War and Austerity: Capitalism in the 21st century

The Activist - Volume 11, Number 1, January 2001
By Doug Lorimer

[The general line of this report was adopted by the 19th DSP Congress, held in Sydney, January 3-7, 2001. In addition to this and other reports adopted by the congress, two draft resolutions were adopted — "The Role of Australian Imperialism in the Asia-Pacific Region" and "The Cuban Revolution in the epoch of Neo-Liberal Globalisation".]

Comrades, a spectre is haunting Europe — and Australia, Asia, Africa and Latin America — the spectre of a US-led global economic recession. The end of year mood of the capital owning class was summed up in the headline on an article in the "Money & Business" section of the December 30 Sydney Morning Herald. It read: "After the cold snap, the big breeze".

The SMH’s Wall Street correspondent, Brian Hale, began his article with the following comments: "America is bidding goodbye to a chilly year with an icy winter that will be felt around the world... It will be known as the year the bubble burst... A year that let in the daylight on the magic that was supposed to be e-tailing, the brave new world of the ‘new media’ and the wonderfully expensive next-generation plans of telecom giants."

"The price for all this", Hale added, "was paid on US sharemarkets, particularly Nasdaq, long the technology poster-boy for the world. And, as the year freezes over, the ultimate price is being passed onto the US economy and thus the world economy".

Of course, what has rattled Wall Street’s confidence is not simply its discovery that emporer.com has no clothes. This was certainly a psychological blow to its "excessive exuberance", and was reflected in a 10% fall in the Nasdaq Composite Index of stock prices on April 17.

The biggest shock was the news at the beginning of November that in the September quarter US gross domestic product had slowed from an annualised growth rate of 5.6% to 2.7%. As more data came in during November showing that the US economy was beginning to turn from boom to bust, anxiety began to grow on Wall Street.

In early December, after a rash of announcements by big corporations that their profit results in 2001 will be significantly lower than they were last year, anxiety began to turn into fear. "December earnings revisions", said ABN Amro’s equities strategist Douglas Orr, "were the worst in terms of negative revisions the market has seen for eight years ... Things haven’t been as bad since the 1990-91 recession".

US Federal Reserve Board chief Alan Greenspan tried to avert a panic, declaring that the Fed was switching its interest rate policy setting from "tightening" to "easing". The financial press editorialists seized on Greenspan’s announcement in an effort to calm investors’ fears. An editorial in the US Business Week magazine, reprinted in the December 9 Australian Financial Review, was typical. "Relax, Chicken Little: no less than Federal Reserve chairman Alan Greenspan says that the sky is not falling."

"For nervous Wall Street", the editorial continued "all but frozen by its fears that the economy was headed to hell in a handbasket, Greenspan’s recent speech on business conditions was a welcome dose of reality. Greenspan made it clear that the economy’s current circumstances are ‘in no way comparable to those of 1998’."

Elaborating on what Greenspan meant by this, the editorial declared: "Yes, credit conditions are tighter, as investors re-evaluate the risks associated with handing over their money. But unlike the systemic risks posed by 1998’s financial near-meltdown, Greenspan said today’s credit tightening is ‘the expected by-product’ of the economy’s transition to a more sustainable pace of growth, compared to the previous boom."

However, when Greenspan’s "soothing" words were not followed up by an actual announcement by the US central bank of a cut in interest rates, fears of a recession again began to haunt Wall Street. "While the Fed says the building is not burning down, investors can smell smoke", said Art Cashin, a broker for the UBS Warburg investment bank.

Cashin’s remark was quoted in an article by Aaron Patrick printed in the December 22-26 Financial Review, which reported: "US share prices are likely to post their worst performance in a decade, with fears rising on Wall Street that the country’s central bank may be unable to avert a recession."

According to the earlier Business Week editorial, Wall Street’s fears of a recession were first raised by data released in late November showing a rise in unemployment relief claims. "The increase in jobless claims", the editorial noted, "reflects layoffs — especially in the auto industry as Detroit cuts output to pare inventories that have become out of line with sales".

What the editorial did not recall is that every one of the previous eight recessions in the US since World War II has been triggered by an overproduction crisis in the automotive industry, and that the Big Three auto makers in the US — General Motors, Ford and DiamlerChrysler — are already planning to cut back vehicle production by 11%, from an annual output of 18 million units to 16 million. What it did note was that "orders in the 89 per cent of manufacturing that excludes computers, peripherals, communications equipment and electronic components have not grown since the start" of 2000, and that the "index of leading [economic] indicators ... . fell 0.2 per cent in October, and it has been trending downward since March".

"Meanwhile", the editorial reassured its readers, "the composite index of tech orders, the remaining 11 per cent, shows only a little easing,"

However, Aaron Patrick’s report in the December 22-26 Financial Review noted, "Expectations of a large cut in US business spending on computer systems are undermining confidence in the Nasdaq Stock Market, which was down 54 per cent from its March high after gaining 86 per cent last year, marking one of the most spectacular investment bubbles this century".

In a back-page article of the same issue of the Financial Review, Alan Kohler forecast that there "is a fair chance of a cut in US [interest] rates of 25 basis points on January 31, followed by a ‘relief rally’ in equity prices around the world". However, he also warned that "in February and March the profit reporting season for the first half of 2000-01 will be an absolute shocker and stocks will be sold off again as investors focus once more on the effect of the slowdowns in earnings".

