The Causes of Capitalist Crisis

Members’ Bulletin 2 The Causes of Capitalist Crisis

1 Contents

A document on the Marxist theory of capitalist page 3 What is the cause of crisis endorsed by the following members of the current capitalist the CWI: Steve Bush (E&W), Allan Coote (E&W), Sandra De Andrade (E&W), Steve Dobbs (E&W), crisis? Pete Glover (E&W), Georg Kumer (Austria), Rae Lewis-Ayling (E&W), Jordan Martinez (US), Alec Price (E&W), Wayne Scott (Scotland), Bruce Wallace (Scotland).

A reply to Bruce Wallace and the Group of Eleven page 24 In defence of the from the Socialist Party Scotland EC transitional programme

2 What is the cause of the current capitalist crisis?

Theory and practice of Marxism which determines our perspectives, strategy and tactics, even if the issue appears at first glance something 1. The development of a new workers party in the next minor. period will almost certainly be achieved with the par- ticipation and guidance of the Socialist Party and the 5. The current capitalist crisis is perhaps the greatest in CWI. The last period has been extremely difficult for the history of the system, or at least since the Great the ideas of Marxism but the leadership and our mem- Depression of the 1930s. The crisis has been dubbed bers have established us as the most incisive current in the ‘Long Depression’ as capitalism on a global scale is the workers’ movement. attempting to limp back to recovery after the financial and industrial crisis of 2007-8. 2. Regarding both theory and practice, Lenin and Trotsky disagreed in the formative years of Russian Marxism. 6. For the working class who are facing the brunt of this But the disagreements of the early Marxists created the crisis and the austerity offensive of the capitalist class, mighty Bolshevik Party. This debate will strengthen the the articulation of a way out of the crisis is a central CWI as we move towards becoming the decisive force question and a crucial one for the forces of Marxism. in world history in the next period. This document is The movements in Turkey and Brazil, the Arab spring, written by comrades and friends in the same Marxist the Eurozone conflagration and the mighty move- organisation. This debate will be another milestone in ments in South Africa are not just the indirect out- the great history of our Party. come of the current crisis, but also pre-tremors of even greater upheavals to come. Therefore, a correct short 3. This document addresses the questions which we be- term and long term perspective, based on a thorough lieve are vital for comrades to grasp to further their examination of the economic evidence, is necessary to understanding of the Marxist theory of crisis and the map out a road for the working class and its leadership. centrality of the Law of the Tendency of the Rate of Profit to Fall, so that comrades are theoretically and 7. Our organisation needs an analysis of the crisis which politically armed for the class struggle and challenges can be used to 1) develop our cadre in the Marxist ahead. The intention of this document is to show that method - utilising the real living events that we are the CWI leadership have misplaced the Marxist theory presented with, 2) provide a correct, Marxist narrative of crisis and to highlight the dangers that this poses to explain the deeper fundamental reasons why work- for our organisation, and the fate of the future socialist ers are facing job losses, real terms pay cuts etc. (i.e. revolution. that the crisis is rooted in capitalist production) and 3) explain why only a socialist planned economy can overcome crisis. Understanding the crisis is vital 8. There is general consensus that the immediate trigger “And even when a society has got upon the right track of the crisis was the bursting of the housing bubble for the discovery of the natural laws of its movement (based on ‘sub-prime’ mortgages) in the USA. This has — and it is the ultimate aim of this work, to lay bare led many people to examine the horrors of the finan- the economic law of motion of modern society — it cial and credit system and lay the blame here. An un- can neither clear by bold leaps, nor remove by legal derstanding of how this works is indeed important in enactments, the obstacles offered by the successive providing a rounded out analysis. However, the Marx- phases of its normal development. But it can shorten ist method tells us that we need to dig a little deeper to and lessen the birth-pangs”. (Karl Marx, 1867, Preface find the root cause of the problem. This is where the to the First German Edition of Capital Volume I) discussion is needed within our party, because the leadership appear to be at odds with what we under- 4. Lenin (1921) wrote ‘‘Politics is a concentrated expres- stand to be a genuine Marxist understanding of crisis. sion of economics’’ and our economic analysis inevi- We view the current position as posing serious dan- tably translates into our political position and pro- gers for our forces in the stormy period ahead and that gramme. Therefore it is a profound misunderstanding the juncture of the crisis has been misjudged. to describe the present debate in the CWI over the causes of the current capitalist crisis as being a nar- rowly theoretical disagreement. It is, in fact, an important question for the working class and its leadership

3 What is the cause of the current capitalist crisis?

Uniqueness of capitalist crisis 13. Marx’s Law of Value explains that only workers create new value during production. Since capitalists need 9. Before the development of capitalism, the pre-capital- to obtain new value, profit, to accumulate and expand ist societies (slavery, feudalism etc) also experienced their capital, the maximum rate of capital accumula- crises. However, unlike capitalism, production was tion is therefore determined by the rate of profit. The fundamentally organised for direct use. For example, rate of profit is the amount of surplus value obtained the feudal serfs worked the land directly for themselves as a proportion to the value of capital employed in pro- and for their landlords. Crises occurred when they did duction. As the rate of profit falls, so eventually does not produce enough to meet their basic needs, such the rate of capital accumulation. For Marx, the rate of as in the case of a bad harvest or famine. These were profit was the motive force of capitalist production, the crises of under-production, in relation to need. soul which animates it.

10. Under capitalism, however, production is not organised to meet human need. As Marx explained, capital- The falling rate of profit ism’s sole mission is to expand the value of capital. As capital is self-expanding value, the capitalists are the 14. Marx explained that the underlying cause of a crisis of embodiment of capital and subject to its laws. They over-production was the falling rate of profit in capital- must invest their capital for the production of com- ist production: modities, the realisation of the value congealed in these commodities and the subsequent reinvestment “[T]he rate of profit being the goad of capitalist produc- and expansion of capital value, which is the sole rea- tion..., its fall checks the formation of new independ- son for the existence of capitalism. As a secondary out- ent capitals and thus appears as a threat to the devel- come of this process, the capitalists are able to pocket opment of the capitalist production process. It breeds a portion of the new value created as money profit. over-production, speculation, crises, and surplus-capital alongside surplus-population.” Marx (1894) 11. This continuous expansion of capital (“economic growth”) for the sake of expansion itself inevitably 15. The falling rate of profit shows capitalism meets the leads to periodic crises. These are crises of over-pro- limits of the capitalist mode of production itself: duction as Marx explained in The Communist Mani- festo: “The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as “In these crises, there breaks out an epidemic that, in the starting and the closing point, the motive and the all earlier epochs, would have seemed an absurdity — purpose of production; that production is only produc- the epidemic of over-production. ... Because there is tion for capital and not vice versa...” Marx (1894) too much civilisation, too much means of subsistence, too much industry, too much commerce.” Marx (1848) 16. The increasing productivity of capitalism manifests itself as an economy-wide average falling rate of profit. This is because more machinery and materials, ‘dead Karl Marx on crisis labour’, are used during production in relation to ‘living labour’. Hence the source of new value, the working 12. A capitalist crisis is always a crisis of over-production, class, is squeezed out of production, so that less sur- but because capitalism is not organised to meet social plus value is produced in each commodity and there- need it cannot be described as over-production in re- fore less is realised per sale. All else remaining equal, lation to social demand. Instead, capitalism is organ- the rate of profit falls. This is the essence of The Law of ised so that capital can continuously expand in value. the Tendency of the Rate of Profit to Fall (subsequently This has historically been the progressive aspect of referred to as The Law) and the central tenet of Marx’s capitalism in developing the productive forces. Thus, theory of capitalist crisis. over-production is in relation to the need of capital to expand in value. Capitalist crisis occurs when capitalism can no longer fulfil its historical mission of accu- mulating and expanding in value through economic growth.

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Overcoming Crisis “As Larry Elliott rightly says, the proliferation of zero- hours contracts represents an increase in the “reserve 17. To overcome the crisis, capital and the value of capital army of labour” in an attempt to reverse a long-term must be destroyed in order to restore the rate of profit. decline in profitability (Why stop at zero hours?) Why Subsequently, the rate of capital accumulation can in- not revive child labour, 5 August). But neither this nor crease and thus the economy can grow again. The rate the other responses he mentions, such as financialisa- of profit is thus temporally restored to some degree for a tion, can ultimately overcome the tendency for profit period, and the process repeats. This explains the regu- rates to fall. lar occurrence of “boom and bust” under capitalism. This is an inherent feature of capitalist competition, 18. Marx held that crisis was nothing more than the de- resulting not from pressure on prices but from each struction of capital value, whereby the weight of dead capitalist’s attempt to raise their individual profit rate labour was purged from the system, which allowed the by investing in more capital-intensive production pro- rate of profit to be restored so a new period of capital- cesses. The overall capital, relative to total profit, goes ist expansion could ensue. This is the underlying force up, and the profit rate goes down. that propels capitalism towards periodic crisis. The Law explains why the falling rate of profit drives the system Although such things as attacks on wages can offset towards crisis and also how it is to be overcome. the basic tendency, sooner or later it results in crises such as the one in progress since 2008. Since the cause is too much capital, the only cure (within capi- Intense debate talism) is destruction of capital through bankruptcy of less-profitable enterprises. Palliatives such as increas- 19. The origins and causes of the current capitalist crisis ing workers’ purchasing power can help the system has been the subject of an intense debate on the left limp along for a while but only at the cost of preparing of the labour movement since the financial crash of a bigger and worse crisis.” 2007-8. A range of explanations have been offered, but a number of Marxist economists, not all of them pure academics, have identified the falling rate of capital- Political Conclusions ist profit as being the fundamental underlying cause of the crisis. 23. Whether we see eye to eye politically with any of these economists is not the point. If we disagree with 20. By underlying cause they mean that all aspects of the their economic arguments, we need to come up with crisis, the financial crash or ‘’credit crunch’’, the mas- a scientific refutation of them. It is an unacceptable sive fall in production throughout the capitalist world, method to dismiss the economic arguments of serious the plunge in investment and the sluggish global re- scientific researchers purely on the basis of what we covery can be traced to the long term decline in capi- regard as their erroneous political views. talist profitability in the advanced capitalist countries (ACCs) and specifically in the USA 25% of the world 24. Regrettably, the Socialist Party EC have attempted to economy. use, to take just one prominent example, Andrew Kli- man’s political conclusions to denounce his economic 21. Among Marxist economists and other scholars there analysis and therefore our support for The Law as the is growing support for the falling rate of profit analy- underlying cause of crisis. This is simply not a logical sis of the crisis including; Roberts (2009), Carchedi argument, let alone a Marxist one. It is all the more (2012), Freeman(2009), Kliman (2012), Granados surprising given that the Socialist Party regularly base (2013), Brooks (2013), Grogan(2013), Shaikh(2008), their economics analysis on sources drawn from con- Deepankar and Manolakos (2010), Cockshot (2012), servative bourgeois newspapers (e.g. The Financial Mattick (2011), Potts (2011), Liodakis (2012) and Wells Times), Keynesians (e.g. Paul Krugman), and more (2011). recently ex-Leninist Bill Jefferies and Mandelite USFI supporter Husson. 22. Julian Wells, an economist with the Open University, summed it up nicely in a letter to the Guardian in Au- 25. To spell it out in black and white, none of the sup- gust this year in response to an article from Larry Elliot porters of this document endorse Kliman’s political the economics editor on zero hours contracts: conclusions, any more than the CWI, by upholding

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Ted Grant’s analysis of the Soviet Union, believe in re- have been unable or unwilling to do this. In our view, claiming the Labour Party. the analysis of many leading comrades is sadly want- ing and inadequate.

