resolution was adopted unanimously by the International
Executive Committee of the Fourth International at its meeting in January.
Despite the years of propaganda that it would never again occur, the capitalist world has plunged into its first generalized recession since the 1930s. While it would be hazardous to forecast that world unemployment levels will rise as high as in the Great Depression, the threat has not been eliminated. A heightened offensive of capital against labor's living standards is under way everywhere. No long-term respite from inflation is possible in any of the major powers. 1 1. The current recession of the international capitalist economy was predicted by revolutionary socialists long in advance. Between 1948 and 1973 capitalist world production increased three and a half times at an average rate of 5 percent a year. There was no growth in 1974. By the last quarter of 1974, industrial output of all major imperialist countries was declining. The United States is in its deepest postwar economic downturn, with the Gross National Product (GNP) down 2.2 percent from 1973. It is falling fast. The GNP fell 3 percent in Japan, after 25 years of expansion. Only some of the minor capitalist countries have as yet escaped the immediate effects of the decline (Sweden, Switzerland, Norway, Austria), either document THE WORLDWIDE RECESSION because of exceptional circumstances (the discovery of North Sea oil for Norway), or because of their particular relationship to the world market. The physical volume of world trade has not yet declined, although the rate of growth has dropped sharply. The major powers are seeking to step up foreign sales, if possible, to counteract the recession at home. Whether the volume of world trade will decline depends on the length of the downturn in the major countries (above all the United States, West Germany, and Japan), and on the extent of protectionist measures undertaken by the competing powers. While the actual downturn in industrial output is still small (except in the United States) the rise in unemployment is pronounced. Indeed, official figures in the imperialist countries for the winter of 1974-75 may show that unemployment has risen above 15 million. This will certainly prove to be the case if in addition to those listed as unemployed account is taken of those who work only part-time because full-time jobs are not available to them. Unemployment is probably around 8 to 10 million in the United States; 1.5 million in Italy; 1 million each in West Germany, France, and Britain; 1 million in the minor imperialist countries of Western Europe (Benelux countries, Spain, Denmark, etc.); 1 million in Japan; and 1 million in Canada, Australia, and New Zealand taken together.
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The reasons for this disproportionate increase in unemployment are twofold: (a) The present worldwide economic crisis follows a long period of rapid technological progress (automation) in which productivity rose steeply, especially in Western Europe and Japan (this occurred earlier in the United States). The technological advance was accompanied as always by a slow erosion of the rate of profit, which capital attempted to offset through speedups, "rationa lization, "and other methods of reducing labor costs. But when the rate of increase of productivity is high, only a substantial increase in output can avoid massive unemployment. If there is an actual decline or even mere stagnation in output, unemployment will soar. (b) In the imperialist countries since World War II, there has been a dramatic increase in the number of women seeking employment. There are two main reasons for this development. One is that average wages for males (whether industrial or "white collar") are no longer adequate to satisfy the basic needs of a working-class family. The other is that women are displaying a greater economic and social independence, a reflection internationally of the women's liberation movement. This growing trend, together with that of mounting seasonal appearances of students on the labor market, has increased the potential supply of labor power in the job market independently of the cyclical fluctuations of the economy. Among the workers seeking employment in the imperialist countries are growing layers that are sexually, racially, and nationally oppressed (in the United States, Blacks, Chicanos, and members of other oppressed nationalities; in Western Europe, immigrant workers), a fact that has facilitated the formation of a large actual or potential industrial reserve army of labor, even during periods of high employment levels. 2. 2. The current international capitalist recession constitutes a turning point in postwar developments of immense significance. (a) It is the first generalized recession since the thirties. There have been many recessions since World War II: Indeed, today as in the past, capital cannot avoid cyclical fluctuations of its economy.
But the staggered character of these recessions (for example, the absence of a recession in West Germany, Japan, Italy, and France during the severe
1957-58 U.S. downturn) limited their breadth and depth. A country with shrinking internal markets could export surplus goods and capital.
