Cyber Nuts and Democrats (2001)

Workers Vanguard No. 754, 16 March 2001

Cyber Nuts and Democrats

Letter

8 December 2000

Dear ICL,

While reading the articles posted on David North’s “World Socialist Web Site,” one can’t help but detect a change in position before and after the U.S. presidential election. Before the election their position seemed to be that both major parties were equally reactionary. Now with all of what’s been happening since, they have stated that the extreme right wing which controls George W. Bush would implement the most sweeping attacks on the working class in history should Bush ultimately prevail. If this is the case why did they not take this position before the election? They seem to think that because the vote was so close, the reactionaries are now seizing the opportunity to steal the election and create a free market police state. If Bush had won decisively I guess he would still be a “compassionate conservative.”

There is no doubt in my mind that the Republicans used intimidation and fraud to assure a Bush victory in Florida. And the articles on the WSWS have been illuminating in exposing this fact. But consistency in positions seems to be lacking.

I would be interested to know what [you] think, not so much about the Northites but about the whole election circus.

In Struggle, Timothy L.


WV Replies: Timothy L. might have missed it, but we dealt with the election circus in our article “White House Scramble” (WV No. 746, 17 November 2000). As for David North’s Socialist Equality Party (SEP) and World Socialist Web Site, this gang will say anything one day and the opposite the next if it appears to suit their immediate opportunist appetites. The one consistent feature of their pronouncements is that they reflect, albeit often in quite weird ways, mainstream liberal public opinion.

When U.S. imperialism launched a wave of terror bombing against Iraq in December 1998, North echoed the patriotism being whipped up by invoking films like Patton and Saving Private Ryan in order to salute the military commanders of U.S. imperialism in World War ll because “they, at least, led their armies against an enemy fully capable of fighting back” (19 December 1998). Respectfully debating professional anti-Communist Ronald Radosh, who had published an article praising McCarthyism, North sent a letter to the New York Times (22 October 1998) obscenely claiming that the Trotskyists had been there first, writing: “Before the cold war, anti-Stalinism was associated principally with the Socialist left — above all with Trotskyists.”

Before last year’s presidential elections, the SEP bizarrely claimed that both capitalist parties had displayed “populist trappings” (3 October 2000) and wrote that Al Gore had adopted the “posture of a populist opponent of powerful corporate interests.” But their subsequent material is positively surreal, arguing that the Florida ballot flap showed “that the attack on the principle of popular sovereignty raised the specter of authoritarian and dictatorial forms of rule” (8 December 2000). In a speech posted a few days later, North talked of “a political crisis so immense, so fundamental” as to “call into question the whole governmental structure.” North took us to task for stating the obvious: “The Gore-Bush feud is at this point more like a tempest in a teapot than a political crisis for the bourgeoisie.” He continued, in truly demented fashion (his italics): “The beginning of a revolutionary crisis in the very bastion of world capitalism — and that is the essential significance of the present developments — has introduced into the world situation a factor of extraordinary and almost incalculable magnitude.”

Cynical crisis-mongering has long been the stock in trade of these political bandits. Like the rest of the fake left, albeit with their own outlandish twist, the Northites used the turmoil around the elections to give backhanded support to the Democrats. The SEP’s Web postings are filled with paeans to the supposed “traditions of American democracy” being trampled underfoot by Bush, the Supreme Court et al. In his speech, North even makes an explicit analogy to the “irrepressible conflict” with the Southern slaveholders on the eve of the Civil War — ironic indeed coming from an outfit which has echoed the racists in opposing defense of affirmative action, among other things.

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As for David North’s Socialist Equality Party (SEP) and World Socialist Web Site, this gang will say anything one day and the opposite the next if it appears to suit their immediate opportunist appetites. The one consistent feature of their pronouncements is that they reflect, albeit often in quite weird ways, mainstream liberal public opinion.
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When North was labor editor of the now-departed and unlamented Bulletin in 1972, he enthused over a “developing break between the labor movement and the Democratic Party” based on his “exclusive interview” with anti- Communist Steelworkers bureaucrat I. W. Abel (Bulletin, 24 July 1972). This was at a time when the Cold War AFL-CIO labor bureaucracy under George Meany stood to the right of significant sections of the ruling class on the burning question of the Vietnam War. North reprinted excerpts from a speech to the AFL-CIO convention in which Abel “broke” with Democratic “peace” candidate George McGovern, meticulously editing out Abel’s endorsement of McGovern’s right-wing Democratic Party rival. North & Co. advanced a “labor party” platform in that period even Meany might have embraced, saying nothing about either the war or the struggle for black rights!

In 1993, the Northites cynically pointed to the pro-capitalist policies of the labor tops in order to write off the trade unions entirely as workers organizations. Today, they chastise the labor tops for not fighting hard enough against the “extreme right-wing elements that control the Republican Party” (“AFL-CIO Rally in Tallahassee: Unions Offer No Strategy to Fight Denial of Voting Rights,” 8 December 2000).

Bush & Co. are plenty right-wing, but stealing an election is as Americas as apple pie — hardly a sign that this imperialist ruling class is about to dispense with the stability of bourgeois democratic rule. As we wrote in response to the bleating of the reformists for “real democracy”: “This is capitalist democracy, which is nothing but a screen for the iron dictatorship of capital.”

How David North Embraces Karl Kautsky 3 (1999)

From Spartacist Pamphlet: Imperialism, the “Global Economy” and Labor Reformism (September 1999)

How David North Embraces Karl Kautsky

The “Global Economy” and Labor Reformism
(Part 3)

The IMF and World Bank - Brutal Imperialist Debt Collectors

The view that “transnational” corporations transcend the nation-state system leads to the notion that certain international economic agencies, like the World Bank and the International Monetary Fund (IMF), have now become a kind of world capitalist government. In a 1992 speech IC leader David North contends:

“Not even at the height of its glory did the British Empire possess even a fraction of the power over its colonial subjects that the modern institutions of world imperialism – such as the World Bank, the IMF, GATT and the EC-routinely exercise over the supposedly independent states of Latin America,Asia, Africa and the Middle East.”
– Capital, Labor and the Nation-State (1992)

The idea that the World Bank and IMF exercise greater power over the workers and peasants of India and Pakistan than did the British colonial army and police is pacifistic nonsense.

No less absurd is the idea that these institutions are powers unto themselves, independent of the imperialist nation-states. The IMF and World Bank act in the Third World (and now in the former Soviet bloc) as brutal debt collection agencies, using blackmail to force through the imposition of draconian austerity policies on the working masses and peasants of the semicolonial countries. But these international agencies act at the behest and in the interests of the major capitalist powers, not autonomously of them and certainly not above them.

The policies and, indeed, very existence of the IMF, World Bank, World Trade Organization, European Union (formerly the European Community) et al. are based on compromises among rival imperialist bourgeoisies represented by their national capitalist states. Both the IMF and World Bank were conceived at the 1944 Bretton Woods conference and, as an article in Monthly Review (September 1995) noted, “ultimately reflected the interests of the world’s overwhelmingly dominant power at that time – the United States.” But that has changed with the waning of U.S. imperialism’s hegemonic position.

For example, last year the U.S. proposed that the IMF and World Bank write off a large part of the money owed them by especially poor countries like Uganda. Washington officials argue that this is necessary to free up government funds for spending on infrastructure, for tax breaks to encourage new private investment, etc. However, Germany and Japan for months blocked the U.S. plan and succeeded in watering down any substantial debt reduction by the IMF/World Bank. As the growing conflicts between the major imperialist powers reach a certain point, institutions like the IMF and World Bank will be reduced to empty shells, stripped of their present financial resources and political influence. A glimpse of this came in 1995, when Tokyo and Berlin openly challenged Washington’s demand that $30 billion in IMF funds be used to bail out (U.S. banks in) Mexico.

“Ultra-Imperialism,” from Kautsky to North

The current authority exercised by the IMF, World Bank, World Trade Organization et al. derives from the power of the imperialist states for which they function as agents. Let us imagine that a left-nationalist government comes to power in Mexico and repudiates that country’s foreign debt. Will the IMF’s army invade Mexico and install a puppet regime? Will the IMF’s navy blockade Mexico’s ports? Will IMF agents confiscate the assets of the Mexican government held in other countries? No, since the IMF has no army, no navy and no agents empowered to confiscate any property anywhere. A Mexican government which repudiated its foreign debt would face economic sanctions and potential military action by the U.S. and other imperialist states.

Basically, the Northites have reinvented the doctrine of “ultra-imperialism” expounded by Karl Kautsky before and during World War I. The core of Kautsky’s theory, quoted by Lenin in his 1916 pamphlet Imperialism, the Highest Stage of Capitalism, went as follows:

“Cannot the present imperialist policy be supplanted by a new, ultra-imperialist policy, which will introduce the common exploitation of the world by internationally united finance capital in place of the mutual rivalries of national finance capital? Such a phase of capitalism is at any rate conceivable.”

For the International Committee, such a new phase of capitalism is not merely conceivable but is now here. To be sure, North & Co. do not deny a tendency toward imperialist war. But they do so by counterposing “transnational” corporations to reactionary nation-states. Corporations like IBM, Siemens and Toshiba are supposedly striving for a transnational capitalist order but are obstructed by the bad, old, obsolete nation-state system. On the contrary, the root cause of imperialist wars does not lie in the nation-state system as such, much less in nationalist and chauvinist ideology and demagogy. The imperialist nation-state is the fundamental political instrument by which transnational corporations, to use the Northites’ favored term, struggle to expand their markets and spheres of exploitation.

As Lenin wrote in opposition to Kautsky’s theory of “ultraimperialism”:

“The only conceivable basis under capitalism for the division of spheres of influence, interests, colonies, etc., is a calculation of the strength of those participating, their general economic, financial, military strength, etc. And the strength of these participants in the division does not change to an equal degree, for the even development of different undertakings, trusts, branches of industry, or countries is impossible under capitalism....

“Therefore, in the realities of the capitalist system, and not in the banal philistine fantasies of English parsons, or of the German ‘Marxist’ Kautsky, ‘inter-imperialist’ or ‘ultra-imperialist’ alliances, no matter what form they may assume, whether of one imperialist coalition against another, or of a general alliance embracing all the imperialist powers, are inevitably nothing more than a ‘truce’ in periods between wars. Peaceful alliances prepare the ground for wars, and in their turn grow out of wars.” [emphasis in original]

Spelling out the reformist implications of Kautsky’s theory, Lenin added: “It is a most reactionary method of consoling the masses with hopes of permanent peace being possible under capitalism.” Not surprisingly, Kautsky was to be a vehement opponent of the 1917 Bolshevik Revolution and the dictatorship of the proletariat which was erected by it to replace the rule of capital.

