Transcript of Alan Woods' speech on the world political and economic perspectives for year 2008 at a meeting of the leadership of the International Marxist Tendency on January 13, 2008. You can also listen to the speech here.

We have said we would have sharp and sudden changes. What more sharp and sudden changes can you have than what has happened in Pakistan, which is now in an explosive situation? After the fall of Stalinism, Ted Grant said, while the bourgeois were rubbing their hands with glee, that this would be the most explosive, turbulent period in human history. Even some comrades doubted this. The fall of Rome was quite turbulent, and incidentally there are many striking parallels between now and the period of the decline and fall of the Rome Empire. Even many bourgeois analysts commented on this. The same was seen during the process of the decline of feudalism.

What is the character of our epoch? Is it a period of growth, expansion, and capitalist progress? One must have to not live on this planet not to see all symptoms of a system in senile decay, at an impasse. Civilization itself is in danger. The choice is socialism or barbarism.

Just look at Kenya - it was supposed to be a success story, carried out market reforms, privatisations, etc., it was considered a shining example of democracy. Now we see the opposite: barbarism, elements of social disintegration - as a result of all of that. It is easy to play up the elements of barbarism - we can see them even in advanced countries of Europe: crime, drugs, murder, collapse of morale in society. How can we expect anything else of a system in decline? As Lenin said: capitalism is horror without end.

The purpose of a perspectives discussion is not academic, as in a university seminar. It is not to show how clever we are, but to analyse the situation in order to intervene - and we are intervening: in Iran, a key country, Venezuela, Mexico, Italy, Spain, and above all in Pakistan, the key country for this International. How was it possible for our comrades to make such a marvellous intervention? It's not an accident that we were in the right place at the right time. It's the result of our perspectives - all these discussions over years and decades.

All the so-called Marxists in the world have denounced us over our orientation to the PPP. Now look at the position: we were the only ones that were able to explain how the masses would react to return of Benazir Bhutto. Do you think the masses read the "small print" of the PPP, PRD or Bolivarian Movement documents? Not at all - but we understand how they move when they move.

There are certain parallels between January 9, 1905 in Tsarist Russia and the situation in Pakistan today. How is it that a Marxist organization can make such progress and develop in a backward country, with fundamentalists etc.? It's because of the superiority of the ideas and methods of Marxism. This is shown not only by Pakistan, not only in Asia but on a world scale.

We predict there will be big falls in the world stock markets, followed by panic. The instability finds its reflection in the rise in oil prices. This has reached over $100 a barrel now. So, what is the mood of the bourgeoisie? We can in some ways measure the mood of bourgeois with the "thermometer" of the stock market. Just 12 months ago, they had a mood of optimism: five years of fast, near-record growth. Now we witness a mood of profound pessimism. As Trotsky said in the Transitional Programme, the bourgeois are tobogganing toward disaster with their eyes closed.

Twelve months ago they said there was no sign of volatility because instability was supposed to have been abolished by the invention of derivatives. We predicted what would happen some years ago. We said the U.S. economy was defying gravity - like the cartoon character (I think it is called Roadrunner), who runs over a cliff and keeps on running in midair, then he looks down and scratches his head, and then falls down the canyon when he realizes there's nothing under his feet. It is the same with the US economy now. There is nothing real under it.

The bourgeois have been selling huge amounts of... debt! Debts are parcelled up and sold on the stock exchanges. This lunacy has now caught up with them. The sub-prime crisis had serious consequences on world scale: in the UK there was the collapse of Northern Rock, which happened suddenly, without warning. It's not a small bank, it's the 5^th largest bank in Britain. For the first time in 160 years in Britain we saw a run on banks: you could see it on TV, not in academic books. People were queuing outside the banks in their hundreds to get their money back.

Even during the boom we saw the most vicious attacks on living standards, pensions, etc: it was a boom at the expense of the working class. It's no good just quoting general figures on growth and other economic indicators; we need to look at the effects on the masses. Yes, huge profits have been made, but at the expense of the masses. There have been a high growth rates in South America as well - but the masses have not benefited from it. Everywhere there has been a huge growth of inequality, obscene wealth at one extreme and extreme misery at the other. It's no accident that the richest man on earth is not Bill Gates but Carlos Slim, a Mexican.