The Current position of the Socialist Party EC 30. However, we emphatically deny that our criticism of the leadership’s position on the causes of the crisis 26. The Socialist Party EC have made statements that depends upon the work of just one economist such as would appear to contradict one of the fundamental Andrew Kliman. Our view is that the crisis is primar- tenets of Marxist theory. The main driver for the crisis ily due to a persistently declining rate of profit and it has been described as a lack of demand and deflation is supported by a range of robust and peer reviewed (a general drop in prices). While we agree this is defi- research from reputable sources, but is also based on nitely a feature of the present crisis, it is not its cause. a serious study of the works of Karl Marx and the other The cause, as predicted by Karl Marx and supported historic figures of our movement. by mounting compelling evidence, is the falling rate of profit within the capitalist system. 31. Presently the intense debate on the causes of the crisis are a closed book to the SP leadership who have not 27. The position of the leadership is clearly contradicto- taken up a serious study of those economists who agree ry, as the Socialist Party Scotland (2013) perspectives with Marx’s most important law of political economy document from this year’s Scottish conference in Feb- and those who reject it from various quarters. ruary stated:

“That is not to argue that the remedy to the capital- Marx Vindicated ist crisis is to overcome “under-consumptionism”. In other words, to get people to spend more money and 32. In our view, Marx’s vision of the fundamental cause of buy more commodities. Rather for Marxists the “lack capitalist crisis has been vindicated by the course of of demand” is a symptom of the malaise, but it is also the crisis itself. As Marx argued: an exacerbating factor which is helping to deepen the crisis. In that sense austerity, currently the favoured ‘’But proceeding from the nature of the capitalist mode policy of world capitalist governments and institutions of production, it is thereby proved a logical necessity is the worst option for the bourgeois.” that in its development the general average rate of surplus-value must express itself in a falling general 28. The Scottish section unanimously voted for a perspec- rate of profit. Since the mass of the employed living tive in February 2013 that the lack of demand is only a labour is continually on the decline as compared to the symptom of the crisis, but at the party conference in mass of materialised labour set in motion by it, i.e., England and Wales Peter Taaffe stated in March that to the productively consumed means of production, lack of demand is the cause of the crisis and that it was it follows that the portion of living labour, unpaid and completely false to blame the crisis on the fall in the congealed in surplus-value, must also be continually rate of profit alone! on the decrease compared to the amount of value rep- resented by the invested total capital. Since the ratio of the mass of surplus-value to the value of the invested Sober assessment total capital forms the rate of profit, this rate must constantly fall.” (Marx, 1894 p213) 29. Any analysis of the capitalist crisis can’t have such glaring contradictions and has to include a sober as- 33. Moreover, it is not just Marxist economists alone who sessment of the research and literature produced from support the idea that the current capitalist crisis was serious sources, including the work of Andrew Kliman caused by, and is continuing because of, the inability and others. This does not mean merely criticising his of the capitalists to restore the rate of profit but it is also conclusions, which we would say are inadequate and verified by serious research undertaken by bourgeois undeveloped, but the body of his work itself. In order economists. for the argument of the CWI leadership to be proved valid, the arguments of the above authors and many others, their evidence and statistics, must be convinc- ingly refuted. It is our contention that the leadership

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Bourgeois evidence of the historical fall in the rate 36. However, Deloitte declared: of profit in the USA “After questioning and re-questioning our data and our 34. An outstanding data set identified but neglected by assumptions, we came back to the same conclusions. Marxists is from the Shift Index issued by Deloitte’s The downward trend in company performance is ac- Center for The Edge in (2011). Deloitte are regularly curate; the assumptions are reasonable, and further cited in Socialism Today so are regarded as a reputable analysis confirms these persistent trends.” source. Their report described as “The Most Important Business Study Ever?” came up with these startling 37. Furthermore the research was compatible with the findings: general development of the US economy as a whole:

“These studies have followed 20,000 publicly traded ‘‘How could there really be a decline in the rate of re- firms between 1965 and 2010 to yield a comprehen- turn on assets of 75% when the GDP grew from 1965 sive measure of profitability. All iterations (2009. 2010, of around $750 billion in 1965 dollars to some $15 2011) shows that the rate of return on assets (not sim- trillion in 2011? Are these numbers compatible? The ply “fixed capital”) has been in dramatic decline for the answer is yes. past 45 years. It moreover demonstrates this decline both with and without integrating the banking sector. Comparing total GDP in nominal dollars doesn’t take However, once the banking sector is included, which into account population growth or inflation. When you now accounts for 60% of total assets (30% in 1965), allow for these factors, one sees that the per capita in- the decline has been even more pronounced. come (based on GDP) has grown about two and a half times over this 45 year period. This rate of growth im- More specifically, this comprehensive review found plies a compound rate of growth of per capita income that ‘US companies’ return on assets (ROA) have pro- from 1965 to 2010 of around 1.9%, which is, as you gressively dropped 75 percent from their 1965 levels would expect, in the middle to low end of the range of despite rising labour productivity’, a near doubling of ROA during the same period (4.8-1.2%). labour productivity to be more precise.’’ The decline in ROA is also consistent with the acceler- ating death of firms in the Fortune 500—a trend that Deloitte’s data valid! has been under way for many decades, as described in the Richard Foster’s book, Creative Destruction’’. 35. Deloitte’s study came in for criticism from capitalist commentators as the right wing economists at Forbes 38. Tellingly, Forbes also point out that financialisation highlighted: has not helped American capitalism to restore profitability: ‘‘One might have thought that managers would head- line the report and invite discussion in order to under- ‘‘Equally, the massive expansion of the financial sector stand what has happened and why. For the most part, is not contributing to growing the real economic pie. however, corporate America has regarded the study As Gerald Epstein, an economist at the University of with studied indifference. It’s still business as usual in Massachusetts has said: “These types of things don’t the Fortune 500 and most business journals. add to the pie. They redistribute it—often from taxpay- ers to banks and other financial institutions.” Yet in the Yet every now and then, an intrepid critic steps up to expansion of the GDP, the expansion of the financial challenge the Shift Index analysis. The most recent sector counts as increase in output. example is Bob Lewis’s article, Big Shift or Shifty Sta- tistics? He writes: “On the surface, this 45-year private- As a result of these various “overstatements” it’s hard sector-wide decline seems to reflect an across-the- to regard the GDP growth as a good guide to economic board failure of management to do its job… Too bad well-being or progress. In any event, there is nothing in it doesn’t stand up to close scrutiny… its logic is too the GDP numbers that would put in question the Shift shaky to rely on.” Index analysis’’.

39. In short, this data from the US economy robustly supports Marx’s prediction that capital would become

7 What is the cause of the current capitalist crisis?

more centralised and concentrated through competi- talist crisis was fundamentally caused by the falling tion, and that the prime driver for this is the persistent rate of profit. This has now radically changed. falling rate of profit. While there has been a historical decline in the rate of profit in the US, this has been 45. Now we have a “one sided” explanation of capitalist partially compensated for by compound economic crisis that it is caused by the over-accumulation of too growth. Although the rate of growth has been slow, much capital i.e. too many factories and machines and it has nevertheless been an average year on year in- not enough customers to buy their production. This is crease in economic output. This was maintained by a slightly more sophisticated explanation of workers massive injections of liquidity into the economies of not being able to buy back what they produce which is the ACCs, but this was unable to halt the fall in the rate a false argument in any case. of profit which led to the credit crunch and financial panic of 2007-8. Marx on over-production 40. It should be apparent that we are following the advice of Peter Taaffe (2012): 46. For Marx, however, this was not his full explanation of the cause of crisis because the over-accumulation of ’’However, it is not sufficient to merely quote what Marx capital and therefore over-production of commodities said on this question, but seek to locate an analysis was only one side of the internal dynamic of capitalist in the real developments of capitalism without in any production. As Marx clarified: way repudiating the basically correct position of Marx on the issue’’. “The word over-production in itself leads to error. So long as the most urgent needs of a large part of society are not satisfied, or only the most immediate needs Theoretical Confusion in the Socialist Party EC are satisfied, there can of course be absolutely no talk of an over-production of products— ... The limits to pro- 41. Although not explicitly stated, certain leaders of the duction are set by the profit of the capitalist and in no CWI do not accept the falling rate of profit as being rel- way by the needs of the producers.... [T]he bourgeois evant to economic crisis. Whether this has anything to mode of production contains within itself a barrier to do with the fact that the late economist Andrew Glyn the free development of the productive forces, a bar- rejected The Law is in question. rier which comes to the surface in crises and, in particular, in over-production—the basic phenomenon in 42. In fact, Andrew, when a member of our organisation in crises.” (our emphasis) (Marx, 1863) 1980, explicitly stated that Karl Marx’s formulation of The Law was theoretically incorrect and definitely nev- 47. He also clarified: er changed his mind. Although he left the CWI shortly after 1980, it is clear that Andrew’s ideas are still held “Over-production of capital, not of individual commodi- or sympathised with by a number of comrades in the ties — although over-production of capital always in- leadership. cludes over-production of commodities — is therefore simply over-accumulation of capital.” (Marx, 1894) 43. So while there have been statements claiming that The Law is “totally correct” from some quarters, from others it is described as “just a tendency”. It is our conten- “Different Expressions of the Same Process” tion that there is either confusion, misunderstanding or disagreement amongst the leadership in relation to 48. The cause of the over-accumulation wasn’t just due to Marx’s law. Some regard it as valid or formally correct investment as this was only one side of the process as without believing it has any impact on the formation of he elaborated earlier: crisis (counter-tendencies have cancelled it out?) and others actually deny that it is important at all. “A fall in the rate of profit and accelerated accumulation are different expressions of the same process only 44. This is a complete reversal of the position that was in so far as both reflect the development of produc- held historically within our organisation and appears tiveness Accumulation, in turn, hastens the fall of the to have come about sometime in the early 1990’s be- rate of profit, inasmuch as it implies concentration of cause prior to that period our position was that capi- labour on a large scale, and thus a higher composition

8 What is the cause of the current capitalist crisis?

of capital. On the other hand, a fall in the rate of profit fall in investment, in turn to a fall in demand, seems to again hastens the concentration of capital and its cen- be a basic mechanism in the causation of recessions.” tralisation through expropriation of minor capitalists, the few direct producers who still have anything left 54. The fall in the rate and mass of profits is the “basic to be expropriated. This accelerates accumulation with mechanism in the causation of recessions” as de- regard to mass, although the rate of accumulation falls scribed by Marx, but apparently this is rejected by the with the rate of profit.” Marx (1894) Socialist Party EC.

49. It is the falling rate of profit which directly determines investment and was responsible for the slowdown in Echos from German Social Democracy capital accumulation in the last three decades in the ACC’s. 55. Karl Kautsky was a leading Marxist theoretician of the German Social Democratic Party in the late 1800’s and in the first half of the twentieth century. He was Further evidence to support The Law famously known as the ‘Pope of Marxism’. Although latterly known as a centrist and as a renegade for his 50. Indeed, we feel we must include here contemporary criticism of the Bolshevik revolution, Kautsky’s eco- research which completely supports our argument nomic ideas about the causes of crisis are important and which has not been acknowledged, like other evi- historically. dence that flatly contradicts the leadership’s position, from Granados (2012). 56. It is our contention that the Socialist Party EC have moved backwards in their theoretical conception of 51. In his paper ‘Does investment call the tune? Empiri- crisis to adopt what is known as a multi-causal con- cal evidence and endogenous theories of the business ception of crisis. This is in opposition to our conten- cycle’, Granados does a proper job of surveying the his- tion that the fundamental driver for capitalist crisis is tory of economic thought in relation to the business the falling rate of profit. It is our contention that the cycle of booms and slumps. His primary focus is on the leadership’s conception of crisis is similar to Kautsky’s, contending theories of Marx and Keynes. The Keynes- and is therefore an outmoded theoretical conception. ian thesis states that investment calls the tune for the economic cycle, while Marx held that it was profit. “Drowning in Profits” 52. Granados then applies both theories to the empirical evidence and he concludes: 57. Kautsky’s position was explained in a book called The Class Struggle where he explained: “Though profits, investment, wages, output, and other variables swing up and down ‘together’ in expansions “The capitalist system begins to suffocate in its own and recessions, observed lags and statistical analysis surplus; it becomes constantly less able to endure the show that the two potential directions of causation be- full unfolding of the productive powers which it has tween investment and profits are not equally likely. The created. Constantly more creative forces must be idle, hypothesis that profits determine investment is much ever greater quantities of products be wasted, if it is more consistent with the empirical evidence. If invest- not to go to pieces altogether.” (Kautsky, 1888). ment ‘calls the tune’, then that tune is an echo of a previous melody.” 58. This bears a strikingly similar ring to our contemporary position in for instance “The Case for Socialism” 53. His empirical evidence is telling: (2013):

“Data on 251 quarters of the U.S. economy show that “... the capitalists are drowning in profits. In Britain recessions are preceded by declines in profits. Profits alone, the major corporations are hoarding an incred- stop growing and start falling four or five quarters be- ible £750 billion, which they are not investing because fore a recession. They strongly recover immediately af- they do not consider they would make a sufficient profit ter the recession. Since investment is to a large extent from it.” determined by profitability and investment is a major component of demand, the fall in profits leading to a 59. For some time, the Socialist Party have made the case

9 What is the cause of the current capitalist crisis?

that the crisis of capitalism is expressed as an excess of the Communist International in 1922 (we refer to of profits, not a shortage. The argument is made that Lenin’s views later). even if the rate of profit has fallen, this has been more than compensated by a counteracting rise in the mass 66. Our Party Manifesto again has eerie echoes of this out- of profits. look:

60. These ideas have historical antecedents that originate “The share of wealth accruing to billionaires has in- with Kautsky. He, too, believed that the Law was an im- creased exponentially while that of the working class portant factor but the mass of profit was more impor- quite obviously has diminished. The working class can- tant than the rate of profit. He did not see profitability not buy back the full product of its labour power”. (So- as the key cause of capitalist crisis. cialist Party, 2012.)

