they seized control of parts of the collapsed Chinese empire. After the war in Afghanistan the Americans have been systematically installing themselves in Central Asia, getting control of oil supplies, building pipelines, establishing bases. This will have very far-reaching consequences in the future. The long-term strategic goal of US imperialism has always been to conquer Asia. That was the case ever since they seized the Philippines over a century ago. But the situation is not the same as it was in the past, when China was weak and defenceless. Then the attempt to dominate China led to the Pacific War with Japan. Now China itself has become a major power in Asia, both economically and militarily. The launching of a Chinese space satellite announces to the world that China considers herself to be one of the great powers.

To paraphrase Napoleon, once Asia with its teaming millions and vast resources is shaken out of its age-old slumber, the world will tremble. The Pacific basin, which geographically includes both the West Coast of the USA, Japan and Russia, is clearly destined to emerge as the centre of events in the 21st century. It will play the same role that was played by the Atlantic in the 20th century and the Mediterranean in the ancient world. The productive potential of Asia is immense. We already had a glimpse of this potential with the spectacular advance of the Asian “tigers” in the 1980s and first half of the 1990s. In the future, on the basis of a socialist plan of production that will unite the economies of the whole region on a rational basis, the sky will be the limit.

However, on a capitalist basis, the emergence of powerful economies in Asia will not lead to peace and prosperity but new dangers for humanity. New fault lines will develop, especially in Asia. The coming centre of world history will be the scene of new conflicts and wars. The way in which Bush and the other bandits in the White House have been bullying North Korea, using the excuse of nuclear weapons, is a further indication of its willingness to meddle in Asian affairs, alleging a threat to its national interests. But despite all the puffing and blowing, they do not dare to attack North Korea as they attacked Iraq, since it has a powerful army and missiles capable of delivering a devastating response.

Despite the present apparent détente with China, the USA will inevitably come into collision with China in the future. The present frictions over trade are an anticipation of this. The present situation of a world dominated by a single great power will not last forever. It is leading, paradoxically, to a greater fragmentation of the world, both politically and economically. Out of this chaos will emerge new power blocs and alliances, the main purpose of which will be to contain and confront America. China will play a key role in this, challenging America for the role of the leader of Asia. The logic of events dictates that China and Russia, and possibly India, will come together in the future in a bloc against the USA in Asia.

Iraq

Bush and the right wing Republican clique in the White House anticipated that the invasion of Iraq would be a “splendid little war”, to quote the celebrated phrase of Theodore Roosevelt – a war that could be won quickly and with few American casualties. But in fact things were not so simple. They are now trapped in a quagmire that can last for many years. Every day there are reports of new American dead and wounded. The Iraqi resistance is getting bolder and more confident to the degree that the foreign occupation forces are more hated by the population.

They have blundered into an area where their presence only serves to exacerbate the problems and create chaos. Even the prospect of looting Iraq’s rich oil reserves is in doubt as a result of the sabotage of oil pipelines and the general chaos. The morale of the US troops in Iraq is low and even bordering on the mutinous, as shown by the open attacks on Rumsfeld. Unfortunately, the US has no alternative but to stay in Iraq, because the consequence of pulling out when none of its objectives have been realised would be even more catastrophic.

Despite all the promises that the US occupation of Iraq will be “temporary” and that Washington has “handed over” power to the Iraqis, the fact is that the country is now a US protectorate or semi-colony. The so-called Iraqi government is really a puppet administration and a government of collaborators. Nobody doubts that the US army controls everything and decides everything. They have even installed themselves in Saddam Hussein’s palaces, which they are renovating to make themselves more comfortable as they plan the destiny of Iraq. These are not the actions of people who are planning to leave soon.

In part, this is a simple business calculation. The US spent a lot of money on this war, unlike the last Gulf War, which was paid for by Saudi Arabia and the other “allies”. Bush, Rumsfeld and Cheney are oil men and they want to make sure they and their friends in the big US oil companies and construction industry get a good slice of the profits from Iraqi reconstruction before they finally decide to leave. Anyway, the US must ensure its oil supplies in the Middle East, especially since Saudi Arabia is now looking decidedly shaky. On the other hand, possession of Iraq gives America a useful base for operations throughout the region. It therefore has both an economic and strategic importance that far outweighs the inconvenience of a few dead and wounded American soldiers. Moreover, it is necessary to keep the French, Germans and Russians out of Iraq, while simultaneously pressurising them to provide money to finance their occupation of Iraq. This is a very complicated task!

The amount of money needed to continue the occupation of Iraq is already huge and the future expenditure unknown. The IMF, the World Bank and the UN have estimated that Iraq will need US$36 billion for reconstruction within the next four years, in addition to $19 billion for other non-military needs calculated by the American occupation regime. Even an economic giant like the USA cannot afford such a colossal drain on its resources over a long period of time. $15 billion will be needed for the restoration of oil, water and electricity supplies alone. Iraqi oil production will not be enough to pay these bills in the near future. Current oil exports amount to a mere $500 million a month.

Bush’s tax cuts and the soaring war costs should be put in the context of the gaping and record-breaking budget and trade deficits currently facing the weak US economy. The US trade deficit has already gone over the perilous 5 percent mark and still rising; while the budget gap has been a rapid reversal from the uninterrupted surpluses, way into the future, promised in previous years. Add to this $5 billion a month, the cost of occupying Iraq, excluding reconstruction, and we have a figure that is already approaching that of Vietnam. This cannot continue. Therefore the Americans are looking around for others to pay the bills. That is why they went back to the despised UN to ask for help.

The hypocrisy of the American imperialists is really staggering. The draft UN resolution tabled by the US at the Security Council was denounced by the usually pliant Secretary General Kofi Annan. In it, the US “appeals to member states to strengthen their efforts to assist the people of Iraq in the reconstruction and development of their economy”. It also “calls upon member states and concerned organizations to help meet the needs of the Iraqi people by providing resources necessary for the rehabilitation and reconstruction of Iraq’s economic infrastructure”.

The resolution even asked the UN to finance Iraq’s electoral process. It “requests the secretary general to ensure that the resources of the United Nations and associated organizations are available, if requested by the Iraqi Governing Council, to help establish an electoral process in Iraq ...” Bush has stated that this war was waged in order to give the Iraqis “the gift of democracy”. In fact, they have given the Iraqi people the “gift” of unemployment, hunger, disease, chaos and devastation.

The bourgeois of Europe are obviously not willing to finance the US unilateral corporate invasion of Iraq. They have their own interests to think about. The USA possesses colossal resources, but nevertheless these resources are not unlimited. By launching the so-called global war on terror, the USA will over-reach itself. This is already proving a severe burden on the US economy. The problem is that America’s “allies” are not prepared to pay out huge sums of money to help Washington take control of Iraq and its vast oil reserves. At one point the European Union was reported to be thinking of giving only a miserable $250 million to Iraqi reconstruction. This is not even 1 percent of the required total, and US officials were reportedly “shocked” at the amount. Canada, for its part, is willing to share $200 million. Only Japan has been reported to be willing to give a relatively large sum of $5 billion because of its reliance on Middle East oil. Still, even when all these sums are added together, they amount to a trifling sum compared to the required $36 billion.

The only answer is to squeeze the money out of the Iraqis themselves. Senator Byron Dorgan insists that the US “should not shoulder the whole burden on its own. Iraq has enough oil to pay for part of the reconstruction effort”. Defence Secretary Donald Rumsfeld is more adamant. “I don’t believe it’s our job to reconstruct that country after 30 years of centralized Stalinist-like economic controls in that country,” he said, as though the damage had nothing to do with the cruise missiles and the decade-long embargo. “The infrastructure of that country was not terribly damaged by that war at all,” Rumsfeld maintains. But the plan of US imperialism is to make the Iraqi people pay for its war of aggression will cause all kinds of new contradictions.

The looting of Iraq is already underway. The US handpicked Iraq Governing Council’s (GC) Finance Minister, Kamel al-Kelani, announced some time ago that all of Iraq’s assets and state-owned corporations, except the oil industry, would be sold off. As sweeteners, the buyers would be entitled to 100 percent ownership of their purchase, full repatriation of profits, and minimal taxation. Given Iraq’s present condition, the items on the bidding block will come very cheap. But in a few more years, what was bought at dirt-cheap prices – using the Iraqis’ oil revenues – could then be sold for a nice profit. However, given the chaotic situation of the country, the constant uprisings and guerrilla attacks on oil installations, it is not clear that these plans will ever materialise.

Making use of the Iraqis’ assets for reconstruction means that the Iraqis themselves will be paying for rebuilding what the Americans destroyed. The use of the Iraqis’ money to finance the massive privatisation scheme of their economy means that the Iraqis themselves will be paying US corporations to buy their own assets from them. Incidentally, this is a violation of the Geneva Convention, which states that humanitarian assistance, aid, reconstruction and other development expenses are the legal and moral obligation of the occupying forces. This, of course, does not bother Washington very much. But the oil coming out of Iraq has only been able to fill around 1 million barrels a day (mbd) – far less than on what the US originally based their plans.

Analysts say it would take another 18 months more before the output could even begin to hit the pre-war production level of 3 mbd. And this does not take into consideration the sabotage of the pipelines. All this only adds fuel to the fire. The Iraqi people resent the occupation of their land by imperialist robbers. The anti-imperialist sentiment of the masses provides a firm base for the resistance fighters, who are sabotaging the pipelines and attacking oil installations. Given the parlous situation, the multinational oil giants are, understandably, keeping their distance. “There has to be a proper security, legitimate authority and a legitimate process ... by which we will be able to negotiate agreements that would be longstanding for decades,” Sir Philip Watts, chair of Royal Dutch/Shell, was quoted as saying. “When the legitimate authority is there on behalf of Iraq, we will know and recognize it.”

In an attempt to pay its Iraqi bills, the US is considering converting Iraq’s expected future oil revenues into marketable securities that could be sold at discounted rates in the present. This implies that the US – despite the so-called handover – will be in Iraq for a long time. It also raises the question of whether the US has the right to decide on matters which should normally be reserved for legitimate and sovereign governments. But such legal niceties do not worry George W Bush overmuch.

