[The following article appeared in the February March 1978 issue of Critique Communiste, a theoretical quarterly published in Paris. The introductory note is by Critique Communiste; the translation is by Intercontinental Press/ Inprecor.]
We are publishing below the final chapter of a book by Ernest Mandel published in West Germany in 1977, entitled "The 1974-78 Crisis: A Marxist Analysis." This 180-page book will be published in French during 1978.
Mandel seeks to place the generalized recession of 1974-75 both in its particular historical framework (the end of the long postwar period of expansion) and in the more general framework of the overall history of the capitalist mode of produc tion. He explains how this recession and the phase of depression—with its halting, uneven, and episodie recovery-were not accidental and were not produced by such extraneous factors as the rise in the price of oil, the "irrational behavior of the trade unions," or "the excessive demands of the workers." Rather the crisis flows inevitably from the inherent logic of the system, although accidental or extraneous factors can obviously play a role in determining the particular character of each cycle. In the course of this work, Mandel refines the explanation and application of the Marxist theory of periodie crises and cycles of industrial production. Every revolutionist will find Mandel's book an indispensable tool for analysis and for struggle.
Every crisis of overproduction involves a massive attack by capital against wage labor. The crisis increases unemployment, and thus also the fear of unemployment, which tends to make workers accept speedup, a drop (or stagnation) in real wages, and the loss of previous gains in terms of working conditions, social security, and protection won during prosperous times against the most flagrant forms of poverty and injustice.
This has been true of every crisis. It was also true during 1974-75. Since then we have seen a general austerity drive against wages by big business. The outcome of this offensive depends on the interaction of three factors:
1. The level of organization, militancy, and class consciousness of the proletariat at the moment the offensive is launched (which is itself determined by everything
that has happened over the last fifteen or twenty years in the class struggle and the workers movement in each individual capitalist country and in the world as a whole).
2. The response of the mass organizations of the workers movement, above all the trade unions, but also the traditional mass parties.
3. The relationship of forces within the proletariat between the bureaucratic apparatuses and the new workers vanguard that has been forged through the struggles of the last ten years (an additional, and in the long run decisive, aspect of which is the comparative strength of the new revolutionary party being formed).
If we wish to draw a sober balance sheet on what has happened in the imperialist countries over the last three years, we must conclude that the employers' offensive has scored certain victories-of varying importance depending on the country-but that nowhere have they achieved their overall goal.
Working-class militancy and the vanguard have not been smashed.
In no imperialist country have the workers suffered a grave, decisive defeat. The capitalists have not been able to increase surplus value to a rate anywhere near that required to solve their serious immediate crisis or to satisfy the historic needs of capitalism.
However, the working class and the workers movement are still, by and large, on the defensive. With the exception of Portugal in 1975, the workers have nowhere been able to use the extremely serious crisis of capitalism to challenge the existence of the bourgeois regimes. Even in Spain, where the scope of militance and politization has been the greatest, the winning of democratic rights and the collapse of the ditatorship under the masses' hammer blows have not (yet) created a crisis that theatens to collapse the capitalist regime itself.
Granted, the potential for such crises remains intact in the four countries of southwestern Europe. This potential might even spread to several countries further north. But at least for now this has not happened. The reason is clear-even though the objective strength and degree of organization of the working class are greater than ever before, and even though a new workers vanguard challenging the domination of the old bureaucracies has actually emerged in many factories and trade unions throughout capitalist Europe
(to a lesser extent in Japan or America, but they will follow the same course, with a few years delay), the traditional bureaucracies still have tremendous power to halt or disorient struggles, since there is no other political force within the workers movement sufficiently broad to present a credible alternative.
The mass workers organizations in Europe had been living in a dream world of "constant growth guaranteeing full employment and social progress." The traumatic shock of four years of widespread unemployment brought them back to reality.
But the bourgeoisie has gone on a big propaganda offensive to confuse workers by "explaining" the crisis as one of shortages rather than overproduction. This campaign is designed to blame massive unemployment on the colonial peoples and on trade unions and working people in Europe. The leaderships of the trade unions and the mass workers parties have proven themselves totally incapable of providing a theoretical and political response to the bourgeoisie's ideological offensive. Almost all of them make concession after concession, when they don't give up altogether.