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But with all the major imperialist countries caught simultaneously, the export markets are pinched off. The possibility of finding a solution by increasing exports to the bureaucratized workers states and the oil-exporting countries of the Middle East is likewise excluded. These potential markets are minimal compared to what is required to absorb the mounting surplus of capital and commodities. Because it occurs simultaneously in many countries, the recession can build up as a whole with extraordinary force, the recession in each country aggravating the recessions in the others, and all of them combining to make the crisis much graver than any recession since the thirties. The danger is particularly great if the recession in the United States lasts through 1975. The United States produces almost as much as all the other 23 member nations of the Organization of Economic Cooperation and Development (OECD), a group comprising all the major capitalist countries. Because of its massiveness, the U.S. economy tends to draw the others into its orbit. (b) The present international recession clearly confirms previous observations that the long postwar capitalist boom had come to an end. The long period of accelerated economic growth following World War Il included cyclical downturns; but they were shorter and less intense than those of the twenties and thirties; and the economic and social consequences for the masses were much less dramatic. In addition to the impulse given to world capitalism by the rebuilding of Europe and Japan following the devastation of World War I, the massive use of "anticrisis" measures by the imperialist governments tended to soften economic downturns, although the end result was merely to postpone the reckoning and entrench permanent inflation. Particularly important has been armaments spending in the United States. Year after year Washington has poured colossal sums into the national and world economy to arm and finance military forces in the United States and abroad, and to pay the increasingly large interest on accumulated military debts. The budget deficits to carry out these operations have become staggering (figures ranging from $52 billion to $70 billion have been mentioned for the U.S. budgetary deficit in the fiscal year beginning July 1975). The "pump-priming" nostrum of government deficit spending was not limited to the United States. By 1973 all the major capitalist powers were throwing huge amounts into deficit spending. The rapid expansion of credit on a world scale drove up prices everywhere. Moreover, each successive recession required bigger
doses of inflationary deficit spending to block a worse slump. This became a vicious circle. Increasing inflation of the dollar led to a series of crises and ultimately to the collapse in 1971 of the international monetary system set up at Bretton Woods in 1944, marking the end of the long postwar boom. The short inflationary boom of 1971-73 was merely a passing phase in the opening of a new long-term period of increasingly aggravated contradictions of world capitalism (including much slower growth) that began in 1967-68 and that became still more clearly manifested in the present world recession. 3. • 3. The present recession is fundamentally a classical crisis of overproduction caused by the inner contradictions of the capitalist mode of production. If is not an accident, allegedly caused by the "oil sheikhs, " any more than the 1929 depression was caused by "speculation" in stocks, or previous serious economic crises were caused by "overextending" railway construction or overseas trade. To be sure, each crisis of overproduction appears as a combination of general phenomena arising from the very nature of capitalist production, and particular phenomena brought to the fore at a given phase of its worldwide expansion and ups and downs. But the very fact that these "accidents" occur with a regular periodicity, that they can be foreseen and predicted, shows that they are bound up structurally with the capitalist system itself. Neither the pre-capitalist nor the postcapitalist economies undergo these cyclical fluctuations of employment, industrial output, and national income. Likewise, the ultimate causes of the present worldwide recession are the inner contradictions of the capitalist mode of production long ago laid bare by Marx. After a period of economic growth, the tendency of the rate of profit to dec line necessarily becomes more prominent. This holds with all the greater force the longer the period of growth and the faster its rate. The organic composition of capital increases as automation and semiautomation reinforce the preponderance of machinery and other forms of stored up "dead labor" in production. The classical avenues for offsetting the effects of the rising organic composition of capital are more and more obstructed. High employment levels and the growing social and organizational strength of the working class make it increasingly difficult for capital to significantly
RECESSION raise the rate of exploitation (the rate of surplus value). The very attempts of capital to cheapen raw materials create divergent trends in prices and profits in primary products on the one hand and manufactured goods on the other. This leads to a growing disproportion in capital investments and current production in both sectors. Sooner or later this results in a relative scarcity of raw materials and in a radical increase in their prices as compared to those of manufactured goods. The decline in the rate of profit combined with an intensification of competition, in turn, creates the need for borrowing a larger and larger part of the capital needed for additional investments. This is the source of the increasingly severe "liquidity crises" of private companies both nationally and internationally. But even the biggest corporations can meet unsurmountable difficulties in raising the funds required for profitable investment. At a given point all these forces pressing down on the rate of profit must lead to a growing number of capitalist firms being threatened by bankruptcy or actually becoming bankrupt, to an overall decrease in the volume of investment (of capital accumulation), to a massive curtailment of production, to massive layoffs, which by their cumulative effects create a generalized downturn in economic activity. On the other hand, there is an inherent trend in capitalist production to extend productive capacity beyond the limited purchasing power of the masses, which is determined in the last analysis by the antagonistic class relations within bourgeois society. Each capitalist boom creates a tendency toward excess capacity and overproduction and the consequent stockpiling of unsellable commodities in key sectors of the economy. As this excess capacity and overproduction increases, current output and employment are correspondingly curtailed, and the crisis is worsened accordingly. In the present recession, overproduction began in the automobile industry and the building trodes. It spread rapidly to electrical appliances, petrochemicals (plastics and synthetic fibers), textiles and clothing, the tourist trade, and aviation industries. It has now reached even the steel industry, which a few months ago was still in the midst of one of its biggest booms resulting from the drastic concentration and curtailment of investment in that industry in the late 1960s, and relative scarcity of steel that resulted in the beginning of the 1970s.