No less inherently reformist and anti-revolutionary is the contemporary Northite version of “ultra-imperialism.” If, to believe North, the competition among different imperialist powers has been subsumed by supra-national agencies, then the traditional Marxist position in inter-imperialist conflicts – that the main enemy is at home – is clearly “outmoded.” When it comes to the national and colonial questions, as we will see, North & Co. rival the worst social-chauvinists of Lenin’s day.

The U.S. Imperialist State and the Exploitation of Mexico
The central role of the imperialist state in what is currently termed the “globalization” of world capitalism is especially clear in the case of Mexico, U.S. imperialism’s most important neocolony. One-fifth of all industrial plant and equipment owned by U.S. corporations in Third World countries is now located in Mexico. Over the past 15 years, the actions of the U.S. government have been crucial in promoting and protecting American investment in that country. Among other things; this has meant an increasingly open role by U.S. imperialism in aiding and arming the Mexican government’s bloody repression against combative worker and peasant struggles (see “U.S. Hands Off Mexico!” WV No. 658, 27 December 1996).

Following the frenzied over-borrowing during the oil-price boom of the 1970s, in 1982 the Mexican government announced that it could not meet the scheduled interest payment on its foreign debt. The U.S. Treasury and Federal Reserve Bank immediately took over the “rescheduling” of Mexico's debts and those of other Latin American countries. This entailed the subsidization by the U.S government, via Mexico, of the major Wall Street banks. Harvard economist Jeffrey Sachs, an arch-“free marketeer,” wrote at the time:

“In the past five years the commercial banks have received large net transfers from the debtor countries, while the official creditors, including the creditor governments and the multilateral institutions, have made large net transfers to the debtor. Operationally, it can be argued that the official creditors are indeed ‘bailing out the banks’.”
– Brookings Papers on Economic Activity 4 (1986)

In the early and mid-1980s, American corporate investment in Mexico was effectively zero. In fact, the movement of capital across the Rio Grande (Rio Bravo) was in the other direction. Wealthy Mexicans were smuggling out billions and parking their money in Wall Street banks, U.S. corporate stocks and bonds, and Texas and California real estate. The turnaround in the Mexican and, more generally, Latin,American debt crisis came with the 1989 Brady Plan, named after then U.S. treasury secretary Nicholas Brady. This plan transformed the short-term bank debt of Latin American countries into long-term bonds guaranteed by the U.S. Treasury. In return, Washington levered open the Latin American economies to unimpeded exploitation by U.S. finance and industrial capital.

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If, to believe North, the competition among different imperialist powers has been subsumed by supra-national agencies, then the traditional Marxist position in inter-imperialist conflicts – that the main enemy is at home – is clearly “outmoded.”
___________________________________________________________________________

The Brady Plan opened the way for a massive American investment boom in Mexico. U.S. banks, mutual funds, insurance companies and corporations which engaged in manufacturing and services assumed that any money they placed south of the border would be fully protected by the fiscal resources and, ultimately, the political/military might of the U.S. capitalist state. The increasing weight of American capital in Mexico laid the basis for and was, in turn, reinforced by the North American Free Trade Agreement (NAFTA), which came into effect on New Year’s Day 1994.

Among its other disastrous consequences, NAFTA meant the economic destruction of millions of Mexican peasant smallholders who could not compete with the much cheaper and better-quality produce, centrally corn, imported from the highly mechanized farms of the American Midwest. Thus, the day that NAFTA came into effect saw a major peasant uprising led by the nationalist-populist Zapatista Army of National Liberation in the impoverished southern Mexican state of Chiapas. The bloody suppression of this uprising by the Mexican army was actively aided by Washington. In the first months of 1994, the Pentagon provided the Mexican army with an additional 3,000 military vehicles, including armored personnel carriers with water cannon, jeeps, trucks and tanks. At the same time, hundreds of U.S. troops were sent to Guatemala in the region bordering Chiapas (see “Pentagon Beefs Up Mexican Repression,” WV No. 604, 5 August 1994).

The sudden and unexpected Zapatista uprising exposed the fragility of the bourgeois order in Mexico, not least to the ever-wary eyes of foreign investors. Furthermore, the Mexican investment boom had reached a point of speculative frenzy. Prices on the Bolsa (stock exchange) bore no relation to actual or prospective profits. The Mexican government could not service its massively expanded foreign debt without devaluing the peso, which it did in December 1994, thereby precipitating a full-fledged financial panic. By year’s end, foreign, mainly U.S., investors had liquidated and withdrawn $23 billion in Mexican assets, more than twice the total value of U.S. direct manufacturing investment in Mexico at the beginning of 1994.

The financial panic was halted only when the U.S. government came up with a $50 billion “rescue package” – $20 billion directly from the U.S. Treasury, the balance from the IMF and the Bank for International Settlements (known as the central bankers’ central bank). Mexican finance minister Guillermo Ortiz later told American journalist Thomas Friedman that if Washington had not acted when and on the scale it did, “We would have had to declare a moratorium on debt repayments.” German and Japanese capitalists were displeased, to say the least, that no small amount of their money was being used to bail out U.S. banks, mutual funds and insurance companies. The German (and also the British) representative in the IMF took the unprecedented step of abstaining on the vote for the Mexican loan package, while Japan only grudgingly voted in favor. And the next time around, the German and Japanese representatives might vote against.

The Mexican financial crisis totally disproves the Northite theory of a new era of globally integrated capitalist production transcending the nation-state system. At the first sign of political unrest and financial overextension, American “transnationals” dumped every Mexican asset they could and repatriated their money back to their own nation-state, the U.S. of A. The flood of pesos into dollars was stanched only when the U.S. government, acting both directly and indirectly, vastly augmented the short-term financial resources available to the Mexican government. And the Mexican financial crisis both exposed and intensified the conflicts of interest among the major imperialist powers: the U.S., Germany and Japan.

Against Capitalist Imperialism For Permanent Revolution!

From its inception, capitalism has been a global system marked by conflicts among competing nation-states. The rise of the bourgeoisies in West Europe to wealth and power was directly linked to the conquest and colonization of more backward regions of the world – the Spaniards and Portuguese in Central and South America, the French in North America and the Caribbean, the British in North America, the Caribbean and the Indian subcontinent. A central characteristic of mercantile imperialism in the 16th-18th centuries was the attempt by the leading colonial powers to insulate their colonies and themselves from the world market by legal prohibitions and sanctions against trade other than between colony and “mother country.”

Economic development during the era of mercantile capitalism laid the basis for the industrial revolution pioneered by Britain in the early 19th century. Marx and Engels initially believed that industrial capitalism would be extended more or less uniformly on a worldwide basis. The founders of scientific socialism were by no means blind or indifferent to the monumental crimes committed by the Western powers against the indigenous peoples of Asia, Africa and the Americas. But they viewed such crimes as a historical overhead cost for the modernization of these backward regions. In an 1853 article, “The Future Results of British Rule in India,” Marx wrote:

“England has to fulfill a double mission in India: one destructive, the other regenerating-the annihilation of the old Asiatic society, and the laying of the material foundations of Western society in Asia....
“Modern industry, resulting from the railway system, will dissolve the hereditary division of labor, upon which rest theIndian castes, those decisive impediments to Indian progress and Indian power.”

This projection was not borne out by the actual course of development. While the Western bourgeoisies introduced certain elements of modem industrial technology (e.g., railroads) into their colonies and semi-colonies, the overall effect of capitalist imperialism was to arrest the social and economic development of backward countries. Thus, British colonial rule deliberately perpetuated and utilized traditional reactionary institutions such as the caste system in India and tribalism in sub-Saharan Africa.

Moreover, the economic development which was introduced under European colonial rule had a deformed character. Thus, the British built the railways in India only from the hinterland to the ports to facilitate trade with the imperialist metropolis. The rail lines did not connect the different regions of the Indian subcontinent. By contrast, railway construction in the United States during the same period was a prime factor in the economic and social integration of the American nation-state.

By the late 19th century, Marx and Engels had become champions of colonial independence and recognized that the modernization of Asia, Africa and Latin America could take place only within the context of a world socialist order. Thus, Engels wrote to Karl Kautsky in 1882:

“India will perhaps, indeed very probably, make a revolution and as a proletariat in process of self-emancipation cannot conduct any colonial wars, it would have to be allowed to run its course; it would not pass off without all sorts of destruction, of course, but that sort of thing is inseparable from all revolutions. The same might also take place elsewhere, e.g., in Algeria and Egypt, and would certainly be the best thing for us. We shall have enough to do at home. Once Europe is reorganized, and North America, that will furnish such colossal power and such an example that the semi-civilized countries will of themselves follow in their wake; economic needs, if anything, will see to that. But as to what social and political phases these countries will then have to pass through before they likewise arrive at socialist organization, I think we today can advance only rather idle hypotheses.” [emphasis in original]

In the 1880s, at the beginning of the era of modern capitalist imperialism, it was understandable that Marx and Engels assumed that proletarian socialist revolution would first take place in the advanced capitalist countries and that the socialist transformation of the more backward regions would gradually follow in consequence. However, imperialist domination and exploitation strengthened the bourgeois order in West Europe and North America, not least by infecting the working class in these countries with the ideology of national chauvinism and racism. As Lenin pointed out in his 1916 pamphlet, imperialist super-profits derived from the colonial world made it “economically possible to bribe the upper strata of the proletariat” in the advanced countries, providing a material basis for opportunism and social-chauvinism.

At the same time, imperialism tended to destabilize the traditional social order in backward countries, generating contradictions which Trotsky termed “combined and uneven development.” A sizable industrial proletariat, working with modern technology, emerged alongside the mass of impoverished peasants still subject to feudal-derived forms of exploitation. The day-to-day struggle against capitalist any pre-capitalist forms of exploitation was organically intertwined with, and reinforced by, the struggle for national independence.

Recognizing the international contradictions brought about by the era of modem imperialism, Leon Trotsky challenged the hitherto accepted sequencing of the world socialist revolution from the advanced to the backward countries. It was now possible that the proletariat of a backward country, leading the peasant masses in the struggle against feudal-derived exploitation and foreign imperialist domination, could come to power in advance of the workers of West Europe and North America. Such revolutions would severely weaken the bourgeois order in the imperialist centers while giving a powerful impetus to the revolutionary consciousness of the workers in the advanced capitalist countries.

