Statement of the International Committee of the Fourth International
Globalization and the International Working Class

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.


Workers Vanguard, February 7, 1997


Workers Vanguard, January 24, 1997


Workers Vanguard, February 21, 1997


International Monetary Fund Report, May 1997, pp. 112 -115