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4 4. While stressing the general structural causes of the present world recession, the analysis should pinpoint the special aspects that differentiate it from previous overproduction crises, especially the big slumps of 1929-33 and of 1937-38: (a) The main distinguishing feature is world inflation. A sharp increase in prices coincided with the opening of the recession. The world capitalist economy passed from an inflationary boom through "stagflation" toward "slumpflation. "In the past, a sharply downward movement if not an actual collapse of prices occurred in depressions. Inflation coincided with crises only in exceptional circumstances -lost wars, civil wars, complete disruption of the economy and output; and then only for a short time. Today world inflation is continuing (and in certain countries like the United States, Britain, Italy, France, even increasing!), in spite of a downturn in production and employment. This disrupts the "normal " function of an overproduction crisis. It is supposed to restabilize the economy by eliminating the more backward firms, clearing out inventories, and increasing the rate of exploitation, thereby paving the way for renewed investment. But the inflationary expansion of credit prolongs inventory buildup, concealing the actual weaknesses of firms. For a time the increase in nominal wages cloaks the erosion of real wages. Artificial purchasing power is created - artificial for firms that ultimately will not be able to remain competitive; artificial for workers who simply cannot repay debts once the lowering of real wages and outright unemployment has reached a certain point. Thus the expansion of credit can go too far. It can prepare the way for unexpected bankruptcies and the closing of oanks; in other words, precisely the kind of credit collapse nationally and internationally that characterized the depression of the 1930s. The imperialists themselves do not rule out this danger. (b) Another distinguishing factor of the world recession is the combination of recession in most sectors of output, including key raw materials, with an acute shortage in two central sectors of the world capitalist economy: energy (especially oil) and food (especially grain and sugar). This combination is not a result of "natural catastrophes, " nor does it express the "limits of growth" of the productive forces. It is a result of disproportions created by monopoly competition. Relatively low prices of raw materials lead to an outflow of capital from this sector into other sectors. 34
Shortages are a means of increasing profits and attracting new capital. This objective process, in turn, can be accelerated by deliberate decisions of the monopolists. The international petroleum cartel (the seven "oil majors") curtailed refinery capacity and oil production as part of a policy of driving up world energy prices and profits. In the interest of higher prices and profits, U.S., Canadian, and Australian "agribusiness" curtailed food production. This is the root cause of the current famines in the African Sahel countries and the Indian subcontinent. These specific features of the world recession have to be taken into account to evaluate its economic, social, and political effects on various countries, parts of the world, and social classes. But they in no way change the estimate of the world recession as a deep crisis of the capitalist system as a whole. 5. 5. Theoretically and technically, a transformation of the present world recession into a depression of the 1929-32 type is not excluded. It could occur if the governments of the imperialist countries fail (for objective or subjective reasons) to follow economic policies aimed at mitigating the downturn. Such a depression could occur if aggregate demand in the key imperialist countries were cut by strong reductions of government outlays and by major curtailment of credit coinciding with big increases in unemployment and sharp declines in wages and profits. Such an occurrence would imply: Either (a) that for some objective reason outside of the control of the capitalist governments (for example, a collapse of confidence in paper money, including the dollar, the Deutsche Mark, etc., leading to a return to gold as the only final means of payment for international operations) a strong deflationary trend appears in money and credit in all the major imperialist countries, a trend that coincides with overproduction. This is what happened in 1929-32, ultimately provoking international bank failures. Or (b) that a trend appears among the capitalist governments to press for general deflation of the volume of money and credit in order to radically "cure" inflation even if it means 30 to 40 million unemployed on a world scale. While the second course is technically possible, it is highly unlikely. Even an unemployment level of