Are the Trade Unions to Blame?
This disarray was reinforced when neo- Ricardian ideas (from the Cambridge school) came back into vogue among economists linked to the workers movement, including the Communist parties (especially the Italian Communist Party).
For the neo-Ricardians, the rate of profit depends only on wages and has nothing to do with the organic composition of capital. So they blame a falling rate of profit on wage increases. From there it is just a short step to the conclusion-shared by the bosses-that "excessive" wage demands eliminate jobs and are thus to blame for unemployment.* This is a step that many economists linked to the workers movement, and even many leading Social Democrats, make very easily.
This shows how theoretical questions that seem to be academic today take on direct social, political, and practical importance for the class struggle. Only the
Marxist explanation for the falling profit rate-that it is caused by the increase in the organic composition of capital and not by wage increases-can provide a firm foundation for trade-union and workingclass resistance to the bourgeoisie's propaganda campaign. This offensive obviously has a pratical goal-to make the trade unions accept cuts in real wages and an "incomes policy" that takes away their right to defend the interests of their members, such as the unconditional right to strike.
The right-wing Social Democrats broke with Marxism a long time ago on this question and transmit the conventional platitudes of bourgeois ideology to the workers movement: "We are all in the same boat. We all have to pitch in to save this company, or the national economy, or Europe, or the 'free world'" (depending on the circumstances).
In a whole series of European countries, the leading Social Democrats have become the advocates and representatives of the austerity policies the bourgeoisie demands. This has been the case particularly in Britain, West Germany, Portugal and Denmark.
Some "Eurocommunist" parties have openly followed in the Social Democrats' footsteps, even outstripping them at times in the "courageousness" of their commitment to austerity.? This is true, for instance, of the Italian and Spanish CPs. The Portuguese CP has taken a softer position, backing the austerity program in principle but letting itself be drawn into opposing several concrete austerity measures, under pressure from its workingclass base.
Alone among all the big workers parties in Europe, the French CP has so far declared its firm opposition to any austerity policy, in the name of a classical Keynesian anticrisis approach. It shares this position with most of the left Social Democratic tendencies (the Labour left in Britain, CERES in France, Fraternidade Operaria in Portugal, the Renardist tradeunion left in Belgium. But so far none of these currents has failed to give pratical support to austerity measures upon going from opposition into the cabinet. It is unlikely that the French CP will do anything different.
Two Arguments for Austerity
There are two types of arguments used by right-wing Social Democrats and rightwing Eurocommunists to defend austerity policies. The first is basically political. It boils down to the everlasting "lesser evil" refrain. "If we don't administer the crisis, it will be administered by the reactionaries, who will impose much harsher austerity programs. Besides, if we don't allow capitalism to extricate itself from this crisis through austerity measures, unemployment will bring the far right back to power, which will mean total catastrophe."
To put things another way, "Let them cut off three fingers so that you don't lose your whole hand."
But there is not the slightest bit of serious evidence propping up such a defeatist argument. Who has ever proved that the workers would be incapable of fighting wage freezes and wage cuts if they organized a militant and unified struggle? Who has ever shown that rightwing governments can blunt the resistance of the workers movement? Has the big defeat the British miners handed to the Heath government's union-busting drive been forgotten? Who has demonstrated that the reemergence of fascist gangs necessarily means they will win? Doesn't anyone remember what happened in July 1936 in the proletarian centers in Spain, and during the 1960s in Italy?
The second argument is more strictly economic in character; it almost seems to be a technical question. The right wing of the workers movement argues that without curtailment of spending by consumers (that is, cutting the volume of wages), there can be no growth of investment, and thus no reestablishment of full employment. To quote Helmut Schmidt's demagogic phrase: "The profits of today are the jobs of tomorrow."
Even from the "purely technical" point of view, however-that is, even by sticking to the framework of the capitalist mode of production-it is simplistic and wrong to theorize that a nation's resources fall into two big funds: the fund of household consumption (basically by wage earners) and the fund of productive investment.* In reality, this is not the case. There are not two but three major categories of expenditures:
1. The fund of consumption by the productive class (including social security payments, which represent the income of all workers not able to sell their labor power for such reasons as retirement, sickness, disability, unemployment, pregnancy, or the need for job training or retraining).
