The Death Agony of the International Monetary System
Three storms in three years' time, that is what the barometer of the international monetary system reveals. Ihere was the devaluation of the pound in November 1967, the dollar crisis in March, and now we have the crisis of the French franc which threatens to extend to all the European currencies, except the Deutsche Mark [DM] (and secondarily the
Swiss franc and the Dutch florin). Even the dollar is threatened. The future of the system created at Bretton Woods is more than somber. This system is sick. It has entered into its death agony. This death agony may be long, and it takes no Cassandra to predict that the longer its death agony is, the more excruciating it will be.
The bourgeois commentators single out -- each according to his taste -- as the chief cause of the crisis either the May events in France, speculation, floatmoney." They ing capital, or "hot overlook the main item —- the worldwide crisis which is inexorably undermining the buying power of all the capitalist currencies. The capitalist world could escape this inflation on only two conditions. It must either stop spending for arms and wars or accept the risk of an economic crisis of the 1929 type. Capitalism cannot accept either of these two conditions. If they were accepted it would only mean that the international bourgeoisie had chosen a quick death over prolonged suffering. Thus, inflation will persist and with it the crisis of the international monetary system.
Doubtless a temporary resuscitation is possible. The expedients proposed to achieve this are well known —- raising the price of gold; creating a "central bank currency"; pooling all the exchange reserves of the West European countries (beginning with the reserves of the Common Market countries) in a "Eurofranc" (with or without fusion with the pound) which would serve as a new international reserve currency. The latter presupposes a new stage in the economic unification of capitalist Europe, a decisive advance, because a common currency entails a common government, that is, a common state. The technicians have no lack of choices.
All these solutions are theoretically possible in the context of the international capitalist economy. None Of them would undermine the foundations of the capitalist mode of production. But each of them entails considerable sacrifices for sections of the world bourgeoisie, in some cases the sacrifice of interests and immediate profits, in some sacrifice of sovereignty, and in some political prestige and power. This means that the new world monetary conference which the Nixon administration will doubtless call next year seems fated to be difficult and that even these expedients will not be easy to apply.
None of these expedients, however, cease to be what they are -- devices to gain time, to postpone a new monetary crisis without dealing even remotely with the fundamental cause. I wrote seven years ago that neocapitalism is caught in a vise from which it cannot escape. International exchanges and payments --
"prosperity" is inon which capitalist creasingly dependent -- require a stable currency. But a policy aimed against crises, recessions and business cycles requires a flexible currency. Ihe one goal cannot be obtained without sacrificing the other.
Ihus the successive tempests which have shaken all these currencies prove that "modern," "technocratic," "managed" capitalism has by no means succeeded in overcoming its fundamental contradictions. The defeat of the pound, the franc, and the dollar is a triumph for Karl Marx, that is, a blatant demonstration of the incurable sickness of the capitalist system. The ability to sell 200,000,000 television sets and 100,000,000 cars, thanks to constant inflation of the volume of money, may have suggested that prosperity had become permanent. The crisis of the capitalist currencies is a harsh reminder of the reality. This "prosperity" is a house of cards that can be toppled by any gust of wind.
Working for the King of Prussia*
Luck would have it that it is Schiller's turn to be the minister presiding over the "Club of the Ten" which includes the ten major imperialist powers of the world. The club meeting called to decide the fate of French finances was therefore held in Berlin. Chance is often responsible for many things. It made possible a spectacular demonstration of the change in the relationship of forces in capitalist Europe which had actually already occurred years ago. As the November 28 London Times observed with both copann
IN THE PAY OF KING OF PRUSSIA
realism and a certain bitterness, this crisis may represent the turning point in the development of power relationships in Europe. The German Federal Republic has emerged as the main power of capitalist Europe.
I also predicted this at the time de Gaulle precipitated the first crisis in the Common Market. The only possible counterweight against the West German bourgeoisie's clear superiority in capitalist Europe would be the entry of Great Britain into the Common Market and the acceleration of the trend toward the interpenetration of capital in Europe.
There would have been no West German hegemony in the giant multinational companies owned by the German, British, French, Italian, Benelux, Swiss, Swedish capitalists. When de Gaulle blocked Great Britain's entry into the Common Market and tried to defend "French sovereignty" over the factories in France, the German drive for hegemony became irresistible. The general was working for the king of Prussia.
The origin of this hegemony and its limits must be understood. In Eastern Europe they like to consider Bonn as "the
No. I United States satellite in Europe,"
at least Washington's "most favored or ally." Ihis is an oversimplification of a much more complex relationship.
It is true that the West German bourgeoisie, deprived of all real military power, could reconstruct its inthe Pentagon's dustrial power only under nuclear umbrella. But it is still more true that its revival expresses economic realities independent of all foreign aid -- an industrial production far exceeding that of any other European power, an export boom, a technological level and advance toward automation ahead of the rest of the continent.