EXCUSE ME. WHICH WAY TO TH UNEMPLOYMENI LINE? a half or a third the scale of the 1930s is frightening enough to governments to induce them to revive inflationary policies (as is already the case in Washington and Bonn). The world recession occurs at a time in the class struggle when the level of working-class organization and the capacity for resistance are immensely stronger than in 1929 or 1937. It occurs at a time when the world relationship of forces between imperialism and its various antagonists is much more unfavorable to world capital than before World War II. Under these circumstances a catastrophic economic depression of the 1929-32 type would engender an explosive social and political crisis not only in Western Europe but also in Japan and North America. If unemployment levels reached 15 million in the United States, 5 million in West Germany, 5 million in Japan, 3 million unemployed in Britain, France, and Italy, short-term palliatives would not avert the intense anger and explosive reaction of the working class. The example of large-scale non-capitalist planned economies that are able to avoid unemployment and inflation despite their bureaucratic deformations would help inspire the Western working class to break out of the private profit system, giving the thrust toward socialism immense force as the masses noted the most effective tactical expedients used in other lands. A repetition of a 1929-32 type of depression would, under the present international and national sociopolitical relationship of forces, clearly initiate the gravest crisis of the capitalist system since its inception To avoid such a catastrophe for themselves, the imperialist governments will likely refrain from the ruthless kind of deflation of money and credit volume that made the 1929-32 depression unavoidable. The strongest ones still have sufficient reserves to
RECESSION
YOURE
IN IT. follow such a course. They have no alternative but to continue in their characteristically pragmatic, and sometimes even panicky way, to oscillate between anti-inflationary and antirecessionary measures in such a way as not to trigger "too much" unemployment or "too high" prices. They can stop neither! Nevertheless the question can legitimately be asked: Is it not possible that even the key imperialist governments will lose control over the situation? It seems obvious that inflation canrot continue indefinitely without exhausting its antirecessionary effects and even transforming itself from a motor into a brake on capitalist economic growth. The collapse of the speculative boom in 1973 and early 1974; the bankruptcies of several important banks; the huge losses met by speculators in currencies, in raw materials, and in land; the collapse of stock prices in the main stock exchanges throughout the capitalist world - all these were ominous signs of a potential worldwide panic. The tremendous extension of the Eurodollar market (additionally fueled by petrodollars); the threat of a massive balance of payments deficit in nearly all the imperialist countries (with the exception of West Germany) as a result of the steep increase in their oil import bill, threatened to provoke a sudden collapse of confidence and a resulting worldwide run on the banking system. Following the collapse of the Franklin National Bank in the United States, I.D. Herstaft of West Germany, and the crisis of the "fringe banks" in Britain, major central banks promised to support rescue operations in behalf of the depositors and, to a certain extent, they will attempt to do this in other cases so as to head off a crash. But these cases also illustrated the limits of such operations. When West Germany refused at first to back Herstatt deposits, the United States retaliated by threatening to freeze West German assets and brought the inter-
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national monetary system grinding to a halt until the secret deals were arranged. The European-American Bank which was formed to take over Franklin National has warned that it will take almost none of Franklin's foreign accounts. In the same category, the United States has recently warned all U.S. banks to review their medium- and long-term loans to Italian industry and to the Italian government itself. The anti-Arab and anti-Iranian propaganda mounted around "petrodollars" by the imperialist banking circles is aimed at helping to force the oil-exporting nations into international credit rescue operations that the imperialists themselves are unwilling to undertake. All of these examples illustrate the fact that the se If-interest of national capitalism places severe limits on the degree to which central bankers can alleviate the international crisis. The deeper and more lasting the inflation, the greater the danger becomes that speculation, debts, and liquidity crises of the banking system will mount to such proportions as to touch off a panicky run on the banks, resulting in a collapse of the banking system and a consequent catastrophic crisis, if not now, then in a future recession. That is why the world bourgeoisie is so worried about inflation. That is why it is trying to alter the class relationship of forces sufficiently to make feasible the eventual use of radical deflationary measures. 6. What makes the present situation so grave for world capitalism, however, is not so much the fact that the economic crisis is the worst yet experienced in the postwar period — it is still much milder than those that occurred between the two world wars -but that it is combined with an exceptionally high level of organization, striking power, and militancy of the working class. The situation in the working class is a resultant of two decades of relatively high economic growth, of a relatively high level of employment, of extensive (Japan, Italy, France, Spain, Canada, Australia) and intensive (Unitec States, West Germany, Britain) industrialization, and a general increase in the level of skills and education (even if spread very unevenly and accompanied by massive downgrading, marginalization, and scrapping of workers). Additional factors have strengthened the working class subjectively. These