The Bush administration has given its richest taxpayers $1.8 trillion in tax cuts, but it cannot afford to spend $20 billion on the people it has just “liberated”. Republicans overturned Democrat efforts to fund the war by raising taxes from the wealthiest Americans. Indeed, a number of these will be profiting handsomely from the post-invasion boom in Iraq. The cynicism with which these gentlemen express themselves is really breathtaking: “You have to offer them a piece of the cake,” advised the French politician and former UN special representative to Kosovo Bernard Kouchner. With over $100 billion dollars or more at stake – said to be one of the most profitable building programmes in decades – there will be a big cake to pass around. But it is clear that the lion’s share of the loot has gone to big US companies, with only slim pickings for the Europeans, and not much more for the British. The Iraqis themselves get next to nothing.

Germany, France and other potential donors want assurances that their corporations will not be shut out of Iraq by US corporations. In other words, the European imperialists will give no serious money unless their corporations are assured of getting invitations during the slicing of the cake. So far, they've had to settle for crumbs. The slogan of the US imperialists is “the winner takes all.”

This resembles the struggle of wild beasts for possession of a corpse. The lions get most, and the hyenas, jackals and vultures must wait till they have sated their appetite and content themselves with the bones. US Federal Procurement laws decree that government contracts for Iraq can only go to US corporations which, in turn, are free to hire subcontractors as they deem fit. Big US companies like Halliburton and Bechtel not only grab the lion’s share of the work for themselves but also decide which foreign firms get whatever subcontracting work is available.

The big US corporations make no attempt to conceal their shameless activities in Iraq. The Iraqi people are being forced to pay the Americans for rebuilding the schools, hospitals, roads and bridges torn down by the US military. Using money borrowed from the US, Iraqis will need to pay the very same corporations that would have had no business in Iraq if there were no war. Vice President Dick Cheney, who allegedly pushed intelligence agencies to exaggerate their Iraq findings, still maintains financial interests in Halliburton, the Congressional Research Service officially declared recently. This is a regime of criminals and crooks who are willing to plunder the whole planet and do not even bother to conceal the fact that they are enriching themselves through looting.

This nauseating spectacle is unfolding before the eyes of the world. Many people are beginning to understand that this war was not fought for democracy or the cause of the Iraqi people, but solely for the profits of the big multinationals and the greed of US imperialism for Iraqi oil. This can also lead to a transformation of consciousness, especially in the USA. In the end, however, the Americans will find that the costs of holding down a hostile population in Iraq outweigh the potential economic benefits. This is what persuaded De Gaulle to pull the French army out of Algeria at the end of the 1950s. But if that happens, the results will be disastrous for US imperialism throughout the Middle East. Yale University economist William Nordhaus warned long before the war, “If American taxpayers decline to pay the bills for ensuring the long term health of Iraq, America may leave behind mountains of rubble and mobs of angry people.”

Dialectics explains how sooner or later things turn into their opposites. The Iraqi adventure will cost the USA dear. The constant financial drain and the loss of life with no end in sight will begin to have an effect inside the USA. Already Bush’s popularity is falling. Even within the Republican Party doubts are being expressed. However, the Democrat candidate Kerry has not put forward a fundamentally different position to that of Bush. In reality they have the same position in all essentials.

Whoever wins the Presidential election will be faced with a massive revolt at a certain stage. The murmurs of discontent will grow into a torrent of protest as time goes on and the reality of the situation dawns on people. It is yet another example of how American imperialism’s role of world policeman in a period of capitalist decline is undermining it at home, where it has dynamite built into its foundations.

The Middle East

The idea that the US invasion of Iraq would somehow bring about stability in the Middle East has been exposed as hollow. In reality there is not a single stable regime in the Arab world. Even the regime in Saudi Arabia is staring overthrow in the face, which is why it has been obliged to distance itself from the actions of US imperialism recently. That will not save it. Living standards in Saudi Arabia have fallen 80 percent in the past twenty years. There is a ferment of discontent. The aggressive actions of the USA have exacerbated this discontent to the extreme.

Immediately after the fall of Baghdad there was naturally a stunned reaction throughout the Arab world. The speed with which one of the most powerful armies in the Middle East was defeated shocked the Arab masses, who were led to expect something different. But the disappointment will soon give way to rage and indignation. This will be directed as much against the pro-US Arab ruling cliques as against George Bush. The universal ferment will give way to explosions and the toppling of one degenerate Arab ruler after another. Coups, rebellions, terrorist acts and assassinations are on the order of the day. This was shown by the bombings in Turkey.

The US invasion of Iraq has not strengthened its position in the Muslim countries but seriously weakened it. A recent global opinion shows that favourable attitudes to America have declined sharply everywhere, not just in the Middle East. In Indonesia the figure has fallen from 61 percent to 15 percent, in Turkey from 52 percent to 15 percent, in Jordan from 25 percent to 1 percent and so on. This means that those regimes that support the Americans are hanging by a thread. The thread can snap at any time.

Palestine remains a festering ulcer that permanently threatens to destabilise the Middle East. Washington had the delusion that it could use its military victory in Iraq to stabilise the region, which is vital for its strategic and economic interests. In fact it has achieved the precise opposite. The so-called Road Map collapsed almost immediately. The idea of an independent Palestinian state was a non-starter from the beginning. What the Israelis wanted was a puppet state that would police the Palestinians on their behalf, while accepting some of the outward trappings of “independence”. Such an arrangement would never be accepted by the Palestinian masses.

The plans of Tel Aviv are reminiscent of the Irish Free State in 1922, which was used by British imperialism to crush the Republican movement and foist a truncated “state” on the Irish people. The result was a bloody Civil War. Michael Collins, who signed the agreement, was assassinated. The same fate would await any Palestinian leader who signed a sell-out agreement with Israel.

The whole thing was unviable because Sharon does not want peace. His slogan is “what we have we hold.” The construction of a wall between Israel and the Palestinian areas is a clear admission of this fact. It is also a means of seizing even more Palestinian land – an open provocation. The result was a new spate of suicide bombings, to which the Israeli imperialists replied with their customary brutality. They believe in the motto “an eye for an eye, a tooth for a tooth”, except that here for every Jewish life lost they kill and maim many more innocent Palestinians. The building of the so-called security wall will not prevent new terrorist attacks. They will always find a way around it.

The result is a further twist in the infernal cycle of violence and counter-violence, with no end in sight. The ceasefire lasted just seven weeks before being blasted apart by the suicide bombing in Jerusalem. In fact, the so-called truce was a farce from the beginning. The Israeli forces did not withdraw from the occupied territories but only pulled back a few dozen metres from Bethlehem and opened a few roads in Gaza. They removed only five roadblocks out of a total of 220 on the West Bank. The settlements were not frozen.

The recent events have ruthlessly exposed the impotence and bankruptcy of the PLO leadership. Arafat is clinging obstinately to power, but he is quite impotent to show a way out. He intrigued against the US stooge Mahmoud Abbas, but in reality his only difference with the latter is that he would like to become the US stooge himself. All his appeals have been directed to “the international community” – that is, to the US and European imperialists. He has no trust in the masses and would like to reach a deal with Tel Aviv and Washington. The trouble is that no real basis for such a deal exists.

Thus, all the manoeuvres and deals have come to nothing. Sharon had no intention of making any serious concessions and was merely waiting for an excuse to renew hostilities. Bush cannot put serious pressure on Tel Aviv (there are elections coming up, and one must think of the Jewish vote). Thus, Sharon can turn a deaf ear to the proposals from the outside world. He feels he can act with impunity because in the last analysis Washington needs a reliable ally in the Middle East. However, he also has nothing to offer.

The proposal to withdraw from Gaza was in fact a tactical manoeuvre to strengthen Israel’s hold on the all-important West Bank. The full-scale reoccupation of the West Bank and Gaza would mean the imposition of martial law over 3.5 million Palestinians – a daunting task and a very costly one when Israel is in a deep economic crisis. It led to resistance in the past and would do so again. Moreover, this time the Palestinians have weapons and some 30,000 armed policemen. Therefore Sharon proposed a “compromise” which was no compromise at all. It was much too little for the Palestinians and much too much for the Jewish hard-liners. It provoked a new wave of clashes with the Palestinians and a government crisis in Israel. Thus we arrive at the point of a bloody stalemate, which can only be broken finally by revolutionary means.

Here too there are important tactical differences between Europe and America. The European imperialists, worried about the effects in the Middle East, would like to put more pressure on Tel Aviv to make concessions to the Palestinians. They are prepared to work with Arafat, whereas Sharon has made no secret of his desire to have him removed – preferably feet first, and Bush was evasive on the subject. However, since the killing of Arafat would undoubtedly be the signal for a general wave of violence and protests throughout the Arab world, and since this would be inconvenient for the imperialists and their Arab stooges, they put sufficient pressure on Tel Aviv to put a stop to these plans. However, this has not altered the stalemate in the slightest.

The point is that the differences remain insurmountable. This does not mean there cannot be a new deal. On the contrary, we can predict that some kind of new deal will inevitably be put together, probably after Sharon leaves the scene. In fact, there will be one deal after another. But each time they reach some kind of ramshackle compromise it will break down again in a welter of blood and mutual recriminations. On a capitalist basis no lasting solution is possible.

Europe and the Middle East

The rivalry between the European and American imperialists extends to the Middle East and Africa. Part of the calculations of Bush in pressing on with the invasion of Iraq in defiance of the Security Council was to exclude the French, Germans and Russians from the region. They thought that they could win an easy victory without the involvement of the Europeans, and then grab the oil wealth of Iraq and distribute the lucrative construction contracts to the big US companies that financed the Republican Party and are now looking for their reward. Even the British were to be frozen out – a suitable reward for their slavish “loyalty”.

But things did not work out as Bush and Rumsfeld expected. The Iraqi resistance is causing havoc with their plans, killing a large number of American soldiers, delaying reconstruction and causing a serious drain on American finances. Therefore Washington tried to make overtures to Europe to participate in the mess they have created in Iraq. But Europe is not anxious to take up this burden. The French are rubbing their hands with ill-concealed glee at the discomfiture of their transatlantic rivals. The British remain in an uneasy alliance, and are thrown a few small bones in the shape of construction contracts for their trouble. But the gap between Europe and America over Iraq remains as wide as ever.

Having been excluded from Iraq, the Europeans are now looking to Iran as an alternative base. The overtures of the EU to Teheran are no coincidence. While Washington blows hot and cold about the “Axis of Terror”, Paris and Berlin are striving for good relations with the mullahs. Teheran is using the issue of nuclear arms as a bargaining chip and as a means of deterring American aggression. After the invasion of Iraq, who can doubt that the possession of real weapons of mass destruction is a very good investment! That is the conclusion that has been drawn by both Iran and North Korea. Even on this level the conduct of the US has had the opposite result to what was intended. But the European bourgeois are not put off by the question of nuclear weapons. They are interested in getting their foot in the door and obtaining privileged access to Iranian oil.