Even more can be said. Bonn's industrial and financial expansion -- the solidity of the Deutsche Mark is the result of an enormous excess of exports over imports which expresses a competitive power unrivaled in Europe or in the world -- today frightens American imperialism. It frightens the American imperialists to such an extent that they have been concentrating all their efforts on getting a revaluation of the DM, which would limit German exports, beginning
(in the first six with those to the USA months of 1968 these increased 48 percent over the corresponding vious year!): Schiller, Period in the pre-
"no" was not so
"no" to de Gaulle or Wilson. It much a was a "no" to Washington. At that moment something fundamental changed, not only in the relationship of forces in Europe but in the relationship of forces between Germany and the United States.
Since Bonn refused to revalue the DM, de Gaulle was confronted with a clear ultimatum - either devalue the French franc or apply a severe austerity policy. "Ten" forced this choice on him, the
"incomes polsame way they imposed the icy" on Wilson last year. If he had not done one of these two things, he would not have gotten the two billion dollars in credit which would make it possible to stop up the breach opened by speculation. He delighted Washington and London by choosing austerity instead of devaluation. Any new devaluation would have immediately undermined the stability of the pound and subjected even the dollar to a harsh test.
The policy of the imperialist powers today is a dialectical unity "of two opposites -- interimperialist competition and imperialist solidarity against common enemies and dangers. In November as in May, the feeling that "we are all in the same boat" quickly took the place of Schadenfreude [enjoying the misery of others]. They were very happy to see de Gaulle's prestige seriously damaged, but a collapse of the French currency threatened to rock the entire international monetary system. Still, within the framework of the solidarity which played the fundamental role, competition did not lose its claims. Ihe main center of decision making in Europe moved from Paris to Bonn.
The next move is up to the German bourgeoisie. Ihey can play it in one of two ways. They can give immediate economic interests priority or they can favor their long-range political interests. The first orientation would mean giving fresh impetus to the Common Market, putting pressure on de Gaulle to drop his veto of Great Britain's entry, accelerating the interpenetration of European capital, creating a common European currency. Ihe second orientation would mean giving priority to the establishment of a "European striking force," that is, secure the access to nuclear weapons which the West German bourgeoisie have coveted for fifteen years. Ihis would bring the military relationship of forces into line with the relationship of economic forces. It would at the same time open up an international crisis of extreme gravity in Europe, because it is unlikely that the soviet Union would stand by passively in the face of the nuclear rearmament of the principal capitalist power on the continent.
From the May Revolution to the March Meeting
From the technical standpoint, the cause of the crisis of the franc was different from the cause of the downfall of the pound. The latter was precipitated by a chronic deficit in the balance of payments, the expression of the structural crisis of British imperialism. Ihe cause of the crisis of the franc was a speculative flight of capital which in the space of a few months drained away almost half of France's exchange reserves.
However, all those, from de Gaulle to Fowler, the
American secretary of the treasury, who say that the french econom-
"fundamentally ic situation remains sound" pass over an essential aspect of the franc crisis.
In order to absorb the revolutionary crisis of May-June 1968, the French bosses and government had to concede wage increases which raised labor costs by 15 percent and cost prices by at least 5 percent. French industry's competitive capacity, (and in some sectors Italian) techalready reduced as a result of Gernological superiority, and damaged by the devaluation of the pound, was struck another blow. French imports already exceed exports by 6 percent. The more rapid rise in prices in France than in Germany, Great Britain, or Italy, could only accentuate this disequilibrium. The speculators, by anticipating a future gold and currency drain caused by a worsening of the balance-of-payments deficit, obvious- 1y precipitated this development. But they did not cause it. It was inherent in the logic of the Grenelle agreements.*
The Gaullist economic policy has now been stamped with the seal of total incoherence. Logically there are two alternatives for absorbing the rise in that is production costs -- expansion, a rapid increase in productivity (it has been estimated that almost 30 percent of productive capacity was unutilized on the eve of the revolutionary upsurge of May 1968!); or devaluation, that is, restoring competitiveness, compensating for increased costs in francs by cutting the cost of the franc in terms of foreign currency. The Couve de Murville cabinet has constantly vacillated between expansion and deflation.
By playing the deflationary card now - because that is what austerity comes down to! -- it is accelerating the rising cost of living still more (in the guise of the charges for public services) while slowing the increase in productivity (by reducing investment, the rate of utilization of the productive apparatus, I even aggregate demana, i1 unemployment rises rapidly). Thus, it is making inroads into the competitiveness of French industry on both sides. Export subsidies will not change much in this regard unless imports are taxed at the same time to a point that would break up the whole Common Market.