include the worldwide rodicalization of youth and women; the advances of the world revolution in the semicolonial countries from China to Cuba; the appearance of a new generation of workers who did not experience the two and a half decades of de36 feats following the October 1917 victory; the crisis of Stalinism; and a generalized increase in opposition to imperialist war. This means that the present social crisis of the world capitalist system, which began with the May 1968 events in France, will be seriously and significantly deepened by the present recession, and that the central role of the industrial working class will become increasingly accentuated. But it also means that the general trend points to increasing tensions and explosive conflicts between capital and labor, of more and more acute political crises in key imperialist countries. Attempts of the capitalists to "buy off" workers will decline relafively while attempts to inflict serious defeats upon the working class will increase, the objective being to "solve" the crisis at the expense of workers by reducing real wages, thereby enabling the rate of profit to rise again. Such an onslaught on the living standard and level of employment of the working class entails serious restrictions on the democratic rights of the working class (statutory wage controls, government arbitration of labor disputes, onerous limitations on the right to strike, antiunion legislation, etc.). Experience has shown, however, that as long as capital is unable to succeed in significantly changing the existing relationship of forces between the classes, the attempts to apply such policies generally fail. This does not exclude short-term attempts to head off revolutionary victories through reforms and concessions. But, as in the 1930s, these will amount to no more than stopgap measures. The aggravation of the world economic situation rules out any significant period of decreasing tension between the classes. It brings class confrontations closer to a showdown. The broad perspective is either the revolutionary overthrow of capitalism, or grave defeats of the working class that will enable capitalism to apply its solution - fascism even more brutal than that of The 1930s. 7. In the present world recession, the proletariat stands in much stronger position than was the case in the 1929-32 depression. Among other things, unemployment is not of such scope and duration as in the Great Depression and has had less of a debilitating effect. Massive unemployment for a long period is generally highly demoralizing. The most favorable moments
‹the immediate effect of the world recession will be to fortify the
Lo? lobs Jobs ALL PUSH upsurge of workers for workers actions are either when unemployment starts (that is why the international bourgeoisie is so afraid that sudden massive unemployment could provoke an immediate reaction in the proletariat) or when it begins to decline after an economic revival has started. But during a period of mass unemployment those who do hold jobs are exceptionally fearful of losing them, the employed and unemployed become pitted against each other, as do the partially and fully employed, and those who have a relatively high level of job security and those who lack it. All these factors tend to limit the number and duration of strikes. Of course, certain modifications have to be made in this general analysis. In particular, it is necessary to take into account the "built-in stabilizers" such as unemployment insurance, social security, the dole, low-cost health services, etc., that were introduced during or after the 1929-32 crisis. However, unemployment on a limited scale, such as still exists in the major imperialist countries, has none of these debilitating effects, especially in view of its combination with inflation and with the growing level of organization and militancy of the working class. Therefore it can be safely predicted that the immediate effect of the world recession will be to fortify the upsurge of workers struggles (with the short-term exception of West Germany, for specific reasons linked with the whole postwar
RECESSION - Jobse ALL
Jobs
ALL PUSH Jobs struggles» cycle of class struggles and class consciousness in that country. In Western Europe, the recession will impel a sharpening of class struggles and class tensions especially in those countries where the working-class upsurge has reached the highest level: France, Italy, Britain, Spain, Portugal, but also in minor capitalist countries like Denmark. It will tend to shift the axis more and more away from partial struggles to generalized struggles, and give increasing impulse to the search for overall political solutions to the deepgoing social crisis of capitalism. The upswing of working-class radicalization and militancy in the United States and Japan (as well as Australia, New Zealand, and Canada) will tend to be accelerated by the generalized recession, the proletariat in these countries thereby beginning to fall more into the pattern seen in Western Europe since 1968. It is still too early, however, to predict the forms and rates of this process. The more the Japanese, American, and Canadian working classes move into action in the coming years, adding their weight to the present upsurge of struggle in Western Europe, the greater will be the impact on an international scale and the more difficult it will be for world capitalism to "solve" its present crisis at the expense of this or that sector of the world working class.