There are also political motives for the friendly overtures of the EU to Teheran. Iran is a key country in the region, and it is poised on the brink of a revolution. After more than 20 years of rule by the mullahs the masses are becoming restive. The movement of the youth and the open splits in the ranks of the regime are clear warnings of the onset of a revolutionary crisis. A revolution in Iran would have a powerful effect throughout the whole region, not just in the Middle East – starting with Iraq – but in Turkey, Pakistan, Central Asia and Afghanistan. The European bourgeois are trying to shore up the regime against revolution, while encouraging the “reformers” in the hope of bringing about concessions in order to prevent an explosion.

But no amount of manoeuvring from Paris, Berlin, London or Washington can prevent upheavals that are rooted in the objective situation itself. Bush and co. calculate that in time the people of the Middle East will come to accept the American occupation of Iraq as a fait accompli. They will see that America’s crushing military superiority makes resistance futile, and that therefore it is better to come to terms with Washington and accept its dictates.

This is a complete misreading of the real state of affairs. The problems of the masses are getting worse every day. Unemployment, poverty and disease are the fate of millions who live in a region that possesses all the prerequisites for universal prosperity. This contradiction is known to the masses, who will not be held down forever by repressive and dictatorial regimes backed by US imperialism. The situation was unbearable before. Now, with the American army rampaging through the region, it is a thousand times worse.

To the degree that people conclude that it is impossible to defeat the Americans on the battlefield, their attention will turn to enemies who are nearer to home and easier to defeat. The combination of economic crisis, national humiliation and corrupt, pro-imperialist regimes, is an explosive mixture. The question is not whether the revolution will break out but only where and when it will begin.

The main problem facing the Arab revolution is the subjective factor. In the past the Communist Parties had a mass base in many countries in the Middle East. They could have carried out a proletarian revolution on many occasions in countries like Iraq and Sudan. But following the Moscow line of “two stages” they threw the opportunity away and subordinated the working class to the rotten Arab bourgeoisie. The workers and peasants paid a terrible price for this betrayal.

The collapse of Stalinism has left a vacuum that was temporarily filled by the Islamic fundamentalists. But they have no alternative to the capitalist system. Their tactics have been exposed as bankrupt. They cannot defeat US imperialism. That can only be achieved by the revolutionary movement of the proletariat and peasantry on a socialist programme. The bourgeoisie has had half a century to show what it can do, and it has failed miserably. The revolution must sweep aside the rotten and corrupt Arab bourgeois regimes and establish a regime based on the rule of the workers in alliance with the poor peasants, small shopkeepers and urban poor.

The prior condition for success is the building of strong proletarian revolutionary parties armed with the ideas of Marxism. Some people in the Middle East say: “We do not hear these ideas any more!” Yes! And precisely for that reason the movement has been shipwrecked. It must be rebuilt! The cadres of these parties will come from the young workers and students who long for freedom and justice, and also from the best of the older generation of Communists who have not abandoned the idea of the socialist revolution. The revolution is inevitable. Armed with the correct programme and policies it will be invincible. But it is necessary to break with bourgeois nationalism, fundamentalism and Stalinism and stand firmly for revolutionary socialism and Marxism!

For over a decade most of the European imperialist countries have enjoyed good relations with the mullahs. Over the past few years, particularly the last two to three years, under the guise of a “constructive dialogue” that is aimed at boosting the “reformers” and moderating the regime’s conduct, the EU countries have been improving their economic and political relations with the regime, as shown by the growing trade and investment. Now that the whole “reformist” wing stands exposed before the Iranian masses, and the “authoritarians” have adopted the main planks of foreign policy of the “reformers”, the Teheran regime is in favour of developing much closer ties with the imperialist countries.

There are occasional differences and temporary reverses, like nuclear weapons research, but the main thrust is to try to ‘normalise’ relations with the imperialist countries. The hypocrisy of the imperialists is shown here with great clarity. If the US requires further concessions before full relations are restored, it is not out of any concern for democracy. We must differentiate between the public rhetoric of the US and the negotiations that have taken place behind the scenes.

Although Iran has been placed within the “Axis of Evil” and the US regularly blocks its application for membership of the WTO, relations have improved following the 11 September attacks and the invasions of Afghanistan and Iraq. Iran has consistently helped rapacious US imperialism in occupying its neighbours. More recently it has mediated with the Iraqi Shias. This indicates important shifts. In May 2003 the Iranian regime even offered to hold talks with the United States on nuclear weapons and terrorism. But the hawks in the US government vetoed this.

While one section of the Bush government talks tough the other is improving relations where it counts: the US recently extended the easing of sanctions which followed the Bam earthquake. It will take a few years for US imperialism to resolve the many outstanding issues it has with the Iranian regime. In the meantime the capitalists of the EU, Japan and other countries are benefiting at the expense of the Americans.

The EU countries, and the UN, are also helping the regime in improving and modernising its economy and developing foreign trade and investment. World Bank lending to Iran resumed in 2000 after a hiatus of seven years and the current portfolio consists of a total commitment of $432 million. According to the World Bank these operations help “to support Iran’s reform efforts”. There are now a whole range of other UN agencies helping the regime “meet its international commitments”, including “fighting terrorism”, repatriating Afghan refugees and so on. The main aim, however, is to bolster the regime and pacify the mass movement.

The imperialists are terrified of revolution in Iran and this mutual fear is what ties them to the mullahs. In addition to the students’ protests, many other sections of society have been protesting, demonstrating, marching and even winning some small battles. The most important element in this equation is the working class. The struggles and strikes against unpaid wages, temporary contracts, factory closures, privatisation, massive unemployment, rampant inflation and so on are mostly met by the silence of the world’s media.

In Iran a simple protest can not only lead to bloodshed but also the refusal of the advocates of “constructive dialogue” to publicise it. The protest by laid off contract workers and their families at the Khatoonabad copper smelting plant in January 2004 led to four workers being shot dead by the riot police. The government’s use of riot police, special police units and helicopters to kill and maim workers and their families can break up individual protests. Death and serious injury, however, have become a part of daily life for working class families. That is why this atrocity did not result in a downturn in struggles but to a call for a five-minute general strike.

The recent May Day arrests, and the subsequent release of all workers and activists, show a clear shift in the balance of class forces in Iran. For the first time in its twenty-five-year history this regime has backed down under the pressure of workers struggles. (Although it has gone back onto the offensive on this question now). It is therefore no surprise that one of the most active UN agencies in Iran has been the International Labour Organisation. The ILO has been giving the Iranian capitalists and their regime the advice and training they need to create ‘trade unions’ which will suffocate all radical action by workers. This is a reactionary response to the steady rise in workers’ struggles in Iran during the last few years that has been disguised as ‘concern’ for trade union rights.

The revolution in Iran will develop over a period with ups and downs, but it is absolutely inevitable. When that happens, it will have a powerful effect throughout the whole region, not just in the Middle East – starting with Iraq – but in Turkey, Pakistan, Central Asia, Afghanistan and the Caucasus. It is a key element in the world revolution today.

Impasse in Afghanistan

The United States has been involved in the Afghan theatre of operations for since it succeeded in overthrowing the Taliban government in late 2001. Despite all its efforts, the U.S. has been unable to establish anything resembling stability. It has created the impression of some semblance of order in Kabul – where the “national” government is located – but outside Kabul, they have little or no control. The American forces do not even control the same territory that the Soviet army controlled in the years 1979-1989. In fact, the United States is not really attempting to control the entire territory of Afghanistan.

The U.S. is maintaining the fiction of a “united” Afghanistan, without providing any troops to enforce central rule. The NATO-led International Security Assistance Force (ISAF) patrols only Kabul and the immediate surrounding area, while various regional warlords and their militias rule their respective territories. The attempt to deceive world public opinion by holding so-called elections in Afghanistan has been cruelly exposed by a new series of attacks by the Taliban and other anti-American elements.

Instead of defeating them, the Taliban and its sympathizers remain free to roam largely at will and conduct hit-and-run guerrilla attacks. Although al Qaeda can no longer use Afghanistan as a major training base, it is still active there and is using the country as a launching pad to send its fighters into Iraq. This is ironical, given the repeated assertions by Bush and Blair to the effect that the invasion of Iraq was justified by the presence of al Qaeda. In fact, they were not present before the invasion – but they certainly are now!

It is true that al Qaeda has been unable to mount a major strike on an U.S. target since Sept. 11, 2001. But it has attacked “soft” targets in places like Casablanca, Bali, An Najaf, Riyadh, etc. Above all, they have obviously been participating in the attacks on US forces inside Iraq. All that the American imperialists have managed to do is to spread instability to other parts of the region – especially Pakistan. The mountainous border region of the Afghan-Pakistani border region is porous, relatively unguarded and home to the Pashtoon ethnic group that lies across national boundaries. Al Qaeda has in all probability moved its main forces into this region, where it is difficult for U.S. forces to operate.

A blow against al Qaeda would be a good way of diverting American public opinion away from the bloody mess in Iraq. But there is a problem. Al Qaeda is based in Pakistan, which is a key ally of the USA, and also extremely unstable. Washington has been tightening the screws on Islamabad recently. With its usual bullying arrogance, US imperialism is mercilessly pressurising its “ally” Musharraf. In effect, they are telling him: either you sort out al Qaeda, or we do it for you! This is alarming the ruling circles in Islamabad.

The Americans want decisive action against the Taliban and al Qaeda and their supporters in Pakistan. It is only a matter of time before some dramatic events occur in the region. The Afghan-Pakistani border is rugged mountainous terrain, perfect for guerrilla operations. The frontier itself is porous, permitting constant guerrilla infiltration: The winter weather and the mountains do not permit the deployment of tanks and other equipment needed for conventional modern warfare. Thus, America’s technological advantage is severely reduced. Above all, their enemies can count on the support and sympathy of the local Pashtoon population.

This was shown by the spring offensive by the Pakistan army in Northern Pakistan, which ended in a farce. The Pashtoons bitterly resent the activities of US imperialism in their homeland. For a long time, the Northwest Frontier Territories has been a virtual no-go area for the Pakistan army. The attempt to launch a fully-fledged offensive there was bound to be a bloody business and fraught with dangers. It solved nothing but further undermined the already fragile regime of Musharraf. As we predicted, it further increased the fury of the fundamentalists, who have points of support in the tops of the army and that hotbed of reaction, the Pakistan Intelligence Services – the ISI.

