Globalization and the International Working Class: A Marxist Assessment Statement of the International Committee of the Fourth International Part One
I. Globalization and the dynamics of capitalist development The Spartacists' central assertion is that globalization is nothing more than a propaganda campaign aimed at intimidating the working class. Accordingly, they maintain that, insofar as changes have taken place within the world economy, these do not represent a qualitative transformation. The internationalization of finance capital is "hardly new," and in many respects, the world economy was more "globalized" in the period prior to World War I than it is today. "For the past few decades ... the world capitalist economy has been returning to the norms of the pre-1914 imperialist order. To maintain a sense of perspective, one should understand that only in the early 1970s did the ratio of world trade to global production once again reach the level attained in 1914, on the eve of the first imperialist war."1 The Spartacists argue that the pre-1914 gold standard, and the rapid growth of international trade, brought about such an integration of the world economy that the idea that "the internationalization of finance capital is a dominant feature of the contemporary profit system, is hardly new."2 The operation of the gold standard, they insist, ensured a "degree of financial integration among the advanced capitalist countries that has never been matched since."3 At one level the Spartacists' arguments are simply ridiculous. It is hardly possible to assert that an economy in which international telephone calls were only just beginning to be made and then with great difficulty is, in any meaningful sense, more globally integrated than one where telecommunications systems are used to operate production processes across national borders and instantaneously transfer billions of dollars of capital from one end of the world to the other. Moreover, to claim that the pre-1914 economy was more internationalized than today, based on the fact that international trade or investment flows formed a higher proportion of Gross Domestic Product (GDP), is to ignore the fact that large portions of the globe were only just beginning to be integrated into the capitalist economy at the turn of the century. There is a sense in which the present phase of capitalist globalization represents a return to the past. However, as a review of the economic history of the 20th century will show, this does not confirm the Spartacist League's arguments concerning the viability of the nation-state and the trade union form of organization. On the contrary, it demolishes them. Nothing much can be learned with the Spartacist method of ripping statistics out of their historical context and mechanically comparing one period with another. It is necessary to examine the dynamics of capitalist development. Such an examination does not show that world capitalism was more globally integrated in the pre-World War I period. Rather, it reveals that, in a fundamental sense, world capitalism is returning, at a higher level, to the path of development which it began in that period. A recent report by the International Monetary Fund underscores the dynamic growth of the world economy prior to World War I: "The period from the mid-nineteenth century to World War I exhibited relatively rapid growth in world trade, as the expansion of exports (3.5 percent a year) significantly outpaced that of real output (2.7 percent a year). The share of exports in world output reached a peak in 1913 not surpassed until 1970. Growth in trade occurred partly as a consequence of reduced tariffs and greatly reduced transportation costs, reflecting the proliferation of railroads and steamships. The period also witnessed a marked convergence of commodity prices across countries... "In the 50 years before World War I, there was a massive flow of capital from the core countries of western Europe to the rapidly developing economies of the Americas, Australia, and elsewhere. At its peak, the net capital outflow from Britain represented 9 percent of GNP (Gross National Product) and was almost as high from France, Germany, and the Netherlands. This compares with the peaks in Japan's and Germany's current account surpluses in the mid- and late 1980s of 4-5 percent of GDP. Before World War I, private capital moved without restrictions. Much of it flowed into bonds, financing railroads and other infrastructure in the new world and into long-term government debt, although there also was substantial foreign direct investment."4 But this process of internationalization did not lead to a harmonious development of the productive forces. On the contrary, it brought about the breakdown of world capitalism and the eruption of World War I. And this had far-reaching political consequences. With the outbreak of war, the real content of the national-reformist perspective of the parties of the Second International and the trade unions, which had dominated the movement of the working class prior to the war, was laid bare, as these organizations lined up to support their own ruling classes. Furthermore the eruption of the historic crisis of capitalism, produced by the internationalization of economic processes and taking the form of war between the imperialist powers, gave rise to explosive social convulsions. These changed the balance of forces between nationalist opportunism and socialist internationalism in the workers' movement. The internationalist tendency, led by Lenin and Trotsky, a seemingly isolated minority at the start of the war, came to the head of an insurgent working class in Russia and led the first successful socialist revolution. It founded a new international, the Third International, which, in the space of a few years, commanded the political allegiance of the most class conscious and revolutionary-minded workers all over the world. The 1920s and 1930s were marked on the one hand by the inability of the bourgeoisie to restore the pre-war equilibrium of the world capitalist system and reconstruct the economic order and, on the other, by the inability of the working class, due to the betrayals of its leadership first social democracy and then Stalinism to overthrow the international bourgeoisie. The attempts to reconstruct the pre-war regime through the gold standard collapsed. Britain no longer had the capacity to support the world financial system as it had in the past, and the US was not yet able to do so. International trade collapsed, contracting by two thirds in the years between 1929 and 1932, while international capital flows all but stopped. The world was plunged into economic depression and then another war. The process of economic reconstruction, which began after World War II, was not aimed at restoring the pre-war integrated structure of the world capitalist economy. In many ways, it was an attempt to use the national state to hold back the operation of the very international tendencies which had led to the breakdown of world capitalism some three decades earlier. Under the direction of the United States, the pre-war trade blocs were progressively dismantled and the European market, formerly divided by cartels and tariffs, was integrated. International trade, which had come to a virtual standstill in the 1930s, began to expand once again. The Bretton Woods system, to which we will return in greater detail, led to the expansion of trade and ensured that currencies could be exchanged at fixed rates, removing the threat of destructive currency devaluation wars. However, the international mobility of capital that had characterized the pre-1914 period was not restored. In fact, in the opinion of the architects of the new system, in particular Harry Dexter White and John Maynard Keynes, it was the international movement of capital had led directly to the collapse of the 1930s. They maintained that the program of social welfare measures and stimulation of demand by government spending, which were necessary to prevent the