Trotsky first developed this concept of “permanent revolution” at the beginning of the century specifically with regard to tsarist Russia, and it was validated by life itself in the Bolshevik October Revolution of 1917. In the late 1920s, in light of the experience of the defeated Chinese Revolution of 1925-27, Trotsky generalized the theory and program of permanent revolution to what is now called the Third World. Thus the section on “Backward Countries and the Program of Transitional Demands” in the 1938 Transitional Program states:

“The central tasks of the colonial and semicolonial countries are the agrarian revolution, i.e., liquidation of feudal heritages, and national independence, i.e., the overthrow of the imperialist yoke. Both tasks are closely linked with each other....
“The general trend of revolutionary development in all backward countries can be determined by the formula of the permanent revolution in the sense definitely imparted to it by the three revolutions in Russia (1905, February 1917, October 1917).” [emphasis in original]

David North vs. Permanent Revolution

As clearly stated in the Transitional Program, Trotsky and the Fourth International he founded regarded the struggle for national independence in backward countries as an integral and important component of the world socialist revolution. The Northites now maintain that in the supposedly new era of “globalized” capitalist production, national independence has become impossible and, indeed, reactionary. In a 1992 lecture, “Permanent Revolution and the National Question Today,” North pontificated:

“To the extent that Marxists attributed a progressive content to national liberation movements, it was because they were in some way identified with overcoming of imperialist domination and the legacy of backwardness, tribal and caste distinctions....
“That content is hardly to be found in any of the movements which presently claim to champion ‘national liberation.’ At any rate, whatever the subjective aims of different movements, the liberation of mankind cannot be advanced in this era of global economic integration by establishing new national states.”
– Fourth International (Winter-Spring 1994)

We have previously discussed at some length the Northites’ opposition to the democratic right of national self-determination (see “David North ‘Abolishes’ the Right to Self-Determination” WV Nos. 626 and 627, 28 July and 25 August 1995). What we want to emphasize here is that their position amounts to passive acceptance of imperialist oppression and exploitation of backward countries.

This can be seen very clearly in the case of Mexico. NAFTA represents a qualitative extension and institutionalization of the exploitation of Mexico by Wall Street. When NAFTA was first proposed in 1991, the Mexican, U.S. and Canadian sections of the International Communist League issued a joint declaration headlined, “Stop U.S. 'Free Trade' Rape of Mexico!” The fight against NAFTA, we maintained, “is a battle against American imperialist domination of Mexico” (WV No. 530, 5 July 1991).

What of the Northites’ attitude toward NAFTA? From a superficial reading of their press, one might assume they are implacably hostile to it. In their International Workers Bulletin (11 April 1994), they stated, quite accurately, that NAFTA “effectively puts the entire Mexican economy at the service of the needs of US transnationals and the Wall Street financial institutions, providing low-wage labor, inexpensive natural resources and vast tracts of land for them to exploit and a huge market for American manufactured goods.” Some months later, they wrote that “NAFTA means nothing more than the economic recolonization of Mexico” (IWB, 16 January 1995). This is actually an overstatement, since Mexico had already been an economic neocolony of U.S. imperialism for decades before NAFTA.

Yet the Northites have never opposed what they themselves call the “economic recolonization” of Mexico, either before NAFTA was implemented or even when its bloody consequences could be seen in the corpses of hundreds of impoverished Indian peasants in Chiapas. A few months before NAFTA came into effect, a political line statement in IWB (20 September 1993) declared: “American workers must not line up behind either side in the capitalist debate over NAFTA,, but must adopt an independent class standpoint which is based on the genuine, i.e., international, interests of the working class.”

What the Northites meant by “an independent class standpoint” was “neutrality” toward the intensified exploitation and domination of Mexico by U.S. imperialism. In fact, there was no debate within the American capitalist class, aside from a few maverick bourgeois pseudo-populists like Ross Perot and Pat Buchanan who opposed NAFTA from a chauvinist standpoint, as did the AFL-CIO bureaucracy. The large majority of the American imperialist bourgeoisie supported and still supports NAFTA wholeheartedly. More fundamentally, the Northites treat imperialist subjugation of backward countries as simply a matter of “debate” within the capitalist class. By this logic they should in retrospect not have opposed the Vietnam War, since this generated a real debate – indeed, a sharp division – within the U.S. ruling class. In short, North & Co. did not and do not support the actual struggles of the Mexican working people against NAFTA and its effects.

One has only to look at the Northites’ attitude toward the Chiapas peasant uprising of early 1994. This unexpected leftist-led revolt gripped the world’s attention. But not the Northites’. The self-described “weekly socialist newsjournal” of the American Northites ran one article on the Chiapas uprising during the period when it was convulsing Mexico and causing no small concern to U.S. “transnational” corporations and banks. This article, “Mexican Government Massacres Hundreds” (IWB, 10 January 1994), was simply a piece of descriptive journalism which raised no programmatic demands whatsoever. The Northites did not call for the defense of the peasant uprising against the Mexican neocolonial bourgeois state. They did not call for the withdrawal of the Mexican army from Chiapas. They did not call for the release of Zapatista militants and peasant supporters imprisoned and often tortured by the Mexican army and police. They did not call for a halt to U.S. arms shipments and other aid to the Mexican military. And, of course, they did not call for the abrogation of NAFTA, one of the key demands of the uprising.

In sharpest contrast, our international tendency actively mobilized in defense of the Chiapas uprising from a proletarian socialist standpoint. In the U.S., the Spartacist League joined in solidarity rallies outside the Mexican consulates in New York City and San Francisco. Our comrades of the Grupo Espartaquista de Mexico (GEM) participated in a mammoth anti-government protest in Mexico City. A statement issued by the GEM, and published in the Mexico City daily El Dia, declared:

“As a Marxist revolutionary organization, the GEM emphasizes to those who seek to fight against capitalism and imperialism, that it is the power of the working class, and not rural guerrilla warfare, which if organized behind the program of international socialist revolution can defeat NAFTA and mobilize the dispossessed peasants and all the oppressed against the misery andbarbarity of the capitalist system. In the face of repression in Chiapas, it is an urgent duty for the working class to defend thecourageous Indian insurgents and all the victims of bourgeois repression.”
–translated in WV No. 592 (21 January 1994)

The very different responses of the ICL and North’s IC toward the Chiapas uprising reflected our adherence and their opposition to the perspective of permanent revolution. By the beginning of the 20th century, tsarist Russia had become the weak link in the European imperialist system. In a parallel way, Mexico has now become the weak link in the American imperialist order in its Western hemispheric base.

For World Socialist Revolution - Reforge Trotsky’s Fourth International!

The massive inroads of American capital – at all levels – have fatally undermined the nationalist-corporatist economic structure upon which the political hegemony of the long-ruling Mexican Institutional Revolutionary Party (PRI) has rested. A popular upheaval in Mexico, toppling the neocolonial PRI regime, would have a powerful radicalizing effect on the millions of Hispanic workers in the U.S., many of whom retain strong family ties to Mexico or Central America. As we stated in “Mexico and Permanent Revolution,” published in the first issue of Espartaco (Winter 1990-91), journal of the GEM:

“The Mexican workers revolution will succeed where the bourgeois revolutions failed, because it will and must be internationalist from the beginning. It must come to the aid of theheroically struggling working people of Central America andextend to the north, in common struggle with the workers andoppressed in the very entrails of the imperialist monster.... This is the goal toward which the Grupo Espartaquista de Mexico is working as part of the International Communist League in the fight to reforge the Fourth International as the world party of socialist revolution.”
– WV No. 518 (18 January 1991)

Whereas we recognize that the Mexican proletariat, leading the rural toilers and urban poor, could strike the first decisive blow against American capitalist imperialism, the Northites maintain that Mexican workers are powerless to move forward unless and until a socialist revolution is on the order of the day in the United States. In a sense, North & Co. have recreated and adopted the Stalinist caricature of Trotskyism, that international socialist revolution means simultaneous revolutions in all major capitalist countries, both advanced and backward. At the time of the Mexican financial crisis in early 1995, the IWB (16 January 1995) wrote: “The events in Mexico demonstrate once again that the only way forward for the working class in the oppressed countries is to unite with their class brothers and sisters in the imperialist centers in a common struggle for the overthrow of capitalist exploitation and the establishment of socialism.” But what do the Northites tell the Mexican workers to do until the mass of workers in the U.S. move to overthrow the capitalist system? The answer is effectively nothing.

By counterposing an abstract conception of socialist internationalism to the actual struggles of the workers, rural toilers and oppressed peoples, the Northite tendency inexorably puts forward a defeatist line toward those struggles. In practice, the Northites oppose socialist revolution both in the U.S. and Mexico, as elsewhere.

Five years ago, as he announced the death of the Soviet Union and of the trade unions in the West, David North effectively proclaimed himself and his IC to be the leadership of the international proletariat. Yet while declaring themselves to be "clearly recognized as the only Trotskyist tendency," the Northites have transformed themselves into "Socialist Equality" parties whose program even at face value is profoundly reformist. Thus, a central aspect of the U.S. SEP’s election platform last November was the stale, old reformist proposal to promote greater equality by “revising” the bourgeoisie’s tax codes. At the same time, the SEP demonstrated its sneering approach to any struggle for social equality by highlighting its opposition to affirmative action programs for minorities and women.

Indeed, while the Northites’ open rejection of the right to self-determination may be a new innovation, getting there was not a very big step. They have long dismissed racial and other forms of oppression born of capitalism as somehow irrelevant to the “class struggle” – by which they meant the pursuit of a crude workerist adaptation to the Cold War labor bureaucrats. Their call on the AFL-CIO tops to form a "labor party" in the early 1970s – raised at the height of the Vietnam antiwar protests and militant struggles for black freedom – took up neither opposition to the imperialist war nor the fight for black liberation.

As we concluded in our article on the IC’s denial of the right of national self-determination (WV No, 627, 25 August 1995):

“The ICFI’s ‘theories’ are nothing but cowardly rationalizations for sneering at the struggle against chauvinist oppression, and for writing off the economic defense organizations of the working class, in order to boost their own petty advantage. The Northites’ policies are those of poseurs seeking a niche as spoilers. Otherwise, they are utterly devoid of, and antithetical to, a program which can lead the international working class and oppressed to a socialist victory over their exploiters.”

How David North Embraces Karl Kautsky 2 (1999)

From Spartacist Pamphlet: Imperialism, the “Global Economy” and Labor Reformism (September 1999)

How David North Embraces Karl Kautsky

The “Global Economy” and Labor Reformism
(Part 2)

Economic “Globalization”: Myths and Realities

An article in the recent special issue of the Nation (15 July 1996) devoted to the question of “globalization” begins with the portentous statement “Economic globalization involves arguably the most fundamental redesign and centralization of the planet's political and economic arrangements since the Industrial Revolution.” Similarly, Australian Northite leader Nick Beams asserts that “globalization refers to the internationalization of the circuit of productive capital” and that this constitutes a “qualitative transformation” of the world capitalist system (International Workers Bulletin, 15 July 1996).

In fact, the history of industrial capitalism was marked by a previous shift, far more profound than the present one, in the geographical distribution of production. The Industrial Revolution began in England and Scotland in the early 19th century and then spread by mid-century to France and the Low Countries (Belgium and Holland). In the late 19th century, the “New Industrializing Countries” of the day were Germany, the United States and Japan.