Instability in Pakistan

The position of the Pakistani regime is very weak and unstable. Musharraf is trying to balance between U.S. imperialism and the militant Islamism that was built up over decades by the ISI and the Pakistan army with the active connivance of Washington. Now, because this no longer suits US imperialism, they demand Pakistan’s unconditional backing for the so-called war against terrorism. But by so doing they are aggravating all the explosive contradictions in Pakistan.

Musharraf has tried to put a safe distance between his government and the United States, but everyone knows that this is a lie. He is increasingly seen as a puppet of Washington. This is the kiss of death for his regime. The anti-Americanism of the mullahs has reactionary overtones, but the anti-Americanism of the Pakistani masses is an expression of a deeply felt anti-imperialism. The merciless U.S. pressure on their puppet Musharraf is undermining him completely in the eyes of the population. There will be mass demonstrations against imperialism that can quickly turn into mass protests against the dictatorship. There have already been three or four attempts against Musharraf’s life and new attempts will be inevitable under these circumstances. The regime is hanging by a thread. It can fall at any time.

The Bush administration is indifferent to the fate of their “ally” in Islamabad. They are hell-bent on the destruction of al Qaeda and the capture or killing of bin Laden, and if this means the fall of the Pakistani president, so be it. From the standpoint of Washington, such “allies” can be purchased at two to the dollar. In the grand order of things, what does it matter if there is a change of regime in Islamabad? There have been plenty of such changes in the past, and there will be plenty in the future!

Musharraf is under no illusions as to the value of American friendship. Therefore he is desperately trying to persuade his countrymen to take action against the “extremists” before it is too late. Under pressure from Washington he has made concessions to India over Kashmir and has even taken steps to close the bases of some of the jihadi groups. But whatever he does will be too little and too late. India and the USA will make new demands all the time. Eventually, he will not be able to comply.

Time is running out for Musharraf. How long he can cling to power it is not possible to predict with accuracy. But one thing is clear: the present regime is very unstable and cannot last. When its time has come, US imperialism will have to find a replacement – a “second eleven”, as they say in cricket. They have a replacement in the person of Benazir Bhutto. She has expressed her firm support for the USA, even though such support is the kiss of death for any government in Pakistan.

When Benazir returns, she will do so in a situation very different to when she left. The masses will be aroused. It is inevitable that the masses that have been recently reawakened to political life will look to the PPP. That is a law. The politically untutored masses will look to the well-known names, the big parties and the traditional banners. The memory of the masses is short, and they are very forgiving towards their leaders. That places a PPP government on the order of the day.

But the next PPP government will not be like the previous two. From the beginning it will be under the pressure of the masses, which will vote for the PPP because they want a change in the conditions of their lives. They will be prepared to wait a little, but not too long. They will demand results and will not be prepared to accept for long the usual excuses of the leaders. The government will be squeezed between the pressure of the masses and the merciless pressures of imperialism and the ruling class. It will be ground between two millstones.

This means that it will be a government of crisis from the beginning. There will be convulsions and splits in the party. At a certain stage a mass left wing will emerge, which under the extreme conditions existing in Pakistan can quickly take on a centrist character – that is, a position that vacillates between Marxism and left reformism. It is not likely that the party could hold together under such circumstances. There will be an open split between the bourgeois and feudal elements in the leadership and the worker and peasant base. This will open up very favourable circumstances for the growth of the Marxist tendency.

In the revolutionary period of 1968-9, the Pakistani workers and peasants could have taken power ten times, but they were paralysed by the leadership. But the revolutionary traditions of that period still live in the memory of the class. They are expressed in the original programme of the PPP, which contains the expropriation of the banks, land and industry under workers’ control and the replacement of the standing army by the armed people. When the workers and peasants of Pakistan once again enter the arena of struggle, they will demand a return to these ideas. The difference is that this time they will have a genuine Marxist tendency to lead them.

It is possible that the first breakthrough of the world revolution will come in Pakistan, where the conditions – both objective and subjective – are maturing rapidly. The ruling class is split and demoralised. The middle class is in a state of ferment. The working class has largely recovered from past defeats and preparing to enter the struggle. Last, but not least, the Pakistani Marxists have built a strong base in the mass organizations. They have adopted the correct tactics and methods of work and are well place to lead a mass movement that will shake the whole Subcontinent.

The Pakistan Marxists have shown tremendous energy and élan, combining all kinds of different work – trade union, youth, parliamentary, etc. – with great creativity. Their striking successes have opened up important possibilities in what is the key country in the Subcontinent – India.

A decisive element in the equation is an internationalist policy. If the Pakistani Marxists come to power, they will have to make an appeal to the workers and peasants of India to support them, or the reactionary Indian bourgeoisie will join hands with the Pakistani landlords and capitalists to crush the revolution, as they did in Bangladesh in the past.

The colossal potential of the Indian proletariat

The spectacular defeat of the reactionary BJP government was yet another example of the inevitability of sudden and sharp changes in the situation. None of the official media even considered such a possibility. The BJP itself was confident of success. Their election campaign was based on the slogan: “Shining India”. But the election result showed that for millions of people, India was far from shining, but rather a nightmare of poverty, hunger and despair. Power cuts, pot-holed roads, and polluted water, corrupt government, illiteracy, hunger and pogroms – these are the normal conditions for millions of Indian workers and peasants today. With 17 percent of the world’s population, India accounts for less than two percent of global GDP and one percent of world trade.

Superficially the Indian economy was developing rapidly, with an annual growth rate of eight percent. But such figures conceal as much as they reveal. In towns like Bangalore a minority of middle class people have good jobs and wages. In the villages there is extreme backwardness, with mud roads and no clean drinking water. India there cannot shine because there is no electricity. For the 70 percent of the people who live in the countryside, there was darkness not light. Three quarters of the cultivatable land is without irrigation. 300 million live on less than one dollar a day. 47 percent of children under five are underweight and life expectancy is 63. Only 58 percent of the population is literate, as opposed to 85 percent in China. Only two percent of GDP is spent on education.

This is the balance sheet of over half a century of independence on a capitalist basis. Since the criminal partition of 1947 the bourgeoisies of India and Pakistan have demonstrated their complete inability to carry society forward. The Indian bourgeoisie once claimed to be secular, democratic and even “socialist”. Then the ugly face of reaction was revealed in the shape of the BJP. But the rise of the BJP was the result of the bankruptcy of Congress, which, after decades in power, failed to solve any of the fundamental problems of Indian society.

Now Congress has returned to power. But Manmohan Singh has no answer to the pressing problems of the Indian masses. He is an enthusiastic advocate of “market economics”. Both the BJP and Congress are reactionary anti-working class parties. What is needed is an independent class alternative. The most important element in these elections was the huge vote for the Communist Parties. This shows that the masses desire a fundamental change.

The CPI and CPI (m) have a mass base among the workers and peasants of India. They must break with the bourgeoisie and Congress and prepare for power. The only way out is the formation of a workers’ and peasants’ government with a real socialist programme. Such a programme would receive the enthusiastic support of millions of workers, peasants, dalits and members of the oppressed nationalities. It would instantly cut the ground from beneath the feet of the communalists and reactionaries. If the working people of India were strong enough to defeat the British Raj, they are strong enough to defeat the Indian landlords and capitalists. What is required is strong and determined leadership!

If the Indian bourgeoisie has failed India, the even more reactionary and corrupt Pakistani bourgeoisie has ruined Pakistan and brought it to the very edge of barbarism. On a capitalist basis no way forward is possible for either India or Pakistan, or any of the other nations that make up the Subcontinent. Bangladesh is a picture of backwardness and terrible poverty. Sri Lanka has been wrecked by decades of bloody civil war and ethnic strife. Nepal too is plunged into an internecine civil war. Kashmir languishes in chains. Everywhere the masses are exploited, oppressed and humiliated.

The Indian working class is the most powerful in the region. It has very militant traditions, as shown by the 50-million strong all-India general strike against the BJP government’s privatisation plans in April 2003, and again in the magnificent general strike of February 24, 2004. An estimated 50 million people including Government employees, observed the nationwide February general strike, demanding a review of the Supreme Court judgment on the right to strike and reversal of the Government’s economic policies.

The strike was total in the Left-ruled States, and had an important effect throughout the country. The strike, called by the central trade unions and industrial federations, was total in West Bengal, Kerala and Tripura and resulted in a semi-insurrectionary (“bandh-like”) situation in Assam, Haryana, Orissa and Jharkhand. The full weight of the state was brought to bear on the strikers. The working class had asserted its right to strike in defiance of the prohibition by the Supreme Court. There were reports of police charges and large-scale arrests in Delhi, Haryana, Orissa and Pondicherry and other states.

The sweeping scope of the strike was impressive. Every section of the class was drawn into the struggle.. The employeess of banks and insurance companies joined the strike. Oil installations in Tripura, Assam, West Bengal and Bihar were affected. A large number of coal miners, employees of public sector undertakings in Bangalore, Hyderabad and Visakhapatnam, plantation workers, construction labourers and those employed in the steel plants in Salem, Durgapur and Burnpur also took part in the strike. The strike hit operations in the Kolkata, Haldia, Cochin, Gujarat, Paradip, Tuticorin and Mumbai ports. Air transpoert was also affected. No flights took off from Kolkata and rail traffic was disrupted in several places.

This magnificent strike shows the enormous revolutionary potential of the Indian working class, once it is mobilised for struggle. It was this movement of the masses that prepared the defeat of the BJP in the elections – not the leadership of Congress. They had no confidence in victory. By contrast, the massive response to the strike by the working class exposed the complete hollowness of the claims of the government that Indian capitalism has created prosperity for all. The pro-market economic policies of the BJP government have benefited a tiny minority of rich exploiters at the cost of deepening poverty, growing unemployment, privatisation and closures and the repeated attacks on the working class.

The Indian and Pakistani bourgeoisies are both terrified of the masses in their own country. Today they need an agreement to pacify the masses. Tomorrow they will create a mood of pro-war hysteria to distract the masses again. There will be no shortage of pretexts – terrorist actions, police atrocities, communal slaughter. All these are implicit in the situation. On a capitalist basis, no lasting agreement is possible. Only the proletariat can show a way out of this terrible impasse by revolutionary means. The working class cannot accept the existing frontiers that cut across all natural boundaries and divide people who speak the same languages and have shared a common history for thousands of years.

