International Committee of the Fourth International
Fourth International Vol. 15 No. 1 (March 1988)

The World Economic Crisis and the Struggle for Socialism

1. The worldwide stock market crash, which began with the collapse of Wall Street on October 19, has opened up a new stage in the capitalist crisis and heralds a period of revolutionary class struggles internationally.

The International Committee of the Fourth International calls upon the working class to reject all forms of economic nationalism, fight the demands of the bourgeoisie and its servants in the labor movement for “sacrifice,” and mobilize its great strength to put an end to bankrupt capitalism.

2. What the bourgeoisie and its apologists said could never be repeated—a 1929-style collapse—has happened. Both in its magnitude and its historical implications, the October 19 crash far outstrips the financial catastrophe of 1929.

In the course of one day, one-quarter of the value of US corporations was wiped out. A total of $1 trillion of share values had been obliterated. The Wall Street panic sent shock waves around the world, producing the biggest collapses in history in London, Tokyo, Hong Kong, Sydney and other share markets.

This destruction of paper values means a transformation in social relations unprecedented since the Great Depression of the 1930s. The working class faces savage attacks on jobs, living standards and basic democratic rights as the ruling class of every country attempts to make it pay for the historic crisis of the capitalist system.

The contradictions which led to the financial catastrophe of “Black Monday” are already working their way through the economy. In the United States, a devastating round of layoffs and plant closures has hit the car industry. In Australia, where share values have been halved, more than 10,000 firings are directly threatened in the steel industry. In every capitalist boardroom, similar measures are being prepared.

The plunge of the US dollar which has accompanied the Wall Street crash has sharply intensified the trade war between the rival imperialist blocs, threatening a breakdown of world trade, stagnation of national economies and raising the specter of a third imperialist world war.

3. The events of October 19 have dealt a shattering blow to capitalist regimes around the globe. The Reagan, Thatcher, Kohl, and Chirac governments, and the various social democratic and national bourgeois regimes that followed their example, all promised a resurgence of capitalism through an orgy of financial speculation and parasitism, combined with brutal attacks on the living standards of the working class.

The social foundations of these right-wing bourgeois regimes have ruptured. All of them rested on privileged layers of the middle class who received the crumbs from the destruction of the welfare states and the massive redistribution of wealth from the working class to the bourgeoisie. The system of “free market” capitalism which was to have produced ever-increasing wealth for these sections at the expense of the working class has collapsed.

This sea change in class relations will lead to direct confrontation between the proletariat and the capitalist ruling class. The coming struggles in defense of jobs, living standards and basic democratic rights will open the road for the working class to mount a revolutionary offensive against capitalism itself.

4. The sections of the International Committee of the Fourth International must organize and lead these struggles, advancing a program for the working class to take political power. They must ruthlessly expose all those Stalinist, social democratic, centrist and petty-bourgeois nationalist leaderships which seek to tie the working class to the bourgeoisie.

Only the overthrow of the capitalist system by the international working class and the establishment of a world federation of socialist states and a rationally planned socialist economy can prevent civilization from being plunged into the most horrific forms of capitalist barbarism.

The perspective advanced by Karl Marx—“Workers of the world, unite”—must guide the struggles of the international proletariat. The historical crisis of the capitalist system arises from the revolt of the productive forces against the outmoded capitalist social relations based on private ownership of the means of production and the capitalist nation-state.

5. The simultaneous collapse of share markets in one country after another has demonstrated the world character of the capitalist crisis and directs the attention of Marxists to the fundamental contradictions of the capitalist system which have produced the collapse.

The socialist revolution is not an event which emerges simply out of the conjunctural changes in the economic situation. It arises out of great historical problems which can be solved only by the working class.

The very development of the productive forces on an international scale and the establishment of integrated world production by vast multinational corporations has intensified the most basic contradiction of capitalism in the epoch of imperialism: that between the world market and the division of the world into nation-states.

Having internationalized production on an unprecedented scale, the bourgeoisie represents the greatest obstacle to the further development of the productive forces and threatens them with destruction through slump, trade conflicts and war.

The international working class must resolve this contradiction by freeing the productive forces from the destructive confines of the capitalist system. It must abolish the capitalist nation-state by means of the socialist revolution and establish a rationally planned socialist economy, built upon integrated world production, the preconditions for which have already been established under capitalism.

Thus, the world socialist revolution, the basic strategy of the world Trotskyist movement, the ICFI, which it has defended against all forms of revisionism, arises as an objective historic necessity.

6. The international revolutionary role of the working class arises from the fact that it is the only class which is not tied to the capitalist nation-state. Therefore, only the victory of the working class through the socialist revolution can end the chaos of the nation-state system and lead mankind out of the historical impasse created by capitalism.