Writing in the 1890s, Friedrich Engels noted that Germany, which at the time of the 1848 Revolution was economically dominated by peasant agriculture and small-scale artisan manufacturing, had become “an industrial country of the first rank.” During the same period the United States, too, became an industrial country of the first rank. American industrial development was heavily dependent on investment by British capital, especially in the key sector of railway construction. Following the overthrow of the feudal order with the Meiji Restoration of the 1860s, Japan deliberately emulated the advanced capitalist countries of the West, beginning by exporting light manufactures produced by cheap unskilled labor. Tsarist Russia also experienced rapid industrial growth between the 1890s and World War I, largely financed by West European, especially French, capital.

By the beginning of the 20th century, however, the existing advanced capitalist (i.e., imperialist) countries had achieved such dominance over more backward regions that they were able to arrest the development of new rival industrial powers. Hence the present global division between the so-called First World and the Third World.

Since the Northite International Committee maintains that world capitalism has recently undergone a “qualitative transformation,” one would expect this ostensibly Marxist organization to substantiate their analysis with a comprehensive study of the relevant economic data. For example, Lenin’s 1916 work, Imperialism, the Highest Stage of Capitalism, contains pages of statistical tables illuminating and substantiating its analysis on all aspects. By contrast, the writings and speeches on “globalization” by North and his henchmen are devoid of even cursory data on trends in global production, investment and trade. Their 1993 pamphlet, The Globalization of Capitalist Production & the International Tasks of the Working Class, contains not a single statistical table or graph.

A few basic and easily accessible statistics debunk the notion of a qualitative transformation of world capitalism. Western/Japanese investment in the so-called Newly Industrializing Countries totaled some $100 billion in 1993, a peak year. Yet this record amount was only 3 percent of total capital investment in North America, West Europe and Japan. In other words, the imperialist bourgeoisies still invest more that 30 times as much in their own “First World” as in the Third World. American capitalists invest 9 cents in Canada and West Europe and just 5 cents in the entire rest of the world for every dollar they expend on productive assets in the United States.

Why, then, all the hullabaloo about economic “globalization”? For the past few decades, and especially since the destruction of the Soviet Union, the world capitalist economy has in certain respects been returning to the norms of the pre1914 imperialist order. To maintain a sense of perspective, one should understand that only in the early 1970s did the ratio of world trade to global production once again reach the level it had attained in 1914, on the eve of the first imperialist world war. Yet the current theoreticians of “globalization” rarely if ever mention Lenin’s seminal study of the rise of the imperialist system, to which they add little or nothing, save confusion. As we noted in an earlier article (“David North ‘Abolishes’ the Right to Self-Determination,” Part One, WV No. 626, 28 July 1995):

“The idea of an ‘era of global economic integration’ which North presents as if it were yet another of his unique ‘theoretical breakthroughs’ has been known to the Marxist movement for over a century now. It’s otherwise known as imperialism!”

The term “globalization” refers to certain significant quantitative changes in the contemporary structure of world production and trade. In 1970, 85 percent of all exports (in value terms) from Africa, Latin America and Asian countries other than Japan consisted of agricultural produce, oil, mineral ores and other primary products. Since then exports of manufactured goods from Third World countries have increased by an average rate of 15 percent a year in real terms and now make up well over half the value of their total exports. Much of this industrial , output is financed and organized by Western/Japanese corporations either directly or through local subcontractors, licensees, etc. However, the growth of internationally competitive manufactures in East Asia and Latin America is reversible and cannot continue at anything close to the rate of increase of the past few decades. That is a political, economic and, indeed, mathematical certainty.

There’s a saying in American business circles: there are liars, damn liars and statisticians. One can always select and present statistics to be deliberately misleading. One of the most common ways of doing this is to show dramatic percentage increases from a low initial base and then to project similar percentage increases into the future. For example, a worker making $5 an hour who gets a dollar raise has received a 20 percent increase while a worker making $13 an hour who gets a dollar raise has received an 8 percent increase. But the second worker is still vastly better off than the first. And the low-wage worker well knows he is not going to keep getting a 20 percent raise every year for the next ten years.

However, much writing and discussion on the world economy – by both bourgeois ideologues and leftist intellectuals – is based on this kind of fallacious methodology. For example, between 1950 and the mid-1970s Japan’s national output grew at an average annual rate two to three times greater than that of the U.S. In the 1970s, big-name American intellectuals wrote well-publicized books – e.g., Herman Kahn’s The Emerging Japanese Superstate, Ezra Vogel’s Japan as Number One – predicting that Japan would overtake the United States as the world’s leading capitalist economic power by the end of the century. Not long after these books. came out, the Japanese growth rate sharply decelerated and during the past decade Japan’s economy has been stagnant. Today, Japan’s national output is still less than half that of the U.S.

The current apocalyptic vision of economic “globalization” is based on the same faulty premises as the “Japan will be number one” literature of the 1970s. For example, between 1985 and 1994 China’s share of world exports of footwear went from 1.5 percent to 15.5 percent, an increase of 1,000 percent. If one projects the same increase for the next ten years, China will account for 150 percent of world trade in footwear, a mathematical impossibility. In another example, investment in plant and equipment by Western/Japanese corporations in backward countries, now including East Europe and the ex-USSR, increased last year by 13 percent. But it is wrong to assume this trend will continue indefinitely into the future.

The Development of Modern Imperialism

To understand the actual significance and limits of the recent changes in the world economy, it is necessary to view these changes In a broad historical perspective. In his 1916 pamphlet, Imperialism, the Highest Stage of Capitalism, Lenin described modern imperialism as that epoch of capitalism marked by the export of capital and the division of the world into “spheres of influence” by a few major advanced capitalist states. The two key institutions of the pre-1914 imperialist order were colonialism and the gold standard.

Particularly Britain and France, but also other West European countries, the United States and Japan exercised direct state power over hundreds of millions of toilers throughout the world. British plantation owners in India did not have to worry that the Indian government would impose high taxes on their property or enact laws favorable to labor since the government in India was their government. Compared to British India, foreign investment in China in the pre-1914 era was relatively slight, because the country was beset by political disorder and was an arena of conflict among a number of rival imperialist powers.

At the same time, the gold standard assured a degree of financial integration among the advanced capitalist countries which has never been matched since. Exchange rates between currencies were fixed, there were few or no restrictions on the international movement of capital, and real interest rates were stable and closely linked in the major financial capitals –London, Paris, New York. British holders of American railway bonds did not have to worry, that their assets would be devalued by hyperinflation or by the depreciation of the dollar against the pound.

Under these conditions the globalization of capital flourished as never before or since, as can be shown with the following few statistics for Britain and France (taken from Herbert Feis, Europe – The World’s Banker 1870-1914 [1964]). The income derived by British capitalists from their foreign assets increased from 4 percent of total British national income in the 1880s to 7 percent by 1903 to almost 10 percent on the eve of World War I in 1914. Foreign investments were concentrated in Britain’s own colonies (especially India, South Africa, Canada and Australia) as well as in the United States and, to a lesser extent; Argentina. By 1914, total productive assets held by British capitalists outside Britain amounted to well over one quarter of the capital stock within Britain itself!

While the globalization of pre-1914 British capitalism was historically unique, the role of foreign investment for French capitalism in this period likewise greatly exceeded that of any present-day imperialist country. Between 1909 and 1913, almost 5 percent of French national income was derived from French investments abroad (mainly in Russia, Turkey; the Balkans and France’s own African and Asian colonies). By 1914, the total value of French long-term foreign investment (45 billion francs) amounted to 15 percent of the productive wealth within France (295 billion francs).

Now let us look at comparable figures for the United States at present. In 1994, total income derived from the foreign assets of American capitalists, both direct investment and stock and bond holdings, was $167 billion. That amounted to slightly less than 2percent of the U.S. gross domestic product of $6.7 trillion. The current total value of American direct foreign investment is about one trillion dollars, slightly less than 10 percent of the $10.5 trillion in privately owned industrial assets (plant and equipment) within the United States. In the case of Japan, the relative weight of foreign investment is even less than it is in the U.S., and in the case of Germany it is substantially less.

World War I and the Russian Revolution

As the above figures indicate, World War I and the 1917 Bolshevik Revolution in Russia brought about a profound and long-lasting disruption of the world capitalist economy. To begin with, the war killed off the gold standard. All combatants financed their huge, unprecedented military expenditures by printing money while imposing tight controls over all international transactions. When the war ended in 1918, price levels in the major capitalist countries bore no relation whatsoever to either prewar foreign-exchange parities or real purchasing power.

An attempt to resurrect the gold standard in the mid-1920s was buried under the wreckage of the Great Depression of the 1930s. That decade saw the collapse of world trade, the rise of “beggar thy neighbor” trade protectionism, the widespread use of foreign-exchange controls (especially in Nazi Germany) and the establishment of regional economic blocs dominated by a single imperialist power (e.g., Japan’s “Greater East Asian Co-Prosperity Sphere”).

Added to the effects of the Great Depression and intensifying interimperialist conflict were the consequences of the Russian Revolution. Not only had a major country been ripped out of the sphere of capitalist exploitation, but the imperialist bourgeoisies were now imbued with a fear of “red revolution” elsewhere; especially in backward countries where social and political conditions were manifestly unstable. The huge losses suffered by French financiers and other holders of Russian tsarist bonds cast a long shadow over world capital markets in the 1920s and ‘30s. Lending to semicolonial countries like China and Mexico was inhibited by the perceived danger of revolutionary turmoil and left-wing governments which would repudiate the country’s foreign debt. The only significant foreign investment in China during the interwar period was undertaken by the Japanese in Manchuria – after they had conquered and occupied this region in 1931.

From World War II to the Cold War

The struggle of the major capitalist powers to redivide markets and spheres of exploitation led in 1939-41, as it had in 1914, to an interimperialist world war, though this time one in which a chief combatant was a (degenerated) workers state, the Soviet Union. (Thus, while taking a defeatist position toward all the imperialist powers in World War II, as in the previous world war, revolutionary Marxists called for unconditional military defense of the USSR.) The outcome of the Second World War perpetuated and deepened the disruption and segmentation of the world economy. By defeating its main imperialist rivals, Germany and Japan, the United States became the hegemonic capitalist power. But the global hegemony of American imperialism was blocked by the Soviet Union, which had emerged from the war as the second-strongest state in the world: From East Asia to West Europe to South America, the course of economic developments between 1945 and 1991 was integrally connected with the Cold War.