2. The fund of productive investment.
3. The fund of unproductive expenditures. This last category includes not only administrative expenditures, military spending, and the costs of maintaining the ruling classes and their dependents and lackeys, but also the distribution and marketing costs created by the anarchy of the capitalist system, amassing of wealth, hoarding for purposes of speculation, the
export of capital, and so on.
Thus, it appears that it is quite possible for the first fund to be reduced through austerity mesures without there being a corresponding increase in the second category. In that case, "compulsory saving" by wage earners simply fuels unproductive expenditures. It is even possible that despite a diminishing of the first fund, the second will diminish at the same time. This is exactly what happened in 1975. It seems to be recurring today in many imperialist countries.
Furthermore, to identify productive investment with the creation of new jobs is another red herring. A growing portion of investment is made for the purpose of rationalization, eliminating more jobs in the industry where it is carried out than it creates in the branches that supply the equipment.
Salvation Through Exporting?
The crudest arguments for austerity begin to lose their credibility among unionized workers as large-scale unemployment becomes chronic and deepens. The workers become more and more irritated and outraged about the powerlessness of their governments, whether of the "left" or "right," to reestablish full employment.
Therefore, the advocates of class collaboration and raising capitalist profits are falling back on a new line of defense: "economic recovery" will only come through a vigorous expansion of exports and a strict curtailment of imports. Since the competitive position of the nation's industry on the world market depends on "moderation" in wage increases, austerity is necessary to insure a "recovery through exports."
Here again empirical facts contradict the theory. The table (see box) clearly shows that there is no correlation between the more moderate rates of growth in wages and the success of export drives.
This is because industrial competitive. ness depends basically on unit costs. These are determined much more by technological progress, economies of scale, the greater or lesser availability of capital, the cost of credit, the degree of access to energy sources or cheaper raw materials. and the burden of debt, than they are by minor fluctuations in the rate of growth of wages. Moreover, we should not forget that in manufacturing, wages represent no more than 25%-30% of production costs and sometimes even less.
it is patently unrealistic
Furthermore, for all the imperialist countries to project a "recovery of growth through exports" at the same time. Since the world market is expanding only slightly, if not contracting, it is obvious that one country's gain must be another country's loss. Therefore, when the trade unions and reformist workers parties support the export drives of their own ruling class, they do so not only at the expense of wages of workers in their own countries. The American trade-union bureaucrats' support for protectionism and for an "illegal alien hunt" is only an extreme example of a much broader tendency. For the proud motto, "Workers of the world unite," these mouthpieces of business unionism substitute the delightful slogan, "Workers of the world, eliminate one another's jobs, and condemn yourselves and each other to unemployment and wage cuts.
The bosses in each country readily invoke the pressure of international competition to justify their opposition to the only effective measure that can immediately reduce unemployment: substantially cutting the work week with no loss in pay and no change in the way work is organized, thus providing for the hiring of additional workers.
Almost all the big trade-union federations in Western Europe have come out for an immediate changeover to a thirty-fiveor thirty-six-hour week. They should immediately launch an action campaign across Europe-including North America and Japan, if possible-for this demand, culminating in a Europe-wide general strike.
But how can they realistically struggle for the thirty-five- or thirty-six-hour week throughout Europe, and at the same time back the campaign of "their own" bosses to step up "their" export level and improve "their" competitiveness (at the expense of their neighbors')??
There are two lines of action here and they are mutually exclusive: either accept international capitalist competition, or apply working-class solidarity and internationalist trade unionism.
Back to Keynesian Methods?
Among those who reject austerity or seek
6. The Social Democratic former prime minister of the Netherlands, Willem Dreesmsr, stated in an interview with the Economic Bulletin of the Free University of Amsterdam in May 1977: *The volume of unemployment is caused by the fact that we allow work to be done here in the Netherlands by foreign workers that could be done by our own citizens. ... We should have gradually sent these foreign workers home, at the same rate at which Dutch workers became available. ... But in any case we should completely eliminate all the [foreign] workers who are here without permits..