“The decline of the rate of profit, and likewise of inter- 67. While it is completely correct to show that inequality is est, in no way implies a reduction of the income of the built into the very fabric of capitalism, it is not correct capitalist class, for the mass of surplus that flows into to infer from this that this is a particular feature of this its hands grows constantly larger…” (Kautsky, 1888) stage of capitalism. Levels of inequality were greater at the time of the robber barons like Rockefeller, Vander- bilt and Carnegie. “No Markets”

61. Crisis, for Kautsky, had another immediate source. It Similarities with Kautsky lay in the restriction of the market; that the working class would not be able to buy back what it had pro- 68. Our official view is unnervingly similar to the position duced and the widening gulf between rich and poor. of Kautsky and his idea that markets become essential- ly saturated. Like our view of “no markets” for capital- 62. As our party has recently made statements that there ism today, Kautsky’s understanding of crisis was that are “no markets” for capitalism. This is an echo from a capitalism had exhausted its possibilities as an histori- time when Kautksy’s views were the views of German cal mode of production and this was leading to stag- Social Democracy in the late 1800’s. As Kautsky said: nation. Stagnation was the deciding factor in changing consciousness. “For some time past the extension of the market has not kept pace with the requirements of capitalist pro- 69. This theory is false as Marx held that capitalism tend- duction. The latter is consequently more and more ed towards period crisis and, eventually, the capitalist hampered and finds it increasingly difficult to develop system would “burst asunder” leading to the expro- fully the productive power that it possesses. The inter- priation of the expropriators. vals of prosperity become ever shorter; the length of the crises ever longer... “ (Kautsky, 1888) 70. Such a perspective will not educate the cadre and the class of the necessary preparations for sharp turns in 63. And again: class consciousness caused by a renewed major capitalist crisis which will be more severe and therefore “But there is a limit to the extension of the markets pose the question of “who rules” in a sharper fashion. … Today there are hardly any other markets to be opened”. 71. The ‘drowning in profits’ outlook reflects the view that capitalism is sitting on an enormous pile of value. 64. The restriction of the market was a key element in his Capitalists and therefore capitalism drowns because it theory of crisis. has created too much of the very thing that drives it. Profits drive capitalism. When capitalism is profitable “The large majority of the capitalists have now noth- it should be a sign that it is healthy. However, the sick- ing to do but consume what others produce (Kautsky, ness of the system is supposedly manifested, accord- 1888).” ing to the EC, by huge profits that threaten to suffocate the capitalists themselves. 65. The idea of contracting markets, a key under-consumptionist idea was attacked at the 4th Congress

10 What is the cause of the current capitalist crisis?

Endless Austerity? nation as is has been applied. Capitalism never ceases to expand and contract. Capital expands or it dies, and 72. It is also revealing how the party understand the term capitalism is a system of disequilibrium, not stagna- “stagnation”. If we mean by stagnation, a period of low tion, which leads to crisis, not stasis. growth then that is one thing. However, we think the EC means something else. 78. A sustained period of low growth for capitalism pre- pares it for inevitable cataclysmic convulsions. The “The inevitable economic contraction which will arise crash of 2007-2008 was just the prelude to a much big- from this will seriously impact on the British economy. ger potential future collapse in capital values, which This will result in a further ‘death spiral’, reflected in a even huge state intervention will be completely inca- plunging economy and rising unemployment, resulting pable of preventing, given the massive international in a further embittered mood with class polarisation debt mountain. As Nouriel Roubini, the radical Keyn- and social turmoil… the most likely economic scenario sian economist has pointed out, governments are “just is for continued economic stagnation, so that by 2015 kicking the can down the road and running out of fis- the British economy will only be at the level of 2002, cal policy bullets”. meaning a lost decade.” (Socialist Party 2012, Con- gress document) 79. The next period will not one of “endless austerity” but of, at some point, a deeper and more extensive crisis. 73. We also state: “The G8’s austerity policies are not work- It is, of course, completely correct that we expose the ing. Most of Europe is in deep recession or facing eco- evils of capitalism in our publications. But a classic cri- nomic stagnation.” (Mulholland, 2013) sis isn’t just a long list of the excesses of the market, no matter how cruel and horrible. 74. And from our newspaper on 27 Feb 2013: “…the reality is that there has been no real return to growth. Pro- longed stagnation - ‘bumping along the bottom’ - is The Coming Crisis the best scenario on offer.” (The Socialist 2013) 80. A crisis on a completely different scale than the nor- 75. The party have acknowledged the perspective of the mal boom/slump cycle has taken place. A crisis of this sober bourgeois commentators: magnitude has been documented at least four times in the history of capitalism: 1) The Long Depression “A new report by the Institute of Fiscal Studies predicts of the 1870s, 2) The Great Depression of the 1930s, 3) that even were Britain to enter a ‘golden period of The Crisis of the 1970s and 4) The current Long De- steady economic growth’ the wages of the poorest half pression. All these crises were expressions of a falling of Britain would continue to decline in real terms until rate of profit and a general destruction of capital value. at least 2020, leaving a typical low-income family 15% The collapse in capital values that occurred during the worse off than they are now. Far from a ‘golden pe- 1930s gave momentum to fascism and ultimately led riod’ the capitalist economic crisis is worsening. Cam- to world war. The current impasse is calling forth simi- eron has told us to expect austerity to continue for the lar gloomy portents. rest of the decade: growing unemployment, enforced part-time working and cuts to essential public services 81. In our view we must prepare our ranks for the possibil- (Sell. 2012).” ity of an impending capitalist collapse that will make the disgusting austerity measures pale by comparison. 76. What is being outlined here is a decade of prolonged In our view this is a sober assessment of the long term stagnation caused by an excess of profits which are un- perspective for world capitalism. We are not in a pe- investable. The perspective is one of years of austerity riod stagnation but one of low growth, particularly in and a capitalism itself that grinds to a standstill. the advanced countries.

82. However, for the next decade, the CWI leadership ap- Capitalism: Stagnant or Dynamic? pear to minimise the possibility of the scenario of a repeat of 2007-08 on a similar or even bigger scale, al- 77. This is contrary to the theory of Marx who explained though accept it as a possibility. that capitalism is a dynamic system beset with contradictions and crises. It is incorrect to use the word stag- 83. The financial crisis was devastating for capitalism and

11 What is the cause of the current capitalist crisis?

nearly dragged the world economy into an epic de- 90. Marx stipulated that the law became “strikingly pro- pression. Alistair Darling recently said we were just 2 nounced” through real periodic crises in real time. As hours away from a complete collapse of the banking the law is an historical one, it has taken a considerable system at the height of the financial crisis. Around the period to express itself. Yet it is expressing itself “strik- same time, Gordon Brown’s aide Damian McBride ingly” specifically in this real crisis and this is support- has said that the Prime Minister considering deploy- ed by an abundance of evidence. ing troops on the streets of Britain to quell anarchy, should cash-withdrawals and bank-cards fail to work. A repeat on a much larger scale is a development we “Just a Tendency”? must consider with the utmost seriousness. 91. Meanwhile, some comrades in the leadership appear to deny the actual empirical operation of the law, stat- Marx on the Counter-Tendencies ing that it is just a “tendency” and that it has no real relevance in relation to the crisis. This is in outright 84. Marx was explicit that the falling rate of profit is the contradiction to the factual data, but a point needs to root cause of major capitalist crises. be made in relation to the counter-tendencies themselves? 85. Indeed, Marx’s exposition of how crises unfold can be applied directly to the Great Recession itself. Marx 92. The counter-tendencies are not a separate factor oper- held that a falling rate of profit would eventually lead ating independently of the rate of profit. This is also a to a fall in the mass of profit being made by the capital- misrepresentation of how The L aw works. There are in ists and this is exactly what happened in the USA in fact six key counter-tendencies which the falling rate 2006; a full year before the onset of the financial crisis of profit actually brings into being and which operate (see the facts below under the section “Counter-ten- as long as the rate of profit is falling. These are primar- dencies exhausted, profits collapsed”). ily: 1. More intense exploitation of labour (increasing pro- 86. It was Marx himself who identified the operation of ductivity) counter-tendencies to the falling rate of profit. How- 2. Reduction of wages below their value (wage cuts) ever the CWI leadership call on the mere existence of 3. Cheapening of the elements of constant capital (re- counter-tendencies as somehow negating the impact ducing the cost of machinery) of the falling rate of profit itself. This is a downright dis- 4. The relative surplus population (using unemploy- tortion of Marx’s argument in Capital. ment to force down wages and conditions)) 5. Foreign trade (the expansion of global capitalism) 87. On the one hand, the leadership of our organisation 6. The increase in share capital (the growth of banking state The Law is “absolutely correct” in the abstract, and finance/debt) but then deny that it is responsible as the key driver for the crisis because of the counter-tendencies. This 93. Although all of these counter-tendencies were opera- displays a misunderstanding and misrepresentation of tive during the neo-liberal period, they did not stop how the law operates in conjunction with the counter- the persistent fall in the historic average rate of profit, tendencies. as evidenced very clearly by the Shift Index data above.

88. Marx was explicit that counter-tendencies could slow 94. Marxist economists have dissected the influences down the fall in the rate of profit but not halt it. All oth- of these counter-tendencies exhaustively and have er influences act to “moderate” and “hamper”, “retard concluded that while the decline in profitability was and partly paralyse” the fall in the general rate of profit slowed down in the 1980’s and 1990’s, some argue it (Marx, 1894 p239). was partially restored, it never recovered to the level experienced in the period of the post war boom of the 89. And: 1950’s and 1960’s. In fact, the crisis of capitalist profitability can be traced to the 1970’s and capitalism has “Thus the law acts only as a tendency. And it is only un- never fully overcome that crisis. Generally, however, der certain circumstances and only after long periods there is unanimity amongst classical Marxist econo- that its effects become strikingly pronounced” (Marx, mists that the US rate of profit peaked in 1997 and then 1894 p239)(our emphasis) began to fall again on average until the crisis of 2007-8.

12 What is the cause of the current capitalist crisis?

95. The partial recovery in profitability was due, in large pirical point of view. Marxists long ago rejected the part, to the increase in mechanisation and computeri- idea that capitalism went into crisis because of the in- sation of production which boosted labour productiv- ability of the workers to buy back what they produced. ity or, as Marx would describe it, relative surplus value This is, in fact, a distortion of the Marxist position. by increasing exploitation. The other was by the exten- Marx rejected this explanation emphatically: sion of trade through the development of capitalism in the Far East opening up new markets for capitalist “The general possibility of crisis is the formal meta- commodities and investment. The development of morphosis of capital itself, the separation, in time other emerging economies was also important. and space, of purchase and sale. But this is never the cause of the crisis. For it is nothing but the most general form of crisis, i.e., the crisis itself in its most Counter-tendencies exhausted, profits collapsed generalised expression. But it cannot be said that the abstract form of crisis is the cause of crisis. If one asks 96. However, just as Marx predicted, eventually the coun- what its cause is, one wants to know why its abstract ter-tendencies exhausted themselves and there was a form, the form of its possibility, turns from possibility sudden plunge in the mass of profit being made by US into actuality” (Marx, 1863) capitalism. In 2006 in the US, a quarter of the world economy, there was a slump in profits. In the 3rd quar- 101. So what Marx means by this is that the lack of demand ter of 2006 the mass of pre-tax profits was $1,865 bil- for commodities, because there are not enough buyers lion but in the 4th quarter of 2008 this had collapsed for them, or the failure to be able to sell them, which is to $861 billion, a fall of more than half (see Brooks, the same thing, is actually a description of the crisis, 2012). On its own, such a catastrophic fall in the mass an observation of what is happening in the economy of profits would have caused a severe recession, but as it appears to us. It is the most “general expression” the slump in profitability and economic contraction of crisis. detonated an implosion in the bloated edifice of international finance capital, resulting in an acute financial 102. So Marx says that lack of demand is “never the cause of and economic disaster. the crisis” which means not ever, at no time, not in any degree and not under any condition. 97. These facts appear to be ignored by the leadership of our organisation or disputed as “new” (?), and we state categorically that they must produce evidence The under-consumptionist tautology which counters this data if their argument is to prove a valid and robust alternative. So far there has been no 103. Marx’s clearest condemnation of the lack of demand attempt to refute this evidence and we challenge the argument, and it’s pretty sharp, can be found in chap- leadership that this is also a continued dismissal of ter 20 of Capital Volume II where he describes the concrete reality. argument as a tautology (in other translations he describes the argument as being a “redundancy” i.e. use- 98. The concept that the counter-tendencies somehow less). negate the crisis mechanism of the falling rate of profit is a straw man argument and a sign of an unscientific 104. Tautology is a logical term which means it is a circular approach. argument. For example if I say “it is raining” and you ask me “why is it raining”(?) to which I reply, “because it is raining”, then that is a tautology. I am saying that Marx: lack of demand “never the cause of the the rain is, in effect, causing itself. A tautology is re- crisis” garded as not forming a coherent proposition and it is not a valid argument full stop. So Marx says: 99. A central argument put forward in the publications of the CWI is that the crisis was caused by rampant in- ‘‘It is sheer tautology to say that crises are caused equality, falling wages, massive increases in consumer by the scarcity of effective consumption, or of effec- debt and a lack of demand for capitalist good and ser- tive consumers. The capitalist system does not know vices. any other modes of consumption than effective ones, except that of sub forma pauperis or of the swindler. 100. This explanation is false from both the logical and em- Those commodities are unsaleable means only that