This is the position of the masses in the best situation of capitalism. What will happen when there is a slump? The world is heading toward recession. The USA is heading for a recession, but Britain, Spain, and Ireland are particularly exposed. More banks will fail, as in the 1930s. There's a combination of factors that is very dangerous for world economy. Inflation is rising (which is normal at peak of a boom). Oil will rise beyond $100 per barrel before an eventual collapse in price. Gold is already over $900 per ounce - the highest level in 28 years. And as we know gold rises when the bourgeois are looking for a safe place to put their money before a slump, this is a telling symptom of approaching recession.

The main motor force of the world economy remains the USA. A country with 5% of world's population has been responsible for almost 20% of growth. It's a growth based on demand, on consumption, but the USA has a record of nearly 30 years of stagnant wages, although the average U.S. worker now produces a third more than he did a decade ago.

There are colossal debts in America: private, corporate, and public debt. This accumulation of debt has limits, which are being reached. There has been a steep increase in unemployment (+5%). The housing bubble is finished and house prices are falling. People have been borrowing money against rising house prices. As long as boom continued, there was a merry carnival of money-making, and people got a little light-headed, banks lent money to anyone. Now there is a massive wave of repossessions. Thousands of American families can't sell their home because they owe more on mortgage than the home is worth. Some call it "a new class of mortgage slaves." This is not an academic discussion. It will have an effect. It is already having a profound psychological effect and the ruling class is alarmed.

After Bush was elected, most on the Left were pessimistic, they thought everything was shifting to the right inexorably. On the contrary, we predicted he'd be the most hated president in history. The ruling class doesn't know what to do. The Republicans are split because of the Iraqi quagmire and the economic mess. Larry Summers, former Secretary of the Treasury under Clinton, said: "America risks the worst downturn since the early 1980's."

Nobody knows the depth or duration of the coming recession. According to The Economist, "The real question is not the technical issue of whether the downturn will qualify as a recession, but how long it will last." They fear that the USA might repeat the experience of Japan in the 1990s, when the boom in the 1980's gave way to a recession for 10 years.

t is a supreme Irony that as the crisis approaches, the bourgeois immediately run cap in hand to the state for help. They want lower interest rates, loans, subsidies, etc. In effect, they want the bubble re-inflated! There is no more talk of "market sorting it all out." Greenspan re-inflated the bubble in 2001 to 2003, and he was seen as a hero - now they accuse him of causing a mess. They are right, of course, but it does not stop them from demanding similar measures now.

The real economy of the USA is already showing signs of crisis. In 2007 the sales of cars and light trucks fell by 2.5% to 16.1 million. This year a fall to 15.5 million is predicted. Major companies are in crisis. Chrysler is bankrupt in fact, if not in theory. The December figures for US manufacturing were the worst in five years. New home sales fell by 9.6% in December, 34.4% lower than a year earlier. Inflation is rising everywhere. The November inflation in the USA was 4.3% higher than a year ago.

There are factors that undoubtedly helped the bourgeois in the last period. The opening of new markets after the collapse of the Soviet Union and the restoration of capitalism in the former Soviet and Chinese blocs meant the entry of nearly 2 billion people in the world trade system. This caused a downward pressure on wages, although in China there are rising inflation and wages.

This was a big help to the capitalist system. It gave it oxygen, but none of the fundamentals changed. It led to the cheapening of commodities as a way of combating the tendency of the rate of profit to fall. Vast quantities of commodities were churned out in countries like China and India, for example cheap TVs, computers, etc. Thus, even without rising wages, workers could afford to buy goods that in the past would have been considered luxuries. But now the prices are rising, and yet wages are being kept down.

The UK provides an example. Public sector workers in Britain compose 20% of the workforce. Gordon Brown has declared that the wages of public sector workers should be below the level of inflation for the next three years, allegedly to combat inflation. This is a recipe for an explosion of strikes in the public sector in Britain. Everywhere there are programmes for further cuts in wages. We can express this in the form of an equation: the capitalists cannot tolerate the maintenance of the reforms and concessions of the past, but the masses can't accept further cuts in living standards.

Part of the reason for the rise in food prices is the bio-ethanol boom, which doesn't actually help environment at all, but uses corn and other foods for fuel (subsidised by the government), driving up food prices world wide. Fidel Castro predicted that this would cause a hunger crisis and he was right: it's a catastrophe for poor countries. In Italy, there's been an increase in the price of pasta, which is a serious issue for the average Italian working-class household. But in countries like Pakistan, India, Bangladesh, Afghanistan, etc. similar rises in basic food stuff have led to riots, because people can't afford to eat. The PPP in Pakistan will come to power in this situation of desperation - a reformist policy can't solve this problem, and serious consequences flow from this.