return of mass unemployment, would be undermined if capital were free to move from one country to another. As Keynes had insisted when first expounding his theories in the 1930s, while goods and ideas could move internationally, it was essential that capital remain "homespun." At the heart of the post-war reconstruction of world capitalism was the revival of the national economy as the focus for the accumulation of capital. And this led, in turn, to the incorporation of the social democratic parties and unions into the running of the state. They became the administrators of the Keynesian programs of social reform and national economic regulation. While the Bretton Woods system was an attempt to block the economic forces that had led to the breakdown of capitalism in 1914, it could not overcome the contradictions of the world capitalist economy. In 1971, the foundations of the Bretton Woods system were shattered with the removal of the gold backing from the US dollar, and, in 1973, floating exchange rates were adopted. Once the wall of national regulation was breached, with the demise of fixed currency exchange rates, other changes quickly followed. All of the major capitalist countries dropped their controls on capital movements the United States and Germany in 1974-75, Britain by 1979, Japan by 1980 and the rest of Europe by the 1980s. The so-called developing countries followed suit by progressively ending capital controls and scrapping their national regulatory mechanisms. Since the breakdown of the Bretton Woods system in 1971-73, international capital flows which Keynes and others saw as so dangerous for the stability of the capitalist order have increased at a rapid rate. Cross-border transactions in bonds and equities, which were less than 10 percent of GDP for most advanced capitalist countries in 1980, were more than 100 percent by 1995. Gross flows of portfolio investment and foreign investment in the advanced countries more than tripled in the last half of the 1980s and the first half of the 1990s, while the flow of direct foreign investment from the major industrial countries quadrupled between 1984 and 1990. This brief review of the economic history of this century demonstrates the significance of the global transformation now taking place: After several decades in which its internationalizing tendencies were blocked by a series of economic and political factors, world capital over the past two decades has resumed, at an even more rapid pace, the path of development it had begun prior to 1914. The consequences will prove to be even more explosive. II. Global economy versus the nation-state system The vast changes in capitalist production over the past two decades associated with the development of computer technology have fundamentally transformed the world capitalist economy. The emergence of the transnational corporation and the organization of production on a global scale have once again brought to a head the central contradiction of capitalism in the 20th century: that between the world economy, expressing the inherent growth and spread of the productive forces, and the nation-state system, the basis of bourgeois rule and private property. This is most strikingly expressed in the collapse of all those organizations based on a nationalist perspective. The downfall of the Stalinist regimes in the Soviet Union and Eastern Europe was, in the final analysis, an expression of the bankruptcy of the nationalist program of socialism in one country. Likewise, the organic incapacity of the trade unions in the advanced capitalist countries to defend the social position of the working class, and their outright collaboration in the imposition of the dictates of capital, signify the collapse of the program of social reform based on an expanding national economy. This historical crisis of the capitalist mode of production is the root of the crisis of perspective in the workers movement. But this very crisis confirms another important prediction of Marx: no problem ever arises without the material conditions for its resolution emerging, or being in the process of formation. The globalization of production has brought about a vast expansion of the international working class. The penetration of capitalist production into new regions of the world where, until recently, there was only peasant-based agriculture, has transformed millions of people into wage workers. In the advanced capitalist countries, ruthless downsizing carried out by major corporations in the struggle to slash costs and boost profits, has ended the relatively privileged status of what were once considered sections of the middle class. It is only in the past two decades that the proletariat has become the numerically predominant social class on an international scale. The same processes which have brought about the proletarianization of an ever-greater proportion of the world's people have produced common conditions of exploitation. Thus the globalization of production has laid the foundations, as never before, for the international unification of the working class in a common struggle against the transnational corporations and international capital. At the same time, globalized production, undermining the national basis for the organization of economic life, has laid the objective foundations for the development of a planned world socialist economy. The program of Marxism has always been based on the understanding that the nation state, like the bourgeois property forms it upholds, is a product of historical processes, destined to pass into history along with other outmoded forms of social organization, such as slavery and feudalism. But if the assertions of the Spartacists are true, then the nation state has a permanence unforeseen by the founders of scientific socialism. Consequently, the abolition of the nation state system, and the entire framework of bourgeois property, is a utopian perspective, for no matter how extensive the development of the productive forces, the nation state remains the preeminent economic entity. Marx himself put the issue very clearly: "If we did not find concealed in society as it is the material conditions of production and the corresponding relations of exchange prerequisite for a classless society, then all attempts to explode it would be quixotic."5 If, as the Spartacists maintain, the growth of the productive forces is not undermining the nation state system, then we must conclude that the entire Marxist perspective is nothing more than a moral or ethical ideal. Indeed, the perspective of a planned socialist economy, in which production is organized by the "associated producers", is not only an idealist utopia, but a downright harmful program, given the timeless economic viability of the national state. Moreover, the perspective for the international unification of the working class the rallying call of the socialist movement since the publication of the Communist Manifesto 150 years ago is rendered no less utopian. If the national state retains its viability as the basic economic unit of capitalist production, then the bourgeoisie and its agencies in the workers movement will always have an unshakable material basis for their program of nationalism. Before taking up the specific arguments of the Spartacists, it is necessary to outline some basic features of capitalist production, so as to focus on the qualitative transformation in the structure of the world economy signified by globalization. Capital, Marx explained, exists in three forms: money capital, productive capital and commodity capital. The process of capitalist production, and the accumulation of surplus value which is its driving force, involves the continuous transformation of these three forms of capital into one another. In the first stage, capital appears on the market in the form of money. This money capital is used to purchase the means of production (raw materials and machinery) together with labor power. In these transactions, money capital is transformed into productive