The Balkanisation of the Subcontinent is the main reason why it is weak and dominated by world imperialism decades after the achievement of formal “independence”. The proletarian revolution must therefore place at the top of the agenda the slogan of the Socialist Federation of the Subcontinent as the only way out for the peoples of the region. Only by uniting the tremendous productive potential of the whole Subcontinent will it be possible to raise the peoples of this vast and imposing region to their true stature.

Latin America is in the vanguard of the process of world revolution. In Venezuela, where the masses have defeated reaction three times, the revolution is at a crossroads. The Cuban revolution is threatened and can only survive by spreading to the rest of Latin America, starting with Venezuela, but also moving on to countries such as Peru and Ecuador, and linking up with the Bolivian revolution, also at quite an advcanced stage. (August 2004)

Latin America

Latin America is passing through the deepest crisis of its history. It is at present the most advanced region in the world from the point of view of the revolutionary movement. For the last five years the continent has experienced a growing economic, social and political crisis that has resulted in revolutionary events in several countries.

There is not a single stable bourgeois regime in Latin America. Mass strikes and movements, general strikes, the election of left governments, and in some cases insurrections and the beginning of revolutionary processes, have shaken all countries without exception. The general trend is towards revolution and those countries where the movement has not yet reached such an advanced stage are nevertheless moving in the same direction. Venezuela, Bolivia, Argentina and Ecuador are the mirrors that reflect the future development of events in the whole of Latin America. Even in small and formerly more stable countries like Costa Rica and Honduras the capitalists system is in crisis and the labour movement on the offensive.

This is the result of a whole series of economic, political and social factors that have combined to create a highly volatile and explosive situation.

From an economic point of view the whole region has gone through a serious economic crisis in the 1997-2002 period. Bourgeois economic analysts have described this as the “lost half decade”. Production per capita is now 1.5 percent lower than in 1997. Half of the region’s countries have had a negative rate of growth throughout this five-year period (1997-2002), and the others have all stagnated after a period of rapid economic growth at the beginning of the 1990s.

The economic decline is clearly revealed in the following figures. After a period of growth in the 1960s, reflecting the upswing in world capitalism, the productive forces have at best stagnated in the last period. They have not come close to the kind of growth that was achieved in the past. As a result the living standards of millions of people have either stagnated or fallen:

Annual GDP growth:

1960s (5+ percent)

1970s (6 percent)

1980s (<2 percent)

1999-2002 (<1 percent)

Annual growth per capita:

1960s (almost 2.5 percent)

1970s (>3 percent)

1980s (negative)

1999-2002 (approx. 0.5 percent)

Open unemployment has now reached 9 percent according to official figures, which is the highest level in history. Obviously real unemployment and underemployment is much higher, approaching 60 percent of the active population in many countries. In the same period the number of poor in the region has increased by 20 million, with many countries having 50 to 70 percent of the population living under the poverty line (less than US$2 a day) and up to 30 percent living under extreme poverty (less than US$1 a day). In Ecuador, for instance, 15 percent of the population has been forced to emigrate to flee poverty.

But this is not simply a cyclical economic crisis, it is also, to a great extent, the direct result of the economic policies forced on these countries by imperialism and enthusiastically adopted by the local governments, representing a capitalist class completely dependent on imperialism.

In the whole of the continent we have witnessed an open struggle between European and US multinationals to take over control of utilities and natural resources. On the part of Spanish companies and banks this has been a process of re-colonisation of the continent, taking over banks, telephone companies, airlines, oil contracts, etc in Peru, Brazil, Venezuela, Argentina, Ecuador, and elsewhere.

The region’s economies have also been left at the mercy of the vagaries of international capital markets. Thus, after the collapse of the South East Asian economies in 1998, foreign investment dried up. Just a few years ago Latin America received more than US$ 150 billion in foreign investment in one year. By 2002 that figure had gone down to less than US$ 35 billion. Net flow of capital in 2002 had been negative to the tune of US$ 41 billion. As a result a war of competitive devaluations started between countries in Latin America in order to maintain FDI flows. The successive devaluations of the Brazilian currency were the final straw that broke the back of the Argentinean economy. Devaluation did not save the Brazilian economy either. In the first half of 2003 Brazil saw its GDP shrink by 1 percent.

All these factors have combined to make the recessive cycle of 2001-02 the longest and deepest in the region for the last 15 years, and also we see an increased synchronisation of the economic cycle. Thus, while the 1994-96 crisis affected mainly Mexico and Argentina, and the 1998-99 crisis hit mainly the South American economies, the 2001-02 recession has affected the whole of the Latin American continent, that is, South America, Central America and the Caribbean and Mexico. The austerity and privatisation policies applied in the last 10 years have also left the region’s economies extremely weakened and less able to generate economic growth.

In 2002 the GDP of all the countries of Latin America registered falls, with an overall reduction of 0.6 percent in GDP, after a slight increase of 0.4 percent in 2001. These figures express a social catastrophe, since even in periods of growth, living standards have stagnated for the majority. Although there has been a recovery in the recent months, this does not mean a general improvement in living standards. The gulf between the classes has become an abyss. The class war has reached an unparalleled peak of intensity everywhere.

In Ecuador the masses tried to use the elections to force a change in economic policies and voted for candidates that promised everything to everybody in a typical populist fashion, Buccaram and Mahuad. But in every case once in power these bourgeois politicians dressed in populist clothes betrayed the expectations of the masses and faithfully followed the adjustment policies dictated from Washington. In both cases the masses, blocked on the electoral front moved on to mass mobilisations in the streets and overthrew both presidents, the latest one in the revolutionary events of January 2000.

Venezuela was one of the earliest instances in which the masses responded to austerity policies with mass mobilisations in 1989, after the Carlos Andres Perez government, elected with the hope of a return to the “golden days” of the 1970s, immediately applied an austerity package. The “Caracazo” uprising of February 1989 left thousands of people dead and created a deep crisis of legitimacy of the bourgeois political system from which the ruling class in Venezuela has not yet recovered.

In Argentina the masses successively put in power the Radicals, the Peronists and the centre-left FREPASO, but they all applied the same austerity policies. All these experiences have radicalised the movement and generalised the idea that only direct action in the streets can achieve change. There has been a general shift to the left in the continent and a general increase in the sharpness of class struggle. An important factor in this has been the realisation that the much-vaunted “neo-liberal” policies have completely failed in practice. They have failed even more spectacularly in those countries which applied them most thoroughly and that were considered as “model pupils” by the IMF, particularly Argentina.

Furthermore, in no country have the masses suffered any serious defeats. On the contrary there has been a string of victories in which the workers and peasants, with mass mobilisations in the streets and in some cases using insurrectionary methods have managed to overthrow governments and defeat privatisation plans. There has been a clear recovery of the confidence of the movement in its own strength.

In the political field, this process coincided with a deep crisis in the leadership of the labour movement and left wing organisations in most countries. Completely unable to understand the collapse of Stalinism in the Soviet Union after 1989 and the apparent success of capitalist economic policies in the early 1990s, the left wing and guerrilla leaders, trained in the Stalinist school of “Marxism-Leninism” completely abandoned any idea of social transformation and sold out the thousands of workers, peasants and youth that had put their hopes in these organisations. Thus we saw the conversion of the leadership of the Sandinistas in Nicaragua to free market policies and their involvement in all sorts of corruption scandals.

Former left wing leaders and intellectuals joined right wing governments and provided the capitalists with “intellectual” arguments against the workers’ movement. Two of the most extreme cases are those of Jorge Castaneda joining the right wing PAN government of Fox in Mexico and even staging a provocation against the visit of Fidel Castro to the Summit of the Americas; and former FMLN guerrilla leader Villalobos becoming an advisor to the right wing pro-imperialist government of Uribe in Colombia. Others plunged into charity work through the NGOs, in most cases playing a pernicious role, demobilising the masses and introducing reactionary ideas into the movement.

All sorts of reformist and counter-revolutionary ideas became popular amongst the “left” intelligentsia. Many moved towards “indigenismo”, promoting the idea that the way forward was a return to traditional Indian values, that the working class had been destroyed and could no longer play a progressive role, that the taking of power was no longer necessary, etc. The ideas of Marxism lost a great deal of authority, though in reality it was Stalinism that had shown its bankruptcy.

This inevitably had the effect of sowing confusion and demoralisation amongst the ranks of working class and left wing activists for a period. But as we explained at the time, the economic conditions of existence would push the mass of workers and youth into struggle once again. Because of the lack of any serious revolutionary alternative the masses have had to go through many distorted experiences in the last five years, but in all cases they have sought to fight to improve their conditions. This was a necessary process of learning which was made more difficult and painful because of the conduct of the leaders of the traditional organisations of the workers and peasants.

The general shift to the left has been expressed in the election of left governments or governments perceived to be leftwing by the masses in some countries (Lula in Brazil, Lucio Gutierrez in Ecuador, the recent electoral victory of the FMLN in El Salvador, the massive vote for Evo Morales in Bolivia, the victory of the left in the Colombian municipal elections, the defeat of Uribe in the referendum, etc). The problem is that these governments have very little room for manoeuvre and therefore the illusions of the masses in them are likely to be short lived.

The bourgeoisie of Latin America has had two hundred years to show what it can do. The results are clear for all to see: misery, hunger, backwardness, unemployment, the unbridled rule of corrupt and reactionary oligarchies. In most cases, they have not even carried out a real agrarian reform. Even the much-vaunted “independence” is a deception, since Latin America is dominated by US imperialism and the big North American transnational corporations.

On the basis of capitalism not one of the fundamental problems facing the workers and peasants of Latin America can be solved. The masses are instinctively opposed to imperialism, but the anti-imperialist struggle is entirely devoid of content unless it is firmly linked to the struggle against landlordism and capitalism. The Cuban revolution showed what is possible on the basis of a nationalised planned economy, despite its bureaucratic deformations. But the Cuban revolution cannot survive in isolation. Its destiny will be decided by the success or failure of the socialist revolution in the rest of Latin America, above all in Venezuela and Bolivia.

The whole of Latin America is in a revolutionary or pre-revolutionary ferment. Here we see the meaning of world revolution. Movements in one country have an impact on the movement of the workers and peasants in another. The conditions are such that once the workers take power in one country, the regimes would fall like dominoes. A decisive victory in any of these countries would completely transform the situation throughout the Americas and on a world scale.