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8. 8. The intensification of interimperialist rivalries was one of the causes that precipitated the worldwide recession in 1974. Far from responding as a whole in ways that would tend to ward off a world recession and possible financial collapse, the competing capitalist nations have mainly pursued narrow policies of self-interest. Moreover, no imperialist power or group of imperialist powers, including the most powerful of all - the United States itself -is able to impose its own competitive interests on all sectors of the world bourgeoisie as operative guidelines. Interimperialist rivalries have aggravated the contradictions underlying the recession. From the standpoint of the overall interests of international capitalism, the use of anti-inflationary (mildly deflationary) policies simultaneously in all the major imperialist countries obviously does not make sense. But from the standpoint of each capitalist class taken separately, it makes sense to "fight inflation" and to try to save its currency and banking system from collapse. Here are three concerns: to keep foreign goods out of the domestic market by keeping the prices of domestic goods lower; to penetrate foreign markets to a greater degree because prices of foreign goods are higher; and to stabilize the domestic currency by maintaining a less rapid rate of inflation. Thus, in the era of simultaneous world inflation, the fight to keep one's "own" rate of inflation lower than the rates of competitors becomes a central preoccupation of the competing bourgeoisies. Each major power would like to shift part of the burden of inflation and the recession onto its competitors. West Germany, for example, maintained deflationary policies right up to December 1974, when the specter of world collapse had already been haunting stock exchanges for most of the year. It held to this course despite increasing pressure from its competitors for "reflation" of the Deutsch Mark, since West Germany is the only major imperialist country that is not suffering from a balance of payments deficit as a result of the increase in oil prices. A strong reflation of the West German economy would mean that German exports (which have now overtaken those of the United States) would suffer seriously, while the West German internal market would yield a larger share to imports from its British, French, Italian, Japanese, and U.S. competitors. But when unemployment reached 3.5 percent in West Germany and threatened to go to 4 percent, Bonn dropped its anti-inflationary program. Pump38 priming government expenditures were announced, the central bank's discount rate was lowered, and West German capitalism will now try another round in gambling against the rates of inflation elsewhere. The 1973-74 oil crisis marked a shift in the inter-imperialist relationship of forces in favor of U.S. imperialism, since the United States is less dependent on oil imports than the other major imperialist powers and the capitalists in Western Europe had for years paid less for oil (and energy) than those in the U.S. Meanwhile, however, the stepped-up export drive especially of West Germany and Japan has partially annulled the results gained by Wall Street through the successive devaluations of the dollar and the oil crisis. Yet France, and especially Britain and Italy, have been less successful with their export drives and as a result have been harder hit by the worldwide rise in oil prices, both Britain and Italy undergoing very severe economic and financial difficulties. Furthermore, the failure to seriously advance their economic integration during the present recession, which threatens to bring down the Common Market, prevents the West German and West European capitalists from offering a plausible alternative leadership to the world capitalist system. Under these conditions, the crisis of leadership of international capitalism as a whole is compounded by the crisis of leadership of the bourgeoisies in each of the major imperialist nations. This will not change in the near future, all the more so as the intensification of the class struggle adds to the crisis in each country. The first bourgeoisie to succeed in imposing a major social and political defeat on "its" working class would, as in the 1930s, gain a significant margin for maneuver, enabling if to engage in dangerous attempts at changing the world relationship of forces in its favor. But again, this is unlikely to occur in the near future. The outcome will be endless consultations, horse-trading, and shady deals, a rigamarole that will become all the more agonizing as the recession drags on. 9. 9. In the semicolonial countries, the effect of the world recession varies according to the relation of their economies to oil, grain, and sugar imports and exports. Those that are large exporters of these vital raw materials, and that have only a small deficit (or no deficit) of these high-priced commodities, have, so far, not suffered from the present recession.