capital. In the second stage, productive capital is transformed, in the process of production, back into commodity capital, with a higher value. The source of this additional, or surplus, value arises from the difference between the value of the labor power that the capitalist purchased in the market, and the value that is added by the workers in the course of the working day. In the third stage, the newly produced commodities are taken back to the market, where they are transformed once again into money capital (realizing the surplus value embodied in them), whereupon the process of accumulation resumes. It is through this continuous metamorphosis from money capital to productive capital to commodity capital and then back to money capital that capital accumulation, or self-expansion, takes place, the source of this expansion being the surplus value extracted from the working class in the process of production. The history of capitalism involves the globalization or internationalization of these three forms of capital. The expansion of capitalist production in the 19th century saw the globalization of capital in the commodity form, as the commodities produced by the factory system and capitalist farms were sold on the expanding world market. By the end of the 19th century, the rise of industrial capitalism brought in its wake an expansion of banking and finance capital, which increasingly became globalized through the development of international investments. However, while both commodity capital and money capital became increasingly globalized, productive capital still remained confined, to a great extent, within the framework of the national state. While the surplus value extracted from the working class, and embodied in commodities, was increasingly realized on the world market, and the money capital derived from this process reinvested by the banks and finance houses on an international scale, the actual process of surplus value extraction the heart of the accumulation process still took place within a given national state. This is no longer the case. The Spartacists begin their denunciation of the International Committee by disputing the supposed claim that "the transfer of production by 'multinational' corporations from North America, West Europe and Japan to the so-called 'Third World' in recent years represents a profound, structural change in the world capitalist system." Furthermore, they insist, "the idea that the capitalist market is 'global', that banks and corporations seek out those (low wage) countries where they can get the highest return on their investments, that, indeed, the internationalization of finance capital is a dominant feature of the contemporary profit system, is hardly new."6 Everything here is jumbled and confused in order to try to obscure the essential processes and assert that nothing fundamental has changed in the structure of world capitalism, at least since 1914. In the first place, globalization of production does not merely refer to the transfer of production to so-called "Third World" countries, or simply to a "large-scale shift in production by 'multinational' corporations to the Third World." These processes, which in themselves are expressions of decisive changes in the structure of world capitalist production, are only one aspect of the globalization process. Globalization of production refers to the mobility of productive capital, engaged in the extraction of surplus value, on an international scale. It signifies not merely a quantitative increase in the international activity of capitalist firms, but marks a qualitative transformation in the capitalist mode of production. For the first time in history productive capital, like commodity capital and money capital before it, is able to move around the world. III. A qualitative change in the structure of world capitalism The process of globalization does not signify merely the transfer of production as such. It is rather the disaggregation of previously unified production processes, the dispersal of these processes to different parts of the world either to advanced capitalist or backward countries in order to minimize costs and increase profits, and the integration of these disaggregated processes across national borders and whole continents. That is, for the first time in history, the process of surplus value extraction the essence of capitalist accumulation has been internationalized. This is the qualitative change in the structure of world capitalism signified by globalization. What is distinctive about globalized production is that a given production process takes place simultaneously on a planetary scale. This could only arise on the basis of a new infrastructure, made possible by new communication technologies and more efficient forms of transport. The Spartacists argue that since finance capital has always been invested internationally, there is nothing new in the present situation. This is to ignore the vast quantitative increase of international capital flows and the myriad new forms it has assumed. The instant transfer of funds, the abolition of exchange controls, the development of global share and bond markets and international futures markets, to name just a few processes, represent, in their totality, a qualitative change. One measure of this transformation is given by the fact that transborder financial flows for the major capitalist countries of the G-7 increased by a factor of 10 for the period 1980-92, as capital was transferred around the globe. Nationally insulated stock markets have all but disappeared. In the decade 1980-90, the volume of cross-border transactions in equities grew at a compound rate of 28 percent a year, from $120 billion to $1.4 trillion. Over the same period, international bank lending rose from $324 billion to $7.5 trillion and the international bond market increased in size from $295 billion to $1.6 trillion. The Spartacists maintain that since trade levels, measured as a proportion of GDP, only reached their 1913 levels in 1970, the international economy was more globalized 80 years ago. They conveniently ignore one salient fact: a considerable proportion of international trade has been replaced by the international production activities of transnational companies. Figures collected by the United Nations illustrate this process. In 1993, the production of the 170,000 subsidiaries of companies operating outside of their country of origin exceeded by 37 percent the total volume of world trade. In that year, world trade totaled $4 trillion, while the total of local sales of these transnational companies was $5.5 trillion. The absurdity of the Spartacists' claims becomes even more apparent when the changes in the nature of international trade are taken into account. In the previous period, trade involved the purchase and sale of raw materials or finished goods. Today, an increasing amount of world trade consists of transfers of commodities or semi-finished articles within a single transnational company. At least one-third of world trade consists of such transfers. Around one half of world trade is produced by transnational companies, and some two-thirds of transactions in goods and services combined are dependent on the operations of these companies. Every statistic points to the growing integration of the world economy under the aegis of transnational companies. While the current value of exports increased 3.5 times between 1975 and 1989, the outflow of foreign direct investment (FDI) over the same period rose seven fold.7 Overall, the annual FDI outflow and inflow almost doubled every five years for the period between 1970 and 1988. In the 1970s, FDI, domestic output and domestic investment grew at similar rates. From the early 1980s onwards, the rate of growth of FDI began to significantly outpace the other two, and in the period 1985-90, global FDI grew almost four times faster than domestic output and more than twice as fast as domestic investment. The rapid increase in foreign direct investment is the statistical