A big collapse in credit-inflated stock prices, of course, always carries with it the risk of snowballing into a banking crash, which in turn, by paralysing the flow of bank credits to businesses and consumers, can transform a routine cyclical economic contraction — nowadays called a recession — into a big-time collapse like the depressions that began in 1873 and 1929. However, this is unlikely to occur since — despite all their neo-liberal rhetoric about the virtues of "free markets"— all of the central banks in the imperialist countries will act to prevent a major banking crash by nationalising any major bank’s unsustainable bad debts and cutting official interest rates — if necessary even making them negative in real terms. Of course, as the experience of the Japanese economy has demonstrated since its credit-fuelled financial market bubble collapsed in 1989, if there is no sustained upturn in corporate profits, the price of avoiding a general economic collapse can be an indefinite period of stagnation in the economy as it oscillates between spurts of glacially slow growth in GDP and frequent mild contractions.

Wall Street’s long ‘bull’ market

The United States has avoided this fate up until now because since the end of the 1981-82 recession US corporate profitability has risen steadily during the 1990s. The after-tax profit rate of US non-financial corporations declined from its postwar average of 7% in the mid-1960s to around 3% at the beginning of the 1980s, rose to 4% by the end of the ‘80s, slumped a little during the 1990-91 recession, and then began a sustained rise during the ‘90s, peaking at about 7.5% in 1997, after which it began to slide.

It was this long rise in corporate profitability, combined with a big hike in the share of corporate profits that is paid out as dividends to stockholders, that powered the long "bull" market on Wall Street. The share of after-tax corporate profits paid out to their rentier owners as dividends averaged 44% during the long postwar wave of rapid capital accumulation from the 1940s to the end of the 1960s. During the 1970s this average declined to 39%. In the early 1980s, however, it rose sharply to 53%, and in the second half of the ‘80s climbed again to almost 72%. Over the period from 1990 to 1997 the dividends paid out by US non-financial corporations averaged just under 70% of their after-tax profits.

US corporations also borrowed heavily in the 1980s. The credit market debt of non-financial corporation profits rocketed up in the late 1970s from its previous 20-year average to over 2000% in the 1980s. What was all this borrowing spent on? Between 1984 and 1997 non-financial corporations spent $864 billion buying back their own stock, and between 1980 and 1997 they spent $3 trillion — that’s 3 million million dollars — buying each other’s stock, i.e., on mergers and acquisitions.

The funds transferred from corporate profits to rentiers by all of these means — dividends, interest, stock buy-backs and M&As — were then ploughed by the rentiers into the stock market, where they powered an enormous rise in the paper value of these rentiers’ financial assets.

Measured by the Standard & Poor’s 500, an index of the share prices of the 500 largest corporations trading on the New York Stock Exchange, the market rose almost 230% from August 1982 to August 1987. From there, it lost a third of its value, mainly during the October 1987 crash. After bottoming out in December 1987, the market rose a modest 65% through to July 1990, fell 20% over the next three months, and then zoomed by over 360% to its all-time high in the middle of last year. Since then it has fallen by almost 14%, with the price of the average stock on the S&P 500 having dropped 27%.

This long rise in the price of stocks, particularly its sustained rise since 1991, has been accompanied by a huge increase in credit-funded consumer spending. The latter has often been assumed to have been encouraged by the former, through what bourgeois economists call the "wealth effect". That is, it’s claimed that share ownership in the US has become so widely dispersed that with the big rise in the paper values of stocks during the ‘90s the great bulk of consumers have felt themselves to be wealthier and have therefore availed themselves of easy consumer credit and gone on a spending binge.

It’s certainly true that household debt has risen enormously in the US over the ‘90s. Seven trillion dollars. That’s the amount of debt US households carried in 1999, up from $3.55 trillion in 1990, according to the Federal Reserve Board. This household debt had nearly reached 100% of personal disposable income, and US households were paying 17% of their after-tax incomes — more than a trillion dollars — on debt servicing.

But this debt is very unevenly distributed. The Fed’s 1998 Survey of Consumer Finances, which began to be published last year, showed that 70% of this debt is held by the bottom 90% of US households. The next 9% of households held 22% of the total debt, while the top 1% of households held only 7%.

While the middle and lower classes have been accumulated debt, the very rich have been accumulating wealth at a fabulous rate. In a 1996 study of the Fed’s 1983, 1989 and 1992 Surveys of Consumer Finances, Edward Wolf reported that between 1983 and 1992, 57% of the appreciation in the value of financial assets went to the richest 1% of US households, 39% to the next 19%, and just 4% to the bottom 80%. According to the calculations of the Forbes business magazine, the net household worth of the richest 400 Americans tripled between 1982 and 1999. In 1999 alone their net worth grew by 35% to hit $1 trillion.

Given these facts and the fact that the top 5% of stockholders hold 94.5% of all publicly traded stock, it’s not hard to work out that the massive rise in credit-funded US consumer spending has come not so much from the "wealth effect" of the rising stock market, as it has from the austerity effect of the decline in real hourly wages and the stagnation in most working people’s household incomes since the early 1980s. As the incomes of the middle and lower classes have stagnated or declined they’ve borrowed from the very rich, who need a place to earn interest on their surplus funds, and the rest of the population is a juicy lending target.