The bourgeois economists are like a drowning man reaching for a straw. They now accept that a crisis in the USA is coming, but hope against hope that Asia will save them, that it will not affect the rest of the world.

China has had the greatest growth of any country in the last 30 years. It's now the number one steel producer and consumer, the second consumer of energy. Some predict that at this rate it can overtake America. In the long term this is true, but it is not an immediate prospect. In the past they said the same of Japan, then the crisis came.

Economists like to extrapolate tendencies on the basis of past figures. Chinese inflation reached a 6.9% annualized rate in November. China's exports amounted to 20% of its GDP in 2001, in 2007 they are 40%. These are estimates, and are probably too high, nevertheless what is clear is that exports play a very important role in the Chinese economy and even a downturn - let alone a deep slump - in the USA will affect it.

It is easy to have sterile discussions on economics, but the point for us is the effect this has on the class struggle. Yes, there's been an increase in world trade and growth, but at the same time there has been a tremendous intensification of pressure on the working class. This has led to explosions of class war, even during the best period from a capitalist point of view.

A formalist might ask why in places like Latin America, where the economy has grown so much, the living standards of the masses are not improving: the answer is that the economies of Lain America grew precisely because the living standards have been stagnating!

The level of exploitation and merciless pressure on the workers is shown by Japan. There's a new term in Japanese: "karoshi" - death from overwork. I recently read a report about a man in Japan who collapsed and died after working 80 hours in a row. Companies are even taken to court for this. In 1998 only 4% of karoshi cases were won. In 2005, 40% were accepted!

Lots of people in the Western countries are accumulating dozens of hours of overtime (often unpaid). 1,780 hours overtime per person per year is Japan's average. In the USA it's 1,800, in Germany 1,400. The tendency toward casualisation and part-time work is very strong.

Now the economy is stalling. The Christmas sales in Britain were dismal. In Germany, growth is expected to fall from 2.6% to 2%, but some are predicting even lower figures like 1.1% in 2008. In France, Sarkozy thinks he can attack the workers but they immediately reacted and his popularity has already fallen by 17%. In Italy, there was the marvellous demonstration of half a million workers in Rome, in little Denmark there was a demonstration of 100,000 against cuts, which is even bigger in proportion to the size of population. There was a general strike in Greece last month, and even big strikes in Switzerland. 

What is the reason for this? Even during a boom, the capitalists can't accept the maintenance of concessions made in past, let alone any new reforms. In all countries, pensions are under attack, in Mexico for example, where we had a revolutionary situation just 18 months ago.

We alone understood the Mexican situation. Is the PRD a bourgeois party? Maybe, but 3 million workers and peasants marching for Lopez Obrador and against the electoral fraud were not bourgeois! Mexico will be the country most affected by the US economic crisis. Entire areas in Mexico depend on money sent back by immigrants who are also under attack, and are being deported.

It's difficult to build a Marxist group in the heat of a revolution. But in Pakistan and Mexico we had cadre organisations before the real start of big events.

Future events will have a big effect on mass organisations. But there is a major problem. It is not a problem of the working class, but a problem of leadership. The mass organisations created to transform society have now been transformed into monstrous obstacles. They put forward pro-bourgeois policies. In the past, at least in words they stood for socialism and communism - at least on May Day. Now they are so degenerated that in Italy the DS (the former Communist Party!) has fused with other bourgeois parties to form a bourgeois party.

Italy is the sick man of Europe. The reason why the bourgeoisie pushed Veltroni into forming this new party, the Democratic Party, is because they have no party to rely upon. What are its chances? The bourgeois will launch a massive media campaign for the new party. That will have an effect. Veltroni will be very popular in the beginning and the vote for Rifondazione Comunista will be sharply reduced, but the reason for the bourgeois to have Veltroni in power is to have him implement a policy of deep cuts. This will cause an explosion of struggle and a ferment within the trade unions as well as RC later on. The Italian Marxists will have important opportunities, as long as we hold a firm position and we don't vacillate.

The mass organisations do not exist in a vacuum; they are affected by the world around them. The sectarians reject these parties, and try to form new parties. But they never succeeded. With the shift to the right of all these parties, it would have been the ideal time to form an alternative to the British Labour Party for example. But they had no luck. All their attempts have failed dismally.