In West Europe and also Japan, the devastation of the war combined with the leftward radicalization of the working class militated against a return to the “free trade” and “free market” policies of the pre-1914 era. Except for the U.S., all major advanced capitalist countries engaged in a high degree of state intervention in economic activity during the first phase of the postwar period. Almost all foreign-exchange transactions in West Europe were subject to strict government regulation and bureaucratic approval The pound, franc and deutschmark did not become “freely” convertible until the late 1950s.

Currency convertibility is a basic economic precondition for large-scale foreign investment in manufacturing and services, since the revenue generated from these activities is usually denominated in the currency of the country in which the investments take place. The oil extracted by Exxon in Saudi Arabia is sold on the world market for dollars. But the automobiles produced by General Motors in Germany are sold to Germans for deutschmarks. Thus, it was only in the 1960s – after the introduction of convertibility gave them the option of repatriating their profits – that American corporations bought out or built industrial plants in West Europe on a significant scale. The total value of U.S. direct investment in manufacturing in West Europe went from $3.8 billion in 1960 to $12.3 billion (discounting for inflation) by the end of the decade.

It was, however, in the economically backward regions of the world that the postwar period saw the most radical political changes affecting the international movement of capital. In the course of defeating the Nazi Wehrmacht, the Soviet Red Army occupied East Europe. Over the next few years, under the hostile pressure of American imperialism, these countries were transformed, bureaucratically from above, into “people’s democracies” – i.e., deformed workers states structurally similar to the Stalinized Soviet Union, based on planned, collectivized economies, the state monopoly of foreign trade, etc.

Bureaucratically deformed workers states also emerged in China, North Korea and Vietnam, as a result of indigenous, peasant-based social revolutions led by Stalinists. It was above all fear of war with the Soviet Union which prevented Washington from using its nuclear weapons against Mao’s China during the Korean War in the early 1950s and a few years later against the Viet Minh forces which were defeating the French colonial army in Indochina. A large part of the world was thus removed from the sphere of capitalist exploitation, although still subject to the powerful political, economic and military pressures of imperialism.

At the same time, radical political changes also took place in those economically backward countries which remained within the sphere of capitalist exploitation. The weakening of the West European imperialist, states caused by World War II combined with the radicalization of the colonial masses led to the “decolonization” of much of Asia, the Near East and Africa. State power in these regions now passed into the hands of indigenous bourgeoisies, who sought to pursue their own national interests within a global context dominated by international finance capital.

Despite some CIA-organized coups (e.g., against Mossadeq in Iran in 1953), the ability of U.S. imperialism to control the governments of the former colonial and semicolonial countries was. limited by the countervailing power of the. Soviet Union. Moscow’s backing allowed bourgeois-nationalist regimes like Nasser's Egypt, Nehru and Indira Gandhi’s India and Saddam Hussein's Iraq to exercise a degree of political and economic independence of the imperialist powers which they could not have attained on the basis of their own national economic. resources.

During the 1960s, Soviet funds and engineers helped build the Aswan High Dam – one of the largest in the world – in Nasser’s Egypt. By the early ‘70s, the USSR had become the largest market for India's exports, while Moscow provided the New Delhi regime with over 60 percent of its imports of military hardware. At the same time, Western and Japanese corporations were discouraged from investing in countries like Egypt and India for fear of punitive taxation, restrictions on the repatriation of profits and the possibility of nationalization without adequate compensation. The 1960s and ‘70s thus marked the heyday of economic nationalism and statified capitalism in what was then called the “Afro-Asian bloc.” But with the collapse of the Soviet Union, there was no longer even a partial counterweight to Western/Japanese imperialist domination in the Third World. The 1991 Gulf War signaled that, without the protection of the USSR, those bourgeois-nationalist regimes which flouted the dictates of Washington would be subjected to the devastating power of the Pentagon war machine.

However, even with the relatively greater room for maneuver they had when the Soviet Union still existed, the bourgeois-nationalist regimes in the Third World did not and could not chart a course truly independent of imperialism, nor could they bring about the economic and social modernization of their countries. Despite their “non-aligned” posture and even “socialist” rhetoric, the semicolonial bourgeoisies remained tied to the imperialist bourgeoisies by a thousand strings, subordinated and subservient to the power of the imperialist world market. Thus, India’s exports remained concentrated, as in the colonial era, in light manufactures produced by unskilled labor. Egypt remained economically dependent on the export of cotton (as well as tolls from the Suez Canal), Ba'athist Iraq and Qaddafi’s Libya on the vicissitudes of the world oil market controlled by the “Seven Sisters” monopolies. And Algeria under the radical-nationalist FLN regime relied heavily on money sent back by Algerians working in France. Only through the revolutionary overthrow of the local bourgeoisies, as part of a perspective of world socialist revolution reaching into the imperialist centers, can these countries achieve true independence from imperialism.

The End of the “American Century”

What is now termed economic “globalization” was rooted in the recovery of Germany and Japanese capitalism from their devastation and defeat in World War II. By the 1960s, German and Japanese manufactured goods were making huge inroads into world markets, including the American market. The competitive position of U.S. imperialism was further weakened in this period by the inflationary pressures generated by its long, losing colonial war in Vietnam. America's large, permanent balance-of-trade deficits, especially with Japan, fatally undermined the use of the dollar as the global medium of exchange and store of value – the international monetary system, originally set up at the 1944 conference in Bretton Woods, New Hampshire. Nixon's August 1971 devaluation of the dollar in terms of gold, and the subsequent recourse to fluctuating exchange rates, signaled the end of the short-lived “American Century” of U.S. imperialist hegemony in the capitalist world.

The weakened competitive position of U.S. capitalism was further exposed by the large losses experienced by corporate. America during the 1974-75 world economic downturn. The American bourgeoisie responded with a concerted drive to increase the rate of exploitation. An anti-labor offensive was marked by “giveback” contracts, two-tier wage systems for younger workers and outright, union-busting. Unionized plants in the Midwest and North, which paid relatively high wages, were shut down as production was shifted to the “open shop” South and Southwest.

At the same time, American industrial capital undertook a major expansion in East Asia and Latin America. Between 1977 and 1994, there was a five-fold increase in manufacturing plant and equipment owned directly by U.S. corporations in Third World countries, from $11 billion to $52 billion (in real terms, discounted for inflation). Japanese industrialists soon followed their American competitors in going offshore. By the mid-1980s, Matsushita was producing many of its TV sets and air conditioners in Malaysia, Yamaha its sporting goods in Taiwan, Minebea its miniature ball bearings in Singapore and Thailand, TDK its magnetic tapes in Taiwan and South Korea, etc.

Nonetheless, investment by Western and Japanese corporations in neocolonial countries was still inhibited by the uncertainties of the Cold War. A popular uprising or even an election or military coup could suddenly bring about a left nationalist regime backed by Moscow. For example, in 1979 a revolution in Nicaragua toppled Washington's puppet dictator Somoza and brought to power the radical petty-bourgeois nationalist Sandinistas. At the same time, a major leftist insurgency was raging in neighboring El Salvador. Thus, even Yankee imperialism's own “backyard” was not secure for Wall Street banks and the Fortune 500 corporations.

Economic “Globalization” and Capitalist Counterrevolution

A fundamental political condition for the present triumph of capitalist “globalization” was the retreat of Soviet global power under Gorbachev, the disintegration of the Moscow Stalinist bureaucracy and the counterrevolutionary destruction of the Soviet Union in 1991-92. It was no accident that the electoral overthrow of the Sandinista regime in 1990, capping a contra war armed and organized by Washington, coincided with the beginning of a massive investment boom by U.S. banks and corporations in Mexico. At the same time, capitalist counterrevolution in the former Soviet sphere has opened up a new, huge sphere for exploitation, especially for German imperialism. A few' years ago, a spokesman for German industry exulted: “Right on our own doorstep in Eastern Europe, we have for the first time a vast pool of cheap and highly trained labor.”

During Cold War II in the 1980s North’s IC joined in the imperialist anti-Soviet chorus along with other pseudo-Trotskyists like the United Secretariat of the late Ernest Mandel, as well as mainstream social democrats and Eurocommunists. Having done all within their means to promote counterrevolution in the Soviet Union and East Europe, the Northites now proclaim that the restoration of capitalism there – a historic defeat for the international proletariat – was objectively determined. Their 1993 pamphlet, The Globalization of Capitalist Production & the International Tasks of the Working Class, informs us: “The collapse of the Soviet Union was only the first major political convulsion produced by the transformation of the forms of production. The qualitative advances ,in the integration of world economy dealt the final blow to the autarchic national policies of the Stalinist regime.”

By their own terms, for the Northites the Soviet working class simply did not exist as even a potential factor in deciding the fate of the Soviet Union. The IC has effectively repudiated the Trotskyist program of proletarian political revolution against the Stalinist bureaucracy as even a historical possibility in this supposedly new era of “globalized” capitalism. The 1938 Transitional Program, written when the Soviet Union was relatively far more economically backward and geographically, isolated than in the 1980s, stated, “either the bureaucracy, becoming ever more the organ of the world bourgeoisie in the workers' state, will overthrow the new form of property and plunge the country back into capitalism; or the working class will crush the bureaucracy and open the way to socialism.”

What did Trotsky mean here about opening “the way to socialism”? Wouldn't a Russian-centered Soviet workers state, even if administered on the basis of proletarian democracy and governed by a genuinely communist vanguard party, still be surrounded by hostile and economically more advanced capitalist states? Yes, of course. However, the overthrow of the Stalinist bureaucracy by the Soviet working class, under the banner of proletarian internationalism, would have reawakened and inspired revolutionary fervor among the workers, rural toilers and oppressed peoples throughout the capitalist world. And a communist government of the USSR would have provided invaluable political, economic and, if necessary, military support for proletarian revolutions in capitalist states, including the imperialist powers.

For Proletarian Political Revolution In China!

As against all the various pretenders to Trotskyism, not least North’s IC, our tendency unambiguously and consistently called for unconditional military defense of the Soviet Union and the deformed workers states against imperialism and internal counterrevolution, as we do today in regard to the remaining deformed workers states – Cuba, China, North Korea and Vietnam. The International Communist League mobilized all the limited resources at our command during the political turmoil in the East German (DDR) deformed workers state in 1989-90, fighting for proletarian political revolution to oust the Stalinist bureaucracy which, in league with West German imperialism and its Social Democratic lackeys, pushed for a capitalist reunification of Germany. Uniquely, the ICL opposed capitalist Anschluss (annexation) down the line, calling instead for a “Red Germany of Workers Councils” as part of a Socialist United States of Europe.