expression of a qualitative change in the organization of production by transnational companies a system in which planning processes within the global corporation are developed in an attempt to counteract the unplanned operation of the market. In the words of a United Nations report: "Elements of ... an extended international production system are gradually emerging as a result of the strategies of TNCS. In that sense, international production can be thought of as performing a wider role than trade, that is, one of moving not only goods and services across borders, but also moving factors of production and organizational methods, skills and technologies under a unified management structure. ... As a result of that organizational effort, the world economy is being transformed qualitatively: trading and other linkages are being complemented, if not supplanted, by linkages at the production level. In an international production system for goods and services, it is increasingly firms transnational corporations that play this coordinating role and that determine participation in the international division of labor, rather than arms-length transactions."8 Different components of a production process can now be located in different parts of the world in different countries and continents so that costs are minimized. This was not possible previously for two reasons. First, the cost of transportation was prohibitive. That barrier has been greatly reduced by the lowered costs of both sea and air transport. Second, the requirements of supervision and the enforcement of standards required that a particular production process be organized within a single factory, or at least in plants in close proximity to each other. Today, different components of a production process can be sub-contracted out to firms all over the globe. Rapid and relatively cheap transport, together with computer-based information systems, make possible the separation of what once were necessarily unified processes. In the past, design had to be in close proximity to production. This is no longer the case; designs can be transferred around the world just as easily as they can be shifted from one room to another. IV. Globalized production and the trade unions One of the central political motivations behind the Spartacists' attempts to deny the far-reaching historical significance of globalized production is their defense of the trade union form of organization. The Spartacists center their attack on a passage from a report delivered by Socialist Equality Party [US] national secretary David North in 1992: "The collapse of the old organizations of the working class is, fundamentally, the product of specific historic and economic conditions. Understanding these conditions does not mean we absolve the leaders of these organizations of responsibility for what has happened. Rather, it enables us to recognize that the rottenness of the leaders is itself only a subjective manifestation of an objective process... The global integration of capitalist production under the aegis of massive transnational corporations and the terminal crisis of the nation-state system have shattered the basic geo-economic foundation upon which the activities of the old organizations of the working class have been based. Nationally-based labor organizations are simply incapable of seriously challenging internationally-organized corporations."9 The chief indictment the Spartacists hurl against the International Committee and North is that "he asserts that the trade unions as such have been made impotent by objective changes in world economy." According to the Spartacists, the betrayals of the working class by the unions are entirely attributable to the union bureaucracy, which has simply capitulated to the bourgeoisie and refuses to organize the union membership to "play hardball." "The decline of the American labor movement," they declare, "is not fundamentally caused by the objective effects of 'globalization' but by the defeatist and treacherous policies of the AFL-CIO misleaders."10 The International Committee is the last to deny the treacherous role of the union bureaucrats or absolve them of responsibility for the deterioration in the social position of the working class. But it insists that, in the final analysis, the role of the trade union bureaucracy is the expression of deep-seated objective tendencies bound up, on the one hand, with changes in the structure of the world capitalist economy, and, on the other, with inherent features of the trade union form of organization itself. We shall go further into these questions at a later point. At this stage, let us merely note that, like all subjective explanations, the Spartacists' claim that the betrayals of the unions are due simply to the rotten nature of the bureaucracy can, in the end, explain nothing. What is to account for the fact that all sections of the trade union bureaucracy, in all countries, have adopted the same policies at the same time? How is it that in the past the working class was able to win certain limited material gains through the unions, but is now continually pushed backwards? Does this mean that the vicious anti-communists of the 1950s were less rotten than the union bureaucrats of today? And what is to account for the fact that, whatever their political affiliations, the union bureaucrats play the same role. In an attempt to back up their assertion that the International Committee is preaching defeatism and capitulation before the propaganda campaign of the corporations and their political spokesmen, and providing a rationalization for the betrayals of the trade union bureaucracy, the Spartacists cite the following passage from a report delivered by Socialist Equality Party (Australia) national secretary Nick Beams: "To the extent that the extraction of surplus value still took place within the confines of a given state, it was possible to apply pressure to capital via the national state for reforms and concessions to the working class. This was the program of the trade union and labor bureaucracies. This is no longer possible." Commenting on this passage, the Spartacists reveal the nationalist orientation which forms the basis of their attack on the International Committee. "In other words, the Northites maintain it is no longer possible for the working class to defend itself against the predations of capital through strikes or other actions, regardless of the tactics and policies pursued."11 Here we have one of the axioms of the politics of all forms of petty-bourgeois radicalism: the identification of the class struggle with the national-based trade union forms that it assumed in the post-war period. The International Committee has explained that the era of national reformism, in which the working class sought to maintain and improve its social position through the application of industrial and political pressure on nationally-based employers and the national state, is over. According to the Spartacists, however, this is equivalent to denying that the working class has any means for defending its interests. In other words, the working class equals the trade unions, the class struggle is the trade union struggle, and to maintain that the economic power of the nation-state has been undermined is to say that the class struggle is over. Having equated the class struggle with the specific, highly-constricted national forms it assumed during the post-war boom, the Spartacists must try and "prove" that it is possible for such struggles to continue. In an attempt to show that globalization of production has nothing to do with the decline of the trade unions, the Spartacists declare: "In none of the major strikes which marked the decline and the defeat of the American labor movement in the 1980s the PATCO air traffic controllers, Greyhound bus drivers, Phelps-Dodge copper miners, Eastern Airline machinists, Hormel meatpackers did foreign competition or the operations of multinationals abroad play any significant role. Greyhound, Eastern Airlines