13 What is the cause of the current capitalist crisis?

no effective purchasers have been found for them, i.e., class cannot afford to buy all of the goods it produces. consumers (since commodities are bought in the final This leads to overproduction and overcapacity. The analysis for productive or individual consumption). But bosses attempt to deal with this through lay-offs and if one were to attempt to give this tautology the sem- downsizing, resulting in a smaller number of industrial blance of a profounder justification by saying that the workers producing the same amount of commodities working-class receives too small a portion of its own that a larger number produced in the past’’. product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in 108. Now, Marx never anywhere said that this was the con- consequence, one could only remark that crises are crete reason for crisis, and in fact, as quoted above, he always prepared by precisely a period in which wages actually poked fun at the idea as “it is sheer tautology rise generally and the working-class actually gets a to say that crises are caused by the scarcity of effective larger share of that part of the annual product which consumption, or of effective consumers”. is intended for consumption. From the point of view of these advocates of sound and “simple” (!) common 109. If the leadership of our organisation are relying on the sense, such a period should rather remove the crisis. much misused quote that ultimately crises are due to It appears, then, that capitalist production comprises the restricted consumption of the masses then there is conditions independent of good or bad will, conditions a distinct problem, as workers will never be able to buy which permit the working-class to enjoy that relative back all that they produce under capitalism. prosperity only momentarily, and at that always only as the harbinger of a coming crisis” (Marx, 1885). 110. Engels explained the place of under-consumption in his work Anti-Dühring (1878) which had been read and approved of by Marx: Major assertions based on flimsy textual evidence ‘‘But unfortunately the under-consumption of the mass- 105. To counter this crystal clear declaration of Marx, the es, the restriction of the consumption of the masses to leadership of our organisation have produced two very what is necessary for their maintenance and reproduc- obscure quotes from Marx. The first one is from Capi- tion, is not a new phenomenon. It has existed as long tal Volume III and is a single sentence: as there have been exploiting and exploited classes…. The under-consumption of the masses is a necessary “The ultimate reason for all real crises always remains condition of all forms of society based on exploitation, the poverty and restricted consumption of the mass- consequently also of the capitalist form; but it is the es, in the face of the drive of capitalist production to capitalist form of production which first gives rise to develop the productive forces as if only the absolute crises. The under-consumption of the masses is there- consumption capacity of society set a limit to them.” fore also a prerequisite condition of crises, and plays (Marx, 1894 p.615) in them a role which has long been recognised. But it tells us just as little why crises exist today as why they 106. In fact, this sentence is actually a bracketed note did not exist before.’’ (On production) that Engels included when he edited Volume III after Marx’s death. It appears in the midst of a long digres- 111. In other words, ultimately the reason for crisis may sion on the role of credit completely separate from his be traced to this condition of capitalism because it is main discussions on crisis but is a hardy perennial for a precondition or prerequisite for crisis, but it doesn’t those who attempt to stand by what is known as the tell us why periodic crises and crashes occur under under-consumptionist theory of crisis. This is a com- capitalism when they do and why they do on a regular mon theme in CWI literature that simplistically argues basis. that capitalist crises occur because workers are unable to buy back all that they produce. Infamous footnote 107. For example this is from Socialism in the 21st century by Hannah Sell (2006): 112. The other quote used to justify support for an under- consumptionist explanation of crisis currently being “capitalism is incapable of fully using the capacity that held up as conclusive theoretical support for their has been created because, ultimately, the working position is a footnote added by Engels to volume II of Capital from a fragmentary sketch by Marx which was

14 What is the cause of the current capitalist crisis?

for “further elaboration” that he did not complete and which turns out means of consumption. Consequently, is suitably abstract: the means of consumption come to occupy a less and less prominent part in the total mass of capitalist pro- “Contradiction in the capitalist mode of production. duction’’. The workers are important for the market as buyers of commodities. But as sellers of their commodity - 116. And: labour-power - capitalist society has the tendency to restrict them to their minimum price.’’ Nothing to Lenin was “more senseless than to deduce from this contradiction between production and con- “Further contradiction: the periods in which capitalist sumption that Marx had contested the possibilities of production exerts all its forces regularly show them- realising surplus value in capitalist society, or had ex- selves to be periods of over-production; because the plained crises as resulting from insufficient consump- limit to the application of the productive powers is not tion … The different branches of industry which serve simply the production of value, but also its realisation.’’ each other as a ‘market’ do not develop uniformly, they overtake each other and the more developed industry “However, the sale of commodities, the realisation of seeks foreign markets. This circumstance does not by commodity capital, and thus of surplus-value as well, any means indicate that it is impossible for the capital- is restricted not by the consumer needs of society in ist nation to realise surplus value … It merely points to general, but by the consumer needs of a society in the unproportionality in the development of the vari- which the great majority are always poor and must al- ous industries. With a different distribution of the na- ways remain poor”. (Marx, 1885) tional capital, the same quantity of products could be realised within the country.” 113. Of course comparing this “footnote” with the key pas- sage within the full text of volume II of Capital makes 117. It should be mentioned honestly that the Bolsheviks Karl Marx look like a fool, who appears to be arguing did not hold directly to the theory of the falling rate of for two completely contradictory things at the same profit being the sole driver for capitalist crisis but a full time! Given that Marx did not include this in his main understanding of Marx’s economic work had not been text and did not elaborate upon it in any detail, it hard- fully grasped within the movement at that stage but it ly stands as support for anything. was taken as self-evident that under-consumption as a crisis mechanism was completely false. 114. This is practically the total textual support that the leadership of our organisation have been able to come 118. For Marxists, it has never been the case that capitalism up with out of three volumes of Capital. This use of faces a persistent problem in selling its commodities selective quotations underscores the one-sided ap- except in periods of acute crisis, but what is called the proach taken up by the Socialist Party EC. over-production of commodities is normally never a generalised problem as Lenin emphasised. Rejection of Under-Consumption by Lenin Unscientific method 115. Further in our support we can also draw on the economic writings of Lenin that categorically reject the 119. The reason for periodic capitalist crisis lies elsewhere, idea that crises were directly due to the under-con- however we must draw attention to the fact that a “bat- sumption of the masses or low wages (variable capi- tle of quotations” is an unscientific method of settling tal). a theoretical dispute particularly where quotes are used out of context. It is our contention that the cita- “As we know,” writes Lenin in his Characterisation of tions of quotes from Marx by the leadership of the CWI Economic Romanticism, 1899, “the law of capital- are (a) selective, (b) abstract or vaguely general and (c) ist production consists in the fact that the constant not properly contextualised or explained. capital increases faster than the variable; that is, an ever greater part of the newly formed capital flows to 120. Any presentation of the work of Marx must represent that department of social production which turns out the general arguments he put forward as a whole. We means of production. Consequently, this department therefore contend that the method employed by the must unconditionally grow more rapidly than the one leadership in their use of selective quotes from Marx

15 What is the cause of the current capitalist crisis?

is not being used to clarify and explain their position case, production and consumption of consumer goods but rather to confuse and mislead members and is not continued to grow right up to the crisis, and crises usu- in the scientific spirit of Marx and Engels. This is not ally originate, not in the consumer goods industries, engaging in discussion in good faith but is an attempt but in the producer goods industries that make robots to obscure and mystify serious investigation into the and super tankers. There were specific features in the object of discussion making use of selective citations US crisis of 2007-8 as it began in the housing market, as a rhetorical device to deflect criticism from an in- which is both partly a part of consumption, but also correct analysis. major fixed capital assets.

126. It was the collapse in the sub-prime mortgage market Workers’ Consumption that was the proximate cause or trigger for the crisis. The key to any crisis, however, is a reduction in invest- 121. It must be bluntly stated that capitalist crisis is not ment in production (including areas like housing) and caused by inequality or a reduction in worker’s wages. that depends, intimately, upon profitability (see Gra- If this were the case, capitalism wouldn’t be able to nados, 2012). grow at all or would just collapse. Indeed, it is contradicted by the development of capitalism itself. 127. This is also supported by the actual statistics for the outstripping of consumption demand by produc- 122. An article in Global Economic Intersection (2013) tion or investment demand (factories, raw materials, summed this idea up neatly in relation to the USA: means of production) in the USA historically, for example. These figures draw on the work of Andrew Kli- ”Let’s start with the obvious. The claim that income man but, as far as we are aware, they have not been inequality unconditionally leads to under-consumption successfully challenged or refuted. is untrue. In the US we’ve seen inequality accelerate since the 1980s, and until 2007 we had robust de- 128. In 2008, investment demand in the US was 77.2 times mand, decent growth.” bigger than in 1933 while GDP was only 18.5 times as large and personal consumption demand was only 123. Indeed, it is just untrue that inequality is a cause of cri- 15.4 times as large. Productive investment demand sis because it is refuted by the evidence of the growth grew nearly four times faster than GDP and nearly rate of the world capitalist economy in the last three five times faster than consumption demand. Over this decades. Most of the ACC’s experienced a period of extended period investment quadrupled while con- debt fuelled boom in the 1990’s and early 2000’s, de- sumption only increased by 16%! spite the rapid rise in inequality and concentration of wealth at the top. This was not a new phenomenon as 129. This is compelling evidence against the idea that capi- we elaborated above. Growth rates were not spectacu- talism is a system existing for the production of con- lar when compared to the post war boom but is diffi- sumer goods. Capitalism only exists for the accumula- cult to identify the difference between a weak anaemic tion of more and more capital for accumulation’s sake, artificial boom and a genuine one. and the motive force for this accumulation is the rate of profit. It is also false that capitalist investment in 124. It is a completely false argument that inequality or lack production ultimately has to mean a commensurate of consumption by workers leads to crisis precisely as increase in the production of consumer goods. This is Lenin cautioned, because the demand for means of contradicted by the facts above as well as the theoreti- production outstrips that of consumer goods. There- cal position of Marx, Engels and Lenin. fore, arguments that the crisis was caused by the concentration of wealth at the top are equally erroneous. 130. The idea that under-consumption was a cause of the crisis is also contradicted by the facts as consumption in all branches of the ACC’s was at record levels when Profits and investment not consumption the financial crisis struck and, even as the crisis deep- ened, consumption continued. “Lack of demand” has 125. Workers consume food and consumer goods like TV’s only been a feature since the economies of the ACC’s and iPods and not industrial robots or super tankers. entered the depression phase from which they are now Why should a crisis all of a sudden be caused by a re- slowly emerging. duction in the consumption of TV’s and iPods? In any

16 What is the cause of the current capitalist crisis?

131. The origin of the crisis lies in production just as Marx 136. ‘Financialisation’ and Keynesian theory held, as crises do not originate anywhere in the market. 137. We must also point out that the economists who pro- pose the financialisation hypothesis of the crisis are “The general conditions of crises, in so far as they are left bourgeois or radical economists who may resort independent of price fluctuations (whether these are to using some Marxist terminology, but are actually linked with the credit system or not) as distinct from deeply infected by the ideas of Keynes such as Stock- fluctuations in value, must be explicable from the gen- hammer , Lapavitsas, Dumenil and Levy , and Husson eral conditions of capitalist production” (Marx 1863). of the Unified Secretariat of the Fourth International et al . 132. The source of major generalised crisis is to be found in production and only in production. It cannot be 138. The financialistion concept straddles the ideological found in the market at all (distribution and exchange). divide from post -Keynesians to old Keynesians and Neither can it be found in the financial/credit system even to some who claim a certain adherence to Marx- although Marx did accept the possibility of limited ism. The arguments of this group of thinkers do not of- monetary crises. To argue, as the leadership does, that fer a Marxist explanation of the crisis, and tend to see crises originate in consumption is not a Marxist argu- it as primarily due to inequality and out of control fi- ment at all and is something else alien to Marxism. nance which, while a surface feature of the period, was not the underlying cause of the crisis.

