RCM News: The World Economic Crisis And The Third Universal Theory

[RCM.22.09.2010] The World Economic Crisis and the Third Universal Theory
By N. Beams

As the world capitalist system sinks into the greatest crisis in its history the achievements of the revolution in the Libyan Jamahiriya are extremely noteworthy for workers and youth all around the world.

In 1951 Libya was officially the poorest country in the world. According to the World Bank the per capita income was only 14 dinars or less than $ 50 a year, even lower than India. Under the old monarchy of King Idris the British and the Americans were given free reign and the discovery of oil did nothing for the masses.

By 1969 oil production had risen to 3.1 million barrels a day but the bulk of it was in the hands of the eight large multinational companies. They took the wealth and prevented the development of the country. Economic stagnation and the introduction of imported foodstuffs drove many people off the land and into the cities. Between 1962 and 1969 the number of farm workers fell from 146,000 to 125,000 and the contribution of agriculture to the national income dropped from 9.8 per cent to 2.4 per cent. Yet industry declined as well. Its share of the national income fell from 5.6 per cent to 1.7 per cent.

Libya’s experience under the puppet king proved the inability of the national bourgeoisie to develop the country and resolve any of the questions facing the masses in the face of the domination of the world capitalist system. It was this economic devastation, inseparable from the international crisis of capitalism that brought such a popular response to the revolution launched by Muammar Qathafi and the Free Officers on September 1, 1969. The Revolution Command Council adopted a program of comprehensive economic planning to decrease dependence on oil and the foreign capital and to provide a future based on the mobilization of the potential of the masses. This strategy was deepened by the General People’s Congress after the dissolution of the government and the transformation of the republic into the Jamahiriya in March 1977.

Libya’s annual growth rate in recent years was estimated at between 15 and 11 per cent, a remarkable figure with the world economy in insoluble slump. Per capita income has reached the third highest in the world. All this has been achieved while cutting the country’s dependence on oil to just 49 per cent of the national income, compared to 90 per cent for other oil producing nations.

Even more important, the economic development has been accompanied by great strides forward in the welfare of the people. In 1951, 90 per cent of the population was illiterate. By 1978 students numbered 861,000 or 28 per cent of the population – the highest ratio in the world. Before the 1969 revolution at least 65,000 families were homeless and another 120,000, a third of the population, were living in shanties and caves. Today nearly every Libyan worker lives rent-free in a modern apartment or house. Similarly, the Al-Fatah revolution tackled the problem of virtually no modern hospitals and one of the lowest ratios of doctors to head of population in the world. Today there is a sophisticated network of health care reaching out into every area of the country.

But the issues raised by the Third Universal Theory cannot be limited to Libya. It is a universal theory abstracted out of the universal experience of man – from primitive socialism to the development of class society producing slavery and wage slavery, bringing the need for revolution to overthrow class society again.

The significance of the world crisis of capitalism is that all the conditions have emerged for the overthrow of capitalism. The Iranian revolution signal led the entry of the masses into the struggle against imperialism on a scale unprecedented in history. The Nicaraguan revolution and the upsurge of Solidarity in Poland continued that process. These are not exceptions. They are the last shocks of a volcanic economic and political explosion of the world capitalist system. Since the mid-1960s when the crisis of the British pound I provided the first unmistakable signs of the impending breakdown of the post-war boom, the death agony of capitalism has been characterized by a chain-reaction of political and social explosions. Each of these explosions has been more explosive than the one which preceded it.

The driving force of these explosions all over the world is the accumulation of the historical contradictions of the world capitalist system. The vast mass of productive forces rebels violently against capitalist private property and the nation-state. The capitalist class is forced to cut living standards of the working class through the monetarist program of the destruction of basic industry, the closure of social services and the liquidation of the mountain of fictitious capital built up during the post-war boom.

The world capitalist system is now plunging into a world depression even more catastrophic than the 1930s.

The entire world system is teetering on the verge of an economic precipice. The debts of bankrupt countries total $ 853 billion with no hope that the money will be found to pay them. The international banks have become engulfed in an ever-deepening spiral of loans, desperately trying to avert the default which will send the whole edifice crashing on a scale dwarfing the Great Crash of 1929.

The world economy has become like a drug addict dependent on larger and larger doses of credit. Any move to halt the debt trademill or even curb it will turn the world slump into a full-scale depression overnight.