and Hormel extract almost all of their surplus value from labor within the confines of the American state."12 There could hardly be a greater display of intellectual bankruptcy than this. In the first place, it should be recalled that the smashing of PATCO in 1981, which set the scene for the onslaught that followed, was organized and carried out by the United States government, the political leadership of world capitalism. It followed in the wake of the change in international economic policy organized by US finance capital, and initiated by US Federal Reserve chairman Paul Volcker in 1979, who raised interest rates to their highest ever levels and brought about the deepest recession in the post-war period. Even setting aside this extremely important political fact, the Spartacists' analysis displays an ignorance of the workings of the capitalist system, not to speak of Marxist political economy. In Volume III of Capital, in the section entitled "Equalization of the General Rate of Profit Through Competition," Marx demonstrated that the profit levels of an individual firm are not determined by how much surplus value that particular corporation extracts from the workers it directly exploits. Rather, each firm receives a portion of the total surplus value extracted from the working class, according to its share of the total capital used to extract it. This division of surplus value, in the form of profit, is a social process, which takes place through the competitive struggle between the different sections of capital. Those sections of capital that produce at below average cost will receive greater than average profits; those whose costs are higher than the average will receive profits at a rate below the social average. These averages are themselves subject to change, as new production processes and techniques are developed. A production process that resulted in average or below average costs at one point in time will, as new methods are developed, result in higher than average costs in another period. In the past, when firms operated to a great extent within national markets, the struggle over the appropriation of surplus value took place primarily within the confines of a given national state. The globalization of production has produced a new situation. Regardless of the percentages of their revenues that firms derive from the national market, costs, efficiency, productivity of labor, the rate of profit are today all determined on an international scale. It is irrelevant if a particular firm operates on a global, national or even only on a regional or city-wide basis. The cost structure it confronts is the outcome of world economic processes that operate quite independently of it. Even where goods and services are produced and sold within a national market, they have to meet standards and costs which are set globally. It has been calculated that in the largest domestic market, the United States, whereas in the 1960s only 4 percent of domestic production was subject to international competition, today that figure stands at more than 70 percent. Furthermore, whatever the market for their goods or services, all companies are subject to the dictates of international capital and financial markets. Those firms which do not meet international cost standards, that is, internationally determined profit rates, will find that capital is more expensive. V. Capitalism and the origins of the nation-state The Spartacists advance a militaristic and ultimately subjectivist view of the nation-state. According to their conception, the nation-state is not the political expression of a definite stage in the historical development of the productive forces, but merely a political-military apparatus developed by the bourgeoisie to maintain its economic domination. The capitalist nation-state was by no means simply the product of military conflicts It arose out of profound economic changes, bound up with trade and the increasing use of money, which undermined the feudal regimes. Military force was not the primary factor. As Engels explained: "Long before the new field-pieces shot breaches into the knightly castle walls, these had already been undermined by money; indeed, gunpowder was, so to say, only an executor in the service of money. Money was the great political leveller in the hands of the burgherdom."13 The principal driving force behind the formation of the nation-state was economic. The growth of capitalist production and the accumulation of capital required the development of a national market and the breaking down of guild privileges, political restrictions, local customs barriers and tariffs, which hemmed in production on all sides. The development of capitalist production drew together backward villages and provinces; it linked the provinces with the cities and created a national market, bound together with a common language, laws and a common currency. However, the development of the productive forces did not cease with the formation of the national state and national markets. In its further development, capitalist production began to transcend the nation-state framework. The whole history of the 20th century, beginning with the intensification of imperialist rivalries and the outbreak of world war in 1914, is bound up with this developing contradiction. World War I, as all the Marxists of the time explained, signified that the productive forces had outgrown the limits of the nation state. "The present war," Trotsky wrote in 1915, " is at bottom a revolt of the forces of production against the political form of nation and state. It means the collapse of the national state as an independent economic unit. ... the real, objective significance of the War is the breakdown of the present national economic centers, and the substitution of a world economy in its stead."14 This contradiction has been raised to a new peak of intensity by the development of globalized production. The national state continues to play a political and military role, just as did the feudal-absolutist state at the dawn of capitalist development. But, like its forerunner, its economic significance has been undermined and it is precisely this economic decline that creates the conditions for its overthrow. In their apotheosis of the nation-state, the Spartacists base their politics not on Lenin, but rather harken back to an earlier figure the petty-bourgeois radical Eugen Duhring, who likewise insisted on the primacy of political and military force over economic conditions. Engels' remarks directed against the petty-bourgeois conceptions of Duhring, and his fascination with the military apparatus of the bourgeoisie, apply with no less force to the Spartacists: "And if the bourgeoisie now make their appeal to force in order to save the collapsing 'economic situation' from the final crash, this only shows that they are laboring under the same delusion as Herr Duhring: the delusion that the 'political conditions are the decisive cause of the economic situation'; this only shows that they imagine, just as Herr Duhring does, that by making use of 'the primary', 'the direct political force,' they can remodel those 'facts of the second order,' the economic situation and its inevitable development; and that therefore the economic consequences of the steam-engine and modern industry driven by it, of world trade and the banking and credit developments of the present day, can be blown out of existence by them with Krupp guns and Mauser rifles."15 In their insistence on the historical viability of the nation-state, the Spartacists undertake a rewriting of the history of capitalist development. "North's view of the capitalists as an international class," they write, "flies in the face of the Marxist understanding that the bourgeoisie cannot transcend national interests."16 Behind this proposition lies a total falsification of the history of capitalism. The Spartacists' mechanical conception is that the bourgeoisie was a product of the national state, while the world market was developed through the