Neo-liberalism: The highest stage of capitalism? 139. The debt fuelled artificial booms of the neo-liberals, however, merely displaced the core contradictions of 133. A distinct feature of this period was the use of finance the system in time and space onto the financial super- as a counter-tendency to the falling rate of profit, of- structure, stocking up combustible fictitious financial ten based on government fiscal policy and recourse to material for a renewed major crisis of epic proportions. debt, or what Marx called fictitious capital. Although this has now been termed financialisation, we chal- 140. The recourse to financialisation under the neo-liberals lenge the idea that there was anything specifically clearly failed, and it is no coincidence that the nature “new” in this phenomenon despite its rampant growth. of the credit crunch and financial panic was so severe. However, its root cause lay in the productive sector 134. The rise of finance and its penetration of the produc- and the persistent decline in profitability in the US and tive sectors has been a long term trend in capitalism other ACC’s. that is continuing. It is not a new fundamental feature of capitalism. Capitalism, despite tremendous chang- 141. More debt was piled on top of existing mountains of es, has not fundamentally changed. We categorically bad debt by capitalist corporations, governments and reject the idea that neo-liberalism is a new stage in the consumers in order to avoid a slump until the slow- development of capitalism as some authors have pro- down in investment and production, caused by the posed , but merely expresses a continuation of devel- falling rate of profit, could not sustain the burgeoning opmental trends within the system that existed prior swindle based financial edifice and the crash was in- to the period. evitable.

135. The leadership of the CWI, whilst denying that they have described neo-liberalism as a new phase of capi- Vulgar economic ideas talism, or that it has fundamentally changed, nevertheless echo many of the arguments of those that do. 142. The leadership offer an explanation of the crisis on a Specifically they maintain holding onto the idea that number of levels. In general material we refer to the the rate of profit has not fallen significantly, in fact cause of the crisis in very simplistic or vulgar terms claiming that capitalism restored “profits” to the lev- as a crisis of overproduction but basically repeating els of the 1950’s and 1960’s, when this is broadly chal- the idea that overproduction is caused by the inabil- lenged by numerous Marxist economists and is con- ity of workers to buy back all that they produce. This tradicted by solid factual evidence that the leadership propagandistic explanation is inherently false but on do not acknowledge. a deeper level the crisis is described as a crisis of over- accumulation.

17 What is the cause of the current capitalist crisis?

143. 23 “There is clear evidence of a long-term decline in capital investment. Capital accumulation is the key to eco- 144. In short, this is also a vulgar explanation that holds nomic growth. Increased capital stock is required to that capitalism has accumulated too much capital and increase capacity and output, and investment is also that it has no “outlet” in which to invest the vast sur- the key to incorporating new technology in produc- plus profits that the capitalists have amassed. We have tion. Capital expenditure, moreover, is a key source already demonstrated that the idea of the capitalist of demand, together with consumer demand. Figures class drowning in profits or being awash with capital is for the growth rates of capital stock 1960-2004 (net totally contradicted by the facts in relation to the debt growth after depreciation for worn-out or retired capac- mountain (see section below “Drowning in Debt, not ity) show that the pace of global capital accumulation Profits”). slowed, especially in the advanced capitalist countries.” (Glyn, 2006 p86)

Mirror image of US under-consumptionists 149. The key argument proposed is that there is too much excess capacity within capitalism for the capitalists 145. The current position is almost a carbon copy of the to be attracted to invest but this is caused by a lack of, argument put forward by the Monthly Review in the specifically, too little consumer demand. United States, the main advocate of an under-consumptionist theory of capitalist crisis, supposedly 150. This argument has far more in common with Keynes based on Marxism. The main theorists of this school and has got nothing to do with Karl Marx. In this argu- are are Fred Madgoff and John Bellamy Foster. Their ment the influence of the rate of profit is completely position is summed up in a book written by Foster and absent, as it is in the material of the Monthly Review Robert W. McChesney in 2012 “The Endless Crisis” and the material of the CWI.

“Capitalism, throughout its history, is characterized by 151. In fact, in the public material of the CWI, even a men- an incessant drive to accumulate …. But this inevitably tion of the Marxist category of “the rate of profit” is runs up against the relative deprivation of the under- generally absent and we will examine the reason for lying population …. Hence, the system is confronted this below. with insufficient effective demand––with barriers to consumption leading eventually to barriers to investment.” (Our emphasis pp. 33–4) British Economic Disaster

146. This is completely contrary to Marx’s explanation for 152. The CWI leadership’s “crisis of over-accumulation” is capitalist crisis as he regarded capitalism as a dynamic also rooted in the ideas of Andrew Glyn, an academic mode of production which tended towards crisis and Marxist and former supporter of Militant who we have not, as our authors above suggest, long term stagna- already referred to above. tion. It is also contrary to the facts but this type of explanation is repeated in the material of the CWI ad 153. In his 1980 book “The British Economic Disaster”, An- nauseam. drew mounted his first major assault on Marxist theory and emphatically rejected The Law, notably in the Ap- 147. As was made clear by Lynn Walsh in a reply to a letter pendix: in Socialism Today in 2012: “Advocates of the LTRPF mistakenly assume that an “This factual data (most of which has been referred to increase in the physical mass of capital operated by in previous articles), in our view, confirms the analy- each worker (the technical composition of capital) nec- sis of a crisis in capital accumulation put forward in essarily implies a rise in its value relative to the value Socialism Today over many years.” Walsh (2012) (our of either output or surplus... [T]he explanation for the emphasis) general fall in the rate of profit from the mid-60’s cannot therefore be the operation of the LTRPF”. (Glyn and 148. This argument is also that put forward by the late An- Harrison 1980) drew Glyn in his book Capitalism Unleashed (2006) which is still quoted in our economic material: 154. Andrew was confident he could disprove Marx’s “most important law of political economy”, which also brings

18 What is the cause of the current capitalist crisis?

into question the validity of The Law of Value itself. tion to the labour supply” which was developed as a However, Andrew’s calculations were based on the rejection of the very same Law! How can the EC ad- false assumption that increases in labour productivity vance two completely contradictory theories? Either not only devalued newly produced commodities, but Marx was right, or Andrew was right, but not both? It also devalued the existing capital employed in produc- requires little effort to deduce who we believe to be tion! This led him to falsely conclude that “The expla- correct on this matter. nation [of crisis] based on the LTRPF is ... wrong”. (Glyn and Harrison 1980) 159. EC member Lynn Walsh claims that the current crisis is one rooted in over-accumulation of capital and draws on Andrews’s ‘Capitalism Unleashed’ as evidence: New (old) theory to replace Marx “There is clear evidence of a long-term decline in capi- 155. To substitute for Marx’s theory of crisis based on The tal investment... Figures for the growth rates of capital Law, Andrew proposed his own theory of over-accu- stock 1960-2004 (net growth after depreciation for mulation in relation to the labour supply. Put very worn-out or retired capacity) show that the pace of simply, he believed that, since employment had been global capital accumulation slowed, especially in the relatively high for the previous two decades, it was not advanced capitalist countries (see Andrew Glyn, Capi- possible for the capitalists to use unemployment as a talism Unleashed [2006], p86)...” (Walsh 2012) weapon to drive down wages and raise the rate of profit. He thought that the wage rises since the mid 60’s 160. However, Lynn fails to mention that the very same in the UK were the sole reason for the falling rate of book also shows a long term decline in the UK pre-tax profit. Yet, his own statistics (Glyn and Sutcliffe 1972, rate of profit since 1965, from 14% to 8% and a massive p66) show that the pre-tax rate of profit had started to collapse in the rate of profit in Japan since 1970, from fall since the early 1950’s, at a time of relative wage re- 24% to 8% (Glyn 2006). straint! 161. So Even by Lynn’s own sources, the rate of profit has 156. Andrew believed if the profit share was low, capitalists fallen! Why do the CWI leadership choose to ignore wouldn’t invest, leading to economic crisis. Converse- this and deny the empirical validity of The Law? ly, those who hold an under-consumptionist position believe that crises are caused by a high profit share because it reduces workers’ wages and thus lowers Two-stage nationalisation consumer demand. The Socialist Party EC maintain a multi-casual approach to crisis and believe that crises 162. The abandonment of The Law and his departure from can be brought on when wages are either too high or Marxist theory led Andrew to reject not only Marxism, too low. but also the basic tenants of socialism such as the nationalisation of the economy. 157. Does the Socialist Party EC therefore believe there is a ‘goldilocks’ level of wages (not too high, not too 163. In 1985, he wrote a pamphlet for the reformist-left low) that would avoid crises altogether? Logic dictates Campaign Group of Labour MP’s called “A Million Jobs that this is what their current position implies. In fact, a year” – a programme for a Labour government to re- the primary method of economic analysis employed store full employment. In this, he rejected socialist na- by the CWI leadership is to measure the wage/profit tionalisation of the economy and instead put forward share and to ignore the Marxist category of the rate of a programme of public control over private capitalist profit, the same method employed by Andrew. industry rather than public ownership. Amazingly, this contradicts a pamphlet he wrote for Militant only 8 years previously “Capitalist Crisis: Alternative Eco- The contradictions in Socialist Party Analysis nomic Strategy or Socialist Plan?” (Glyn 1977) where he attacks the very ideas he later presented! 158. This puts the Socialist Party EC in an obvious contradiction. On the one hand, they formally claim to ac- 164. He does decisively call for the immediate nationalisa- cept The Law (in the abstract, of course). Yet, as part tion of the banks: of their “multi-casual” approach to crisis, they adhere to Andrew Glyn’s “crisis of over-accumulation in rela- “The major financial institutions are capitalism’s nerve

19 What is the cause of the current capitalist crisis?

centre, with a dense web of links to industry, and ca- 168. Lynn believes that the banks should be nationalised pable of causing financial chaos in a matter of min- first, and this would “unavoidably pose the question” utes by moving out of sterling or away from lending to of nationalisation of the rest of economy after an unde- the government. Taking them into immediate public fined amount of time. ownership seems absolutely indispensible if a Labour Government is to prevent financial crisis and be ena- 169. Another example from Lynn, this time from our news- bled to use the credit system as part of planning for full paper: employment.” (Glyn 1985, p31) “Workers are questioning the legitimacy of the capital- 165. Of course, the nationalisation of the banks is some- ist system. What is required is a clear alternative. This thing that all members of the Socialist Party would means for a start, taking over the banks, not merely support without question. What is significant is his ap- to subsidise their losses but to reorganise the bank- proach to the rest of the economy: ing system to act in the interests of society. This would be the first step towards a socialist planned economy, “It can be argued that such approaches to the control run under workers’ democracy.” (Our emphasis Walsh, of [private capitalist] industry would have the advan- 2012c) tage of demonstrating, through the process of strug- gling to shape the development of the economy, the 170. A similar position is also put across in the Party’s latest justification and eventual necessity for the full imple- pamphlet “The case for Socialism” (2012), published mentation of Clause IV [i.e. nationalisation of the com- this year: manding heights]. Discussion and evaluation of these various approaches to controlling industry... is an ab- “So what is the alternative to dictatorship of the mar- solute priority if a convincing Full Plan for Full Employ- kets? As a start we call for the nationalisation of the ment is to be constructed.” (Our emphasis Glyn 1985, big banking and finance companies...That is why a cru- p34) cial step towards solving the economic crisis would be to take into democratic public ownership the 125 or so 166. In other words, once the banks have been national- big corporations that control around 80% of Britain’s ised, a socialist government would have to somehow economy.” (Our emphasis) demonstrate the need for the nationalisation of private industry, which would take place over an indefinite 171. Again, the Socialist Party EC presents the case that the amount of time. banks should be nationalised first, and then the next “step” would be to nationalise the economy, after an undefined amount of time. The Socialist Party EC justi- CWI adopts two-stage “socialism” fy this position because they claim it is in line with the transitional programme and the transitional method. 167. Unfortunately, Andrews’s ideas, fine economist However, in our view, this shows a failure to under- though he was, seem to have been partially adopted stand the transitional method itself. by our organisation. In Socialism Today, Lynn Walsh reviewed the book of Keynsian economist Paul Krug- 172. Historically, this two-stage approach has never been man “End This Depression Now” and explains the “so- the position of the party. Partial nationalisation lead- cialist” solution: ing to further nationalisation was the position of Trib- une, the left-reformist grouping in the Labour Party in “The banks and finance houses would have to be na- the 70s/80s whom Militant so successfully defeated in tionalised (not bailed out and propped up at public debate after debate in the Labour Party. For a Tribu- expense), and run under democratic workers’ control nite idea such as this to enter the lexicon of our party and management... Such measures would undoubt- stretches the idea of transitional demands to breaking edly meet the entrenched resistance of the capitalist point. We have to ask ourselves: when does a transi- class. State intervention in favour of the working class tional demand transform itself into a reformist one? would unavoidably pose the question of the takeover We believe the answer is when it is underpinned by an of the commanding heights of the economy, to form incorrect interpretation of Marx’s political economy, the basis of a democratic plan of production” Walsh namely, Marx’s laws of motion of capitalism and his (2012b). most important one on the rate of profit to fall.