The world bankers face a growing list of irresolvable debts and bankruptcies:

MEXICO with more than $ 80 billion in debts is the world’s most indebted country. The IMF has formally taken control of its economy in return for the rescheduling of loans worth $ 1.8 billion but there is at least another $ 40 billion due within 12 months.

BRAZIL also owes about $ 80 billion in short-term loans.

POLAND still owes private Western banks more than $ 14 billion this year and is seeking further rescheduling.

ARGENTINA is trying to rearrange $ 36 billion in foreign loans. HUNGARY is trying to organize emergency finance of more than $ 500 million since short-term credits were withdrawn by Western banks.

YOGOSLA VIA and EAST GERMANY are facing the same crisis as other Warsaw Pact countries.

INTERNATIONAL HARVERSTER is restructuring part of it$ $ 4.2 billion debt to more than 200 banks.

AEG-TELEFUNKEN, one of Germany’s largest companies, has crashed and needs extensive restructuring of some of its Deutsch-mark 5 billion in borrowings.

DOME PETROLEUM, the Canadian oil company, owes banks more than $ 4.1 billion, part of which is being restructured.

MASSEY FERGUSON has more than 200 banks discussing the reshaping of debts totaling $ 715 million.

GRUPPO ALF A is seeking refinancing of part of its $ 2.3 billion debt.

BANCO AMBROSIANO collapsed in June, leaving its Luxembourg subsidiary owing more than $ 400 million.

DRYSDALE SECURITIES crashed in July, endangering the second largest bank in the U.S. Chase Manhattan.

PENN SQUARE BANK failed in June costing other American banks more than $ 400 million.

In the world of one leading Australian company chief, “money shock” is gripping the world economy.

This mountain of debt goes hand in hand with unprecedented financial parasitism, with money flooding from one area of speculation to another while productive capacity stagnates and declines. The buying binge on Wall Street in the final 10 days of August saw the biggest turnover in history, eclipsing even the chaos that preceded the Great Crash of 1929.

The spark for the rush on shares was the prediction that interest rates would drop because of the depth of the slump. From speculating on the price of money the parasites of capitalism turned to desperate speculation on the price of shares.

The declining rate of profit in the post war period led the capitalist class to creasing speculation in search of profits, more and more removed from production. There was an enormous expansion of the export of capital in search of higher profits from investment in low-wage countries. This increase gave way to direct loans to the desperately poor semi-colonial countries at exorbitant interest rates. This turn to usury on a giant scale was given a new impetus in the wake of the quadrupling of oil prices after the 1973 war in the Middle East.

The functioning of the world economy became more and more dependent on the recycling of petro dollar surpluses through the American and European banks.

The whole process depended on the creation of new forms of paper value which are manipulated to generate profits without producing any real value. The result has been the creation of a mountain of fictitious capital making intolerable demands on the surplus value produced by the working class.

The very creation of fictitious capital exacerbates the tendency for the rate of profit to decline (what Marx called the most important law of political economy). The vast pool of fictitious capital which does not represent real value makes a claim on the only source of wealth – the surplus value pumped out of the working class. The amount of capital expands to such an extent that the rate of profit is driven down. Even the most savage and sped up exploitation of the working class – which is being attempted – cannot overcome this crisis.

The ruling class has no other solution but the forcible destruction of vast areas of fictitious capital through the crashing of banks; industries and whole economies. The economic doctrine of monetarism – savage cuts in government spending together with soaring interest rates, expresses the drive by finance capital to eliminate vast areas of surplus capital, especially in secondary industry, in order to try to maintain its rate of return.

In other words the world economy must be crashed, driving forward the world revolution.

The roots of the crisis lie in the retreat that capitalist system was forced to make from the resurgent strength of the working class at the end of World War II. Under the Bretton Woods Agreement of 1944 the U.S. undertook to shoulder the burden of shoring up the capitalist system and financing the post-war reconstruction. In doing so it has concentrated within it all the contradictions of the world economy.

Imperialism faced a working class that was returning from war, armed in many cases, and that would have met any attempt to return it to the conditions of the 1930s with social revolution.