The trade union and labor bureaucracies, which today attempt to tie the working class to their “own” bourgeoisie on the basis of economic nationalism, will become the recruiting sergeants for imperialist war tomorrow.

All of these bureaucracies and their centrist props are rooted in the capitalist nation-state system and therefore respond to the crisis with increased economic nationalism and closer collaboration with the capitalist state against the working class. The most determined struggle must be waged for the international unity of the working class against this nationalist poison.

The conditions have emerged for smashing the grip of these bureaucracies over the working class precisely because the bourgeoisie which they serve has no means of restoring capitalist stability.

7. In fact, the current crisis has arisen out of the very attempts by the international bourgeoisie to avoid a resurgence of revolution in the advanced capitalist countries following the betrayal by the Stalinists and social democrats of the postwar struggles of the working class in Europe and Japan.

Based on the relative strength of US imperialism, world capitalism inaugurated economic policies aimed at postponing a confrontation with the proletariat. US imperialism’s loss of its global economic hegemony over the past four decades constitutes an essential driving force of a new era of revolutionary upsurge.

Under the Bretton Woods agreement of 1944, which was aimed at averting the wave of protectionism and competitive currency devaluations which led to the strangulation of world trade in the 1930s, the US dollar became the world currency backed by gold. All other currencies were tied to it through fixed exchange rates. The unique role of the dollar rested on the relative superiority of US capitalism expressed in its massive trade surplus. In order to secure its own survival, the US had to organize the revival of capitalist production in Western Europe and Japan, extending dollar loans under the Marshall Plan and thereby expanding world trade.

The postwar monetary and trade system contained a fundamental contradiction: the superiority of US capitalism upon which the system was based was being undermined by the growth of industry and increasing labor productivity in Western Europe and Japan.

In response to the resulting dollar crisis and growing trade imbalances which emerged from the end of the 1960s, President Nixon on August 15, 1971 scrapped dollar-gold convertibility, the foundation of the Bretton Woods agreement, and ended the system of fixed exchange rates which had been the chief means for the expansion of world trade.

8. The breakup of the postwar boom through its own internal contradictions in the mid-1960s produced a decade-long eruption in the class struggle worldwide. A prerevolutionary situation emerged in France in May-June 1968 and the US working class engaged in the biggest strike wave since 1946. In 1974, the fascist regime was overthrown in Portugal and the Colonel’s junta collapsed in Greece. In the same year, the Heath Tory government was brought down by the British miners.

In the former colonial countries, the Indo-Pak war of 1971 signaled the beginning of the breakup of the postwar settlement imposed by British imperialism in collaboration with the national bourgeoisie. This was followed two years later by the Arab-Israeli war, and, in 1975, the 30-year struggle of the Vietnamese masses culminated in the defeat of the US imperialist armies.

The bourgeoisie was able to survive this period only through the betrayals of the social democratic, Stalinist and bourgeois nationalist leaderships. But while it was able to retain power, the bourgeoisie was completely incapable of overcoming the fundamental contradictions of the capitalist system which had led to the smashing of the Bretton Woods agreement.

After 1971, the curve of capitalist development began to turn downwards. Whereas in the 1950s and 1960s, recessions were followed by booms in which production surpassed previous peaks, in the 1970s and 1980s, recessions have been deeper and more prolonged, with manufacturing industry in the advanced capitalist countries continuing to be cut back even in periods of an upturn in the economic cycle.

The period since the oil price hikes of 1973-74 and the “recycling” of petrodollars through the world banking system has seen an enormous expansion of credit. This has increasingly taken the form of fictitious capital, that is, capital no longer representing real productive forces, but claims on future income. This credit expansion fueled the orgy of speculation, takeovers and mergers which characterized the frenzy on world stock markets over the last five years.

9. Since the beginning of the 1980s, the relative strength of US capitalism has disintegrated. The US has recorded a trade deficit every year, with the balance of payments gap running at around $15 billion per month. Over the past five years, while the share markets were setting new records, the US was being transformed from the world’s leading creditor nation into its biggest debtor. The foreign assets built up by US capitalism over the course of seven decades have been wiped out in the space of five years.

Under the weight of these deficits, the world market is being increasingly fractured into antagonistic trading blocs, posing the same ominous consequences as the wave of protectionism in the 1930s.

This is recognized by the most conscious sections of the bourgeoisie. As the director of the Institute for Monetary and Economic Studies at the Bank of Japan, Yoshio Suzuki, warned recently, unless a solution to the present crisis was found, “then, as history teaches, the confrontation for power between the old and the new will become violent; economic blocs will form, trade frictions will worsen and finally world depression or war will break out.”

The fall of the US dollar has brought relations between American and West German capitalism to the breaking point and is threatening to tear apart the EEC itself.