Argentina

In December 2001 Argentina suffered the biggest default of any state in history. Overnight millions of people were reduced to poverty, and the savings of the middle class were wiped out. This led immediately to a popular uprising and the opening of a revolutionary process that is still continuing. But given the weakness of the subjective factor, the process is being drawn out, as we predicted.

We said that the bourgeoisie could not immediately resort to a counterrevolutionary coup but would instead make use of manoeuvres involving a “left” Peronist government. That is precisely what has happened. The purpose of the government of Nestor Kirchner is to gain the confidence of the masses in order the better to betray them to imperialism and the oligarchy.

The victory of Kirchner was entirely predictable – and was predicted by our tendency. But to the sects in Argentina this is a book sealed with seven seals. They completely misunderstood the stage the revolution was at and consequently adopted an entirely mistaken tactic in relation to the elections. As a result they were heavily defeated. Their members are confused and demoralised. They will not be able to play any important role in the revolution.

Nothing has been solved for Argentine capitalism. In 2002 there was a deep slump with an 11 percent fall in production. A formerly prosperous country has been converted into a poor country where people do not have enough to eat. It is true that this year the Argentine economy has achieved a high rate of growth. Some recovery was inevitable, just as an object that is thrown off a cliff will bounce. This may give a little breathing space to the regime, but it has resolved nothing fundamental. There are huge debts that have to be paid and nothing to pay them with. Sooner or later there will be another outburst of the class struggle.

Kirchner is a clever demagogue who has tried to get a “left” image by attacking the Junta. In fact, he is incapable of a serious struggle against imperialism. He talks of “restoring investor confidence” – which cannot be done without attacking the living standards of workers. But in the short run he has to take care not to alienate the masses. 70 percent of the population are opposed to using the country’s reserves to pay the IMF.

Kirchner is obliged to walk a tightrope between the classes. Sooner or later he will be knocked off it. Although the economy is now growing at about 5 percent, this is after a fall of at least 11 percent. Inflation is high and officially unemployment stands at 20 percent. However, this is a gross underestimate and more than 50 percent of the population are living below the poverty line. On a bourgeois basis there is no way out for the masses. The illusions in Kirchner will not be long lasting. The way will be prepared for new explosions.

The revolutionary process in Argentina is not finished. It will continue for some years, with ebbs and flows, before there can be a decisive conclusion – one way or another. Despite all the noise, the Kirchner government will be seen to have been only a temporary episode. In the last analysis, there can only be one of two outcomes – either the greatest of victories for the working class, or the biggest defeats.

Venezuela

Venezuela, together with Bolivia, is the country where the revolutionary process has gone furthest. In fact the revolutionary movement has already defeated reaction on two decisive occasions, during the April 2002 coup and during the December 2002 – January 2003 oil sabotage and lockout. Now we see the same thing repeated in the referendum campaign.

Here we see the enormous revolutionary potential of the masses. On three occasions the working people have defeated the counterrevolution. If Hugo Chavez was a Marxist he could have easily overthrown the corrupt and reactionary oligarchy and taken power. The conditions are extremely favourable. The counterrevolutionaries were demoralised after the defeat of the reactionary bosses’ lockout. The masses were aroused and confident. But yet again the opportunity was lost. Now the reactionaries are agitating for a referendum to get rid of Chavez.

US imperialism is terrified that Venezuela will go the same way as Cuba. This has not yet happened but it is entirely possible in the future. Despite their defeat in the referendum, the counterrevolutionary Venezuelan bourgeoisie, with the active support of the American embassy and the CIA is preparing for a new attempt. There is therefore no possibility of a compromise. Despite his conciliatory speeches, Chavez will find that the oligarchy is irreconcilable. He can be compelled to lean on the working class to strike blows against the reaction, in so doing he may end up going further than he intended.

The strategy of the counter-revolution is to bring down Chavez by one method or another. The defeat in the referendum was undoubtedly a heavy blow that will force them to make a tactical retreat for a time. But they will return to the attack later. The imperialists, who were forced reluctantly to accept the result, may change their tactics, but their fundamental aim will stay the same. They will strive to undermine the revolution and overthrow Chavez. They have not, and will not, abandon this aim.

The imperialists and their local agents can use different tactics. They can make use of a combination of economic sabotage in order to undermine support for Chavez, together with all kinds of counter-revolutionary provocations, including terrorist activities and international pressure (trying to present the Chavez government as “supporting terrorism”). They can try to provoke military hostilities between Venezuela and neighbouring Colombia. However, within Venezuela they are in a weak position. The social base of the opposition, having been defeated three times, is demoralised, divided and sceptical. At the same time, the state apparatus as an instrument of repression of the ruling class has been weakened.

On the other hand we see an advance in the process of the radicalisation of the masses, and particularly of the workers’ movement. The victory in the referendum will have enormously raised the self-confidence of the masses who will press for more reforms and wish the revolution to go forward.

The masses, and particularly the activists, are discontented with the old bureaucratic leadership and want to take control of the movement into their own hands. They want to keep the patrols and other rank and file organizations in being.

The Chavez government has a bourgeois-nationalist programme, that is, it wants to develop the country’s economy in the interests of the majority of the population, but thinks it can do so within the limits of capitalism. The problem is that this is a completely utopian proposition. There is no “progressive” section of the ruling class in Venezuela. In fact the whole experience of the last 5 years shows this very clearly. The capitalists and important sections of the middle class are against Chavez and on the side of imperialism, while the overwhelming majority of the workers and poor, and a small section of the petty bourgeoisie are on the side of Chavez. It is impossible to reconcile the interests of both sides and therefore the conflict has not been decisively resolved.

The most pressing task in Venezuela is to build the nucleus of a Marxist cadre organisation, able to fight for the leadership of the movement of the workers and the poor, on the basis of a firm policy of democratic workers power and a democratically planned economy. We can only do that by understanding clearly the character of the chavista movement and intervening energetically in it.

The Venezuelan Revolution and Cuba

The fall of the Soviet Union has transformed the international balance of forces concentrating colossal and unprecedented power into the hands of US imperialism. With colossal power comes colossal arrogance. Washington is trying to impose its will onto the whole world. The barbarous invasion and occupation of Iraq is a monstrous manifestation of this.

However, the capitalist crisis on a world scale manifests itself as a revolutionary crisis everywhere. This is clearly evident in Latin America where there is not a single stable bourgeois regime at the present time. The aggressive campaigns of US imperialism directed against Cuba and Venezuela are a reflection of this fact. The Cuban and Venezuelan revolutions are a point of reference for the oppressed workers and peasants of Latin America. That is why Washington is striving by all means to defeat and destroy them.

The Cuban revolution, which provided hope for millions of people, is threatened by external and internal enemies. The forces of capitalist restoration inside Cuba constitute the greatest threat to the revolution. They are backed by world imperialism, in particular by the USA and the European Union. It is necessary to fight against capitalist restoration in Cuba and defend the elements of the nationalized planned economy. However in the last analysis the only hope for the Cuban revolution is the victory of the socialist revolution in Latin America and on a world scale.

The danger of capitalist restoration in Cuba exists. It cannot be denied and it would be criminal to close one’s eyes to it. The danger comes from without – from the remorseless pressure of imperialism. This is clear to everyone. However, the danger to the Cuban revolution comes not only from without but from within. It is no secret that there are pro-capitalist elements in Cuba, and not only among the opposition. Far more dangerous is the phenomenon of bureaucracy that contains within it powerful pro-capitalist tendencies. We saw the same thing in Russia before the collapse of the USSR.

It is the elementary duty of all revolutionaries to defend the Cuban Revolution against imperialism and capitalist counterrevolution. The victory of the counterrevolution would be a heavy blow against the cause of socialism and the working class everywhere. For the people of Cuba it would be a terrible catastrophe. But it is necessary to see that the danger to the nationalized planned economy in Cuba comes not only from Washington and Miami but also from elements within the regime itself.

Fidel Castro, it is true, remains implacably opposed to capitalist restoration. As long as he lives, the pro-capitalist elements in the Cuban bureaucracy will be kept firmly under control. But what will happen when he is no longer present? How can the pro-Capitalist elements be defeated and the gains of the Revolution defended?

The only firm support for the Cuban Revolution is the masses, the workers and peasants who have remained loyal to the cause of the Revolution. By implementing the four conditions of Lenin – the principles of workers’ democracy – the Revolution would acquire new strength and energy to stand up to its enemies, internal and external. But in the last analysis, the only way to defend the Cuban revolution is to extend it to the rest of Latin America.

The conditions for the victory of the socialist revolution in Latin America are ripening fast. There is a ferment everywhere, and the main focus of revolutionary action is in the urban centers. The role of the working class is the key element in this equation. The Venezuelan Revolution shows the colossal power that exists in the working class. All the attempts of the counterrevolution have been defeated by the masses, the workers, the peasants, the urban poor, the women and the youth.

But the question of power has not yet been solved. Even after the marvellous victory in the Referendum, it is not correct to say that the revolution cannot be reversed. Imperialism and the oligarchy will never be reconciled to the Revolution. There will be new counterrevolutionary attempts – one after another.

The destiny of the Cuban Revolution is inseparably linked to that of the Venezuelan Revolution and will stand or fall with it. If the Venezuelan Revolution is defeated, the Cuban Revolution will be isolated and the pressures of imperialism will be multiplied a thousand fold. The victory of the counterrevolution in Venezuela would represent a deadly blow to the revolution throughout Latin America. It would place the Cuban revolution in extreme danger.

Those who argue that the Venezuelan Revolution must be halted, that it is necessary to negotiate with the bourgeoisie and imperialism, are betraying the Venezuelan Revolution, no matter what their subjective intentions are. There can be no truce between revolution and counterrevolution. Either one side or the other must win.

The Bolivarian revolution has begun as a national democratic revolution but it is meeting with the ferocious opposition of the Venezuelan oligarchy and US imperialism. Under modern conditions the unification of Latin America can never be achieved by the bourgeoisie, nor can democracy be consolidated on the basis of capitalism. Only the victory of the proletarian revolution can guarantee the gains of national democratic revolution and unification of Latin America. The Latin American revolution can only be carried out by the proletariat in alliance with the poor peasants and the other exploited layers under the banner of socialism.