aggregation of various national markets, like a set of building blocks. The real course of historical development bears no resemblance to this. The bourgeoisie arose in Europe before the formation of the nation-state and in its trade, banking and other commercial activities, including manufacturing, functioned as an international class, within a framework of the absolutist-feudal regimes. Historically, the international market arose prior to the development of national markets, and indeed, was one of the factors leading to the breakdown of localized production based on feudal relations, and the development of commodity production for the market. The capitalist nation-state arose out of a complex historical process in which the bourgeoisie sought to develop the political structures necessary to defend its property and economic interests wealth which in turn was a product of the growth of the world market. In other words, the bourgeoisie is, at the same time, the creator of the world market and the creator of the nation-state system. The logic of capital is universal. Its inherent drive to accumulate brings it into conflict with all previous forms of production. Capital strives to break down every barrier and cross every border in the relentless drive for accumulation. The nation-state form, however, is based on the erection of borders and barriers, for they define its authority and jurisdiction. The capitalist system is founded on this objective contradiction between the striving of capital to expand globally on the one hand, and the limitations imposed by the nation-state on the other. This contradiction, which has been inherent in capitalism since its birth, has reached explosive proportions in the 20th century, giving rise to two world wars. The bourgeoisie cannot resolve this contradiction. It cannot do away with the nation-state system in which its property is rooted. Neither can it confine the productive forces to the limits imposed by national boundaries. The bourgeoisie is driven by the objective logic of capital itself. Therefore, in its economic activity, it has to continuously transcend the nation-state framework and undermine it. It is not the analysis of the International Committee, but rather the drivel produced by the Spartacists which "flies in the face of the Marxist understanding." Those not unknown Marxists, Karl Marx and Friedrich Engels, wrote the following in the Communist Manifesto: "The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere. "The bourgeoisie has, through its exploitation of the world market, given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All the old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw materials, but raw materials drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the productions of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal interdependence of nations. As in material, so in intellectual production. The intellectual creations of individual nations become common property. National one-sidedness and narrow-mindedness becomes more and more impossible, and from the numerous national and local literatures, there arises a world literature."17 VI. Spartacist and the "stockholders who care" Because they assert the primacy of political and military considerations over the basic economic driving forces of the process of capital accumulation, the Spartacists present a completely subjective view of the workings of the capitalist economy. Thus they write that, according to the International Committee's perspective: "...corporations like IBM, Siemens and Toshiba are devoted solely to maximizing their profits on a global scale; their directors and stockholders supposedly don't care whether their actions strengthen the American, German and Japanese bourgeois states."18 It is not a question of whether the stockholders and directors "care" about the strength of the national state, or any other question. The process of capitalist production, as Marx demonstrated, is not driven forward by the subjective wishes or intentions of the owners of capital, but by the objective logic of the process of capital accumulation itself. This is not some "aspect" of Marxism, but is central to Marx's analysis of commodity fetishism, which forms the core of Capital. "The functions fulfilled by the capitalist," Marx wrote, "are no more than the functions of capital viz the valorization of value by living labor executed consciously and willingly. The capitalist functions only as personified capital ..."19 Major corporations are forced to maximize their profits, without regard to the impact on their "own" national state, or risk being put out of business by more competitive rivals. This regime is enforced by the continuous movement of finance capital. The shareholders' funds of major corporations are no longer dominated by the holdings of individual capitalists, but are comprised of investments by banks, life insurance funds, pension and superannuation funds, mutual funds and other forms of accumulated savings. These funds scour the globe in search of the best rate of return, forcing corporations, whatever may be the wishes of their directors, to continuously develop their production methods to secure a competitive rate of return on shareholders' funds. Those firms which fail to do this that is, maximize their profits on an international scale, irrespective of the consequences for the national state in which they originated will find that their share price declines as the funds of the leading savings institutions move out to seek higher rates of return elsewhere. Consequently, the corporation will find that it has to pay a higher premium on capital to attract funds, or higher interest rates to the banks, as its assets are devalued, and it will become a target for a takeover or merger, if it is not forced out of business altogether by its more profitable rivals. The analysis of the objective logic of capitalist production has formed the core of the Marxist critique of all those social reformist nostrums that have maintained that the worst excesses of capitalist production can be eliminated, and its socially destructive character modified, through workers' buyouts or the placing of more "socially responsible" directors on the boards. While the Spartacists' positions are nonsense from the standpoint of a scientific analysis of the workings of the capitalist economy, they do have a very definite class logic. If boards of directors can be made to "care" about the fate of their "own" nation-state, irrespective of the consequences for profit maximization, then they can be made to "care" about other issues as well, including the provision of rising wages for the working class, or increased social welfare provisions. Indeed, a whole social reformist agenda can be advanced. Herein lies the Spartacists' political perspective. Rejecting the primacy of global economic forces and stressing the attachment of corporations to their home base, they are oriented to sections of the bourgeoisie who "care" about the nation. Spartacist is not alone in this regard. Some of their cohorts in the radical milieu have marked out even more clearly the direction in which they are heading. The perspective of all of them is summed up in a recent book by Paul Hirst and Grahame Thompson, two representatives of the British middle class left. Their Globalization in Question has become something of a Bible for these tendencies. The authors describe their perspective as a "mixture of skepticism about global economic processes and optimism about the possibilities of control of the international economy and of the viability of national political strategies." They acknowledge that social goals, such as full employment, have become "problematic", but contend that: "..this should not lead us to dismiss or ignore the forms of control and social improvement that could be achieved relatively rapidly with a modest change in attitudes on the part of key elites. It is thus essential to persuade reformers on the left and conservatives who care for the fabric