And during the terminal crisis of Stalinist rule in the USSR, our tendency actively intervened in the Soviet Union with the program and perspective of proletarian political revolution to “open the way to socialism.” The counterrevolutionary destruction of the Soviet Union was no more objectively inevitable in 1991-92 than in 1941, when the USSR was invaded by Nazi Germany. The direction taken by Russia, the Ukraine and other Soviet republics when the Kremlin bureaucracy disintegrated under Gorbachev, while conditioned by the pressures of the world capitalist market, was determined by the struggle of living social and political forces. A decisive factor in the outcome was a retrogression in the political consciousness of the Soviet working class brought about by three generations of Stalinism in power. Widespread apathy and cynicism as well as, to a certain degree, illusions in Western-type bourgeois democracy among the masses allowed the ascendancy of the counterrevolutionary forces centered around Boris Yeltsin in Russia and around anti-Soviet nationalists in the non-Russian republics.

In the case of the USSR, the Northites maintain that the capitalist counterrevolution which actually did take place was inevitable. In the case of China, they maintain that a capitalist counterrevolution has already taken place when it has not yet occurred. A major article in their Fourth International (Winter-Spring 1994), titled "The Political Background of the Restoration of Capitalism in China," asserts:

“The state which issued from the Chinese Revolution no longer defends or maintains the limited gains won by the workers and peasants in 1949....
“The Chinese state is not, even in the most distorted sense, an instrument for the defense of the working class.... The state defends the interests of the bureaucracy as a privileged social layer: increasingly linked to the rising capitalist class and, through them, the interests of imperialism itself.”

Despite the significant inroads made by capital, both domestic and foreign, over the past several years, the People's Republic of China remains a bureaucratically deformed workers state. The author of the article quoted above, one Martin McLaughlin, is here plagiarizing without attribution the Maoist doctrine of “capitalist roadism" and applying it to Mao's one-time chief rival within the Beijing Stalinist regime, Deng Xiaoping. Significantly but predictably, not once is the Trotskyist program of proletarian political revolution mentioned in this lengthy article, which purports to cover the entire history of China in the 20th century.

In contrast, a “Perspectives and Tasks Memorandum” adopted by our international tendency in January 1996 states:

“The next period is likely to see the breakdown and terminal crisis of Stalinist rule in China as powerful elements in the bureaucracy, directly tied to offshore Chinese capital and actively supported by Western and Japanese imperialism, continue to drive toward capitalist restoration. The Chinese working class, although heretofore limited by police repression to actions at individual workplaces, has in recent years exhibited massive discontent with the social degradation, insecurities and blatant inequalities generated by Deng’s ‘market socialist’ program. The rural economy has experienced the rise of a class of relatively wealthy peasant smallholders while an estimated 100 million landless peasants have flooded into the cities. We can thus foresee monumental class battles leading either to proletarian political revolution or capitalist counterrevolution in the most populous nation on earth.”

“Transnational” Corporations and Imperialist States: Antagonists or Partners?

A central element in the theory of a new “globalized” capitalist economy is that transnational corporations have supplanted nation-states as the dominant institutions in world power politics. In his latest book, Global Dreams: Imperial Corporations and the New World Order (1994), leading American left-liberal intellectual Richard J. Barnet maintains:

“The architects and managers of these space-age business enterprises understand that the balance of power in world politics has shifted in recent years from territorially bound governments to companies that can roam the world. As the hopes and pretensions of government shrink almost everywhere, these imperial corporations are occupying public space and exerting a more profound influence over the lives of ever larger numbers of people.”

A more extreme version of the same thesis is presented by another American rad-lib intellectual, David Korten, in his 1995 book, When Corporations Rule the World. The current view of the International Committee is essentially similar, as North stated in a 1992 speech:

“Under the aegis of imperialism, the globalization of production collides against the nation-state form within which capitalist rule is rooted.... “The web of alliances being formed by various transnational corporations, such as Toshiba, IBM and Siemens, expresses the organic drive of the productive forces to organize themselves on a world scale. But the other side of the same process is the growing antagonism among nation-states and the eruption of various forms of national and communal conflict.”
– Capital, Labor and the Nation-State (1992)

Transnational corporations are here counterposed to imperialist nation-states. Moreover, the former are presented as (relatively) progressive, since they serve as agents of global economic integration, while the latter are viewed as reactionary and obsolete. North’s statement is diametrically counterposed to what Lenin argues in his Imperialism. In particular, North’s view of the capitalists as an international class flies in the face of the Marxist understanding that the bourgeoisie cannot transcend national interests (for further discussion, see “On Bourgeois Class Consciousness,” Spartacist No. 24, Autumn 1977).

In the Barnet/Korten/North view, corporations like IBM, Siemens and Toshiba are devoted solely to maximizing their profits on a global scale; their directors and stockholders supposedly don't care whether their actions strengthen or weaken the American; German and Japanese bourgeois states. This view expresses a liberal idealist outlook since it implicitly assumes that capitalists do not need state power – i.e., armed bodies of men – to protect their property against challenges from both the exploited classes and rival capitalists. in other countries. Wall Street bankers and the CEOs of the Fortune 500 corporations understand (as Richard Barnet and David North apparently do not) that Mexican and South Korean workers are not devout believers in the sanctity of private property. Replying to similar arguments at the time, notably by German Social Democrat Karl Kautsky, Lenin in his 1916 study of imperialism quoted the German economist Schulze-Gaevemitz:

“Great Britain grants loans to Egypt, Japan, China and South America. Her navy plays here the part of bailiff in case of necessity. Great Britain’s political power protects her from the indignation of her debtors.”

The same applies to the U.S., Germany and Japan, whose armed forces are prepared to act as “bailiff in case of necessity.” Whether undertaken by corporations, banks or other financial institutions, foreign investment depends on the political, economic and military power of the states controlled by the owners of these capitalist enterprises.

North & Co. have not yet revised or repudiated the position that the Republican and Democratic parties represent the interests of the American bourgeoisie. Why then do the political leaders of these parties continue to expend hundreds of billions of dollars a year on the U.S. armed forces? Even an old-fashioned liberal like Russell Baker has observed: “The era of big government is over except for the Pentagon” (New York Times, 24 September 1996). That’s because the Pentagon provides and organizes the security guards, so to speak, to protect the property of American capitalists in other countries. Citibank and Exxon are no more independent of, much less antagonistic to, the American imperialist state than Barings Bank and Royal Dutch Shell were independent of the British imperialist state in the pre-1914 era.

Indeed, if the recent merger announcement by Boeing and McDonnell Douglas demonstrates anything, it is that “multinational” corporations – especially so in strategic industries like electronics and aerospace – are very much rooted in their own nation-states. This monopolistic merger is aimed not only at reinforcing the U.S. aerospace and weapons industry but at increasing its competitive edge against rivals like the West European Airbus conglomerate.

How David North Embraces Karl Kautsky 1 (1999)

From Spartacist Pamphlet: Imperialism, the “Global Economy” and Labor Reformism (September 1999)

How David North Embraces Karl Kautsky

The “Global Economy” and Labor Reformism
(Part 1)

Over the past couple of years, a flood of books and articles have announced or analyzed what a column in the Washington Post (16 February 1996) called “this structurally new and still imperfectly understood creature known as the global economy.” Whether they hail it or condemn it, mainstream bourgeois economists and leftist ideologues alike argue that the transfer of production operations by “multinational“ corporations from North America, West Europe and Japan to the so-called “Third World” in recent years represents a profound, structural change in the world capitalist system. The liberal Nation devoted a special issue to “globalization” last July. The labor reformists who publish Workers' World News (January-February 1996) speak of “a fundamental change as deep as the industrial revolution of the last century.” An essay on the “global economy” by sociologist Ulrich Beck in the principal German news weekly, Der Spiegel (13 May 1996), which reflects the skepticism of a section of the German bourgeoisie toward European “economic integration,” warns that “we are racing toward a capitalism without labor,” claiming, “What is at issue is political freedom and democracy in Europe.”

Though not all of the more cataclysmic predictions associated with “globalization” are universally accepted, a common theme in this literature is that the possibility of successful defensive struggles by the working class against the attacks of a particular capitalist government or employer is becoming a thing of the past. In a remarkable intellectual convergence, spokesmen for Wall Street, liberal and radical ideologues, labor bureaucrats in the U.S. and Europe and a group which claims to be a revolutionary Marxist (i.e., Trotskyist) international organization have all joined together to proclaim that “globalization” has rendered trade unions around the world powerless to affect wages, benefits and working conditions.

“Unions Threatened by Global Economy,” crows the Wall Street Journal (25 March 1996). The editors of the Wall Street Journal also maintain that present-day capitalism has resolved the problem of the trade cycle. Meanwhile, union leaders have seized on “globalization” as the latest alibi for selling out or avoiding struggles that can, in fact, be won. From the American Midwest to the German Ruhr, labor officials are telling their workers: “If you don't accept a freeze or even a cut in wages and benefits, the bosses will close down your plant and shift production to India or Mexico.” Joining in this defeatist refrain is the so-called International Committee of the Fourth International (IC) led by one David North, which not only denies any possibility of successful trade-union struggle but rejects trade unions altogether – except nonexistent unions to be run by North & Co. – as workers organizations of any kind.

The idea that the capitalist market economy is “global,” that banks and corporations seek out those (low wage) countries where they can get the highest return on their investments, that, indeed, the internationalization of finance capital is a dominant feature of the contemporary profit system, is hardly new. Writing just over 80, years ago, Russian Bolshevik leader V. I. Lenin noted in his 1916 work, Imperialism, the Highest Stage of Capitalism, that “the twentieth century marks the turning-point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital.” In a summary definition, he explained.

“Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capital is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed.”

Lenin not only analyzed the economic workings of the imperialist system, he exposed the bourgeois economists who served as its apologists and the reformist and centrist pretenders to Marxism who sought to downplay the significance of this new stage of capitalist development in order to deny the urgent need for socialist revolution. Lenin took particular aim at the German Social Democrat Karl Kautsky, whose hypothesis of a unitary world “ultra-imperialism” sought to mask the growing contradictions of the capitalist system and Kautsky's own role as lawyer for the “social-chauvinist” and “social imperialist” lieutenants of the German bourgeoisie.

For Lenin, imperialism signified the epoch of “wars and revolutions.” Indeed, the pamphlet was written in the midst of the first inter-imperialist world war, as the major capitalist powers sent millions of young men to die in a bloody scramble to redivide markets, spheres of influence and colonial possessions. And little more than a year after his pamphlet was completed, Lenin's Bolsheviks led the workers of Russia to power in the first victorious proletarian revolution in history, smashing the capitalist state, sweeping out the bankers, bosses and landlords and setting an example to workers around the world.

What is striking in surveying the current literature on “globalization” is the extent to which all the liberal and reformist apologetics and nostrums currently being put forward were already taken up, exposed and demolished by Lenin eight decades ago. While certain quantitative changes have taken place in the world capitalist economy in the last decade or so, much of the current hoopla about “globalization” is a reflection not of any profound new economic transformation but rather of a profound political defeat, the counterrevolutionary destruction of the Soviet bureaucratically degenerated workers state. In its wake, the reformist and centrist left has bought into imperialist triumphalism over the supposed “death of communism.”