20 What is the cause of the current capitalist crisis?

Militant Tendency attacks two-stage socialist Drowning in Debt, not Profits programme 176. The leadership’s apparent enthusiasm for the expro- 173. In the 1977 Militant pamphlet “Capitalist Crisis: Alter- priation of the UK banks stems from the idea that they native Economic Strategy or Socialist Plan”, the very contain £850 billion locked away in the vaults. They same Andrew Glyn sharply criticised those who failed have equally extravagant notions corpulent US banks. to put across a clear socialist programme of simultane- However, the idea that the capitalists are sitting on ous nationalisation of the economy: massive cash piles doesn’t match up with the facts.

“By attempting to go part of the way towards a socialist 177. Now, of course we don’t reject this figure necessarily, programme, this strategy is not “transitional” to such a but what does it really mean? Fundamentally the cash programme, but is transitional to a tremendous disas- assets in the vaults of the banks have to be balanced ter. An attempt simply to implement such a programme against capitalist debt. Just as in a household you may would be met by the capitalists using the enormous have £1,000 under the mattress, but if you owe your power left in their hands to sabotage the government’s creditors £10,000, your actual real assets are minus plans. The danger is not just that the ideas of social- £9,000. ism would be discredited in such a way, but that the economic chaos which would result would pave the 178. Have the capitalists in the UK reduced their debt bur- way for a reactionary takeover on the basis of crushing den massively since the financial crisis? Hardly as the the organisations of the working class, as the Chilean McKinsey Global Institute pointed out in a report in experience makes clear.” (our emphasis Glyn , 1977) January 2012 called ‘’Debt and deleveraging: uneven progress on the path to growth”: 174. In Militant International Review 34 (1987), Bob Mc- Kee wrote a scathing review of Glyn’s “A Million Jobs 179. “The United Kingdom: Deleveraging has only just be- a Year” and the idea of a two-stage approach to social- gun. Total UK public- and private-sector debt has ris- ism after Andrew had theoretically retreated: en slightly, reaching 507 percent of GDP in mid-2011, compared with 487 percent at the end of 2008 and 310 “A socialist leadership must explain to the working percent in 2000, before the bubble…” class clearly and from the beginning what is necessary in order to give them the most direct way of control- 180. UK banks have managed to recapitalize somewhat, ling the economy. That can only be a programme of but financial companies have increased debt outlays public ownership, under workers’ control and manage- since the Great Recession and total UK debt stands at ment, of the financial institutions and major industrial an amazing 507% of GDP! UK Non-financial corpora- and commercial monopolies. If a [socialist] govern- tions have more than twice as much debt as monetary ment was to follow the policies [outlined by Glyn] and assets. Far from drowning in profits, the capitalists are decide it was not necessary ‘immediately’ ... to take drowning in debt! over the commanding heights, then it cannot succeed in really controlling the economy. It will also confuse and weaken the workers’ resolve if it changes its pro- Fictitious Capital gramme midstream after the capitalists have been able to sabotage the economy and prepare for political 181. The idea proposed by the CWI leadership, that it is just reaction. In such a situation, the advantage is with the a question of seizing control of this mythical reservoir capitalist class while they continue to hold the levers of of capital and investing it is, in our opinion, politically economic and political power.” (our emphasis) dangerous. The current economic policy of the CWI leaders is based on a false notion of cash fat capitalist 175. Our organisation in 1987 correctly pointed out the pit- banks, when in fact the financial resources of interna- falls of presenting a misleading and ambiguous two- tional capitalism are deeply in the red and comprised stage socialist programme to the working class. But it primarily of fictitious capital. is exactly this muddle of a programme that the Social- ist Party EC are advancing in our current material. 182. Why are the CWI leaders clinging to this false analysis i.e. that there is sufficient capital available to re-ener- gise the economy but only if the banks were brought under state control?

21 What is the cause of the current capitalist crisis?

183. The Socialist Party EC is attempting to argue that this is ence, 20-25 May 2012, Mexico City. http://eprints.gla. the application of transitional demands, but you can- ac.uk/66937/1/66937.pdf not base transitional demands on a skewed version of the facts. The working class must be told the truth and Deepankar, B. and Manolakos, T. (2010) Is There a Ten- it is pure utopianism and dangerously misleading to dency for the Rate of Profit to Fall? Econometric Evidence suggest that seizure of the phantom bank reserves can for the U.S. Economy, 1948-2007 University of Mas- be regarded as a “first step” towards achieving social- sachusetts – Amherst http://scholarworks.umass.edu/ ism. econ_workingpaper/99/

Denning, S (2011) The Big Shift or Shifty Statistics? Conclusion Forbes http://www.forbes.com/sites/steveden- ning/2011/10/19/the-big-shift-or-shifty-statistics/2/ 184. We submit that the leadership of the Socialist Party and CWI are in gross error in relation to their interpretation Deloitte (2011) The Shift Index http://www.deloitte.com/ of the causes of the crisis in Marxist terms and that this assets/Dcom-UnitedStates/Local%20Assets/Documents/ is infecting our strategy and tactics accordingly. TMT_us_tmt/us_tmt_shiftindex_revised_120512.pdf Engels, F. (1887) Anti-Dühring http://www.marxists.org/ 185. In our view, this has potential explicit dangers for our archive/marx/works/cw/volume25/index.htm forces now, but even more so in the medium to long term. Foster, J. B and McChesney, R. W.. (2012) The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation 186. This document is an initial contribution to the debate and Upheaval from the USA to China. New York: Monthly and we have concentrated more on explaining our Review Press. criticisms of the leadership’s analysis of the crisis but also on some of the potential dangers involved. Freeman, Alan (2009): What makes the US Profit Rate Fall? MPRA http://mpra.ub.uni-muenchen.de/14147/ 187. We welcome this debate and will strive to engage in it in the spirit of our great teachers Marx, Engels, Lenin Global Economic Intersection (2013) Is Consumption and Trotsky. We also pledge our complete loyalty and Distorted by Income Inequality? http://econintersect.com/ commitment to the CWI and it is, in our opinion, in b2evolution/blog2.php/2013/02/14/is-consumption- the best interests of our movement that we are raising distorted-by-income-inequality these principled Marxist disagreements. For us, in the words of Trotsky, from In Defence of Marxism: in 1939: Glyn. A, Sutcliffe. B, (1972) British Capitalism, Workers and the Profits Squeeze Penguin Books 188. “It is absolutely unthinkable that this old society can be overthrown and a new one constructed without Glyn. A (1977) Capitalist Crisis: Tribune’s Alternative Eco- first critically analyzing the current methods. If the nomic Strategy or Socialist Plan Militant party errs in the very foundations of its thinking it is your elementary duty to point out the correct road.” Glyn. A. Harrison. J, (1980) The British Economic Disaster Pluto Press 189. Build the CWI, build the forces of Marxism! Glyn. A (1985) A Million Jobs a Year Verso Editions

References Glyn, A. (2006) Capitalism Unleashed: Finance, Globalisa- tion, and Welfare Oxford University Press Brooks, M (2013) Capitalist Crisis Theory and Practice: A Marxist analysis of the Great Recession eXpedia Granados, J. A. P. (2013), Does Investment Call the Tune? Empirical Evidence and Endogenous Theories of the Carchedi, G. (2012) Behind the Crisis: Marx’s Dialectic of Business Cycle, in Paul Zarembka (ed.) Contradictions: Value and Knowledge Historical Materialism books Finance, Greed, and Labor Unequally Paid (Research in Political Economy, Volume 28), Emerald Cockshott, W.P. (2012) Is the theory of the falling rate of profit valid. World Association of Political Economy Confer- Grogan,B. (2013) From accumulation to dis-

22 What is the cause of the current capitalist crisis?

accumulation paper for the Heterodox confer- debt&l=Insights%20%26%20Publications ence of economists http://www.hetecon.net/ documents/ConferencePapers/2011Refereed/Grogan_ Potts, N. (2011) Marx and the Crisis Capital & Class Octo- AHE2011039R.pdf ber 2011 vol. 35 no. 3 455-473

Kautsky,K. (188) The Class Struggle http://www.marxists. Roberts, M (2009) The Great Recession: Profit cycles, org/archive/kautsky/1892/erfurt/ economic crisis A Marxist view Michael Roberts

Kliman, A. (2012) The Failure of Capitalist Production Sell,H (2012) Action against austeritym The Socialist 26th Pluto press September

Lenin,V. I. (1899) The Characterisation of Economic Sell, H. (20060 Socialism in the 21st Century http://www. Romanticism https://www.marxists.org/archive/lenin/ socialistparty.org.uk/socialism21/ works/1897/econroman/index.htm Shaikh, A. (2008) The Deepening Economic Disaster, Lenin. V, I (1921) Once Again on the Trade Unions http:// speech, available from http://nyusociology.org/blogs/radi- www.marxists.org/archive/lenin/works/1921/jan/25.htm cal/2008/12/08/the-deepening-economic-disaster/

Liodakis, G. (2012) Transformation and Crisis of World Socialist Party (Scotland) (2013) Perspectives for Scotland Capitalism: Long-run Trends and Prospects Socialist Party (2012) British Perspectives Paper for the Joint Conference “Political Economy and the Outlook for Capitalism” Socialist Party (2012) Election Manifesto

Mattick, P. (jnr) (2011) Business as Usual: The economic Socialist Party (2013) The Case for Socialism Crisis and the Failure of Capitalism Reaktion books Taaffe, P. (2012) The profits crisis debate Socialism Today Marx. K (1848) Manifesto of the Communist Party http:// letter by Wallace. B and reply by Taaffe, P. Issue 159 www.marxists.org/archive/marx/works/1848/communist- http://www.socialismtoday.org/159/profit.html manifesto/ The Socialist (2013) .Austerity... Anger... Action! The Social- Marx. K (1863) Theories of surplus value http://www. ist, 27 Feb marxists.org/archive/marx/works/1863/theories-surplus- value/ch17.htm Trotsky, L. (1939) In Defence of Marxism Pathfinder Books

Marx, K. (1867) Capital Volume I Marxist internet archive Wells, J. (2013) The rate of profit as a random variable http://www.marxists.org/ PhD thesis http://eprints.kingston.ac.uk/9490/

Marx, K. (1885) Capital Volume II Marxist internet archive Walsh, L. (2012) On Capital Investment Socialism Today http://www.marxists.org/ letter by Wallace B. and reply by Walsh L. Issue 163 http:// www.socialismtoday.org/163/capital.html Marx. K (1894) Capital Volume III Marxist internet archive http://www.marxists.org/archive/marx/works/1894-c3/ Walsh, L. (2012b) A Way Out of depression? Socialism ch15.htm Today Issue 161 http://www.socialismtoday.org/161/krugman.html McKee, B. (1987) A Million Jobs A Year - Reviving the AES Militant International Review number 34 Walsh, L. (2012c) Spain: bank bailout can’t stop Euro death-spiral The Socialist, 13th June McKinsey Global Institute (2012) Debt and deleveraging: uneven progress on the path to growth Mulholland, N (2013) No to G8 austerity The Socialist, 12 June 2013 http://www.mckinsey.com/Search.aspx?q=uk