The armed uprising against the Nazis by the partisans in France, Italy and Greece, the overturn of the old order in Eastern Europe and the outbreak of revolutionary struggles in China, Vietnam and Indonesia, compelled the imperialist system to erect an edifice of credit based on paper money. Millions of dollars were poured into the Marshall Plan for Europe and the reconstruction of Japan and paper dollars were used to postpone the show­down with the working class in the advanced capitalist countries.

The measures undertaken were not indications of any strength but of the profound weakness of imperialism. The boom was not a new stage of capitalism, higher than the epoch of imperialism analyzed by Lenin, (or neo­capitalism as the revisionists labelled it), but a contradictory expression of the historic crisis of the capitalist system.

A crucial role was played by the reformist and Stalinist bureaucracies which disarmed the masses, and carved Europe and the Middle East into spheres of influence with the imperialist powers under the Stalinist doctrine of “peaceful coexistence”.

With the Bretton Woods Agreement the US dollar became the world currency, said to be worth $ 35 to an ounce of gold, enabling the US to do what no other country could do: pile up a foreign debt.

It was not a solution to the fundamental crisis exposed in the 1930s but a further development of it. It did not overcome the conflict between the imperialist powers but intensified it. By the end of the 1960s the flooding of Europe with paper dollars was challenged by De Gaulle who demanded the conversion of France’s dollar holdings into gold.

On August 15, 1971 President Nixon was forced to remove the gold backing from the dollar and open up a period of uncontrolled inflation. It was a blunt admission that there was no value behind the almighty green­back.

The period since 1971 has seen the breakdown of all the mechanisms for holding back the crisis, and their transformation into their opposite.

From being the agency of stabilization the International Monetary Fund has been transformed into the agency of destabilization, taking control of economy after economy on terms that require bloody confrontation with the working class and masses.

Unlike the 1930s there is no remaining currency to replace the US dollar as the measure of value. There is no holding back the transformation from the long boom to the greatest crash in history. The breakdown of the conference of the General Agreement on Tariffs and Trade (GATT) at the end of November 1982 revealed the irreversible drive to trade war and military war dictated by the world slump. Attempting to meet for the first time since 1973, the imperialist powers were unable to come to any agreement to halt the unleashing of trade war which will devastate the world economy.

The trade war has begun on agricultural products with the Americans threatening to unload into the world market their gigantic stockpiles of grain and dairy produce. Current US government holding of dairy products, for example, include 1225 million pounds of skim milk, 787 million pounds of cheese and 408 million pound of butter – enough to feed the world for a year.

Such is the anarchy of capitalist production that the accumulation of these stocks under the GATT agreements was necessary to try to avoid a return to the trade war and collapse of world trade which characterized the 1930s. Having begun on agriculture the trade war will not stop there but extend across the board. On his return from the failed summit, Australian Deputy Prime Minister Anthony issued a warning of a “calamitous” breakdown of the international trade and credit arrangements. He was reported to have told senior cabinet members that the world faces a 1930s style depression involving widespread unemployment, a breakdown in trade and a collapse of the international monetary system.

Similar warnings have been made by President Reagan himself.

But there is nothing the world capitalist leaders can do to resolve the crisis. The inability of the leaders of the major trading nations to reach any agreement at GATT, despite being fully aware of the consequences, is an acute expression of the fact that the crisis of the capitalist system is an objective phenomenon completely outside the control of any government.

One of the worst affected countries will be Japan, whose growth since World War II has been dependent on the expansion of its share of the world market.

The US threats to European agriculture have already led to warnings of an EEC offensive against Japanese imports and there are strong moves in the US to shut out Japanese imports.

The drive towards war is an inescapable necessity for imperialism. The economic contradictions of capitalism have developed far beyond the levels which ignited the first “wars to end all wars”.

The death agony of imperialism now threatens mankind with a nuclear holocaust.

Through the onslaught against the semi-colonial countries and the national liberation movements, imperialism is preparing to launch a nuclear World War III against the Soviet Union and the deformed workers’ states.

As outlined in Reagan’s and Weinberger “1984-1988 Fiscal Year Guidance” for the Pentagon, US military strategy centres on the use of nuclear force to “prevail and be able to force the Soviet Union to seek earliest termination of hostilities on terms favourable to the United States.”

The drive of the nuclear maniacs in Washington for a “winnable nuclear war” expresses the objective necessity for imperialism to re-conquer the gains of the workers’ states and the national liberation struggles.