7. The PSUC (Catalan section of the Spanish CP) recently adopted a document on political economy at its fourth congress explicitly based on a struggle against inflation and for "the restoration of competitiveness and profitibility to industry."
to camouflage it, the general preference is for Keynesian methods to spur recovery. They say that increasing the buying power of workers, especially of the poorest strata (who will immediately spend any extra income will create additional markets for consumer goods, putting the process of economic growth back on the right track (growth of a different type than that of the 1950s and 1960s, however, with increased social consumption). The Common Program in France tends in this direction.
It is unquestionable that a rise in the income of working people can have an immediate "multiplier" effect, and in the short run can lead to a strong recovery in the consumer sector, especially if this sector contains much unused productive capacity. All the experience of the last forty-five years attests to this.
But experience also confirms that such a short-term recovery does not automatically produce a large-scale renewal of productive investment and a radical decrease in unemployment (see, for example, the failure of Roosevelt's New Deal). Experience demonstrates that it is impossible to prevent the bourgeoisie from responding in a hostile fashion whenever the growth of workers' real wages passes a certain threshold where the ratio between wages and total surplus value within the national income is seriously upset. These hostile responses include flight of capital, investment strikes, economic sabotage, and financial (to say nothing of politicalmilitary-terrorist) conspiracies against the "governments of the left."
Given the maintenance of the capitalist mode of production and the fact that a country is part of the international capitalist economy, the two abovementioned factors result in accelerated, if not galloping, inflation-the "natural" device the capitalist system provides for taking away what the workers have already won.
such as Steven Holland, the
Some, theoretician of the British Labour left, have denied that Keynesian recovery techniques inevitably cause inflation.® They see inflation as simply the combined result of recovery and the state's financial crisis, which is in turn caused by the bourgeoisie's refusal to pay "enough taxes." But is there any way of changing such behavior on the part of the bourgeoisie-which is in keeping with the logic of capital accumulation-except by expropriating them?
Hence, the use of neo-Keynesian methods to spur recovery can have only very limited positive effects, especially because they are short-lived. After a year or two, tensions mount significantly at all social, economic, and political levels. The mixed economy is a myth.
A capitalist economy can only recover and prosper according to the laws of capital, that is, production for profit. You can, of course, overcome these tensions by obeying this logic-but that means austerity. Or you can overcome them by expropriating the bourgeoisie and obeying another set of laws, those of an economy human needs—in based on satisfying other words, by building socialism. But trying to straddle the two solutions, or trying to alloy them through some kind of alchemy means running rapidly toward a total breakdown of the economy, as in Chile in 1973—in other words, toward catastrophe.
The left Social Democrats and the most sophisticated left Eurocommunists make an effort to take into account the negative results of past experiences with Keynesian techniques. Thus, they combine a policy of recovery through increased consumption with one of controlling investments and enlarging the public sector, supposedly to reestablish full employment." All the contradictions of the "mixed economy" idea burst through when light is shed upon these proposals.
How can it be guaranteed that investments in the public sector will not compete with the growth of the private sector? Who is going to make the rulers of the trusts obey the government's dictates on investment that run contrary to their own interests, i.e., investments that are only complementary? How are the capitalists to be prevented from "destabilizing" the national economy-with the help of their class brothers in other countries-as long as the imperatives of the "open economy" are accepted? How is the bourgeoisie to be prevented from responding with all the hostile reactions referred to earlier if the most profitable monopolies are actually nationalized? (Obviously, the socialization of losses only aids big business. How is the bitter rivalry between the nationalized and private sectors to be prevented from provoking energetic reprisals by the private sector-particularly if nationalizations extend into manufacturing?
How can one be sure that every increase in public investment will not automatically be followed by a reduction in private investment, if not a massive flight of capital, making all those grandiose plans for a 6% medium growth rate (as in the French CP's program) unworkable?