But this economic incoherence has a striking social meaning. In the grip of the "great fear" of May, when socialist revolution was beating at the door, the French bourgeoisie wanted to save the essential thing, that is, its class power. It rallied behind its supreme savior and was ready to pay the bill. But once the fear receded, they became their old selves again.
De Gaulle had the outlandish idea of levying some small taxes on large incomes and inheritances in order to limit inflation. Immediately a mutiny broke out.
"psychological blunder"! What "an What a Mistatoo capital Waltzing a tate to the Invitation to the Waltz," that is, to a throat of the French government, in a couple of visits to the Zurich and Frankbig capital forced it to furt banks, change its economic and social policy from top to bottom. The workers themselves will pay the bill for May. The wage earners will take the beating instead of the speculators. That is the logic of the capitalist system.
Now all these nice people are unmasked and the spectacle is not exactly an attractive one. Patriotism is good for sending soldiers to be killed, or, in a pinch, for stampeding the electorate. But above all, don't let anybody ask us to sacrifice our hoards in the interest of the country. When it is a question of winning or losing 10 percent, the national borders disappear.
The general's nationalist rhetoric is good for naive television viewers or for André Malraux's anthologies. But when the speculators crack the whip, de Gaulle cringes like any undersecretary of state of the Fourth Republic. Put revolutionary students in prison, right away! But neither prison nor confiscation will touch the profits - to say nothing of the fortunes -- of big capital which is trying to bring down the franc. They prefer to freeze wages. Ihat is obviously easier.
What a comedown, what a revolting comedy! But also what an object lesson for 10,000,000 French workers. In May they had power within their grasp. On the advice of misleaders, they let it go in exchange for two illusions -- the illusion of parliamentary elections, which in an imperialist "democracy" cannot help but be manipulated; and the illusion of wage increases, which big capital can absorb rapidly by price and tax increases. This will no doubt be completed by the beginning of 1969.
It is true that the patriotic refrain is already being heard again. And, in the wake of a three-billion-dollar capital flight organized by the French
Bertrand Russell, antiwar leader Tariq Ali, and the poet Stephen Spender were among the signers of a letter published in the November 25 London limes demanding that U.s. Black Panther party leader and author Eldridge Cleaver not be imprisoned for an alleged violation of his parole.
"Eldridge Cleaver," the letter said, "...was released on parole in 1965 after serving nine years in prison. In April this year he was arrested following a confrontation between the racist Oakland police and a group of armed Black Panthers patrolling their own neighbourhood. No police were hurt on this occasion, but 17-year-old Bobby Hutton was shot and killed by the police as he walked from the house with his hands up. In this confrontation Mr. Cleaver was wounded and held in gaol for two months without a hearing."
bourgeoisie, a paper like Le Monde* was to write: "The French not ashamed are no less all in the same boat. "People
November 26.)
Are they really in the same boat? Will the costs be distributed "equitably" after an "equitable" distribution of the profits? Where is the tax on capital which would confiscate all the profits of the speculators? Where is the opening of the books and the elimination of banking secrecy which would make it possible to track down all these profits and show that a part of the capital sent abroad was made up of state credits accorded to businesses? Where is the workers control which would deprive the employerspeculators of the power to impose their will like a divine right on the workers in the plants when they have lost all moral credit?
This is what the workers will remember at the March meeting, when the accounting will have to be made. This is what must arouse them to an energetic defense of their June 1968 economic gains. This above all is what must arouse them to aim higher than their trade-union leaders did in May and June -- to set their sights on power in the plants and power in the state, without which no gain can be consolidated. In taking the option of a frontal attack against the jobs and wages of the workers, de Gaulle has ensured a singular hastening of the next social explosion in France.
* The French daily, equivalent in standing to the New York Times or the London Times. -- I.P.
In response to appeals from Cleaver's defenders in the U.S., the letter called on people to "write to American publications and American Embassies and to circulate the petition demanding the continuation of Eldridge Cleaver's parole. Telegrams and letters should also be sent direct to Henry Kerr of the California State Adult Authority, Sacramento, California, and to Governor Ronald Reagan..."
The authors of the letter described Cleaver's book, Soul on Ice, as "one of the most important statements on the situation of the black man ever written." They announced the formation of the International Committee to Defend Eldridge Cleaver, 7 Carlisle Street, W.l., London. Signers of the letter were Tariq Ali, Michael Foot, Clive Goodwin, Christopher Logue, Davia Mercer, John McGrath, Adrian Mitchell, Julian Mitchell, Stephen Spender, and Bertrand Russell.
Notes
* A French expression meaning to work for little or nothing. The early kings of Prussia were notorious for pennypinching. -- I.P.
* The agreements with the unions which ended the May-June general strike.