of their societies that we are not helpless before uncontrollable global processes."20 In Britain, where Hirst and Thompson write, this perspective would mean an orientation to sections of the Euro-skeptic Tory Party, anti-EU figures such as the late billionaire Sir James Goldsmith and his Referendum Party, as well as sections of the Labour Party, the trade union bureaucracy and the nationalists of Arthur Scargill's Socialist Labour Party. In the United States, the Spartacists have already taken part in a similar front during the anti-NAFTA campaign, which saw the formation of a de facto alliance embracing the AFL-CIO bureaucracy, the neo-fascist demagogue Pat Buchanan, billionaire Ross Perot, the consumer campaigner Ralph Nader and the petty-bourgeois radical "left." The Spartacists sought to integrate themselves into this alliance and curry favor with sections of the bureaucracy and the bourgeoisie by adapting to their economic nationalism. This gravitation to the extreme right-wing is neither accidental nor unique. The middle class left long ago rejected the working class as a revolutionary force. It relied on the labor bureaucracies, Stalinism and the nationalist movements to restrain imperialism internationally and pressure the ruling class for reforms at home. With the decline of these old leaderships, the left groups cast about for new social forces with which to pressure the state. Their nationalist outlook brings them into alignment with the most backward and provincial sections of the bourgeoisie, whose reactionary political spokesmen, from Le Pen in France to Buchanan in the US, likewise denounce globalization. We have seen how the Spartacists explain the decline of the trade unions as a result of the subjective motivation of the union officials and their refusal to play "hardball". Now the circle is completed. The major corporations are not driven by global economic forces, but by the subjective attachments of their directors and stockholders to their home base. Consequently, the two can come together on the national soil as the trade unions apply pressure to the major corporations for reforms and concessions. An alliance of the trade union bureaucracy with sections of the bourgeoisie who "care" about the nation and are concerned to ensure that its strength is maintained: that is what the political program of the Spartacists amounts to. It shares much in common with that of the modern-day fascist and ultranationalist movements, which have sprung up in response to the globalization of production. VII. International finance vs. the capitalist state The same subjectivist outlook, combined with a petty-bourgeois fascination with the military apparatus of the nation-state, is exemplified when the Spartacists turn to the question of finance capital. They begin by citing a speech by David North, in which he referred to the increased power of finance capital as follows: "Not even at the height of its glory did the British Empire possess even a fraction of the power over its colonial subjects that the modern institutions of world imperialism such as the World Bank, the IMF, GATT and the EC routinely exercise over the supposedly independent states of Latin America, Asia, Africa and the Middle East."21 This presentation of an undeniable fact of economic life, expressed in a whole series of statistics, evoked a furious response from the Spartacists. "The idea that the World Bank and IMF exercise greater power over the workers and peasants of India than did the British colonial army and police is pacifistic nonsense."22 Here again the Spartacists reduce all historical processes to the exercise of military force. The plundering of the wealth of India did not take place primarily through military, but rather economic, means. The chief instruments for the destruction of the Indian economy and its subordination to the British Empire were not guns, but cheap cotton textiles and the railways. The life-blood of capitalist productive activity is not military power, but international finance. To secure the means to finance investments, build infrastructure and operate basic facilities, the governments of the semicolonial countries have to implement the so-called "structural adjustment" programs of the International Monetary Fund and the World Bank. These programs, initiated in the mid-1980s, following the Mexican debt crisis, have proven to be the most effective method for sucking the life-blood out of whole regions of the globe and transferring vast amounts of wealth through the automatic workings of the financial markets, into the coffers of the major banks and transnational corporations. The extent of this financial transfer can be seen from the following statistics for just a single year. In 1992, the interest on debt due from the poorer nations to the banks and international lending institutions was $125 billion, while the estimated return on the investment of the transnationals (calculated at 15 percent of the capital stock of $420 billion) was $64 billion, making a total transfer of $189 billion. Even after deducting the $59 billion granted in so-called aid, the total transfer was $130 billion. Even this staggering figure fails to give the full picture. Added to this must be the effect of declining raw material prices, the impact of transfer pricing policies of the transnational companies and the charges for the use of technology and "intellectual property rights." Recent events have rendered their own judgement on the profundities of Spartacist in relation to the ability of finance capital and its institutions to impose their will not only on colonies, but on nominally independent states. Presidents and prime ministers from Thailand to South Korea and even Japan the second largest national economy in the world have, over the past several months, received object lessons in the relative power of the International Monetary Fund and national states. The photograph published in newspapers from Jakarta to Washington, showing Indonesian strongman Suharto putting his signature to the IMF bailout terms, while IMF Managing Director Camdessus looks over his shoulder, is worth, as the saying goes, a thousand words. The Spartacists' glorification of the nation-state is summed up in their attitude to the role of international agencies of finance capital, such as the World Bank and the International Monetary Fund. "The view that 'transnational' corporations," they write, "transcend the nation-state system leads to the notion that certain international economic agencies, like the World Bank and the International Monetary Fund (IMF), have now become a kind of world capitalist government." "No less absurd," they continue, "is the idea that these institutions are powers unto themselves, independent of the imperialist nation-states ... these international agencies act at the behest and in the interests of the major capitalist powers, not autonomously of them and certainly not above them."23 For the Spartacists, there is no reality higher than the national market and the national bourgeois state, and insofar as the global financial system and international financial institutions are considered, they are treated as the sum of national markets or the instrument of the domination of national states. This fixation on the nation-state, for all its superficial radicalism, has nothing in common with Marxism, which, as Trotsky explained, "takes its point of departure from world economy, not as a sum of national parts but as a mighty and independent reality which has been created by the international division of labor."24 The Spartacists continually invoke Lenin and his work Imperialism in their attack on the International Committee. But Lenin's work cannot be employed to defend the dominant role of the national state. On the contrary, he was explaining the dominant and global role of finance capital in the imperialist epoch. Far from the national state playing the dominant role, Lenin maintained the exact opposite: "Finance capital is such a great, such a decisive, you might