23 IN DEFENCE OF THE TRANSITIONAL PROGRAMME

1. The new pamphlet from the Socialist Party and Social- they assert: “For a Tribunite idea such as this to enter ist Party Scotland – The Case for Socialism - has been the lexicon of our party stretches the idea of the tran- subject to some severe criticism by Bruce Wallace sitional programme to breaking point.” The Tribune (BW) in a series of posts on his blog. The pamphlet is grouping was a significant left-reformist trend inside also attacked by the small grouping of eleven mem- the Labour Party, whose programme called for a mixed bers of the CWI who support BW’s position, as out- economy, involving partial public ownership. lined in their recent document, What is the Cause of the Current Capitalist Crisis? Their criticisms reflect an 6. We have long argued against the “stages theory” of so- increasingly strident opposition by them to our tran- cialism, which has been defended by reformists and sitional programme for the economic crisis, which, in particularly the Communist Party in the past as well our view, now forms a central theme of the current de- as today. In essence, it is the idea that socialists should bate that began on whether a fall in the rate of profit put forward limited objectives – minimum demands was the key underlying factor in the crisis in 2007-08. – separated in time from the need for the socialist transformation of society. The CP, for example, split 2. The issues around the Law of the Tendency of the up ‘democratic demands’ and socialism into artificial Rate of Profit to Fall (LTRPF) have been more than ad- compartments, reinforcing the idea that it was possible equately dealt with in the Socialist Party England and to achieve long-lasting or permanent reforms or ad- Wales EC statement, A Reply to Andrew Kliman. In this vances for the working class without linking this to the contribution we will seek to respond to the attacks by struggle to overthrow capitalism. This led the CP and BW and his supporters on the character of our Marxist other reformist leaders during the Spanish revolution programme and the related issues on how to engage in the 1930s and in Chile from 1970-73 to argue against with the current levels of consciousness. the urgent necessity of the working class coming to power through the socialist revolution. The main task, 3. The group that supports BW’s incorrect method of they argued, was to ensure the defeat of fascism and analysis towards the causes of the economic crisis dictatorship and secure the victory of the ‘democratic also makes crude and ultra-left criticisms of the pro- stage’. The struggle for socialism should be postponed gramme that the Socialist Party is putting forward. It until this was achieved and conditions would suppos- is clear, on a reading of their material, that the politi- edly be more mature. This false policy of stages led the cal method which led them to draw erroneous conclu- Stalinist and reformist parties to argue for a bloc be- sions on the economic front is also infecting their ap- tween the workers’ organisations and the ‘democratic’ proach to how we reach the layers of the working class bourgeois; what followed was a catastrophic defeat for open to our ideas today. the working class.

7. The difference between the transitional method and Stages Approach? the theory of stages is clear. For Trotsky, and for us today, the key task is to base our programme on the 4. Dealing with The Case for Socialism pamphlet on his objective needs of the working class: the need for the blog, BW states: “It should be apparent from a proper overthrow of capitalism and the establishment of a reading of The Case for Socialism that what we have democratic socialist society. However, we also have here is the proposal for a minimum and a maximum to deal with reality and the existing consciousness of programme. In short a two-stage theory of the revolu- the working class, which is not yet in its majority con- tion! First you nationalise the banks and then, after an vinced of the need for socialism. This requires an all- undisclosed hiatus, you move on to the nationalisation round approach and the putting forward of demands of the whole economy. This is an out and out reformist that coincide with the current consciousness but also plan.” act as a bridge towards an understanding of the need for socialism. 5. This accusation is repeated in the document by BW and the group of 11 when they accuse the CWI of adopting 8. Trotsky in the 1930s, in dealing with the consciousness “two-stage socialism”. They say the Socialist Party and of workers in the US, pointed out that to simply call for the CWI has transformed the transitional programme ‘socialism’ would be considered by most as an “alien” into a reformist one. Apparently, according to them, idea imported from Europe! Transitional demands on we argue for the nationalisation of the banks followed wages, hours of work and a programme to deal with by further nationalisations at a later stage. Absurdly, mass unemployment were, however, immediately

24 IN DEFENCE OF THE TRANSITIONAL PROGRAMME

understood by workers. This did not mean Trotsky including capital. This would provide the possibility of was abandoning socialism. He argued for expressing developing a democratic, socialist plan of production the need for socialism through a series of transitional that could very quickly transform the lives of millions.” demands in such a way that can be understood and fought for by the working class but which could only 10. This point is reemphasised later in the pamphlet: “A be fully realised by the ending of capitalism. This is the genuinely socialist government would take the big method that that the Socialist Party and the CWI de- corporations, which dominate the economy, into fend today. democratic public ownership, under workers’ control and management, in order to plan the development of 9. It’s worth quoting from The Case for Socialism pam- society for need instead of profit.” phlet to show exactly the position of the Socialist Party and Socialist Party Scotland: 11. As the centre page article written for the Socialist by Peter Taaffe for the issue covering the TUC demonstra- “As a start we call for the nationalisation of the big tion at the Tory Party conference in Manchester on the banking and finance companies. Compensation 29th September explained: should be paid only on the basis of proven need. Not one penny should go to the speculators who are de- “Socialist and Marxists argued there is no such thing manding that the working class pay for the crisis for as a ‘quarter of a revolution’. Where 80% of industry is which they bear responsibility. owned by the private sector and 20% is state owned, the 80% will dictate to the 20% and not vice versa.” “A socialist nationalised banking sector would be democratically run by representatives of banking workers “Unless the process of taking control out of the hands and trade unions, the wider working class, as well as of the capitalists is carried through completely by the the government. Decisions would be made to meet the nationalisation of the commanding heights of the needs of the majority – for example, offering cheap economy and run through democratic workers’ control loans and mortgages for housing, to assist socially- and management, then inevitably the capitalists and useful small businesses, and for the planned develop- their representatives would seize the first opportunity ment of industry and services, and ending all repos- to turn back the wheel of history.” sessions of peoples’ homes. 12. It is crystal clear from the above examples, and many “That would only be the start, however. Capitalism has others of a similar vein in the publications of the So- led to enormous economic destruction. In Britain the cialist Party and the CWI, that the democratic nation- economy has shrunk by about 10% as a result of the alisation of the banks is always linked to bringing into great recession. Nor is there any prospect of a return public ownership the major sectors of the economy, to healthy growth. This is the real difference between alongside other demands. Nowhere does the Social- now and, for example, the end of the Second World ist Party ever say that the nationalisation of the banks War when the total national debt was far higher as a would then be followed by a “hiatus” – with no other proportion of the economy than now - over 200% of measures taken against capitalism. gross domestic product (GDP) compared to around 68% in July 2011. Then, however, Britain entered a period of unprecedented economic growth, thereby A combination of bewilderment and misunder- shrinking the national debt. Today, the best prospect standing that can be hoped for under capitalism is a prolonged period of economic stagnation. 13. BW’s opposition to the demand for public ownership of the finance system being brought to the forefront of our “That is why a crucial step towards solving the econom- programme is very instructive. Firstly, he completely ic crisis would be to take into democratic public owner- ignores and/or misunderstands the widespread view ship the 125 or so big corporations that currently con- among the working class that the banks bear a huge trol around 80% of Britain’s economy. This would need responsibility for the economic crisis. As a recent Fire to be combined with full government control of incom- Brigade Union pamphlet pointed out: “The banking ing and outgoing foreign trade. This would enable a collapse triggered a massive downturn throughout the democratically elected government – and the working world economy. Countries like Britain, which are very class, not the market – to control imports and exports dependent on the banking sector, have suffered more

25 IN DEFENCE OF THE TRANSITIONAL PROGRAMME

in the recession than others, who depend less on finan- 19. There are some left and even Marxist economists who cial earnings.” [FBU pamphlet, It’s time to take over the do argue this case – although not the CWI. However, banks, by Mick Brooks and Michael Roberts.] Ironically, unlike BW and others in the LTRPF school we do rec- Brooks and Roberts are regularly cited by BW in defence ognise the decisive turn made in the advanced capi- of his position on the LTRPF. The fact that they have co- talist countries to financial investments following the authored a pamphlet that calls only for the nationalisa- end of the post-war boom in 1973 and the onset of the tion of the banks is simply not mentioned by him. neo-liberal, globalised era. This was a product of falling profitability in the traditional manufacturing sec- 14. The character of the crisis that began spectacularly tors of investment for the bourgeois and a search for in the finance sector has spread to all main sectors of more “profitable” outlets for capital. For example, in capitalist production – the “real” economy. However, the US, trading in equities and stocks in 1970 was the the deep-seated anger, exacerbated by continuing equivalent to 13.2% GDP; by 2000 this had accelerated bankers’ bonuses and a return to huge banking prof- to 145% of GDP! its, has meant that it is absolutely correct to bring the demand for the banks to be taken out of the hands of 20. BW criticises the SP and the CWI for adapting our pro- those who wrecked the economy to the forefront of gramme to suit the “left wing of the trade union move- our transitional programme. Moreover, given the huge ment in their strategy to build an independent working role played by finance in the world capitalist economy, class party. To do so they [the CWI] have rejected the including in Britain, such a transitional demand is an classical theory of Marx to accommodate themselves essential part of our programme. to the ideas of left Keynesianism within the working class.” 15. There is bitter class hatred throughout the advanced capitalist countries for those who are seen as the main 21. This again is very instructive. What BW is expressing authors of the present economic catastrophe, namely here is a doctrinaire sectarianism which ought to be the financiers and bankers. entirely alien to our movement. A key task for Marx- ists in this period is to understand the complications 16. What is wrong with making this demand “first on the of current consciousness as well as drawing up a skilful list” given the way that the banks are seen by broad transitional programme that can connect with work- sections of the working class, and the huge role the fi- ers and young people who are moving into opposi- nance sector plays in the modern capitalist economy tion to capitalism. Instead of patient explanation and and in many aspects of day-to-day life? In Greece, our consistent activity in the workers movement, BW has comrades, also raise the nationalisation of the banks, fallen prey to dogmatic ultra-leftism that, if applied by linked to non-payment of the debt and capital controls us, would turn our forces into an irrelevance as far as as immediate measures, alongside demands for public the overwhelming majority of the working class is con- ownership of the wider economy, and an emergency cerned. programme of investment and a socialist confedera- tion of European states. Keynesian poison? 17. Lying behind BW’s virulent opposition to this demand being at the forefront of our transitional programme is 22. At one with Andrew Kliman, BW believes the main en- his fear that this means we are succumbing to a false emy to be confronted today is Keynesianism. All and theory of “financialisation”. This is the mistaken idea any manifestations of this, real or imagined, must be that capitalism has entered a new phase that negates put to the sword. So BW comments in his blog under the fundamental laws of motion of capitalism worked the heading: “Fight Keynesian Poison in the labour out by Marx, and that the crisis is resolvable by merely movement”: taking control over banking and finance, allowing a return to a more equitable mode of capitalism. “What would be necessary is pitiless criticism and struggle against these ideas as a dead end or poten- 18. We do not accept, and have never argued, that a de- tially a fatal flaw in the revolutionary policy of the work- coupling of the world economy, particularly the ad- ing class and must be fought by all means available by vanced capitalist countries, from the dominant role of revolutionary Marxists. That would also mean directly finance capital would offer a new lease of life for the criticising this policy in the movement not supporting system. it!”

