Lecture eight: The 1920s—the road to depression and fascism
6 October 2005
The following is the second part of the lecture “The 1920s—the road to depression and fascism.” It was delivered by Nick Beams, the national secretary of the Socialist Equality Party of Australia and a member of the WSWS Editorial Board, at the Socialist Equality Party/WSWS summer school held August 14 to August 20, 2005, in Ann Arbor, Michigan. The lecture will be presented in five parts.
This is the eighth lecture given at the school. The first, entitled “The Russian Revolution and the unresolved historical problems of the 20th century” was posted in four parts, from August 29 to September 1. The second, “Marxism versus revisionism on the eve of the twentieth century,” was posted in three parts on September 2, 4 and 5. The third, “The origins of Bolshevism and What Is To Be Done?” was posted in seven parts from September 6 to September 13. The fourth, “Marxism, history and the science of perspective,” was posted in six parts from September 14 to September 20. These lectures were authored by World Socialist Web Site Editorial Board Chairman David North.
The fifth lecture, “World War I: The breakdown of capitalism,” was delivered by Nick Beams, the national secretary of the Socialist Equality Party of Australia and a member of the WSWS Editorial Board. It was posted in five parts, from September 21 to September 26. The sixth, “Socialism in one country or permanent revolution” was delivered by Bill Van Auken and posted in three parts, from September 27 to September 29. The seventh, “Marxism, art and the Soviet debate over ‘proletarian culture,’ ” was given by David Walsh, the arts editor of the World Socialist Web Site, and posted in four parts from September 30 to October 4. The ninth, “The rise of fascism in Germany and the collapse of the Communist International,” was delivered by Peter Schwarz, the secretary of the International Committee of the Fourth International and a member of the WSWS Editorial Board, and posted in three parts from October 11-13.
Capitalist crisis, political perspective and revolutionary leadership
What must be the basis of a scientific approach though which we seek to conduct an examination of the historical process in light of the laws of political economy? In the introduction to his lectures on The Philosophy of History, Hegel remarked that “it is the desire for a rational insight, and not merely the accumulation of a mass of data, which must possess the mind of one concerned with science.”
In an appreciation of Marx, Joseph Schumpeter pointed to “one thing of fundamental importance” that he achieved. “Economists,” he wrote, “always have either done work in economic history or else used the historical work of others. But the facts of economic history were assigned to a separate compartment. They entered theory, if at all, merely in the role of illustrations, or possibly of verification of results. They mixed with it only mechanically. Now Marx’s mixture is a chemical one; that is to say, he introduced them into the very argument that produces the result. He was the first economist of top rank to see and to teach systematically how economic theory may be turned into historical analysis and how historical narrative may be turned into histoire raisoneé.” 
If one examines the history of industrial capitalism over the past 200 years, it is clear that economic growth has taken place through a series of fluctuations. The business cycle, comprising periods of boom, stagnation and recession and punctuated by crises, is a permanent feature of the capitalist economy, notwithstanding periodic claims that it has been abolished.
It is also clear that there are longer periods that have their own features and peculiarities. For example, the period from 1849 (the start of the mid-Victorian boom) to the financial crash of 1873 is different from the period 1873-1896, which has gone down in economic history as the great depression of the nineteenth century. Likewise, the 1920s and 1930s are very different from the post-war boom of the 1950s and 1960s, just as that period is very different from today. In all of these periods, the business cycle continued to operate, yet economic development was very different. Clearly, there are processes at work that shape the operation of the business cycle and establish the framework within which economic development takes place over the longer term.
The relationship between the business cycle and the longer historical periods in the “curve of capitalist development” was the subject of a major report delivered by Leon Trotsky to the Third Congress of the Communist International in June-July 1921, and was the subject of many speeches and articles by Trotsky dealing with questions of perspective over the next several years.
When the Third Congress convened, it was clear that the initial revolutionary upsurge that had followed the First World War was receding. The working class had failed to come to power in Germany, the Hungarian revolution had been overturned, and there was a certain economic revival following the deep-going crisis of 1919-1920. These developments posed new challenges in the development of the perspectives of the revolutionary movement.
On the right wing, the social democrats, having aligned themselves against the Russian Revolution, declaring it to be premature, and organising the counter-revolution against the German working class, hailed the upturn in the business cycle as justifying their stance. The upturn, they maintained, demonstrated that the conquest of power by the Bolsheviks was invalid from the standpoint of Marxism and constituted a “putsch” because the productive forces were still capable of undergoing further development within the framework of capitalism. The perspective of the conquest of power by the working class, therefore, had to be consigned to the indefinite future, as it had been before the war.
On the other hand, numerous left tendencies advanced the so-called theory of the offensive. According to this perspective, there was no possibility of an upturn in the capitalist economy. The economic crisis of the immediate post-war years would continuously deepen and lead inexorably to the conquest of power by the working class.
Trotsky’s analysis was aimed at showing that capitalism had not established a new equilibrium and that the perspective of the social democrats was false. The war and the Russian Revolution were not accidents, but signified that the capitalist system had entered a period of profound disequilibrium that would continue.