Under these conditions, class conflict is also transferred to the domain of financing. How is the bourgeoisie going to be forced to pay the large tax increase that is supposed to finance the expansion of the public sector? And if it does not pay, won't austerity for the workers be the only alternative, or else galloping inflation (which amounts to the same thing anyway? Where are the extra resources going to be found to simultaneously restore mass consumption, social services, and public investment if the bourgeoisie, out of its class interests, refuses to pay? Won't a test of strength rapidly develop?
And in economic terms, this test of strength means either expropriate big business or capitulate to it. In political terms, it means that either the working class takes power or the counterrevolution returns with a vengeance.
The supporters of such "left" solutions, moreover, weaken their case by not adding the call for a break with the capitalist world market. The only outlet this leaves them is a combination of increased protectionism (fussy and ineffective, because it inevitably brings on reprisals), and efforts to coddle the "national" and international bourgeoisie. The French SP expresses this contradiction in a particularly striking way, stating:
"The soundest and most powerful way of turning back the flight of capital is, of course, to put economic development back on the right path, because a healthy economy is the best guarantee of fiscal stability. Today, only the left is capable of bringing about an economic recovery." (89 Réponses aux questions économiques, p. 105).
Is there such a thing as a "healthy economy" independent of class interests?
Is the bourgeoisie going to fervently applaud an increase in production accompanied by a hard-hitting tax on capital? Is it going to be taken in by a huge jump in sales of ski boots and economy cars, even if some of its best factories are expropriated and its global profits cut in half? Is the bourgeoisie's "holy of holies" the index of industrial production, real wages, and employment? Or is it not rather the volume and rate of profit?
Do the economists of the French SP really think they can put the Common Program into effect while increasing the volume and rate of private profit? And if not, won't the national and international bourgeoisie consider the economic situation "unhealthy" and unleash a flight of capital, no matter what the index of production says? Once again the concept of a "mixed economy" is shown to be a dangerous and destructive myth. It could become a real trap for the working class and the workers movement.
The crisis, and the reappearance of large-scale unemployment, are an organic
Rate of Increase in Real Wages and Rate of Growth in Exports
Real Wages*
Volume of Exports
+3.60%
+1.75%
+2.25%
+2.60%
United States
+7.40%
-3.75%
+10.50%
+1.20%
Great Britain
+6.25%
+3.10%
+8.50%
+3.00%
France
+12.40%
+5.00%
+2.00%
+4.00%
West Germany
+5.50%
+4.30%
+2.75%
+21.80%
Japan
+7.75%
+7.00%
+11.70%
+4.40%
Italy
*Increase in hourly wages minus increase in consumer prices.
Source: Perspectives économiques de l'OCDE, outgrowth of the capitalist system. These problems cannot be overcome within the framework of capitalism, except through a brutal attack on the living and working conditions of the masses. This attack cannot be repelled except by overturning the capitalist regime and beginning to build a qualitatively different type of economic system.
Obviously, the response of the workers movement to the crisis cannot simply be to proclaim the need for a general anticapitalist struggle; this would mean division, demoralization, and certain defeat. The crisis confronts workers with concrete, wrenching problems: layoffs, falling incomes, factory closings, and attacks on trade-union and political rights won in the past.
To refuse to launch a detensive struggle around immediate issues, on the grounds that "there is no solution under capitalism," means to condemn oneself and the whole working class to impotence. Moreover, the working class is not going to follow dogmatists who make a fetish out of this.
The workers have already demonstrated their readiness to struggle fiercely in defense of every gain and every job that is threatened. The elementary duty of revolutionary Marxists is to support this battle with all their strength, proposing the most effective demands and organizational forms.
The thirty-five-hour week, the sliding scale of wages (defending it or winning it, depending on the country), defending the right to stike and the right to free collective bargaining, solidarity actions with hit-immigrant workers, those hardest the unwomen, youth, the elderly, employed-these are the main priorities of this basically defensive struggle.
The bosses and reformists argue that such demands undermine the profitability of industry and threaten to aggravate the crisis. To this we respond that, faced with a choice of defending the physical and moral integrity of our class or else defending the capitalists' profit, we stand firmly for defense of our class and against profit.
No. 22, December 1977.
If full employment and a decent standard of living are incompatible with capitalism, then the bosses simply have to go.