The big rise in the share of corporate profits that channeled into the pockets of their rentier owners to gamble on the stock market during the 1980s and ‘90s was paralleled by a decline in the amounts that corporations spent on new purchases of new plant, equipment and in output of commodities, i.e., what bourgeois economists call "capex", capital expenditures. During the 1950s and ‘60 capital expenditures by US non-financial corporations averaged 8.5% of GDP, declining slightly from 9.1% of GDP in the early 1950s to 8.3% in the late 1960s. During early 1970s they slumped to 6.4% of GDP, then rose slightly in the 1975-79 period to 7.5%. In the early ‘80s they fell sharply, to 4.3% of GDP. Over the period from 1985 to 1994 they averaged 4.4% of GDP, i.e., at half the levels of the long postwar "boom" of the ‘50s and ‘60s. In 1995-97 capital expenditures by non-financial corporations in the US rose to 6.2% of GDP, i.e., to slightly less than their 1970-74 level.

These figures indicate that during the 1980s and ‘90s the rentier owners of US corporations saw no alluring opportunities to reinvest rising corporate profits back into a big expansion of their firms’ capacity to make profits by producing and selling lots more commodities.

Austerity drive

Where then did the rise in these firms’ profitability come from? It came from the advances that the US capitalist class, spearheaded by the Reagan, Bush and Clinton administrations, has had in imposing austerity on the US working class in the form of real wage cuts and the shrinkage of welfare provisions.

Following the Reagan administration’s smashing of the air-traffic controllers’ strike in 1981 — achieved by the federal government’s wholesale sacking of all members of PATCO, the air-traffic controllers’ union — a sustained employer offensive was launched to cut workers’ real wages. The US union movement responded to this offensive with a prolonged retreat — rout would perhaps be a more appropriate description. Throughout the 1980s US unions agreed to contracts with wage increases lower than the inflation rate. So-called "fringe benefits" — employer contributions to health care insurance, pension funds, paid vacations, etc. — were reduced even more drastically.

In the late 1980s and early 1990s, US employers launched a further big assault on workers’ wages achieved through corporate "downsizing" of their work forces, i.e., sacking permanent employees and then rehiring them as casuals and contractors at substantially lower rates of pay. Some 2.5 million workers were directly affected by corporate "downsizing". Out of these 1.8 million were rehired, with 63% of them taking a wage cut. By 1994 the real purchasing power of the hourly wages of non-supervisory workers in the US had fallen 14% below what they were in 1973, to what they were in the late 1950s.

The other major component of this sustained offensive against the US working class was the shrinkage of welfare provisions. The US ruling class had found during the 1973-75 recession that the classical capitalist "disciplinary" function of rising mass unemployment — that is, putting the working class in a more desperate economic position, thereby reducing its bargaining power so that it would be forced to yield to the demands of capital — were undercut by the welfare programs.

So, during the 1980-82 recession — which the Federal Reserve Board extended for two years through a deliberate credit squeeze — the Reagan administration began cutting federal funds to cities for low-cost housing, drastically cut back public sector employment programs, and threw 2.2 million people off emergency assistance programs. Between 1981 and 1983 the number of people officially tabulated as living below the poverty line increased by 2.2 million.

As intended, this set of policies enlarged the reserve army of labour and its more desperate plight fulfilled the classic function of mass unemployment in cutting wage levels generally as those who remained employed felt the pressure to accept lower wages in order to keep their jobs.

The Bush and Clinton administrations, of course, continued this anti-labor offensive into the ‘90s, with Clinton and his vice-president Al Gore being the most enthusiastic champions for "ending welfare dependency".

This anti-labour austerity drive, which has also been implemented in all the other developed capitalist countries (though with less success to date than in the United States), is the product of the intensification of inter-imperialist competition caused by the long-term slowing in the pace of capital accumulation that began at the end of the 1960s, a product of the exhaustion of all the conditions that generated the 1948-68 long wave of expansion of rapid capital accumulation.

During that expansionist long wave, under conditions of a basic deterioration in the international relationship of class forces at the expense of imperialism reflected in the extension of post-capitalist societies to encompass a third of the world’s population in the wake of World War II, the priority for big capital was to bribe the working class of the imperialist countries into supporting its Cold War drive to "contain" the potential anti-capitalist dynamic of the post-war wave of anti-colonial struggles and to "roll-back" communism. Maintaining low levels of unemployment at home and increasing welfare provisions for the working class in the imperialist countries was central to the imperialist ruling classes class struggle priorities.

But with the passage from the postwar expansionist wave to the post-1960s depressive long wave, big capital in all the imperialist countries changed its domestic class struggle priorities. Countering a sharp decline in the average rate of profit through a sustained upswing in the rate of exploitation of the working class through rolling back all the economic concessions it has granted to the working class in the imperialist countries became big capital’s top domestic priority.


This anti-labour policy agenda has been ideologically justified by appeals to a neo-liberal rehash of the classical liberal economic doctrine formulated in the 18th century that "best government is the least government". The catch-cries of the first ruling-class political apostles of neo-liberalism — Margaret Thatcher in Britain and Ronald Reagan in the US — was the need to "get the state off people’s backs" and to "reduce the size of government".