The only way to defend the Cuban revolution is by fighting for the socialist revolution in Latin America, beginning in Venezuela. The Latin American revolution will triumph as a proletarian revolution or it will not triumph at all. It is the duty of the revolutionary Marxists to support with all of our energy and enthusiasm the anti-imperialist struggles of the people of Latin America, to arm it with the ideology, programme and policies of Marxism-Leninism and to transform it into and all-Latin American proletarian revolution. Our slogan is permanent revolution; our goal is the emancipation of the working class and of all humanity.

Peru and Ecuador

Peru has also experienced big strikes and demonstrations. The Toledo government is weak and may not last. The workers are demanding wage increases, while the government is raising taxes. The public sector debt stands at 47 percent of GDP. We can easily see another collapse as in Argentina.

The defeat of Fujimori’s Bonapartist regime was the direct result of the mass movement of the people, and the election of bourgeois politician Toledo was only the distorted expression of this movement. He actually stood in the election as an opponent of “neoliberalism” and played on his Indian and poor origins. But as soon as he tried to privatise electricity in the south of the country in June 2002 he was faced with a general strike which took on insurrectionary features, particularly in Arequipa, where the army and the police were not able to enter the city for more than a week. In this movement, the working class, through its organisations, played a key role and through the Civic Committees other sections were incorporated into the struggle. The movement was victorious and exposed to the masses the weakness of the Toledo regime and the fact that mass struggle was the only way to defeat it.

This mood led to the movement around the teachers strike in May/June 2003. This was no ordinary strike but reflected the deep crisis of legitimacy of the whole of the bourgeois political system in the country. The level of support of the president, the congress and the judicial system hit rock bottom, with only 13 percent of the population having any trust in these institutions. When the government tried to declare a state of emergency to crush the strike, the unions replied with a general strike and there were mass demonstrations all over the country. The movement ended in a partial victory for the teachers and a further weakening of the Toledo government, which is likely to fall in the next few months. The movement is still continuing, and we must follow it closely.

In Ecuador, after the revolutionary events of January 2000 and January/February 2001 we saw the election of Lucio Gutierrez at the beginning of 2003. This was not simply an election victory but the electoral expression of the revolutionary movement of the masses in the years prior to the elections which had been derailed because of the lack of a Marxist leadership. Lucio was the leader of the junior officers who sided with the people in the January 2000 revolution. He was elected in a very polarised election campaign in which all bourgeois parties joined forces against him and accused him of being an atheist and a Communist. Of course he is neither, but the fact that the masses voted for him despite this campaign against him is highly significant.

At the time we said that Lucio had two alternatives: if he sided with the workers and peasants he would clash with the capitalists and the IMF and a Chavez type situation could develop. However, if he sided with the ruling class and Washington he would soon clash with the workers and peasants who had elected him. The latter is what happened.

Six months into his presidency, he had signed an agreement with the IMF and had not even started addressing any of the urgent needs of the workers and peasants. First the MPD and the powerful peasants’ organisation which played a key role in the 2000 revolution, CONAIE, withdrew from Lucio’s government and announced a programme of mass mobilisations. The honeymoon period has been so short because the crisis of Ecuadorian capitalism is such that the ruling class can only maintain its profits by further increasing the exploitation of workers and peasants, and the margin for concessions is almost non-existent. But another important factor is that his election victory, rather than being the early stages of a shift to the left (as is the case with Lula in Brazil), comes after a series of revolutionary movements of the masses, who are no longer prepared to wait. In fact the opening lines of the statement of the Congress of the People, convened in August 2003 by the CONAIE and other trade union organisations reads precisely: “Enough is enough! We have waited for 6 months!” Sooner rather than later a new mass movement will overthrow him.

Bolivia – the revolution has begun

The revolutionary events in Bolivia in October mark one of the highest points in the revolutionary process in Latin America. The magnificent movement of the workers and poor peasants is an inspiration to the entire world. The uprising was the result of the accumulation of experience of the Bolivian workers and peasants during the last 3 years of struggle. The victory of the uprising against water privatisation in Cochabamaba in March/April 2000 marked the beginning of the recovery of the Bolivian workers and peasants movement, which had suffered a massive defeat in 1985/86. Since then we have seen the mass movement of the coca-growers, national road blockades on the part of the peasants, the movement of the pensioners in January 2003 and the February uprising this year.

All these movements have shown the extreme weakness of the ruling class in Bolivia, fragmented and split in the electoral field, with an unreliable state apparatus and completely dependent on US imperialism. One of the key elements of the February uprising against the tax proposals of the Sanchez de Lozada government was a police mutiny in which police officers fought together with the workers against the army. Had it not been for the leaders of the trade union and left organisations, the workers and peasants could have taken power at that time.

These three years of rich experience have also had an impact within the traditional organisations of the working class and the peasants. The Bolivian unions have replaced the previous pro-government right wing leadership by a more radical one representing the “anti-neoliberal bloc”. It was the miners’ federation (traditionally the backbone of the Bolivian workers’ movement) that played a key role in the election of a new, more left leadership of the COB in August. The new leaders of the COB, particularly its secretary Jaime Solares who comes from the miners’ federation, talk of workers and peasants government with a socialist programme, of workers’ defence militias, and so on.

This is a reflection of the radicalisation of the mood amongst the masses but also an expression of the Trotskyist traditions of the Bolivian workers’ movement. But radical and even “Marxist” sounding speeches do not guarantee victory on their own, on the contrary they can often lead to defeat. During the October uprising it was precisely the vacillation of these leaders in the decisive moments that allowed the ruling class to sacrifice president Sanchez de Lozada and put another bourgeois politician, Mesa, in his place.

The importance of the October movement is that it clearly posed the question of power. In El Alto, the workers and the people formed embryonic soviets in the form of Juntas Vecinales (neighbourhood juntas), there was an appeal to form self defence committees, sections of the police fraternised with the demonstrators and even within the army there were soldiers who refused to fire on the people. For a few days there was a struggle between the president, who was suspended in mid-air, and the workers and peasants who had real power in the streets. Despite all the claims of the “left” intellectuals, once again it was the working class through its organisations, and particularly the miners who played the key role in the uprising. All other sections in society look to the trade union organisations for a lead.

The movement has not been defeated, only temporarily derailed. The new government of Mesa has no room for manoeuvre and sooner rather than later will face a new uprising. At a certain stage the ruling class will have to put some of the workers’ and peasants’ leaders in government. Evo Morales and his Movement Towards Socialism (MAS) are the leading candidates to play this role. However, this will not be a normal left government, but one which will be under heavy pressure from below and from which the masses will not tolerate any shifts to the right.

The idea of a Constituent Assembly put forward by some of the left leaders (and some of the ultra-left sects) will probably be used by the ruling class to try to solve the crisis of legitimacy of its regime.

Consciousness of the masses

The bourgeois of all countries, with America at the head, are tobogganing to disaster with their eyes closed. They have no real understanding or perspective, but react empirically to events they do not control. In reality, the capitalist system finds itself in an impasse on a world scale. The bourgeois twist and turn trying to find a way out of the crisis, and by their actions they lend it an even more convulsive character.

It is a commonplace that the crisis does not move in a straight line. There are ebbs and flows. It is necessary to take the process as a whole. Trotsky once wrote: “Reformists only see ups and sectarians only see downs, but Marxists see the whole process.” The main thing is the effect of the boom-slump cycle on the consciousness of the working class and society as a whole. Moreover, the effects of changes in the economic environment do not take place automatically, but only with a delay. Human consciousness, in general, is deeply conservative and lags behind events. The present consciousness of the masses is still rooted in the past. After a long period of relative prosperity, there is a natural reluctance to admit that this avenue is now closed, that there can be no going back.

The reformists base themselves on this psychology, which may be characterised as the triumph of hope over reality. It will take a fairly long period, and many hard knocks, to burn these prejudices and illusions out of the consciousness of the masses. But every day they are acquiring new experiences and learning painful lessons in this respect. The new situation does not allow the ruling class the luxury of serious reforms and concessions. On the contrary, they are striving with might and main to eradicate the reforms of the past.

This is graphically revealed by the assault on pensions in Europe. Having worked hard all their lives the workers are informed that they must now work until they are 70, before which many of them will die: “Work until you drop!” That is the slogan of the bourgeoisie, which does not prevent them from looting the workers’ pension funds to fill their own pockets. This kind of thing is noticed not only by the working class but by the mass of middle class people, who are also receiving some very good lessons on the meaning of capitalism. If the Labour leaders were any use at all they could easily appeal to the middle class on this basis alone to support socialism. But they are more interested in the good opinions of the billionaires than that of the middle class or the workers.

The point is that if capitalism could achieve a rate of growth of even 3 percent or 4 percent there would be no need to reduce pensions. But they can no longer achieve the kind of results they achieved in the past. Many things flow from this, above all the fact that the kind of reforms that they gave in the past are no longer possible. This fact is not yet understood by the masses in the advanced capitalist countries, who have the illusion that the present crisis is only a temporary interruption of normality. This illusion is encouraged by the Labour leaders who are living in the past.

Because of the weakness of the subjective factor, the process will inevitably be drawn out over a long period of time, with the inevitable ebbs and flows. It will resemble the process in Spain between 1930 and 1937. In 1931 the fall of the Monarchy and the proclamation of the Republic opened up a stormy period of revolution. The masses took to the streets in huge demonstrations. The mood was euphoric.

The Republicans and Socialists came to power. But the deep crisis of Spanish capitalism did not permit an “intermediate” solution. This period ended in a colossal increase in the class struggle, an open conflict between Left and Right, ending in the Asturian Commune of 1934 and the victory of the Right in the Two Black Years (el Bienio Negro). This was a period of black reaction, but it did not solve any of the problems of Spanish capitalism. In 1936 the Popular Front swept to power and a new revolutionary period opened up, leading immediately to a fascist rising and Civil War. The working class had many opportunities to take power in this period but were thwarted by every single one of their organizations: Socialist Party, Communist Party, CNT and POUM. The last opportunity was in 1937 in the May Days of Barcelona.

Of course, there are many differences and there can be no question of a mechanical repetition of these events. But the central point to grasp is that the Spanish revolution unfolded over a period of seven years. Within this process there were great revolutionary advances, but there were also periods of tiredness, demoralization, retreat, defeats and even black reaction. But given the impossibility of solving the fundamental problems on the basis of rotten Spanish capitalism, every retreat was only a preparation for a new and even stormier upheaval. That is the main parallel with the period we have now entered on a world scale.