The reformists (and ultraleftists) retort that the logic of capitalism cannot be refuted factory by factory, industry by industry, or region by region, but only in its entirety; and that while waiting for the final battle against international capitalism-which must take place in all countries simultaneously, thus relegating it still more surely to the indefinite future-we must meanwhile accept the logic of the system.
Our answer is that everything starts somewhere; that it is entirely possible to defeat one employer or one sector of the employing class if the working class is united and militant and produces a leadership equal to the task. In fact there is no better way to open up a general struggle than through some partial struggles that are rewarded with victories and that show the workers in practice that it is possible to defend the jobs, wages, and rights they have won.
But it is true that every victory in a defensive struggle can only be fragile and precarious. It is true that the logic of capitalism will reassert itself in the long run, as long as we live under capitalism.
The logic of capitalism is particularly disadvantageous to the workers in a period of massive unemployment and economic depression. That is why every defensive struggle has to be part of an overall anticapitalist strategy that seeks in every way to maximize the mobilization of the working class to win transitional demands and to fight against the fundamental causes of their oppression.
In a period of economic depression, such transitional demands should center around:
• Expropriation of all factories that close down or lay off large numbers of workers, and their operation at the state's expense under workers control.
• Nationalization without compensation of all credit institutions, key industries, and all "national" and "multinational" monopolies, and their operation under workers control.
• Thoroughgoing workers control over hiring and the organization of work, including veto power over any layoffs.
• Development of a plan for economic recovery and development, based on giving priority to the needs of the masses, to be drawn up by workers and community organizations based on a network of democratically elected and frequently replenished committees.
Development of public enterprises for this purpose, and an end to all subsidies to private enterprises (or else the nationalization of all subsidized enterprises).
The struggle for these demands should result in the creation of a broad network of factory and neighborhood committees that can draw up and supervise the implementation of this plan and foil sabotage by the bourgeoisie; the general arming of the laboring population to thwart any military-fascist conspiracy, "national" and/or foreign; the dismantling of the bourgeois repressive apparatus; and the formation of a workers government that can implement this program with the support and supervision of the broad masses.
This transitional program opens the way to the building of a democratic socialist society, with a self-managed and planned economy, founded on the power of workers councils and a spectrum of political parties with no restrictions; a society that can maintain, consolidate, and extend all political freedoms for all its members.
To struggle for such an alternative to the dead end of capitalism means counterposing to unemployment, austerity, and growing repression the only real, effective alternative worthy of an effort by the toiling masses.
Notes
1. This was obviously the theory behind the Common Program of the Socialist Party, Communist Party, and "Left Radicals" in France.
2. See the statements of various ruling-class representatives.
3. See, for instance, Enrico Berlinguer, Austerità, occasione per transformare l'Italia [Austerity: An Opportunity to Transform Italy], Rome: Editori Riuniti, 1977.
4. There is an obvious parallel here with the Stalinist axiom of the priority of heavy industry over the manufacture of consumer goods in the process of industrialization, which was based on the same incorrect two-sector theory.
5. See both the French SP's 89 Réponses aux questions économiques (89 Answers to Economic Questions], Paris: Flammarion, 1977, pp. 107-108; and the work of the French CP economists Boccara, Herzog, Le Pors, and Quin, Changer l'Economie [Transform the Economy], Paris: Editions Sociales, 1977, pp. 90-91, 97, 147-150.
8. The expansion of the public sector is defended primarily by the French CP, the Labour Party left in Britain, and (to a lesser extent) the French SP. The idea of public control over investments is put forward mainly by the German left Social Democrats. See, for example, Baisch et al., Die Wirtschaftskrise in der BRD |The Economic Crisis in West Germany] A group of economists led by Prof. J. Huffschmid, whose approach lies somewhere between the left Social Democrats and the CP, is oriented almost exclusively toward neo-Keynesian solutions. At a news conference in Bonn on May 1, 1977, this group called for a special recovery budget on the order of twenty billion German marks, instead of the miserly three-billion-mark budget proposed at that time by Helmut Schmidt's cabinet.
9. Steven Holland, The Socialist Challenge, London: Quartet Books, 1975.