In the East, Japanese capitalism, which has only been able to maintain stability throughout the postwar period through continuous economic growth, faces explosive upheavals, as vast sections of industry are hit by the deepening of the global trade war.

In the so-called newly industrialized countries of the Pacific Rim, the growth of trade war will bring explosive developments in the class struggle, of which the strike wave in South Korea was only the beginning.

For the oppressed nations of Africa, Latin America and Asia, completely dependent on exports to the advanced capitalist countries to meet payments on their crushing foreign debt, the eruption of trade war spells the collapse of their national economies and starvation for millions. In this situation, the conditions will emerge for the proletariat, which has expanded during the postwar period, to lead the toiling masses in a struggle to overthrow the national bourgeoisie.

10. The eruption of the world capitalist crisis starkly reveals the complete bankruptcy of the Stalinist perspective of socialism in one country. Despite the enormous development of the productive forces made possible by state property forms, the productivity of labor in the Soviet Union cannot reach the levels achieved in the advanced capitalist countries. The resulting economic crisis, which represents the pressure of imperialism on the isolated workers’ state, can only be resolved through the extension of the October Revolution on a world scale.

The counterrevolutionary bureaucracy of Gorbachev is organically opposed to this perspective because the extension of the socialist revolution will lead directly to a struggle by the Soviet working class to overthrow it.

The Stalinists are opening the way for capitalist restoration. Through their glasnost and perestroika campaign, they are preaching the virtues of the profit motive and the market and are in the process of abandoning central planning and the state monopoly of foreign trade. These policies are driving toward the reintegration of the Soviet economy into the division of labor established through the anarchy of the capitalist world market, thereby threatening the gains of the 1917 revolution.

The perspective fought for by the Trotskyist movement since the formation of the Left Opposition in 1923 has been completely vindicated: the defense of the October Revolution is possible only through the strategy of world socialist revolution. The Soviet bureaucracy, the agent of the world bourgeoisie in the first workers’ state, must be overthrown by the working class through the political revolution in order to defend the conquests of 1917.

11. All the lessons of the 1930s have a burning significance for the working class as it stands on the eve of great struggles. The decade following 1929 saw the working class time and again enter the struggle for power only to find its way blocked by its leadership. Capitalism survived the crash of the 1930s and the social convulsions which followed not because of any inherent strength, but because of the crisis of leadership of the working class.

To resolve this crisis, Leon Trotsky founded the Fourth International in 1938. The past period has revealed the putrefaction and decay of the existing leaderships of the working class. Written in 1938, the opening sentence of the founding document of the Fourth International—“The world political situation as a whole is chiefly characterized by a historical crisis of the leadership of the proletariat”—has a burning actuality today.

12. The events of October 19 have not only dealt a shattering blow to the bourgeoisie and all its apologists, but above all to the social democratic, Stalinist and centrist organizations in the workers’ movement which have based their policies on faith in the power, stability and permanence of the capitalist system.

Ernest Mandel, the leader of the Pabloite United Secretariat and chief ideological representative of all of these tendencies, who maintained that a period of “neo-capitalism” had developed in which the bourgeoisie could avert a collapse on the scale of 1929-33, has been reduced to frightened silence. Mandel speculates on whether the crash will produce a recession, but says nothing about the tasks which confront the working class, thereby revealing the fundamental hostility of all the centrists to the socialist revolution.

The events of October 1987 constitute the most powerful vindication of the Marxist perspective fought for by the ICFI and have underscored the significance of the 1985-86 split with the Healy-Banda-Slaughter leadership of the Workers Revolutionary Party.

In the two years since their split with the ICFI, the three central leaders of its former British section have completely renounced a revolutionary proletarian perspective, going over to craven support for Stalinism, bourgeois nationalism and popular frontism. Their renunciation of revolutionary Marxism manifests the new needs of imperialism at the point of its greatest crisis.

The ICFI’s struggle against this renunciationist tendency has clearly demarcated the program of proletarian revolution from all forms of centrism and petty-bourgeois radicalism, which form the last line of defense for the decaying capitalist order.

In the aftermath of October 19, all those political skeptics who attack the viability of Trotskyism stand exposed as nothing more than the transmission belt for the pressure of the bourgeoisie on the working class and its revolutionary vanguard.

13. The conditions have been created for a large influx of workers into every section of the International Committee and the coalescence of genuine revolutionary forces under its banner.

Every section of the ICFI has the task of leading and organizing the struggle of the working class against all attempts by the bourgeoisie and its servants to impose sacrifices to save the bankrupt capitalist system.

Systematic work must be carried out in the trade unions, among the unemployed and youth, as part of an integrated campaign to recruit and train the revolutionary cadre who will provide leadership to millions in the coming period.

The ICFI directs this call to class-conscious workers everywhere: assemble under the banner of the ICFI, join and build its sections to carry forward the struggle for the world socialist revolution.