According to the neo-liberal doctrine increased government involvement in "market economies" results in economic outcomes ceasing to be reflective of the workings of "natural", "impersonal" market forces and become politicised. Coalitions of interest groups are then able to impose their wishes on private entrepreneurs. This is incompatible with individual freedom and economic efficiency.

Of course what the big capital and its political representatives — whether they call themselves conservatives, liberals or social-democrats — became concerned about with the end of the long postwar expansionary wave in the 1960s was not the politicisation of economic decision-making itself, but the political power of the labour movement, particularly its ability to frustrate capitalists to drive up the rate of exploitation of wage labour. Similarly, their aim was not to get the capitalist state off any and everyone’s back but to get the labour movement, and the legislative regulations enacted as concessions to it, off the employers’ backs. The whole aim of the neo-liberal policy agenda is to return the relations between capital and wage labour to how they were before World War II.

The change in the imperialist rulers’ domestic class-struggle priorities reflected in the neo-liberal policy agenda will continue to set the framework of life for working people in the developed capitalist countries in the 21st century. The post-1997 decline in the rate of profit in the US — which is now being manifested in a decline in the total amounts of US corporate profits and is what is pushing the US economy toward recession and which threatens to be globalised through a contraction of world trade — will impel the US capitalist rulers to launch a new wave of austerity measures against the US working class so as to retain the competitive edge they achieved in the late 1990s over their imperialist rivals.

The further intensification of inter-imperialist competition that any new slowdown in the growth of the capitalist world economy will bring will exert an enormous pressure on the capitalist rulers in other imperialist countries to try to catch up to their US rivals in imposing further austerity on their own workers.

In fact "austerity" — which literally means "deprived of luxuries" — is too mild a word to describe their policy agenda toward the working class. Two statistics perhaps illustrates this more than any others. In 1980 the take-home pay of 16% of employed workers in the United States consigned them to a standard of living that fell below the official poverty level. By the late 1990s, 25% of employed workers in the US were living below the official poverty level. Driving millions and millions of workers into poverty is the real aim of the capitalists’ neo-liberal policy agenda.

The international political situation report adopted by the party’s 17th congress four years ago pointed out that:

"After the 1980-82 recession, there was an upturn in all the developed capitalist economies. Neo-liberal recipes seemed to have worked. Public acceptance of these recipes was all the greater because the stock market crash of 1987 did not immediately result in the recession everyone expected. The developed capitalist economies continued to grow and unemployment declined a little everywhere.

"But then came the 1990-93 recession. Unemployment rose sharply, reaching an official average of 8% across the imperialist countries ...

"The old arguments for neo-liberal economic policies ... lost their credibility. Instead, a new argument [began to be] peddled to legitimise these policies: if we , the workers of the developed industrial countries, do not accept more cutbacks in our wages, working conditions, social welfare entitlements, and individually pay more for health care, education and our retirement pensions, then ‘our’ countries will become uncompetitive in the eyes of the now globally mobile forces of big business, which will then shift its investments out of ‘our’ countries into the lower-cost economies of the ‘Newly Industralising Countries’."

The report began by observing that: "It is widely asserted by bourgeois economists, social scientists, management gurus, journalists and politicians of every stripe that we now live in a new historical era in which national economies, national cultures and national borders are being dissolved and superseded by a rapid and recent process of ‘globalisation’."

"Central to this fashionable discourse", the report noted, "is the claim that a ‘truly global economy’ has emerged or is emerging in which distinct national economies and state policies corresponding to them are irrelevant. The world economy is now dominated by corporations that have internationalised their activities to such an extent, that carry out production and sales in so many countries, that they have no allegiance to any particular nation-state and will locate their investments and operations wherever in the global market they can get the highest returns. Big capital is now so footloose and mobile that any attempt by national governments or the labour movement in any particular country to impose policies upon it that increase its costs will lead it to withdraw from that country and relocate its operations elsewhere, that is, where costs are lower."

The report also noted that: "The concept of globalisation has also gained acceptance among many former adherents of the radical left, who argue that big capital is now so mobile and powerful, and national states are so weak in comparison, that it is pointless for the working class to struggle for state power."

The report then went on to demonstrate that these claims were either completely misleading or based on gross exaggerations of the real situation and that what has been truly globalised since the beginning of the 1980s — i.e., extended to the entire capitalist world — is the neo-liberal policy agenda. This latter point was elaborated in more detail in the talk on "Imperialist Capitalism and Neo-Liberal Globalisation" presented on behalf of the National Executive to the Marxism 2000 conference held here last January, which was reprinted in the fourth issue of last year’s Activist bulletin.

As delegates will now be aware, Comrade Dick Nichols, while agreeing with that report’s refutation of the exaggerated claims made by the advocates of neo-liberal globalisation, disagrees with the view held by the majority of the National Executive that there has not been a qualitative change in the structure and mode of operating of the capitalist world economy since the early 1980s. He has presented his arguments in the 18th issue of last year’s Activist in an article entitled ‘Globalisation: A Qualitative Change in World Economy".

Since this disagreement has not expressed itself in any differences within the NE over the political activity of the party or the political line publicly expressed by the party and is largely of a theoretical nature and centres around different evaluations of a large amount of economic data, the NE is unanimously of the view that it would be best to discuss it out in written form through the pages of the party’s internal discussion bulletin.

