Fifteen months after its first devaluation, the dollar has just suffered a second. During the negotiations around the first devaluation, certain capitalist groups and their spokesmen were able to spread around the illusion that the new exchange rates "would stick." But today, nobody upholds such an optimistic prognosis for the international capitalist system any more. For the time being, the system of fixed exchange rates is done forthat is the bitter conclusion that emerges from this second devaluation, which will inevitably be followed by others.
The Technical Causes
From a technical point of view, the causes of this fall of the dollar are not hard to find. Today, outside the United States, mulitnational corporations (most of them in fact American) have dollar holdings of upwards of $50-60 thousand million in liquid or partially liquid form. Each of these capitalist companies is prepared to hold these liquid assets in dollar form only insofar as it is not worried about taking a loss in exchange.
But since 1971 (actually since 1968), the U.S. central bank has refused to exchange these dollars for gold. The central banks of other capitalist coun tries will exchange them for their own national currencies only within certain limits.
So all that is necessary for the agreed-upon system of exchange rates to break down is for a certain amount of dollars - 2 or 3 thousand million out of the 50 thousand million total! - to be thrown on the currency market. This is what just happened. And inevitably, it will happen again.
The capitalists on a world scale would be willing without hesitation to hold these liquid assets in dollar form only if one of two conditions were met: if the dollar's convertibility into gold (or into some other means of payment with an intrinsic value) were reestablished; or if American imperialism re- 302
gained its competitive superiority, so that dollars would again be linked to American commodities that could be resold at any time because they would be a better bargain and of superior quality to those of U.S. imperialism's competitors.
Neither of these conditions is about to be reestablished; the persisting deficit in the American balance of trade after the first devaluation demonstrates this. Hence, an exacerbation of the crisis of the international monetary system is inevitable.
Thus, a law established by Karl Marx more than a century ago is confirmed: No inconvertible paper money can retain a fixed rate of exchange beyond the boundaries of a state. The second fall of the dollar thus confirms the decline of American hegemony, the lack of an international capitalist authority, and the reality of interimperialist competition.
Economic and Social Causes
The mass of paper dollars that has inundated the capitalist world during the past three years did not fall from the sky. It was not the product of a technical "mistake" made by the Washington monetary authorities, nor was it the reflection of a diabolical scheme to attack the trade of Europe and Japan, nor was it the result of Common Market protectionism. It is the product of the inflation of credit and the budget deficit that the Nixon adminstration was forced to resort to in order to get out of the 1969-71 recession.
To fail to understand this is to present an idyllic image of the inextricable contradictions in which American imperialism, and with it the international capitalist system, is mired.
Immediately halting the American balance of payments deficit during 1969, 1970, and 1971 would have involved transforming the American recession into a very serious overproduction crisis, would have meant 10 or 12 million unemployed in the United
States instead of 5 or 6 million. That would have involved a very serious economic crisis in the rest of the capitalist world. The disintegration of the international monetary system is the price paid to temporarily avoid this economic and social crisis.
The American bourgeoisie and its ideologues are completely aware of this. If today the bourgeoisie talks about "limiting" the annual increase in the monetary mass (inflation of credit) to 5 percent a year (as opposed to 10 percent a year since 1969), it is because it knows that the higher rate would provoke a new recession. Its only hope, articulated by Arthur Burns and Milton Friedman, is that it would be only a "minirecession." We shall see.
The dilemma of the European and Japanese capitalists is no less real. They can demand that Washington return to a more "orthodox" monetary policy. Their pressure is doubtless partially responsible for the budget cuts (all at the expense of the working people and the poor) that Nixon has just decided on. At some point, they could even refuse to defend the dollar's exchange rate (which is what the Swiss bankers did on the eve of the first devaluation, and also what the West German bankers finally wound up doing, thus precipitating the second devaluation).
But by doing this, they would be running great risks, for two main reasons. Above all because every serious economic and social crisis in the United States, the central fortress of the international imperialist system, would have grave repercussions in all the other sectors of the system. The U.S. domestic market is today a key sector of the world market for all the other capitalist powers.
Bankers and Industrialists
Not only that. By pushing towards devaluing the dollar, they are pushing toward devaluing a not inconsequential fraction of their own holdings. A not inconsequential (albeit minority) part of this worldwide floating mass of tens of billions [millards] of dollars is held by European and Japanese capitalists. These dollars automatically lose a part of their value when the dollar falls.
The capitalist partner-competitors of the United States are thus condemned to always lose, one way or the other.
But the opposite is also true. On both sides of the Atlantic, the first commentaries on the consequences of the second devaluation stressed its effects on world trade. In New York they were jubilant: American exports would become less expensive, imports more expensive. In Düsseldorf and Tokyo they groaned: "Our" exports will get more expensive.
All these commentaries are superficial and partially imprecise. The world market is not as monopolized as national markets are. Prices on the world market are not so closely controllable by the big trusts. An increase in the rate of exchange will therefore not automatically reflect itself in prices. Furthermore, demand is not so elastic; products are not so easily substituted for one another as on the national market.