The imperialist powers aim to restore the unchallenged dominion they held over the globe before the victory of the October Revolution of 1917 and the establishment of the first workers’ state in history.

The trade war antagonisms between the imperialist powers themselves are even deeper than they were on the eve of World War II.

But these profound inter-imperialist conflicts are subordinated to the collective antagonisms between the ruling classes of America, Europe and Japan toward the workers’ states and the national liberation movements that have swept the globe since 1945.

Capitalist society divides man into two great classes – the capitalist class and the working class. One appropriates the means of production while the other, having been deprived of the means of production, is reduced to selling its labour power as wage slaves in order to live. This division is an insoluble contradiction which has to lead either to the overthrow of the capitalist class or the resort to dictatorship, war and barbarism.

As the Green Book states, there is no reform which can ameliorate this fundamental conflict: “Wage workers are a type of slave no matter how improved their wages might be.”

Despite all the propaganda to the contrary, capitalist society has not done away with class antagonisms – rather it has brought these to a new and catastrophic high point. Society as a whole is more and more divided into two great hostile camps based on the bourgeoisie and the proletariat. With the overthrow of feudalism and the creation of a world market” the capitalist class left no nexus between men other than naked self-interest expressed in callous “cash payment”. It reduces personal worth into exchange value­labour power itself became a commodity like everything else.

This is a universal tendency. The capitalist system of production cannot exist without a constantly expanding market extending over the whole surface of the globe. Once the colonization of the world was completed, so-called “free enterprise” capitalism gave rise to monopoly capitalism dominated by finance capital. This exploitation of the world market has destroyed the basis to the nation state.

The world economy has become a mighty reality dominating every continent. Through the development of technology and communications the capitalist class drew all nations into its sway. Its cheap commodities and finance control the heavy artillery with which it batters down all opposition.

It compels all nations on the pain of extinction to adopt the capitalist mode of production. In short the capitalist system has created all the conditions where the advent of socialism on a world scale is both possible and necessary.

The Green Book says: “The new socialist society is no more than a dialectical consequence of the unjust relations prevailing in this world”.

The capitalist mode of production was incompatible with the feudal system, with the privileges it conferred on individuals and social ranks and the hereditary ties of subordination. The capital class broke the feudal and Quilt upon its ruins the new order based on so called free competition, individual liberty and equality before the law for all commodity owners.

Having carried out their revolutions, the capitalist class’ exploitation of labour and technology could develop unhindered and for a time the productive forced developed rapidly. But just as the older manufacture and handicrafts had come into collision with the feudal limits of the guilds, so now modern industry is in collision with the confines of private ownership. This conflict between the productive forces and their ownership is not a conflict engendered in the head of man. It exists objectively outside us, independently of the will and actions even of the capitalist class. Modern socialism is the reflection in thought of this conflict in fact.

Before capitalism the system of petty production was generally based on the private ownership of the labourers in their means of production, in the country, the agriculture of the peasant, freeman or serf; in the towns, the handicrafts. The instruments of labour were for the labour of single individuals such that, as a rule, they belonged to the producer himself.

To concentrate these scattered limited means of production, to enlarge them, to turn them into the powerful levers of production of the present day the capitalist class had to transform them, at the same time, into social means of production, workable only by a collectivity of man. The spinning wheel, handloom and blacksmith’s hammer were replaced by the spinning machine, the powerloom and the steam hammer; the individual workshop by the factory, bringing together thousands of workmen. This meant that no one could say of productions:: “I made that, this is my product”. Socialized production overthrew individual production but the system of appropriation did not. The owner of the instruments of labour – the capitalist – appropriated the production for himself although it was exclusively the product of others. The socialized mode of production was subjected to individual appropriation although it abolished the condition on which it rested.

This contradiction, which is precisely the hallmark of capitalism, contains the germ of the whole of the social contradictions of today. More and more the separation was made between the means of production concentrated in fewer and fewer hands, of the monopoly capitalists, on the one hand, and the producer, possessing nothing but their labour power, on the other.

As the Green Book explains, the working class, through organization into I

trade unions, has made important gains, at least in the advanced capitalist countries but “despite all these not inconsiderable developments in the hi­story of the economic problem, nevertheless the problem still exists… This attempt confined to wages was certainly not a solution at all. It is an artificial attempt aimed merely after reform, more of a charity than a recognition of the rights of workers”.