Neo-liberal globalisation and Third World debt

The international political situation report adopted by the party’s 17th congress pointed out that what we now refer to as neo-liberal globalisation began to be implemented by the imperialist governments several years before the coming into office of Thatcher and Reagan. The report pointed out that at the 1976 summit of the heads of government of the seven richest imperialist countries, "the G7 leaders agreed upon a plan for reorganising the economies of the Third World through: opening to the world market (i.e., to imports from the imperialist states), prioritising exports rather than the internal market, privatisation of state enterprises and utilities and opening to foreign (i.e., imperialist) investment, and the reduction of ‘unproductive’ budget items like education and health".

The report explained that the "aim of these policies has been to roll back the leverage to extract political and economic concessions from the imperialist states and the transnational corporations which decolonisation and formal political independence gave the bourgeoisies of these countries".

The primary instrument used by the imperialist governments, the big commercial banks and the imperialist-controlled international financing agencies like the IMF and the World Bank to impose neo-liberal policies on the semi-colonial countries has been debt slavery.

With the end of the long postwar expansionary wave of rapid capital accumulation in the imperialist countries ruling families of finance capital in the First World found themselves with insufficient profitable ways to invest money capital in expansion of industrial capacity in the imperialist countries. From the early 1970s they began to foist large amounts of their surplus money capital onto governments and groups of capitalists in the semi-colonial countries ostensibly as loans for "development". At the same time, the slowing of growth in the imperialist countries led to deterioration in the prices of the commodities exported by most Third World countries relative to the prices of the commodities they imported from the First World, giving rise to a growing deficit in their trade balance. The combination of so-called development loans and loans to cover their growing trade deficit, led to an explosion in the Third World’s debt to the First World — from around $75 billion in 1971 to $524 billion in 1981.

The sharp rise in interest rates in the US in the early 1980s rapidly inflated the outstanding debts of Third World countries, forcing their governments to take new loans in order simply to service the interest payments on the old debts.

In exchange for rescheduling payments on interest and principal, governments in the Third World were forced to turn over ownership of entire factories, mines, or tracts of farm and forest land to imperialist commercial banks and corporations.

By the end of the ‘90s this total Third World debt had reached $2.5 trillion. Serving this debt — that is paying blood money on this mountain of parasitic bank loans — remains an enormous burden, exacted by capitalist governments in Latin America, Africa and Asia from the wealth produced by brutal exploitation of the workers and peasants.

The devastating social consequences of the deepening poverty this debt slavery inflicts on the 4 billion inhabitants of the underdeveloped capitalist countries is illustrated by one fact alone: 16 million children die in these countries every year from hunger and curable diseases. This means that very four years the same number of children die as the total number of victims during the whole of World War II. Every four years a world war against the children of the Third World takes place so that the poor of the poor countries can fatten the bank accounts of the rich of the rich countries. There you have the barbaric reality of capitalism at the beginning of the 21st century.

The deepening social misery caused by imperialist-dictated austerity measures on the masses of the oppressed nations is the fundamental driving force behind the growth of nationalist sentiments among these masses and of mass rebellions against national oppression. But because national oppression today is more obviously exerted through economic rather than direct political oppression, struggles for national liberation are increasingly combined with battles against local exploiters for democratic rights and social justice. These national-democratic and anti-imperialist struggles, in order to be carried through to victory, will more than ever require revolutionary working-class political leadership.

Finance capital’s defence of the "political stability" necessary to ensure the maintenance of the social environment for the extraction of the superprofits it obtains from the super-exploitation of the workers and small farmers of the oppressed nations is the chief source of war today. Civil disorder, particularly civil war, anywhere in the world today is regarded by the imperialist powers as a threat to their "national security", to the secure flow of the tribute they the ruling families of finance capital expect from their formally independent colonial subjects.

The so-called Plan Colombia recently approved by the US Congress provides an example of the sort of imperialist military interventions that we are likely to see much more of in the 21st century. While presented as an operation financed and directly led by Washington to combat the production of narcotics through the destruction of the crops that 400,000 peasant families depend upon for their survival, it has a counterinsurgency political objective. Eighty percent of the $7.5 billion allocated for Plan Colombia will be devoted to assisting the Colombian army’s military operations against the armed insurgency of the Revolutionary Armed Forces of Colombia (the FARC) and the National Liberation Army (the ELN) and their civilian supporters.

Plan Colombia was justified by the Clinton administration as necessary to protect the "national security" of the United States from the "insecurity of the hemisphere" allegedly posed by the "Colombian disorder" which it was claimed "is becoming a regional danger". What is really under threat in northern Latin America is the security of the "neo-liberal model" that has been implemented by the governing elites of Colombia, Ecuador, Peru and Bolivia, all of whom face a crisis of governability. The successive indigenous uprisings in Ecuador, urban poor and peasant rebellions in Bolivia, as well as the collapse of the Fujimori regime in Peru have made the northern Andean region an epicentre of resistance to neo-liberal globalisation.

Whereas the pressure of debt was the primary instrument for the imposition of neo-liberal policies throughout Latin America in the 1980s and 90s, Plan Colombia uses military pressure to assure the implementation of the new neo-liberal austerity program the Colombian government and the IMF agreed on in 1999.