This means that European and Japanese exports to the United States will not decrease in the same proportion as the devaluation of the dollar, that American exports to Europe and Japan will not go up in the same proportion, that the cost of living in the United States will be affected by the higher prices of imports, and that the general expansion of world trade will slow down. The gains anticipated by U.S. industry thus threaten to be less than expected (as was already the case with the first devaluation).
Furthermore, it must not be forgotten that the European and Japanese central banks are not hoarding "devalued" dollars, but are immediately reinvesting them in U.S. treasury bonds on which they earn interest. Thus, one of the consequences of the influx of dollars in Europe and of the devaluation is that the overseas capitalists' share in the surplus value created by American workers increases. In this sense the devaluation, first proclaimed as a "triumph" by Washington, reflects a deteriorated situation and not a strengthened position.
But still, the basic thing is another point. What the dollar devaluation wins for American industrialists and loses for German industrialists, it will lose for American financial groups and win for European and Japanese financial circles. It means in effect that from now on it will take more dollars to buy a factory in Europe, less Euro- March 19, 1973
pean (and Japanese) currency to buy a factory in the United States. In this sense also, the American imperialists have no reason to rejoice about the fall of their currency.
The Common Market Threatened
Nevertheless, American imperialism did score some points against its European competitors. But this success is not so much in the realm of trade as in forcing a halt to the attempts at unification of the European imperialist powers through the strengthening of the Common Market.
To promote an interpenetration of capitals capable of creating enterprises of the same power as the major American trusts, the European bourgeoisie would have to create a European superstate with its own currency, its own industrial policy, and its own independent nuclear arms. In view of the great differences in their situations and the great divergences that separate them, these imperialists can hope to achieve such a unification only one step at a time. The formation of the Common Market was conceived only as a first step. Monetary unification by 1980 was supposed to follow as the second decisive step.
But the disintegration of the international monetary system hit the different imperialist powers at a time when the economic and social situations in the various countries are widely disparate. Two of the four big Common Market powers, Great Britain and Italy, are going through a difficult economic situation marked by exceptionally severe class-struggle tension. The bourgeoisies of these two countries could not agree to a united solution with the other European bourgeoisies. They "floated" their currencies not only in relation to the dollar but also in relation to the other European currencies. In one blow, the hopes of monetary union based on a European "superstate" were shot down.
Thus, the devaluation of the dollar, following in the wake of the American attempt to scuttle the Concorde - and with it the threat of seeing the European aeronautics industry outstrip America's for ten years —has put very severe strains on the capitalist integration of Europe.
Calls for "European solidarity" are on the rise in every bourgeois capital; but reality does not jibe with the appeals.
New Contradictions Hitting Declining Capitalism
American imperialism is trying to make the European and Japanese capitalists bear the brunt of its own falling rate of profit. The European and Japanese capitalists are responding by trying to impose the necessary sacrifices on their own workers in the form of wage freezes, incomes policy, "wage consultations," "rationalization, and so on. When the European workers refuse, the bourgeoisie does not miss a chance to reveal its own basic hypocrisy.
Last week The Economist, one of the most representative weeklies of the British bourgeoisie, published two articles, one devoted to the workers' revolts against the incomes policy decreed by the Tory cabinet, the other on the international speculation that provoked the devaluation of the dollar.
In the second article, it was explained that no political decision can prevent "the laws of the market" from fixing the floating rates of exchange; a governmental decree aimed at counteracting the "laws of the market" would be worth only the paper it is printed on.
But in the first article, all the stops were pulled in trumpeting moral indignation against the British trade unions, which had dared to defy government decrees fixing the rate of wages and which had sought to "exploit" the "laws of the market" to their own profit, thus committing outrages against parliament, democracy, and humanity.
In other words, only the workers must bow before government decrees; only the speculators have the right to exploit the laws of the market to their own advantage.
But behind this hypocrisy lies an objective contradiction to which attention must more and more be directed. These famous "speculators" who made the dollar fall are not some obscure figures of the netherworld, the "mafia" of "international finance." They are the multinational corporations, that is, the most honorable leading lights of industry, banking, and trade in all the imperialist countries - and American capitalists in the lead! These gentlemen have today become uncontrollable by their own governments. But at the same time, they need governmental aid more than ever. Precisely the 1969 recession reminded them of the sad fact that whatever their profits may be, they can very soon be brought to the brink of ruin if a sufficiently deep recession shakes the economies of the imperialist countries.
Bourgeois governments less and less able to restrain the multinational corporations, while the multinational corporations cannot do without more and more sizable periodic governmental support and subsidies; an inflation that must be accelerated to hold back increasingly serious recessions, but which at the same time wrecks the international monetary system and thereby disrupts the expansion of world trade; an accelerated interimperialist competition at the very time that the formation of a new international monetary system demands the greatest international bourgeois solidarity; the necessity of "disciplining" the wageworkers and the impossibility of breaking the obviously rising combativity of the workers — these are the new strains that today are added to the classical contradictions of the capitalist system.