The mass organisations

The present crisis is not just a passing affair, as the apologists of capitalism try to pretend, but a deep organic crisis of world capitalism. The basic contradiction may be simply stated: the bourgeoisie cannot afford serious concessions, and the workers cannot afford any more cuts. Any attempt by the bourgeoisie to find a way out of the crisis can only be at the expense of the working class of the advanced capitalist countries and the impoverished masses in the so-called third world. That is the objective basis for an explosion of the class struggle everywhere. At the present stage consciousness is still lagging far behind the objective conditions. This is the fundamental reason for the weakness of the revolutionary tendency at the present stage. But the consciousness of the masses will catch up with a bang. The basis of reformism will be undermined.

Periods of great social upheavals inevitably affect the mass organizations of the working class in a fundamental way. In the past period the mass organizations have been dominated everywhere by right reformism. This was a reflection partly of the objective conditions, partly of the lag in consciousness of the working class. But the present crisis is pulling the rug from beneath the feet of the reformists. The basis of reformism was reforms. But reformism without reforms – reformism with counter-reforms – makes no sense to anybody. It is a recipe for crises and big splits in the reformist organizations. At a certain stage the right wing reformists (Blair etc.) will be driven out of the mass organisations. This will prepare the way for a period of left wing reformism or even centrism. Under such conditions the Marxist tendency can grow by leaps and bounds.

The experience of the Spanish revolution of 1931-7 is an object lesson in how the mass organizations reflect the general movement of the working class. The leaders of the Spanish Socialist Party had collaborated with the dictatorship of Primo de Rivera. Largo Caballero, the leader of the Socialist trade union, the UGT, was even a minister in it for a short time. In the period 1931-3, Socialist ministers sat in a government that brutally repressed uprisings of the anarchist workers and peasants. Yet in 1934, the Socialists under Largo Caballero organized the Asturian Commune.

One year later the Young Socialists, an organization of 100,000 members, came out against the Second and Third Internationals and in favour of the Fourth International. They even asked the Spanish Trotskyists to join them and educate them in the ideas of Bolshevism. But Andres Nin refused to do this, on the grounds that it was impossible to join the Social Democracy. Because of this, a golden opportunity was lost and the Young Socialists were won over by the Stalinists. This settled the fate of the Spanish revolution. Trotsky broke off all relations with Nin, whose actions he considered a betrayal.

The role of the mass organizations in the present epoch is a decisive question. Because of the whole history of the last fifty years, the reformists and Stalinist organizations have colossal reserves of support in the population, while the forces of genuine Marxism have been thrown back. It will take time and the experience of great events to change this situation. But one thing is crystal clear: the crisis of capitalism will cause convulsions and splits in all the mass organizations. The polarization of society to the Left and Right will inevitably signify a polarization to the Left and Right within the mass organizations – not just the trade unions but also the reformist parties.

The strength of reformism is not an accident, but is rooted in objective conditions – to be more accurate, it is rooted in the conditions of the past period. The present consciousness of the working class in the advanced capitalist countries has been shaped by decades of relative improvement in living standards and reforms. The class contradictions were, of course, not abolished, but they were partially ameliorated. The edge of the class struggle was blunted and the mass organisations of the working class came under the pressure of the bourgeoisie, especially through the leading layer. All kinds of alien petty bourgeois and bourgeois ideas penetrated the movement.

This reflected a certain softness in the consciousness even of sections of the workers activists, who had forgotten the harsh lessons of the past. This situation seemed normal to them, whereas in reality it was an historical exception. But now capitalism is striving towards its historical norm. The smiling reformist-democratic mask will be thrown aside to reveal the real ugly and rapacious face of the bourgeoisie. The present attacks on the welfare state and the aggressive militarism of US imperialism are only an anticipation of what we can expect.

In the past period, reformism in all its guises, Keynesianism, feminism, pacifism, black nationalism etc have blunted the class consciousness of the activists and diverted them away from the struggle for socialism and revolutionary politics. But once the fresh winds of the class struggle begin to blow once again, all this will be swept away. In the harsh class battles that impend, all the softness, servile and conciliatory tendencies will be burnt out of the consciousness of the working class. The workers will come to understand the seriousness of the situation and that only a revolutionary change in society can solve their problems.

The wave of strikes, general strikes and mass demonstrations that have swept across Europe in the last three years was no accident. They are a symptom of the beginning of a reawakening of the working class. Trotsky pointed out in his writings on Spain in 1930, that this is an absolutely unavoidable stage. But he also pointed out that even the stormiest strikes do not solve anything fundamental, let alone those that are defeated. Without a fundamental change in society, strikes and demonstrations cannot solve the problems faced by the working class. The crisis of capitalism has reached such a point that the bourgeois cannot make serious concessions. Through the experience of many struggles, the working class, beginning with its vanguard, will begin to realise that more serious, political measures are necessary. Over a period, they will begin to draw revolutionary conclusions.

Great events are needed to change the psychology of the working class and sweep away the cobwebs. After a prolonged period of inactivity, the class needs to stretch its muscles, the new generation needs to learn some hard lessons to realise the seriousness of the tasks before it. This will take time. It is like the process that athletes call limbering-up. The general strikes and mass demonstrations of the recent period correspond more or less to this kind of preparatory exercise. They are a dress rehearsal for more serious movements that are being prepared.

The main problem is the extreme weakness of the subjective factor – the party and the leadership. If there existed an authoritative Marxist party or tendency, the workers, beginning with the active layer in the unions and mass parties, would learn far more quickly. But the authority of Marxism has been damaged by decades of Stalinism and now by the collapse of the Soviet Union. The whole movement has been temporarily thrown back. For several decades the forces of genuine Marxism have been reduced to a small minority and largely isolated from the class. This is the main thing that is making the process so slow and long drawn-out. But the tempo of events is already beginning to accelerate. This will be even more the case in the next period. The combination of events and the persistent, patient work of the Marxist tendency will enable us to bridge the gap between the workers and the Marxists and penetrate the mass movement at all levels. This is the only secret of success in the building of the revolutionary movement.

It goes without saying that the majority of the working class are not Marxists. Even the advanced layers in the shop stewards committees do not have the advantage of a worked-out scientific perspective. Therefore they easily become prey to moods of disillusionment, scepticism and despair. It is necessary to stand firm in the face of such moods, which sometimes even affect the Marxists. It is necessary to wage an unremitting ideological struggle to safeguard the movement from alien ideas and strengthen the theoretical foundations of the revolutionary tendency. This is the prior condition upon which everything else depends.

It is scarcely necessary to point out that ebbs and flows in the class struggle are inevitable. The workers cannot always be on strike! The movement cannot be kept in a state of white heat indefinitely. Only the ultra left sects could imagine such a thing. There will inevitably be some pauses, as workers try to make a balance sheet of their actions and work out the next step forward. But the belligerence of the bosses means that such pauses will only be the prelude to new and even stormier movements.

Everywhere the bosses are adopting a belligerent attitude. This is not for subjective reasons, but a reflection of the crisis of capitalism, which does not allow meaningful reforms. This will be a period of harsh class struggle, in which the only way the workers can get concessions is by militant action. In the past, the workers of the advanced capitalist countries could obtain important concessions with relative ease. Often they did not even need to strike: the mere threat of strike action would be sufficient to get the bosses to retreat. But those days are long gone.

Of course, it will not be easy and straightforward. The movement never proceeds in a straight line. Ebbs and flows are inevitable. There will be many defeats, as well as victories. There will be periods of tiredness and apathy, despair, even reaction. But every “lull” will only be the prelude to new upheavals and shocks, and even sharper class struggles. The pendulum will swing sharply to the left for a whole period. That is the main tendency, and we must stress this, not the temporary lulls that are an inevitable part of the process.

The main point to understand is that on a world scale the bourgeoisie has not been able to restore a new state of equilibrium. Any attempt to establish a new economic equilibrium will destroy the social and political equilibrium. This is the central dilemma. It will provide the Marxists with many opportunities, provided we remain firm on ideas and programme and adopt correct tactics and methods. Moreover, if we train our cadres in the fundamental ideas of Marxism, the ephemeral ups and downs of the movement should have little or no effect on them. We must learn to look beyond the immediate and see the broader historical processes that are unfolding, unseen and unsuspected by the majority.

If we educate our cadres in a correct manner, concentrating on theory and the ideas of Marx, Engels, Lenin and Trotsky, there is no reason why we should be affected by temporary ebbs and flows of the movement. We must learn to be patient with the workers. “Patiently explain!” – that was Lenin’s slogan in 1917, and ours today. The kind of shrill denunciations and hysteria practiced by the sectarians is futile and counterproductive. It only serves to repel the workers and discredit the ideas of Marxism. They are all busy building “revolutionary parties” in the clouds, consisting of three men and a dog. But they are organically incapable of connecting with the real movement of the working class.

The great advantage of our tendency over all others is our serious attitude to theory. Together with flexible tactics and a firm orientation to the mass organizations of the working class, this is the guarantee of our success. Theory is our guide to action and our magnetic north that will lead us unerringly through every twist and turn. Naturally, there will be all kinds of cross currents and ups and downs, but for a whole period the pendulum will swing to the left. It is therefore not correct to attach too much importance to temporary and ephemeral moods in the class. We must at all times concentrate our attention on the fundamental processes.

Just over a decade ago, with the fall of the Soviet Union, the bourgeoisie was euphoric. They dreamed of a future of peace, prosperity and democracy everywhere. Now all these dreams have been reduced to ashes. The old order is crumbling before our eyes. Crises and shocks succeed one another with breathtaking speed. In retrospect, the collapse of Stalinism will be seen as only the prelude to a far greater historical drama. The tremendous scenes in Eastern Europe, when masses of people came out onto the streets demanding a fundamental change of regime will be repeated on a far higher level in London, Paris and New York. The stage will be set for the victory of the socialist revolution in one country or another. Given the degree of interpenetration of the world economy, that would be the signal for revolutionary movements on a global scale.

The present epoch is unique in human history. The revolutions of 1848-9 only affected Europe. The revolutionary wave that followed the Bolshevik Revolution in 1917 affected the whole of Europe, and had important echoes in Persia, India, Egypt, Turkey and China. But now the entire world has been linked together in a way that has never been seen before. The defenders of capitalism boasted about globalisation. But globalisation now manifests itself as a global crisis of capitalism. This is creating the objective conditions for a worldwide revolutionary movement of the proletariat.

It is the task of the Marxist tendency to give this international movement a conscious and organised expression, to arm it with a programme and a perspective. That is the prior condition for victory.

The present epoch is the epoch of the world revolution.