The masses will inevitably move through their traditional organizations. Where are the masses at present in Britain? They are not active anywhere, not in the LP, and not anywhere else either. They're at home watching the TV, struggling to make ends meet. But this will not last: they will move into action and when they move, they will move through the traditional mass organizations: in Britain that means the trade unions and the Labour Party. As things heat up and the Labour Party is reactivated, we will begin to get an echo. In Italy, we will be able to make big gains in Rifondazione Comunista.

In Spain, there's been a terrific polarization. The economy has been doing very well, so the process has been delayed a bit, but the right wing and the Church are now using the language they used in the 1930's. We have a strong Spanish organisation with roots in the working class, and a base in the youth - which is the key everywhere.

The United States remains a key country. George W. Bush was liked by the US bourgeois at first, because he's an accurate reflection of themselves: ignorant, provincial, narrow-minded, arrogant... But he has gone on dangerous adventures. Now they want a more reliable representative.

Generally the US politics has nothing of substance, but the primaries are interesting for what they reveal about the underlying currents in US society. The phenomenon of Obama is explained by a general feeling of the need for change, although if he were elected he would be the worst of all. When ordinary people were asked why they backed Obama they said: because we are looking for a change.

I expect a Democrat, probably Hillary Clinton, to win. But the next president will come to power in period of crisis. Three-quarters of US citizens think that the USA is on the wrong track. The Democrat-led Congress is very unpopular - the Democrats have done nothing.

All of this will produce serious consequences. The American dream is finished. Living standards are falling across the board. This is the first generation that cannot expect better living standard than the previous one. Everything (Iraq war, scandals, etc.) has an effect. At a certain stage the need for a labour party will become apparent.

To all this, we must add Iraq. "I hate Iraq; I wish we had never gone there". Who do you think said that? No, it was not Bush, it was Winston Churchill, in 1926 when the British imperialists faced similar problems. The US imperialists have solved nothing by the invasion of Iraq, and they have destabilized the entire Middle East as well. They have behaved like an elephant in a china shop.

How longer can the USA stay in Iraq? Bush's idea of a surge is crazy and the ruling class knows that. It tried to politely warn him with responsible advice from the Iraq Study Group, which was the true voice of the Establishment. They told him: "Look, we have lost! We must gradually extricate ourselves from there and reach a deal with Iran and Syria."

Now, in the circumstances this was not bad advice. But what does Bush do? He threatens Iran and goes to the point of accusing the Syrians of interfering in the internal affairs of other states! He sends more troops to Iraq. He then says he is going to solve the Palestinian problem by establishing a separate state. He can get up to such nonsense because he's at the end of his presidency. By the way, the USA has destroyed the Iraqi army - the only counter-weight to the Iranian army in the Gulf area.

We do not have a sentimental attitude towards war. War is a terrible thing but it can have revolutionary consequences. We see the beginnings of a movement of the working class in the region: big strikes in Egypt, strikes in Jordan, Morocco, Lebanon, and Israel itself. But the lack of a revolutionary leadership is the main feature of the present impasse in the Middle East. In the past the Stalinists had a strong base in the region and their betrayals largely responsible for current situation.

And we cannot stress enough the importance of the situation in Iran. The regime is split. Ahmadinedjad tried to bolster himself by basing himself on the clash with the US, and its threats to attack Iran. But now a CIA report has been leaked, stating that Iran has no nuclear capability. Who do you think leaked it to the journalists? The US ruling class is trying to prevent another adventure like the WMD farce staged by the neo-conservative clique to justify the invasion of Iraq. The Americans can't launch a strike now. Israel could, but it's facing class struggle too and it remains to be seen whether they will act.

Iran is ripe for revolution. There we have all the conditions listed by Lenin for a revolution: splits at the top, ferment among the middle class, a powerful working class with revolutionary traditions, waves of important strikes, etc. The only factor missing so far is the subjective factor - the revolutionary party. The work of our Iranian comrades is of great importance to the IMT. We must give them assistance.

The situation in Iran is very similar to pre-1905 Russia. Once the Iranian masses start to move, look out. The coming revolution can take different paths but there is one thing we can be sure of: it's not going to be a fundamentalist uprising! 28 years of the mullahs in power have totally discredited them among the masses and youth. The majority of the population is young and fresh; they will be open to revolutionary ideas and Marxism. The Iranian revolution will change the entire situation in the Middle East, showing that genuine anti-imperialism needn't be fundamentalist. It will have an impact on the whole region.