“Why are the workers given wages?” the Green Book asks. “Because they carry out a production process for the benefit of others who hire them to produce a certain product. In this case they have not consumed their production but have been obliged to surrender it for a wage”.

Capitalism also means that anarchy reigned in socialized production. The producers have lost control over their own social relations. Each man produces for himself with such means of production as he may happen to have, and for such exchange as he may happen to require for his remaining wants. This anarchy gives the illusion of freedom but man as a whole remains enslaved to the laws of production for profit revealed through competition which can cast whole factories and nations onto the scrap heap.

The anarchy increases with the development of technology which makes human labour superfluous. It means the displacement of millions of manual workers. Technology which should be the most powerful instrument for shortening labour time and liberating man becomes the opposite. The very product of the producer is turned into an instrument for his suppression. The overwork of some becomes the preliminary condition for the idleness of others and modern industry forces the consumption of the masses down to starvation level, destroying its own market. It established an accumulation of misery corresponding with accumulation of capital.

The contradictions of capitalism give rise to ever deepening economic crises which can only be offset by violent destruction of productive forces in war or, every temporarily, by borrowing and printing money. That is the story of this century – a world war, a massive depression, another war, an inflationary boom, and, not, a catastrophic slump and drive to militarism and civil war.

The solution can only consist in the practical recognition of the social nature of the modern forces of production and, therefore, in the harmonizing of the modes of production and exchange with the socialized character of the means of production. Society as a whole must take possession of the produc­tive forces which have outgrown all control except that of society as a whole. With the taking of this step the social characters of the means of production and of the products will be utilized by the producers with a clear understan­ding of its nature so that instead of being a source of disturbance and collapse it can become the most powerful lever of production itself.

In the words of the Green Book: “The ultimate solution is to abolish the wage system, emancipate man from its bondage and return to the natural law which defined relationships before the emergence of classes, forms of gover­nment and man-made laws”.

This does not mean a return to primitivism but, on the contrary, to the primitivism of all the achievements of capitalism into the only system capable of taking these achievements forward – social ownership. Social forces and laws are like natural forces and laws – they work blindly and destructively so long as man does not understand them and harness them consciously. With the real recognition of the nature of the productive forces of today the anarchy of production can give way to the social regulation of production upon a definite plan according to the needs of the community and of each individual.

Capitalism, as Karl Marx observed, creates its own gravedigger – the working class. As it transforms the great majority of the human race into proletarians or starving masses it creates the power which, faced with its own destruction, is forced into revolution. As the Green Book states: “The overturning of contemporary societies to change them from being societies of wage workers into societies of partners is inevitable as a dialectical result of the contradictory economic theses prevailing in this world today, and is the inevitable dialectical ‘result of the injustice to relations based on the wage system which have not been solved. The threatening power of the trade unions in the capitalist system incapable of overturning capitalist societies of wage workers into societies of partners… The objective of workers strikes will shift from a demand for the increase of wages to a demand for sharing in the production”.

It is the historical mission of the working class, leading all the oppressed masses, to accomplish the universal act of emancipation. It must seize the political power and the means of production to abolish itself as a class and ultimately abolish all class antagonisms.

As the Green Book stresses, socialism can only be achieved when profit and money disappear. “The recognition of profit is an acknowledgement of exploitation” and removes the possibility of limiting it. The abolition of profit requires the development of socialist production to the level where the needs of society are satisfied. By revolution the working class frees the means of production from the fetters of capital accumulation and gives their socialized character complete freedom to work itself out. Only in this way does an enormous development of production and technology upon a plan become possible.

The capitalist class and their press say that the abolition of profit and the private ownership of the means of production will lead to universal laziness: But if this was the case capitalist society would have collapsed long ago through sheer idleness for those of its members who work acquire nothing while those who acquire anything do not work. As the Green Book says: “Whoever works for a wage has no incentive to work. Work for wages failed to solve the problem of increasing and developing production.”

It is the elimination of need which is the key to the elimination of profit and money. As the Green Book states “Need causes exploitation. Need is an intrinsic problem and conflict grows out of the domination of man’s need”.

But need can only be eliminated through the planned production and provision of the necessities of life and the banning of the exploitation of others. The barriers to socialized and planned production must be removed.

The New International order,
Published by the World Center for Researches and Studies on the Green Book.
pp. 120-132

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