(A collapse of sugar prices and a sharp decline of oil prices cannot be excluded if the recession is long-lasting, although even in this case, oil prices will not drop to pre-October 1973 levels.) The ruling classes of the major oil-exporting coun tries have benefited the most. They gained much more in oil revenues than they lost because of increases in the prices they paid for imports, or because of a narrowing of markets for exports other than oil because of the recession. In fact, the big influx of income and gold-and-currency reserves to the oil-exporting countries expresses a redistribution of the surplus value produced by the world proletariat, including the proletariat of the semicolonial oil-exporting countries, in favor of the ruling classes of the oil-exporting countries and at the expense of the imperialist bourgeoisies. This redistribution (the appearance of a high mining rent appropriated to a large extent by the local ruling classes) is a result of the economic disproportions underlined above and of a political shift in the relationship of forces on a world scale. Imperialism was forced to switch from direct to indirect rule over its former colonies after World War Il because the anti-imperialist liberation movement became too strong and could not be defeated militarily on a worldwide scale. The imperialist powers tried first to transform the ruling classes in the colonies into junior partners without payment of a substantial economic price for this changed form of rule. Today, through the oil crisis, the bill is being presented by history. Some junior partners are able to demand and obtain a significantly increased portion of the spoils. While the world balance of forces does not favor an imperialist aftack on the Middle East and while U.S. imperialism favors higher world oil prices to a much larger degree than it publicly pretends, no imperialism favors even the partial redistribution of its wealth to subalterns. The danger of renewed war in the Middle East is consequently very real, especially because of the explosive relations between the Palestinian liberation struggle, the Arab regimes, and Israel. While the oil-exporting countries will generally strengthen their economic growth, including capitalist industrialization to a limited extent, for the other semicolonial countries the combination of a world recession with sharp increases in the prices of oil, food, and fertilizer has become a major economic disaster - the greatest to hit any part of the world since World War 1l. The countries of the Indian subcontinent have been hit hardest of all. The increased food, fertilizer, and oil bills; the decrease in their own exports as a result of their
RECESSION inability to compete with the imperialist powers in a period of intensified trade warfare; the decline of their own industrial production triggered by all these developments, which in turn leads to serious difficulties in buying the raw materials necessary for normal industrial production; the ruthless profiteering and hoarding of food reserves by the indigenous ruling classes; the collapse of the "green revolution" as a result of the steep increase in fertilizer and energy costs - all these factors have brought about an explosive increase in misery, underemployment, and outright starvation both in the countryside and the towns. The ingredients for a social explosion have thus been assembled. But the crisis of proletarian leadership, which is nowhere near its solution, has increased the danger that reactionary right-wing forces will take the initiative in turning the crisis to account at the expense of the masses, who will pay for it in blood and starvation. 10. 10. The noncapitalist character of the economies of the bureaucrafized workers states. has been strikingly confirmed - contrary to all the mystifications of the supporters of the theory of "state capitalism" - by the fact that they have not been caught up in the vortex of mass unemployment and decline in production engulfing all the major capitalist countries. On the other hand, those who stick to the parallel mystification of "socialism in one country" will encounter new difficulties in trying to explain why these supposedly "socialist" countries cannot completely cut their ties with the world market, thereby remaining subject to the effects of the world capitalist recession. These effects can be summarized in four points: (a) The world recession reduces the export markets of the bureaucratized workers states in the capitalist countries (except oil, grain, sugar), export markets which these economies urgently need in order to increase their imports of modern equipment. The bureaucracy will try to compensate for this relative decline in its export markets by stepping up the search for loans, in return for which it will be all the more willing to pay the political price of not exploiting the mounting social crisis in the West. The bureaucracy has gone out of its way in giving assurances that it is not going to seek to turn the recession into a revolutionary crisis and that it will see to it that the Communist parties do their utmost to keep the workers within the bounds of class-collaborationist reformism. (b) The shortage of oil and grain upsets some of the