Israeli imperialism and the Palestinian national liberation struggle

Undoubtedly, the most direct confrontation today between the imperialist powers and the oppressed nations of the world is the conflict between the Israeli imperialist state and the Palestinian nation. The imposition of a "solution" to the Palestinian "question" short of full justice for the dispossessed and colonialised Palestinian nation continues to evade the Israeli rulers and their US ally.

The new Palestinian uprising was triggered by the provocative visit to the site of the al-Aqsa mosque by general Ariel Sharon — supervisor of the massacres of Palestinian civilians at the Sabra and Chatila refugee camps during the Israeli army’s invasion of Lebanon in 1982 — who was generously provided with an escort of 1500 Israeli troops by general Ehud Barak, the Labour Party prime minister of an Israeli state more than ever dominated by its military officers. However, Sharon’s provocation was only the straw that broke the camel’s back.

The al-Aqsa uprising is the consequence of seven years of accumulating frustration with the so-called "peace process" opened up by the Oslo accords and their signing by PLO leader Yasser Arafat and then Israeli prime minister Yitzak Rabin in Washington, on the White House lawn, in September 1993. In the course of those seven years the economic and social position of the Palestinian masses worsened, while their hopes of winning national independence were increasingly dashed by the failure of successive Israeli governments to fulfil the promises made in the Oslo accords.

In signing those accords, Rabin hoped to secure the collaboration of the bourgeois nationalist leadership of the PLO in replacing direct Israeli military rule over the Palestinian territories occupied by the Israeli army in 1967 with a nominally independent, but subservient Palestinian policing authority. This would fulfil two objectives.

Firstly, it would enable Rabin to implement a withdrawal of Israeli troops from the West Bank and the Gaza Strip — a withdrawal which Israeli army commanders had been demanding since 1988 out of concern to preserve the morale of their troops who were bogged down in the tasks of repressing the first intifada.

Secondly, the withdrawal of the Israeli army from the territories occupied in 1967 would enable Israel to "normalise" its relations with the neighbouring Arab countries so as to gain access to their markets for the export of Israeli manufactured goods and to open up their cheap-labour economies to be directly exploited by Israeli capital investments. This would consolidate the transition Israel began in 1967 from a colonial-settler state dependent upon loans and grants from Washington into the resident imperialist exploiter in the Middle East.

The bait that Rabin held out to the PLO leadership to collaborate in this process was the implied promises contained in the Oslo accord that the Israeli rulers would meet the Palestinian people’s elementary demands: dismantling of the Israeli settlements in the West Bank and Gaza Strip, total withdrawal of the Israeli army from these territories, establishment of an independent Palestinian nation-state ruling over the whole of these territories with east Jerusalem as its capital, and recognition of the right to return to Palestine of the refugees of 1948 and 1967. However, the Oslo accords only detailed these as items as matters for negotiation in reaching what was called a "final settlement".

In exchange for Israel’s agreement to enter into negotiations with the PLO on these matters — which in itself was a victory for the Palestinian national liberation struggle — the PLO leadership threw away its strongest bargaining card by bringing the first intifada to an end.

With the pressure of the first intifada removed, successive Israeli governments after 1993 — those of Rabin, Peres, Netanyahu and Barak — conceded to the Palestinians only some of the promises of Oslo, with an eye dropper and increasingly late, demanding each time that the Palestinian National Authority increase its repression of dissent in the West Bank and Gaza Strip as a condition for the next stage of negotiations.

Meanwhile, the Israeli rulers carried out a policy of development of the Zionist settlements and the military and infrastructural parcellisation of the West Bank and Gaza Strip along the lines of their Israeli army’s original 1988 withdrawal plan. This would allow the Israeli army to maintain strategic control of these territories and their external frontiers while placing the enclaves of the Palestinian population under permanent siege, able to be locked-up in self-governing concentration camps.

In July of last year, Arafat was confronted by Barak and Clinton with the demand to sign a "final settlement" which conceded none of the elementary demands of the Palestinian national liberation movement. Knowing that if he signed such an agreement his fate would be the same as former Egyptian president Anwar Sadat, he refused.

While the initial protests against Sharon’s provocation in September were spontaneous, from the leading role that his closest associates in the Fatah faction of the PLO have played in mobilising the Fatah youth organisation and the Fatah militia, it now seems clear that Arafat sanctioned the generalisation of the initial protests into a new intifada. From the various statements made by leading members of Arafat’s Fatah faction, it is also clear that they feel they were duped by Israel and the US over the last seven years, and that unless they demonstrate to their own population, including their own troops, that they are not Israeli puppets, they weaken themselves in any future negotiations with Israel and its US ally.

It remains to be seen if the Arafat leadership have drawn the obvious lesson of the last seven years, i.e., that without a visible expression of popular resistance to the Zionist occupation of their homeland they will not be able to extract meaningful concessions from their militarily more powerful adversary.

The Palestinian population in the West Bank and Gaza Strip, on its own, does not have the means to free itself from Israeli domination. The military and economic relationship of forces is heavily weighted against them. But through maintaining a visible expression of popular resistance to Israeli domination they can help to change the relationship of political forces more in their favour through:

Firstly, generating a political movement of solidarity in the Arab world which would exert pressure on Arab governments to give the Palestinians the diplomatic support and economic aid which are indispensable to sustain their resistance.