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23. This outburst by BW, and echoed by others in the rial. Of course, this was supplemented by articles and group of 11, was in response to the three year old PCS other material in the Militant newspaper, pamphlets, pamphlet, Austerity isn’t working – There is an alter- etc., as well as speeches made by our comrades that native (www.pcs.org.uk) which he describes as “an gave a wider explanation of our programme. ideological pact with the ideas of the left wing of the bourgeoisie.” 28. As mentioned earlier, BW’s condemnation of the PCS pamphlet does not extend to that of the Fire Brigade 24. The PCS pamphlet calls for public ownership of the Union’s equivalent, It’s time to take over the banks. In banks, the closing of the tax gap of evaded tax, an end it, the authors state: “Taking over high finance is the to privatisation and attacks on PCS members, etc. It beginning of the way to change society forever. Tak- also raises the idea of increased wages, investment in ing over the banks will enable planning, investment job creation and an end to the policies of austerity, in- and the creation of millions of jobs. A publicly owned cluding criticising Labour’s austerity-lite approach. All and democratically accountable banking system is es- of which are demands we would support. It is true that sential to developing such a programme.” According it puts forward a Keynesian-type alternative and does to the laws of Marxism defined by BW and his small not raise the issues of wider public ownership or the band of supporters, does this not fall under the crime need for socialism but it is a document of a trade union of “an out-and-out reformist plan”, and capitulating to not a revolutionary party. “financialisation”, given that there is no explanation for the need to nationalise the rest of the economy? Per- 25. What should be the approach of our trade union com- haps the fact that the authors of the pamphlet are fel- rades to the drawing up of such a document in a trade low LTRPF disciples Mick Brooks and Michael Roberts union organisation of 300,000 members? It is inevita- makes it immune from criticism? ble at this stage, given the level of consciousness, that concessions will have to be made on what we can get 29. The idea that the Socialist Party and the CWI should agreement. We should explain our full party position go to war against Keynesian “poison” in the trade unin Left Unity and the wider PCS in favour of a socialist ions, specifically against the ideas of Mark Serwotka, programme and build support for it in the union. How- Len McCluskey and Bob Crow, all of whom BW cites, ever, the fact that such a pamphlet only raises partial is so removed from reality that it could only come from demands does not mean our trade union comrades someone with no current connection with the real would refuse to endorse it. Our role is, of course, to struggles or experience of dealing with the conscious- support the progressive demands in the pamphlet and ness of the working class. the independent struggle of the workers’ movement to implement these demands through the influence and 30. Rather than take a baseball bat of condemnation to the activity of our party, as well as seeking to build a con- re-emergence of reformist ideas in the workers’ move- stituency for a more far-reaching and developed pro- ment and workers consciousness, the role of Marxists gramme for the trade union at a later stage. is to skilfully counterpose our programme to what is missing from these ideas. Take them as a starting point, 26. BW, on the other hand, argues that leading PCS com- explain the limitations and advocate a developed tran- rades should have refused to sign the PCS pamphlet. sitional programme that points the way forward. The Moreover, the Socialist Party should be “directly criti- Socialist Party in England, Wales and Scotland have cising this policy in the movement not supporting it.” done precisely this with the new pamphlet, The Case This is craven ultra-left posturing and completely at for Socialism. odds with the transitional method of Trotsky and the history of our own organisation. 31. The emergence of mass support for left Keynesian and left reformist ideas among the working class, which is 27. By even raising this point BW shows extreme ignorance inevitable at a certain stage, would represent a step of his and our own history. When we worked in the La- forward in consciousness. It would, particularly with bour Party there were many occasions when Militant our intervention, help facilitate the emergence of new supporters standing as Labour candidates stood on a mass workers’ parties, fighting trade unions and speed limited and partial programme from a Marxist stand- up the building of more powerful sections of the CWI. point. This was an overhead of our work in the social democracy where there were certain limits to what we 32. Under these conditions, as we do today, we would skil- were able to put forward in official Labour Party mate- fully and in a rounded-out way, explain the inability

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of a Keynesian programme to deliver long-lasting re- armchair or side-line to engage with the working class forms in favour of the working class. We would call for and, together with it, helping to change consciousness a socialist government, a programme of public own- and increasing identification with socialism.” ership and workers’ control and management of the economy. We would also actively warn of the dangers 37. Were we to take the advice of BW and his supporters, of only taking partial measures against capitalism and this would have catastrophic consequences for our the need for a thoroughgoing eradication of capital- ability to reach new layers of the working class and ism. This transitional approach, sadly, seems to be a precisely to change consciousness in a socialist direc- book sealed with seven seals for BW and the handful tion. The role of the transitional programme is to con- of people who support him. nect with existing consciousness using day-to-day and immediate demands and point to the need for the socialist transformation of society. Method matters 38. For example we put forward the demand of tax increases 33. Our role, especially today given the level of conscious- on the rich and big business and a 50% levy on the unin- ness, is to take the experience of the working class and vested capital of the major corporations. We also call for the mass opposition that is developing to austerity as a an emergency programme of public investment to build starting point and develop our programme from that, new homes, and rebuild public services, transport and including all the necessary demands that lead to the infrastructure, etc. Some of these could be described as conclusion of the need for socialism. reformist demands if left in isolation. However, linked to the nationalisation of the commanding heights of the 34. As we have pointed out many times, never in history economy under democratic workers’ control and man- has the gap – the ‘scissors’ – between the objective agement and a socialist plan of production, they form situation of capitalism and the outlook of the working an essential part of a Marxist programme today. class, aggravated by the absence of organisation, particularly mass workers’ parties, been so evident. 39. We would also give full support for to a struggle for any and all reforms by trade unionists and the wider 35. Therefore, while fighting for a democratic, socialist working class. Moreover, even the struggle for partial planned economy in the programme of socialists and demands that we put forward, against the backdrop of Marxists, it is necessary to put forward fighting transi- this terrible crisis, tend to come up against the limits of tional demands in the current situation. These include what the system can afford and pose the need for more partial demands on wages, conditions and demands decisive measures against capitalism. Ed Miliband’s on governments on an array of issues. pathetically modest pledge to freeze energy prices from 2015 for 20 months has produced a furious reac- 36. As Peter Taaffe explained in his introduction to a tion from the energy companies who are threatening a Socialist Party reprint of Trotsky’s Transitional pro- strike of investment and power shortages. This poses gramme in 2010: the question in the minds of workers of the need to nationalise the sector completely. “The need for a transitional programme in this era aris- es from the mixed consciousness of working-class peo- 40. The weakness of the capitalist system in this period, its ple. This consciousness will be shaken and changed by drive to counter-reforms, has limited the ‘room to ma- the march of events. noeuvre’ for those who base themselves on a Keynes- ian solution. Paul Krugman, and some of the figures “But the development of a rounded-out socialist con- around the Common Weal and Red Paper Collective in sciousness, firstly of the most politically developed lay- Scotland, put forward in reality very limited proposals, ers and then of the mass of the working class, can also constrained by seeking to operate within a diseased be enormously facilitated by a transitional approach capitalism that can offer little in the way of reforms. and programme. However, capitalist governments and even left governments in the future may be forced, under mass pres- “This provides a bridge from the consciousness of sure from the working class, to take more far reaching working people today to the idea of socialist change. Keynesian measures. Left Keynesianism/reformism Sectarians have no need for such a bridge because is likely to emerge as a significant force in the labour they have no intention of passing over from the study, movement at a certain stage.

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Taking account of consciousness 46. Of course while supporting increased taxes on the rich and big business, we point out that the capitalists will 41. Working class consciousness and organisation have find a million ways to avoid and evade tax. They threat- been thrown back, as has the idea of socialism as a en to go on an investment strike, to move their mon- viable alternative to capitalism following the collapse ey abroad, etc. That is why we explain that a socialist of the Stalinist states after 1989-90. Marxists therefore government would bring the banks and big business have to put forward a combination of what are effec- into democratic public ownership with a monopoly tively demands for reforms, including wealth redistri- of foreign trade, including capital controls, as part of bution, increased taxes on the rich, a programme of a socialist plan. public spending to create employment and increased wages alongside far reaching socialist measures. This 47. BW has clearly been disorientated by the complica- is especially the case in the absence of the former so- tions that have faced Marxists since the early 1990s. cial democratic parties, like the Labour Party, that This was reflected in his long period of political inac- used to raise these ideas. tivity and, unfortunately, the drawing of ultra-left conclusions, which have been evident since he reengaged 42. BW and his co-thinkers clearly believe that we can with the party in 2012. This political adaptation, it skip over the current complications of consciousness seems, has been reinforced by the relative and tempo- and proceed to demanding the socialist order. Thus rary slowness in the change of political consciousness he goes on to criticise our approach when we raise among broad layers of workers following the crisis. the idea of wealth redistribution: “Socialism has got absolutely nothing to do with a redistribution of the 48. “In truth there is a deeper process going on [in rela- existing wealth of society. This is a crude appeal to the tion to the adaptation of the CWI to Keynesian ideas] emotions and isn’t scientific. Socialism means break- that is entwined with a blunting of class consciousness ing the fetters that capitalism places on the means of in general.” BW makes an important error here, but production in order to raise the level of wealth of so- one that is instructive for us. Socialist Party Scotland ciety as a whole and usher in a new mode of produc- and the CWI believe it is too one-sided to say there has tion where the exploitation of the working class will be been a “blunting of class consciousness” in the last abolished.” period. It is true that socialist consciousness has been driven back, as well as working-class organisation in 43. Genuine wealth redistribution is not possible on a sus- the form of mass workers’ parties and trade union tained basis under capitalism and it is correct for us to structures. But class polarisation has sharpened con- skilfully seek to counter illusions that it can. Only the siderably. There is a burning class anger that, where an socialist transformation of society, public ownership outlet has been available, has burst into the open. That and control of the economy can end wealth inequality was our experience in the 30 November 2011 public that is inherent in the capitalist system. However, not sector strike when two million workers took action to include such demands as part of our overall social- against pensions as well as the mass trade union-led ist programme would make it more difficult to connect demonstrations that have been organised. It is also with the consciousness of broad sections of the work- our experience in the Bedroom Tax campaign that has ing class today who can be open to socialist ideas. seen an outpouring of working-class rage against the ConDem coalition. Internationally, it is also evident 44. Workers, young people and the poor are emotional, in the series of general strikes in southern Europe, the angry and outraged at the massive inequality of wealth, revolutionary movement in North Africa, and the mass unprecedented in world history, which has exploded movements in Turkey and Brazil. under neo-liberal policies and has accelerated since the crash in 2007-08 as a result of savage austerity. New mass workers’ party 45. The idea that we do not articulate that anger and see it as an important development of consciousness in 49. “Should a new workers’ party begin to take off the CWI our programme by advocating wealth redistribution, would find themselves participating in a broad party wealth taxes, increased wages, etc., as part of our pro- where the majority of the leadership would adhere gramme would leave Marxism as a dry, arid concept, to left Keynesianism. In that project the CWI, despite completely divorced from the realities of working- its traditions and structures, would have an econom- class life. ic policy practically identical to the left reformists in

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the movement. Far from the CWI being the Marxist 53. We are prepared to bloc, in a principled way, with spine of such a formation it would become the cen- those trade union leaders who support the idea of a trist underbelly of a left reformist project.” The incor- new party, the realisation of which would represent a rect position of BW on the attitude of Marxists to the huge step forward. At the same time, before and fol- emergence of new mass workers’ parties is illustrated lowing the formation of such a party, we would put in the quote above from his blog. The Socialist Party forward our distinct Marxist programme based on and the CWI were unique on the left in the early 1990s public ownership of the commanding heights of the in understanding the changed character of the Labour economy, workers’ control and management and a Party in Britain and other former bourgeois-workers’ socialist planned economy. But according to BW, we parties across Europe and internationally. Losing their have abandoned the centrality of the LTRPF “because working-class base and shifting to a neo-liberal posi- it allows the CWI to orient towards the lefts in the trade tion had over time, transformed them into out-and- union bureaucracy”. out capitalist parties, posing the need for the building of new mass working- class formations. 54. There is nothing in the approach taken by the Socialist Party and the sections of the CWI towards new left for- 50. We have campaigned in Scotland and Britain for the mations that would allow such conclusions by BW and trade unions to break from Labour and help estab- his supporters to be drawn. They clearly have no un- lish, along with the non-affiliated trade unions, a new derstanding or knowledge of the work carried out by party to represent the working class and young people. our forces in Greece (SYRIZA, Initiative of 1,000), Ger- This idea has been taken up by the leadership of the many (WASG, Die Linke), Scotland (SSP, Solidarity, RMT and other trade unionists, with our support and SACC, TUSC) England and Wales (Socialist Alliance, involvement through TUSC for example. The condi- TUSC), South Africa (WASP), Brazil (P-SOL) and Spain tions for the emergence of a new workers’ party will (IU) among many others who have and are participat- be speeded up by a combination of mass struggle and ing in or initiating left parties and formations. The CWI also if a Labour government led by Miliband is elected has an unparalleled record and ‘body of work’ in de- in 2015. fending a Marxist programme and organisation while seeking to build fighting mass parties of a broad char- 51. The formation of a new party, if done in the right way, acter. would represent a huge step forward and would have a big impact on working class consciousness. Engels 55. All this seems to be a closed book to BW, based on the commented that one concrete step forward for the evidence of his ‘blog’ and the document of the group working class was worth a dozen programmes. It is of eleven who are raising criticisms of the Socialist Par- true that it is most likely the policy and programme of ty and the CWI. Their largely academic and ultra-left such a party would, initially, have a left reformist char- conclusions flow from a misunderstanding of the real acter; nevertheless it would potentially attract tens objective situation in relation to the trends in the capi- and even hundreds of thousands to its banner, offer- talist economy, the developments in working-class ing major opportunities to strengthen immeasurably consciousness and the role of Marxist ideas today. It the already important base that Marxists have in the has also led to them making fundamental mistakes on working class and trade unions today. the need for a skilful and all-round transitional programme. Their position does not offer us a way for- 52. This would involve us having to skilfully take up the left ward in the urgent task of building our forces in the reformist ideas expressed not only by leaders of such period ahead. a party but also existing in the outlook of many workers and young people. Our aim would be to convince through patient discussion and experience the need for a fully developed Marxist programme for the eradication of capitalism. However, were we to follow the advice of BW we should be condemning demands like wealth redistribution as “having nothing to do with socialism”. We would lecture those workers who have illusions in reformism that they were guilty of participating in a “pact with the left wing of the bourgeoisie”.