At the same time, he took issue with the “lefts” who identified the downturn in the business cycle following the war with the historic crisis of the capitalist economy. The situation was far more complex. By 1921, it was clear that an economic upturn was taking place. But this did not mean that a new equilibrium had been established.
In opposition to the “lefts” and their identification of a downturn in the business cycle with the historic crisis of capitalism, Trotsky explained that if one were to draw a curve delineating the development of capitalism, it would be seen that it was a “composite of two movements; a primary movement which expresses the general upward rise of capitalism, and a secondary movement which consists of the constant periodic oscillations corresponding to the various industrial cycles.” 
The relationship between these two movements was the following: “In periods of rapid capitalist development the crises are brief and superficial in character, while the booms are long-lasting and far-reaching. In periods of capitalist decline the crises are of prolonged character while the booms are fleeting, superficial and speculative. In periods of stagnation the fluctuations occur upon one and the same level.” 
Against those who maintained that the economic crisis of 1919-1920, becoming ever more grave, had to persist until the conquest of power by the working class, Trotsky insisted that while capitalism remained, it would continue to oscillate cyclically, as a man continues to breathe even on his deathbed, and that, no matter what the general conditions might be, a commercial economic crisis would act to sweep away surplus commodities, devalue existing capital, and, for that very reason, create the possibility for an industrial-commercial revival.
But this did not at all mean that capitalism would be able to restore the conditions for equilibrium—that is, the conditions for economic development that had made possible its pre-war growth. “On the contrary,” Trotsky explained, “it is quite possible that after its very first consequences this boom will collide against the economic trenches dug by the war.” 
But what if capitalism continued? Was it possible that at some point in the future a new equilibrium would arise, ensuring a general expansion such as had taken place in the nineteenth century and for the first decade of the twentieth? In his report to the Third Congress, Trotsky did not rule out such a perspective, but made clear that it was possible only under very definite conditions.
“If we grant—and let us grant it for the moment—that the working class fails to rise in revolutionary struggle, but allows the bourgeoisie the opportunity to rule the world’s destiny for a long number of years, say, two or three decades, then assuredly some sort of new equilibrium will be established. Millions of European workers will die from unemployment and malnutrition. The United States will be compelled to reorient itself on the world market, reconvert its industry and suffer curtailment for a considerable period. Afterwards, after a new world division of labour is thus established in agony for 15 or 20 or 25 years, a new epoch of capitalist upswing might perhaps ensue.” 
Returning to this question in a speech six months later, in what tragically turned out to be a forecast of the fate of the European and international working class, he again emphasised that it was not a matter of the automatic interplay of economic factors. Only if the working class remained passive and if the Communist Party committed one blunder after another would it be possible for economic forces to “restore in the long run some sort of new capitalist equilibrium upon the bones of millions upon millions of European proletarians, and through the devastation of a whole number of countries. In two or three decades a new capitalist equilibrium would be established, but this would at the same time mean the extinction of entire generations, the decline of Europe’s culture, and so forth. This is a purely abstract approach, which leaves out of consideration the most important and fundamental factors, namely, the working class, under the leadership and guidance of the Communist Party.” 
Trotsky’s remarks establish a point of immense methodological significance. Contrary to the positions of Harding, the historical evolution of capitalism cannot be considered outside of the development of the class struggle and the role of the parties and tendencies in the working class movement.
In other words, the unfolding of the capitalist economy did not in and of itself produce a single, inevitable historical outcome. Rather, it set the groundwork on which the class struggle was to be fought out—a struggle within which the role of the subjective factor, revolutionary leadership, was to assume decisive importance.
If the working class were not capable of overthrowing the bourgeoisie, because of the policies of its leadership, then a new equilibrium would be possible—obtained at a terrible cost. But the attainment of such a situation would not signify that the capitalist system still had a progressive historical role to play, but rather that the revolutionary class, the proletariat, had not been able to overthrow it. Given different leadership and policies, an entirely different outcome, resulting from the same set of economic conditions, would have been possible.
The same issues arose when the historical process was viewed from the standpoint of the bourgeoisie. While it remained in the saddle, it did not do so because of the automatic working out of the objective laws of the capitalist economy. Rather, the historical crisis of the capitalist mode of production meant that the fate of the bourgeoisie depended directly upon its intervention.
To be continued
 Joseph Schumpeter, Capitalism, Socialism and Democracy (London, Allen and Unwin, 1976), p. 44.
 Leon Trotsky, First Five Years of the Comintern, Volume 1, pp. 252-253.
 Trotsky, op. cit., pp. 253-254.
 Leon Trotsky, First Five Years of the Comintern, Volume 2, p. 81.
 Leon Trotsky, First Five Years of the Comintern, Volume 1, p. 263.
 Leon Trotsky, First Five Years of the Comintern, Volume 2, p. 61.
Contribute to the fight for socialism in 2020
2019 has been a year of mass social upheaval. We need you to help the WSWS and ICFI make 2020 the year of international socialist revival. We must expand our work and our influence in the international working class. If you agree, donate today. Thank you.