Secondly, making it clear to the large numbers of Israelis who desire peace that this will not be attained unless they exert pressure on the Israeli government to give in to the elementary demands of the Palestinian national liberation movement.

And, thirdly, by encouraging the growth of the broader international movement of solidarity, particularly within the United States, Israel’s chief diplomatic and military ally.

One of the demands that can help build such an international movement of solidarity is the call for the United Nations Organisation to send an international armed force to protect the Palestinian inhabitants of the West Bank and the Gaza Strip from Israeli violence, and to supervise the implementation of UN Security Council resolutions 242 and 338, adopted in 1967, demanding that the Israeli military withdraw from occupied Arab territories, and UN General Assembly resolution 3236, adopted in 1974, which affirmed the "inalienable rights of the Palestinian people", including its "right to return to its country" and the "right to national independence and sovereignty". Such a demand can help generate support for the Palestinian people’s struggle by making it clear that the Israeli occupation of the West Bank and Gaza Strip are not only morally unjust but also contrary to what is generally accepted as "international law".

The new anti-globalisation movement

We have always argued that building movements of solidarity with the struggles of Third World peoples against imperialist oppression in the imperialist countries like Australia is vital to developing anti-capitalist class consciousness among working people in these countries. As our party program points out: "The ruling class recognises that Australian capitalism is an integral part of the world capitalist system, and is affected by the outcome of struggles between the exploiters and the exploited internationally. It therefore extends moral and material solidarity to the forces of imperialist reaction throughout the world. Working people in Australia need to be just as class conscious about their international interests and extend solidarity to struggles against exploitation and oppression in other countries."

The explosive emergence of the new movement in the imperialist countries against neo-liberal globalisation that began with the mass protests against the World Trade Organisation meeting in Seattle in November 1999 presents revolutionary Marxists with big new openings to imbue large numbers of working people in the imperialist countries with an anti-capitalist internationalist consciousness, as the basis for imbuing them with anti-capitalist, working-class revolutionary political perspectives.

The National Executive’s assessment of this new movement, particularly as it manifested itself at the S11 blockade of the World Economic Forum in Melbourne, was set out in some detail in the report on "Australian Politics and Our Party-Building Perspectives After S11" presented to and adopted by the party’s October National Committee plenum, which formed part of the Political Committee’s platform for the election of congress delegates. Our views on how we think revolutionary Marxists should orient to and further build this new movement we also set out in that report, and will be also taken up in a number of the reports presented by the NE to this congress. In this report what we want to do is to restate out general assessment of this movement — its basic characteristics and dynamics — and our general perspectives for building it. These can be summed up in six points.

The first is that this new movement reflects a growing crisis of popular legitimacy for the imperialist ruling class’s drive to globalise — to extend to the entire world — their neo-liberal policy agenda. This was acknowledged by the London Economist magazine in its September 23 editorial attacking the new movement, when it noted that "many of the issues" raised by the protesters in Seattle "reflect popular concern about the hard edges of globalisation — fears, genuine if muddled, about leaving the poor behind, harming the environment, caring about profits more than people, unleashing dubious genetically modified foods, and the rest" and when it also acknowledged that "the tide of globalisation, powerful as the engines driving it may be, can be turned back".

For the imperialist rulers and their most class-conscious ideological spokespeople "globalisation" is synonymous with the world-wide imposition of their neo-liberal policy agenda. This was made explicitly clear by Percy Barnevik, president of the ABB electrical equipment corporation, when he said: "I would define globalisation as the freedom for my group of companies to invest where it wants when it wants, to produce what it wants, to buy and sell where it wants, and support the fewest restrictions possible coming from labour laws and social conventions".

The second point is that what has most sharply brought on this crisis of legitimacy is that large numbers of people, particularly young people, in the imperialist countries, are deeply concerned at the deepening of the poverty of masses of people in the underdeveloped countries caused by neo-liberal globalisation. Again, this was partly noted in the Economist editorial when it declared that "The protesters are right that the most pressing moral, political and economic issue of our time is third world poverty".

However, while the radical wing of the movement tends to be rightly motivated by moral outrage at the impact that neo-liberal globalisation is having on the peoples of the Third World, the explicitly class-collaborationist wing of the movement headed by the labour bureaucracy is opposed to neo-liberal globalisation because it fears that it will erode the relative privileges of their social base — the minority of workers who were previously protected by big capital from the pressures of global capitalist competition.

The third point is that this crisis of legitimacy for neo-liberal globalisation is most immediately focused on the imperialist-dominated international institutions that are seen as the key vehicles for promoting and imposing neo-liberalism on a world scale — the World Trade Organisation, the International Monetary Fund, the World Bank and the World Economic Forum. This is, of course, why the new movement has made meetings of these institutions the targets of its mass protest actions.

Point four: This movement is objectively anti-capitalist in its dynamics because in opposing the capitalist rulers’ drive to globalise neo-liberal policies it is opposing the interests of the capitalist rulers in the imperialist countries.

Of course, many in the radical wing of this movement are also subjectively anti-capitalist. However, at the moment only a minority of these radical opponents of neo-liberal globalisation oppose capitalism from a Marxist, a revolutionary working-class, ideological perspective. As was noted in the report adopted by the October NC plenum, ideologically, the radical wing of the movement "is a rag-tag army whose leading detachments comprise socialists, anarchists, feminists, environmentalists, anti-racists, neo-hippies, alternate lifestylists, etc." The predominance within the movement of those with petty-bourgeois, anarchistic anti-capitalist views of course is not surprising since this is the usual, initial, ideological outlook of newly radicalised small "l" liberals lacking any sustained experience of participation in collective mass actions.