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economic plans of the workers states, especially the heavy importers of these commodities like the German Deriocratic Republic (GDR) and Cuba. In these instances it could cause a slowdown of the rate of economic growth, especially in combination with a decline of exports to the West. (c) The shortage of oil and grain, combined with the effects of the recession, creates new stresses and tensions in the relations between the bureaucracies. To sell oil at world market prices to other workers states (GDR, Cuba, North Vietnam, Hungary, etc.) becomes so lucrative for exporting bureaucracies like the USSR, Rumania, and China that charges will be leveled of exploitation. (d) The change in the world economic situation increases interest among the imperialist powers in probing the bureaucratized workers states both as markets for exported goods and as sources of raw materials. The tendency will mount to seek big trade deals like those already made to exchange oil and natural gas of the USSR and China for pipelines, petrochemical plants, petroleum refineries and other equipment. However, quantitatively. this is not large enough to offset the results of the deceleration in the growth of the volume of world trade which is occurring. Moreover the deals are of such a long-term character that their effect will be felt only over a period of years. 11. 11. In view of the general increase in social and political contradictions and tensions as a result of the worldwide recession, imperialism will be increasingly tempted to block social explosions by local wars, and to "absorb" some of the major effects of the long-term decline in the rate of growth by stepping up the armaments race. In spite of the policy of detente and peaceful coexistence pursued with complete sincerity by the Stalinist bureaucracies, there are areas in the world where, for obvious reasons, i.e. self-defense, the bureaucracies cannot retreat indefinitely without endangering their own security. Factions prepared to adopt a policy of unlimited retreat in the face of renewed imperialist aggression in those areas would probably meet stiff opposition, in the first place from the army commands. The Middle East obviously is such a key area of potential conflict today. The economic recession spreading throughout the international capitalist economy combined with the steep increase in oil prices has created a dangerous climate of imperialist aggression, politically and economically, in this area. This is the first time since the 1949 recession that a serious downtum in the economic situation 40 of imperialism has coincided with a sharp increase in international tension in an area where a direct military confrontation between imperialism and the armies of the Warsaw Pact is possible. Up to a certain point U.S. imperialism can carry on maneuvers, horsetrading, and military blackmail with both the Arab ruling classes and the Zionist leaders with the aim of imposing a "settlement" in the Middle East, essentially at the expense of the liberation struggle of the Palestinian masses. The objective of retaining essential control over Middle East oil is to be accomplished through joint ventures with the Arab ruling classes, including massive investments of petrodollars in Western property, the better to tie the Arab rulers to the "economic order" of international capitalism. The Zionist leaders are not simply puppets of imperialism; they have their own independent interests to defend. Seeing that time works against them, that the relationship of forces in the Middle East could become more and more adverse to the maintenance of an expansionist colonial seftler state in the area, they could be tempted to exploit a temporary military superiority at a given moment and undertake a preemptive strike against the neighboring Arab countries. In case of partial failure or in face of heavy retaliation, they might resort to extreme measures, including the use of atomic weapons. This could lead to incalculable consequences through involvement of the world's two major nuclear powers. The fact that the international working class and toiling masses, including those in the United States, are strongly opposed to warlike adventures is a deterrent to such desperate adventures by the capitalist that imperialism will seek a military showdown with the bureaucratized workers states as long as the international working class has not suffered a disastrous defeat. Nevertheless, the graver the economic difficulties of world capitalism become, the more the social and political tensions increase, the more will certain sections of the capitalist class tend to intensify war preparations and play with military adventures. Either the danger of war will intensify and along with it the danger of forms of the "strong state" and anti-working-class dictatorships coming to power, or the proletariat will impose its own solution for ending the death agony of capitalism - the conquest of power by the toiling masses, the victory of the socialist revolution.