The late Michael Harrington, a leading ideologue of American social democracy, defined his political program as “the left wing of the possible.” With the collapse of the Soviet Union and intensifying inter-imperialist rivalries, the American, West European and Japanese bourgeoisies are engaging in an all-sided offensive against the working class and ethnic minorities. Consequently, the labor bureaucracies in these countries now maintain that the left wing of the possible has moved far to the right. This reformist outlook has been taken to its logical conclusion by the Northites: categorical defeatism toward all working-class struggles in this period.

Not coincidentally, North's obituary on the trade unions came in the same speech in which he proclaimed “The End of the USSR” (Bulletin, 10 January 1992). Though wont to denounce all its political opponents as “petty-bourgeois radicals,” North's IC marches in ideological lockstep not only with the petty-bourgeois left and the labor bureaucracies but with bourgeois liberals and worse. Having for years joined with the ‘AFL-CIA’ tops in promoting every counterrevolutionary force aimed at destroying the Soviet workers state, North's tendency seized on the death of the Soviet Union as a justification to apologize for outright scabbing. At the same time, they have embraced a latter-day variant of Kautsky’s ultra-imperialism, using this as an excuse to spit on the struggles of oppressed nations and the colonial and semicolonial peoples enslaved by the imperialist bourgeoisies. Pointing to “vast changes in world economic and political relations,” the IC today openly rejects the right of national self-determination.

“Globalization” and Northite Defeatism

“Globalization” is but a new variation on an old theme. In the 1950s and early '60s, the term “automation” was invested with the same apocalyptic, earth-shaking consequences. Liberal intellectuals predicted that the industrial working class would in large part be replaced by robots and other machinery. One conclusion was that trade unions were becoming or would become obsolete. After all, you can't unionize industrial robots. At the same time, labor bureaucrats told their ranks that if they pushed the level of wages and benefits too high, they would lose their jobs through automation.

Today, it is intellectually fashionable to explain the sharp deterioration in the living standards of American working people over the past generation as a result of “globalization,” especially the transfer of production by major U.S. corporations (“multinationals” or “transnationals”) to low-wage countries in East Asia and Latin America. Speaking in Rome a few years ago, the dean of liberal American economists, Paul Samuelson, predicted: “As the billions of people who live in East Asia and Latin America qualify for good, modern jobs, the half billion Europeans and North Americans who used to tower over the rest of the world will find their upward progress in living standards encountering tough resistance.” In his 1991 The Work of Nations, former Clinton labor secretary Robert Reich wrote that “Americans are becoming part of an international labor market, encompassing Asia, Africa, Latin America, and, increasingly, Eastern Europe and the Soviet Union.” “Top U.S. Exports Continue to Be Jobs,” moans the AFL-CIO News (5 August 1996), official organ of the American labor bureaucracy.

“Runaway shops,” “outsourcing” and the transfer of production to low-wage areas like the U.S. South and Mexico and other semicolonial countries have indeed led to a sharp decline in unionized manufacturing jobs, particularly in the Northeast and Midwest. But instead of seeking to organize international class struggle against attacks on jobs and unions, the AFL-CIO bureaucracy polices the labor movement on behalf of the U.S. capitalist rulers while trying to shift the blame for layoffs here on workers abroad.

The views expressed above by Samuelson, Reich and the pro-capitalist AFL-CIO tops have become the central ideological theme of the Northite tendency. In a speech in Detroit in 1992, North stated:

“The collapse of the old organizations of the working class is, fundamentally, the product of specific historic and economic conditions. Understanding these conditions does not mean that we absolve the leaders of these organizations of responsibility for what has happened. Rather, it enables us to recognize that the rottenness of the leaders is itself only a subjective manifestation of an objective process....
“The global integration of capitalist production under the aegis of massive transnational corporations and the terminal crisis of the nation-state system have shattered the basic geo-economic foundation upon which the activities of the old organizations of the working class have been based. Nationally-based labor organizations are simply incapable of seriously challenging internationally-organized corporations.” [our emphasis]
– Capital, Labor and the Nation-State (1992)

Despite North's disclaimer, his notion of “globalization” and its effects does absolve the labor bureaucracy of responsibility for the decline of the trade-union movement and the degradation of the working class. It is no accident that North's views are also expressed, in almost identical language, by spokesmen for the union bureaucracy. Thus, the general secretary of the International Union of Food and Allied Workers' Associations, Dan Gallin, argues.

“Nation states are becoming irrelevant.... National governments no longer control the flow of financial capital. So they can no longer control their own economies. This in turn weakens the power of national democratic pressures from labour parties and trade unions.”
– the Workers' World News (January-February 1996)

Gallin, who is at least more intellectually honest than North, openly argues for a popular-frontist perspective of “building a broad-based people's movement” to counter the effects of “globalization.”

But neither does North denounce the union misleaders for not mobilizing the economic power of the workers movement and popular political support against the capitalist offensive. Instead he asserts that the trade unions as such have been made impotent by objective changes in the world economy. This position is stated even more clearly and categorically by Nick Beams, head of the Australian section of North's International Committee: “To the extent that the extraction of surplus value from the working class still took place within the confines of a given state, it was possible to apply pressure to capital via the national state for reforms and concessions to the working class. This was the program of the trade union and labor bureaucracies. That is no longer possible” (International Workers Bulletin [IWB], 15 July 1996). In other words, the Northites maintain it is no longer possible for the working class to defend itself against the predations of capital through strikes or other actions, regardless of the tactics and policies pursued.

This position is radically false and, if accepted, can only foster demoralization and defeatism within the working class. In none of the major strikes which marked the decline and defeat of the American labor movement in the 1980s – the PATCO air traffic controllers, Greyhound bus drivers, Phelps-Dodge copper miners, Eastern Airlines machinists, Hormel meatpackers – did foreign competition or the operations of multinationals abroad play any significant role. Greyhound, Eastern Airlines and Hormel extract almost all of their surplus value from labor within the confines of the American state.
To be sure, there have also been major labor struggles recently against large corporations which are critically dependent on international trade and foreign Outsourcing, notably the two-month-long strike at Boeing aircraft in late 1995. In this case, the strike was actually starting to hurt Boeing when the leaders of the Machinists union called it off for minimal gains while, at the same time, fomenting anti-Asian chauvinism and protectionism.

For a Class-Struggle Perspective!

The decline of the American labor movement is not fundamentally caused by the objective effects of “globalization” but by the defeatist and treacherous policies of the AFL-CIO misleaders. As we wrote right after the defeat of the Greyhound strike.

“No decisive gain of labor was ever won in a courtroom or by an act of Congress. Everything the workers movement has won of value has been achieved by mobilizing the ranks of labor in hard-fought struggle, on the picket lines, in plant occupations. What counts is power. The strength of the unions lies in their numbers, their militancy, their organization and discipline and their relation to the decisive means of production in modern capitalist society. The bosses are winning because the power of labor, its strength to decisively cripple the enemy, has not been brought to bear.”
– “Labor's Gotta Play Hardball to Win,” WV supplement (March 1984)

The AFL-CIO bureaucracy plays by the bosses’ rules in all strikes, including in the service sector where foreign competition is nonexistent. Consider the strike by janitors and other building workers in New York City last winter. As usual the union tops insisted on porous picket lines. As a consequence an estimated 15,000 scabs replaced the striking workers and office buildings operated more or less as usual. But let us imagine what would have happened if the organized labor movement had sought to mobilize New York City's working people and appealed to the dispossessed population of the ghettos and barrios to actively support the heavily minority and immigrant building workers.

Dozens and hundreds of strikers and other workers-union and non-union-along with black and Hispanic youth could have surrounded every major office building in the city and prevented anyone from entering. David North to the contrary, the CEOs of American multinationals would not have responded by closing their New York headquarters and running their operations out of New Delhi or Mexico City. Rather the cops would have attacked and tried to break the picket lines, arresting militant workers and their supporters. The outcome would then have been determined by the ability of the New York City labor movement to organize effective actions backed by popular support especially in the black and Hispanic communities. A one-day transit strike, for example, might have convinced the powers that be in the world's financial capital to impose a deal on the real estate barons favorable to the building workers.

To take an international example, the defeat of the 1984-85 British miners strike by the Conservative government of Prime Minister Margaret Thatcher opened the way to a crippling assault on all trade unions in Britain. The year-long miners’ struggle was far and away the most significant class battle in West Europe in the 1980s. While the importation of foreign coal did play a role in that strike, the key factor in its defeat was the refusal of the Labour Party and Trades Union Congress tops to countenance joint strike action by other sectors of the British working class, even as workers from France to South Africa expressed their solidarity with the British miners by halting scab coal shipments and raising financial support.

Seeking to limit union struggle to what is acceptable to the capitalist rulers, the reformist labor misleaders generally eschew any possibility of real international proletarian solidarity. Typical of this is the leadership of the United Auto Workers (UAW), potentially still one of the most powerful industrial unions in the U.S. Instead of promoting organizing efforts in the American South and in the Mexican maquiladora industrial belt south of the U.S. border, the UAW tops respond. to “outsourcing” and “runaway shops” by shoving one concession after another down their members' throats while appealing to Washington for protectionist measures. Far from seeking coordinated strike action with Canadian and Mexican workers during last fall's contract negotiations with the Big Three, whose operations throughout North America are now fully integrated, the UAW bureaucracy openly denounced a strike by GM workers in Canada, seeing that as counterposed to its efforts to get Democrat Clinton re-elected.

The existence of “multinationals” simply underscores the historic need for an internationalist class-struggle perspective that transcends parochial, nationally limited trade unionism. Indeed, one of the reasons for the establishment of the First International founded by Karl Marx was to organize trade-union solidarity between workers in Britain and continental Europe.

There are, of course, limits to what can be gained through trade-union struggle, however militant. As their labor costs rise beyond a certain point, capitalists will respond by retrenching (i.e., shutting down less-profitable operations), introducing new labor-saving technology as well as shifting some operations to low-wage countries. The labor bureaucracy points to the ability of the capitalists to counter union gains by such means in order to argue that the workers must accept existing, or even worse, conditions without a fight, while laying the blame on workers in other countries for “stealing American jobs.” As revolutionary Marxists, we point to the limitations of trade-unionism to argue for the need to overthrow the capitalist system of exploitation. As Marx wrote over a century ago.