Point five: This social movement, like every other, is broadly divided between two trends — a spontaneously class-struggle trend centred around the radical, subjectively anti-capitalist forces and a consciously class-collaborationist trend headed by the trade-union bureaucracy.

I have already pointed out the differences in their motivations for opposing neo-liberal globalisation. This difference is also reflected in their different aims. The radical trend wants to take advantage of and deepen the crisis of legitimacy of the imperialist powers’ international regulatory agencies so as to increase the forces that will struggle against them so as to shut them down completely. The class-collaborationist trend seeks to take advantage of these institutions’ crisis of legitimacy to get them to reform themselves into institutions that collaborate with the trade union bureaucracy in protecting its social base from the impact of neo-liberal policies through "free trade" being replaced by "fair trade", i.e., trade agreements that include tariffs on imports from the Third World.

The class-collaborationist wing of the movement argues that the fundamental problem with these institutions is that there is too much corporate influence within them and not enough input from labour unions, environmental groups and NGOs (collectively called "civil society"). By fostering the illusion that they can be reformed into agencies that "civilise" global capitalism, this wing of the movement provides these institutions with a way to get them out of their crisis of legitimacy by changing their rhetoric.

This in fact has been their response to the new movement. Since Seattle the IMF, the World Bank and the WTO have all gone on a campaign to re-legitimise themselves by presenting themselves as allies of the poor and the marginalised. Mike Moore, the director-general of the WTO, has taken this a step further. On July 26 last year he declared: "We on the left have a lot to be proud of. We built the Welfare State that looks after people when they are sick, poor, or old. We fought for the equality of women and minorities. We argued passionately for internationalism, for solidarity between workers in Sweden and those in Africa."

With Comrade Mike at the helm of the WTO, I’m sure the superexploited workers in Africa will sleep easier at night!

The sixth, and final, point is that if the movement is to build on the successes it has already scored in de-legitimising these institutions, it needs to demonstrate to wide layers of the population that these institutions’ newly found concern for Third World poverty is nothing more than a hollow rhetoric; that it is only a tactical manoeuvre that will have no effect on the continuation of their strategic goal of breaking down all barriers to the unfettered plundering of the Third World’s natural resources and human productive forces by imperialist corporations.

To do this the movement needs to continue to retain its public visibly by staging mass street protests that disrupt the normal functioning of corporate capitalism’s most publicly identified institutions. But as part of these protests it also needs to raise demands on the corporate rulers for the immediate implementation of measures that would, if carried out, actually lessen Third World poverty, such as:

1. Immediate and unconditional cancellation of the entire debt owed by all Third World countries to the First World.

2. Abolition of the IMF, the World Bank and the WTO.

3. Abolition of the wall of non-tariff barriers imposed by the First World countries on the agricultural and manufactured exports of the Third World

4. Restoration of the Basic Commodities Agreements and other defence schemes designed to compensate poor countries from unequal exchange.

5. Abolition of all restrictions, including patent and intellectual property fees, on Third World countries’ importation of advanced technology from the First World.


Comrades, in 1915 Lenin forecast that the imperialist epoch — the epoch of decaying, parasitic capitalism — would be an end full of horrors for the working people of the world. In the aftermath, and as a direct result of, the enormous horrors that imperialist capitalism subjected the workers and farmers of the world to during the following three decades — two world wars, fascist rule in Europe, mass unemployment and destitution — for a quarter of the 20th century a small section of the world’s working people — those living in North America, western Europe, Japan and Australia — largely escaped from the worst of imperialist capitalism’s horrors. In the last decades of the 20th century that began to change.

At the beginning of the second century of the imperialist epoch capitalist horrors that working people through decades of struggle thought had vanished forever from the First World — such as outwork, poor relief managed solely by the churches and compulsory work at subsistence wages for the destitute — are being reintroduced and openly defended by "respectable" bourgeois voices as necessary to restore social discipline and "family values".

The history of the 20th century has shown that before large numbers of working people begin to seek a radical alternative to capitalism, significant layers of young people start rebelling against the most brutal and dehumanising consequences of capitalism’s social and economic contradictions. The new movement against neo-liberal globalisation — against imperialist capitalism’s "solution" to its own contradictions — finds its strongest support among young people. That of course is only to be expected. They have their whole lives ahead of them and they don’t want to live in a world in which every aspect of human life is subject to the tyranny of corporate greed for profits.

But the growing numbers of young people who are repulsed by the prospect of living in such a world are also reacting to something else. They have begun to recognise that the capitalist rulers, despite their triumphal posturing, are not all-powerful. They are not what they pretend to be. They don’t have a stable future. Their rule can be challenged, if enough people are mobilised against them.

The challenge facing revolutionary Marxists — communists — at the beginning of the 21st century is to utilise all that we have learned from the experience of our movement in the last century to ensure that the aspirations expressed by these radicalising young people in Seattle, at S11, and in Prague are realised. Yes, let’s shut the corporate tyrants down; let’s shut them down forever.