We have dealt with Latin America at some length in our document on world perspectives and we will have a separate session on Venezuela. Latin America remains at the cutting edge of world revolution - and counter-revolution. There's not just Venezuela but Bolivia too. Morales is piddling around with parliament, laws, constitutions, etc. He suffers from a disease called "parliamentary cretinism". This can pave the way for the defeat of the movement. We have the beginnings of a Marxist group in Bolivia, but time is not on our side. Nor is it in Venezuela.

The situation in Venezuela shows the role of the subjective factor. In the 1930's, Trotsky said that the Spanish proletariat was capable of making, not one revolution but ten revolutions. The same applies to Venezuela - the heroism of Venezuelan masses has no precedent in history. Those masses have been in ferment for 10 years, defeating the counter-revolution several times. But there is a limit. You cannot maintain millions in state of agitation forever without showing a way out.

The masses voted overwhelmingly for Chávez in December 2006, and they were voting for a change. But, apart from some nationalisation, which we supported there has not been any fundamental changes yet. With the best intentions in the world, Chávez can lead the revolution to defeat. We must not get "starry-eyed" about it. We can't permit ourselves to be romantic - Revolution is serious business.

The Bolivarian movement is heterogeneous; the leadership consisted of petty-bourgeois revolutionary democrats in the beginning, and there are deep contradictions in its composition and ideas. But it is a mass movement and we must intervene in it and orient to it - but without hiding our ideas or watering down our programme.

People can change. Ted grant always pointed to the case of Largo Caballero in the Spanish Revolution in the 1930's: he was in many ways an honest left reformist who was trying to move towards Marxism. Ted insisted that if the Spanish Trotskyists had behaved correctly, they could probably have won him over. But they behaved like irresponsible ultra left sectarians. They refused to enter the Spanish Young Socialists when they were invited to do so, and therefore delivered this mass organization into the hands of the Stalinists. That was the main reason for the defeat of the Spanish Revolution.

Trotsky called this a betrayal and he was quite right. He broke off all relations with Andreu Nin as a result. What would he say now about the conduct of Orlando Chirinos and the Venezuelan ultra lefts? Chávez is honest and courageous. He would like to introduce socialism, but he doesn't know how to do it. And history shows that sometimes an honest man with incorrect policies can play an even worse role than an open opportunist.

Chávez has no real party, and bureaucrats, Stalinists and reformists of the worst kind surround him, exercising a negative influence, as happened after the referendum defeat,. This was a minor defeat. But Chávez also suffers from parliamentary illusions, imagining that everything must be done "legally by the book." Therefore, instead of offering the masses fundamental changes, he offered yet another referendum. But there are elements of tiredness now among the masses.

However, the process is far from finished. Chávez can switch back and forth from day to day, depending on last person he spoke to, or last book he read. Once it may be Trotsky and the next day something by Chomsky and the cables get crossed.  Last week he said revolution needs to slow down, now he says need to expropriate those engaged in speculation!

We must direct all our fire against the reformist wing and the bureaucracy. My new book on Venezuela will be directed against Heinz Dieterich, the main theoretician of reformism. He speaks of the "political Centre". But there is no Centre in Venezuela! There is tremendous polarization to the right and left. That is the reality, and the revolution is reaching a critical stage.

It's very difficult to discuss the whole of World Perspectives these days. Revolutionary fronts are opening worldwide, too much to deal with in the time we have. I have just touched superficially on a few things. But we are in a marvellous position around the world: in Mexico, Venezuela, Pakistan, and other countries, because we are in the right place at the right time.

We are not discussing the Venezuelan, Pakistani, or Iranian revolution - we are discussing the world revolution. The capitalist system is in crisis - globalization manifests itself in a world crisis of capitalism. It is one single process. The Marxists, which are the general staff of the world revolution, must grasp the global scope of this process.

We will have a very good year ahead of us, and a remarkable world congress, which will show qualitative and quantitative development. But we must ensure that in the turbulent period that we have entered, a period of war, revolution and counter-revolution, one thing is all-important - we must have the forces, the "troops on the ground" or we will miss important possibilities. There will be no shortage of possibilities. But we need the numbers. If there is one thing that we should focus on above all, it is growth, recruitment, winning new comrades, educating cadres, and gathering the forces we need to build a genuinely mass Trotskyist international.

January 13, 2008, Nieuwpoort (Belgium)