say, force in all economic and in all international relations, that it is capable of subjecting, and actually does subject, to itself even states enjoying the fullest political independence..."25 Lenin was examining world capitalism at the beginning of this process and the trends he identified have since developed on an enormous scale. The national state and the banks are both creations of the bourgeoisie, and their history is, to a great extent, intertwined. However the power of the banks is not derived from the nation-state, but from the control of credit and finance, the lifeblood of the capitalist economy. Far from the one-way relationship that the Spartacists present the banks as the subservient instruments of the national state the real relationship has been far stormier. The history of the banking and financial system in the post-war period can be said to be one of a continual struggle by the banks to free themselves from control by the national state. And the rise of international finance capital and global financial markets has taken place in direct opposition to the state. The growth of the international financial system in the post-war period is inseparably bound up with the history of the international monetary system established at the Bretton Woods conference in 1944. From almost the day the United States entered the war, leading officials in the Roosevelt administration were concerned with the development of a viable, post-war financial structure. There was a realization, borne of the bitter experiences of the preceding two decades, that unless the conditions for an expanding world market were established, tariff and import controls dismantled and a stable international system of payments established, the world economy would rapidly plunge back into depression, giving rise to the threat of social revolution. VIII. The rise and fall of the Bretton Woods system The Bretton Woods conference established a highly regulated international currency system. The United States dollar was established as the international currency fixed at the rate of $35 per ounce of gold. The cornerstone of the system was the establishment of fixed exchange rates between the major currencies. In order to prevent the type of competitive devaluations and disruptive currency fluctuations which had caused such devastation in the 1930s, the International Monetary Fund was established to provide funds for those countries experiencing difficulties in their balance of payments. The International Bank for Reconstruction and Development (the World Bank) was set up to provide funds for long-term loans for the reconstruction of the economies of Western Europe. The establishment of a system of fixed currency rates necessarily presupposed the regulation of international capital movements by the central banks and the political authorities of the national state. The history of the demise of the post-war monetary order is also the history of the breakdown of this national control over finance capital and the rise of an international financial system. For the Bretton Woods system to function, the United States had to supply dollar liquidity to the rest of the world, through the financing of private capital investment by US corporations and government loans and aid. These dollars were utilized, in turn, to finance the balance of trade surplus of the United States with the rest of the world. Embodied in this arrangement was a fundamental contradiction: it was based on the economic supremacy of the United States over its rival capitalist powers, on the one hand, while on the other, the consequences of its operation were to strengthen the rest of the advanced capitalist nations and relatively weaken the position of the United States. These contradictions first began to emerge towards the end of the 1960s in the form of a gold crisis. Underpinning the entire system was the guarantee by the United States that dollars would be redeemed out of the gold stock at Fort Knox at the rate of $35 per ounce. In the first years of the 1950s, the amount of gold leaving Fort Knox was negligible, as dollars were always in demand to pay for much-needed exports from the US. But as European and Japanese industry began to revive and then expand, there was a diminishing relative demand for US exports and the stock of dollars outside the US began to grow relative to the gold that backed them. In 1958, for the first time, the dollars held by foreigners exceeded the US gold stock. The decade of the 1960s was marked by a deepening crisis of the Bretton Woods system. American gold stocks, which stood at $18 billion in the 1960s, were declining at a rate of between $0.5 billion and $1 billion per annum. But in the year 1964-65 gold stocks fell by $1.5 billion, as the de Gaulle administration in France opened a war against the US dollar. By 1968 the gold stock had fallen perilously close to the level of $10 billion, considered the minimum necessary for the functioning of the Bretton Woods system. US gold stocks were now around half what they had been in 1950. In response to the mounting gold crisis, President Johnson attempted to impose a series of restrictions on the outflow of American capital in 1968. But the very imposition of these measures led the US banks to discover ways to evade exchange controls. Their actions laid the foundations for what has now become an international financial system operating outside of the control of any national state or group of central banks. The origins of this new system lie in the emergence of the so-called Eurodollar market in the 1950s. This consisted of initially small amounts of dollars held in the European banks and the European branches of American banks. So long as the Bretton Woods system operated relatively smoothly, the bulk of these dollars were used to purchase exports from the United States. But towards the end of the 1950s, as the demand for US exports declined relatively, the pool of Eurodollars began to grow. This development led to the emergence of a Eurodollar lending market the floating of loans by banks from their holdings of dollars outside the US. The Eurodollar market was to expand rapidly in the latter part of the 1960s, as the US administration sought to control the outflow of dollars from America, and multinational companies, eager to acquire funds to invest in Europe, and banks, equally eager to accommodate their demands, sought ways to escape these controls. With the final breakdown of the Bretton Woods system in the period 1971-73, the so-called Eurocurrency markets soon comprised a world financial market dealing in currencies outside the nation-state that had issued that currency. And the greatest single force bringing this about was the US multinational corporations and banks which sought ways to undermine the attempted controls of the most powerful imperialist state. There are many examples from recent history showing how the national state has had to submit to the pressure placed upon it by international financial markets the Callaghan government in 1975-76, the Mitterrand government in 1982-83, Brazil and Mexico in the 1980s. One of the most recent experiences was the withdrawal of Britain from the European currency arrangements in 1992, in which British banks played a key role in the selloff of the pound. The Spartacists' insistence that international financial institutions are merely the agencies of the imperialist states flies in the face of one of the central features of the capitalist economy: the basic conflict between the unbounded geography of profit accumulation and the bounded political geography of national states. Like the rest of the middle class radical fraternity who were fascinated by Mao's slogan "all power grows out of the barrel of a gun," the Spartacists are dismissive of the financial power exercised by the IMF and other financial institutions, because they do not possess weapons and an army. Table of Contents | Part Two | WSWS	Price: US: $14.95 Australia: $14.95 Britain: £8.75 To Order Online Front Page Contents WSWS