“Trade Unions work well as centers of resistance against the encroachments of capital.... They fail generally from limiting themselves to a guerrilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class, that is to say, the ultimate abolition of the wages system.”
– Value, Price and Profit (1867)

The Northites now openly repudiate this basic Marxist position. They maintain that trade unions can no longer function as centers of resistance to the predations of capital, and they counterpose a socialist transformation to the defense of the workers' interests within capitalism. According to the wisdom of Nick Beams: “In order to defend even the most minimal conditions-the simple and most ordinary demands-the working class is confronted with the necessity of overthrowing the social relations based on capital and wage labor determined by the capitalist market through which the appropriation of surplus value takes place” (IWB, 1 July 1996).

At first glance, this may seem like a terribly revolutionary position. In fact, it indicates a defeatist and abstentionist attitude toward the actual struggles of the working class, without which all talk of overthrowing the social relations based on capital and wage labor is empty rhetoric. As Leon Trotsky wrote: “The triumph of the proletarian revolution on a world scale is the end-product of multiple movements, campaigns and battles, and not at all a ready-made precondition for solving all questions automatically” (“Independence of the Ukraine and Sectarian Muddleheads,” July 1939).

The mass of workers can achieve socialist consciousness only through the intervention of a revolutionary party in the proletariat's day-to-day struggles. This is a central theme of the 1938 Transitional Program, the founding program of Trotsky's Fourth International.

“The Bolshevik-Leninist stands in the front-line trenches of all kinds of struggles, even when they involve only the most modest material interests or democratic rights of the working class. He takes active part in the mass trade unions for the purpose of strengthening them and raising their spirit of militancy.... Only on the basis of such work within the trade unions is successful struggle possible against the reformists....Sectarian attempts to build or preserve small 'revolutionary' unions, as a second edition of the party, signify in actuality the renouncing of the struggle for the leadership of the working class.”

The Latest Posture of Political Bandits

For years, North’s Workers League agitated for the racist, pro-imperialist, rabidly anti-Communist Meany/Kirkland bureaucracy of the AFL-CIO to form a “labor party.” Now the North gang not only denounces the AFL-CIO tops as reactionary but likens the unions to a “company union or a scab organization.” Having recently rechristened themselves the Socialist Equality Party (SEP), the Northites now declare.

“Workers must face the fact that the AFL-CIO is a failed organization that will not respond to the workers' demands. Workers need democratically-controlled unions, committed to defending their interests without compromise. Such unions can only be established-as the industrial arms of a mass political party of the working class, and this party can only be built in ruthless struggle against the trade union bureaucracy. This is the perspective fought for by the Socialist Equality Party.”
-IWB (15 July 1996)

The nonexistent “industrial arms” of a nonexistent mass workers party are here supposed to replace the actual mass economic organizations of the U.S. working class.

If North, Beams & Co. were honest and courageous politicians, however misguided, they would call on American workers to leave the AFL-CIO en masse, Australian workers to leave the Australian Council of Trade Unions, British workers to leave the Trades Union Congress, etc. According to the Northites, not only have the unions become reactionary but also strikes: “Even when the bureaucracy calls a strike, it does so for the purpose of more effectively demoralizing and defeating the workers” (The Globalization of Capitalist Production & the International Tasks of the Working Class [September 1993]). If that is the case, then the Northites should tell the workers never to go out on strike and should give no support to strikes that do occur. Given its line, there is no reason for the Socialist Equality Party to oppose scabbing.

In fact, following the sellout of a 17-month-long UAW strike at Caterpillar in 1995 which saw widespread scabbing, North's International Workers Bulletin (18 December 1995) openly apologized for strikebreaking: putting the word “scabs” in quotation marks, sympathetically “explaining” that “the large majority of the 4,000 union members who returned to work were not right-wing or anti-union,” and attacking the union tops from the right for “diverting the anger of strikers towards the ‘scabs,’ i.e., those union members who decided to cross picket lines.” Around the same time, North's British acolytes made themselves notorious among striking Liverpool dockers by denouncing international labor solidarity with their struggle. A scurrilous article, “Dockers Must Reject Fake Internationalism” (International Worker, 2 December 1995), attacked as a “fraud” plans by international longshore unions, which were implemented that same month, to refuse to handle ships loaded by scabs in Liverpool (see “David North, ‘Socialist’ Apologist for Scabbing,” WV No. 637, 19 January 1996).

Yet in their platform for a recent parliamentary by-election campaign, the British SEP had the gall to insist that “Workers in Britain must seek the support of workers overseas” (International Worker, 30 November 1996). These are political charlatans who always speak, out of both sides of their mouths. On one side, they denounce the unions as “failed organizations,” thereby seeking to appeal to workers fed up with the bureaucracy’s endless sellouts and angry and frustrated over falling living standards. On the other side, they try to make themselves look good by posing as sympathetic to workers engaged in struggle.

Many years ago, we characterized the tendency led by the late Gerry Healy, North's mentor, as political bandits whose practices stood in flat contradiction to their professed principles, who say and do today the exact opposite of what they said and did yesterday and would say and do tomorrow. Having abjectly tailed the pro-capitalist union misleaders until a few short years ago, the Northites now turn around and repudiate the unions altogether. But the union bureaucracy was no less reactionary then than it is today – and the same can be said of David North & Co.

During Cold War II, the anti-Soviet war hysteria of the 1980s, the Northites marched in ideological lockstep with the AFL-CIO tops in enthusiastically supporting every pro-imperialist, anti-Communist nationalist movement in and around the Soviet bloc – from the CIA-backed Afghan mujahedin to counterrevolutionary Polish Solidarnosc to the Baltic “captive nations” types. In Britain, Healy/North's IC parlayed its support for Solidarnosc into a provocative witchhunt, in league with the most right-wing forces inside and outside the labor movement, against the militant miners union and its leader, Arthur Scargill. In late 1983, the Healyites instigated an anti-Communist furor over Scargill’s description of Solidarnosc as “anti-socialist,” with the aim of isolating the miners from the rest of the British trade-union movement as they prepared for battle against Thatcher and the Coal Board. And in 1991 North & Co. even condemned the Bush administration for not more aggressively backing the fascist-infested Lithuanian Sajudis, which called for secession from the Soviet Union as part of a drive for capitalist restoration.

When the demand for self-determination served as a “democratic” fig leaf for attacks on the Soviet degenerated workers state, the Northites waxed eloquent about their support to “national rights.” Now they denounce the call for self-determination and claim that national independence has become impossible, indeed reactionary, in a “globalized” economy. Having supported the counterrevolutionary destruction of the Soviet Union – the greatest defeat for the international proletariat in decades – the Northites have adopted a position of defeatism toward all struggles by the working class and oppressed peoples in the post-Soviet world.

Marx vs. the “Iron Law of Wages“

The Northite view of “globalization“ – i.e., the large-scale shift in production by “multinational” corporations to the Third World – and its effect on the relation between labor and capital is a present-day version of what in the 19th century was called the “iron law of wages.” This was a doctrine that wages could not be permanently raised above a fixed level regardless of the actions – economic and/or political – taken by the working class. While initially developed by British bourgeois economists, the “iron law” was adhered to by almost all of the early socialist and anarchist tendencies-British Owenites, French Proudhonists, German Lassalleans.

It is readily understandable why the ideologists of the bourgeoisie maintained that the existing level of wages was determined by the immutable laws of the capitalist market. Why would leftists who opposed the capitalist system also uphold such a position? Because they believed that the workers could be won to the program of socialism (or, in Proudhon's case, to anarchism) only if they were convinced that it was hopeless to attempt to improve their conditions within capitalism.

There were different versions of how the “iron law” was supposed to operate. The originator of the doctrine, the Reverend Thomas Malthus, asserted that if wages rose above subsistence levels workers would have more children, more of whom would live to maturity. The increase in the supply of labor would therefore drive wages back to the subsistence level. The leftist adherents of the “iron law” generally argued that any increase in money wages would be quickly and fully offset by rising prices. Hence they regarded trade unionism as useless or even injurious to the working class.

Proudhon's last work, The Political Capacity of the Working Class (published posthumously in 1865), was a sustained attack on trade unionism, which had just emerged in France on a significant scale.

“While threatening to strike, some of them [trade unionists], indeed the majority, have demanded an increase in wages, others have demanded a reduction in working hours, and still others both at the same time. Surely they have always known that increased wages and reduced working hours can only lead to a general price increase.”

In opposing strikes, Proudhon made the additional argument that the financial resources of the capitalists were so much greater that the workers could never win.

“Let us imagine that an industrial establishment has a capital of three million and that it employs one thousand workers who one day go on strike. The employer rejects their demands.... After a month the workers have exhausted their funds and will have to resort to the pawnshop. The capitalist will have lost merely a twelfth of his interest and his capital will not have been touched. The match is clearly unequal.”
– Stewart Edwards, ed., Selected Writings of Joseph-Pierre Proudhon (1969)

If one substitutes “transnational corporation” for “industrialestablishment" in the above passage, it accurately represents the current Northite line.

Throughout his life as a revolutionary workers leader, Marx opposed all exponents of the “iron law of wages.” His most comprehensive treatment of this question is his 1865 pamphlet, Value, Price and Profit, a polemical response to an old Owenite socialist, George Weston, who was then a member of the General Council of the First International. Here Marx scientifically demonstrated that an “immense scale of variations is possible” in the rate of exploitation (the ratio of surplus value to the value of wages):

“The fixation of its actual degree is only settled by the continuous struggle between capital and labour, the capitalist constantly tending to reduce wages to their physical minimum while the workingman constantly presses in the opposite direction.
“The matter resolves itself into a question of the respective powers of the combatants.”

Marx's theoretical demolition of the “iron law of wages” was confirmed by the actual experience of the working class as mass trade unions developed in Europe and North America in the late 19th century. By the beginning of the 20th century, the “iron law” had been generally discredited within the workers movement and left. A notable exception was the American socialist Daniel De Leon, who counterposed the overthrow of the capitalist system to trade-union struggles for higher wages and shorter hours.

In line with pre-1914 Social Democratic orthodoxy, the De Leonists regarded the decisive event of the socialist revolution as the electoral victory of their party, the Socialist Labor Party (SLP), over the bourgeois parties. Attached to the SLP was an industrial arm called the Socialist Labor and Trade Alliance, which over time tended to shrink to an artificial, Potemkin village organization consisting entirely of the SLP’s own supporters. Despite the name, the Socialist Labor and Trade Alliance was not a trade union in any sense. It did not advocate, much less engage in, struggles to improve the wages or conditions of the workers. What then was its purpose? Following the expected electoral victory of the SLP, the Socialist Labor and Trade Alliance would “seize and hold” the means of production from the capitalists and subsequently administer the socialist economy.

Third World Wages Mean... Third World Economies

The present posture of the North group parallels the old De Leonist program except that the De Leonists were principled, albeit misguided, socialists. A primary activity of North’s Socialist Equality Patty (SEP, formerly the Workers League), and the other SEPs recently set up by IC sections in Britain and Australia, is running for office in bourgeois elections for various levels of government. They have adopted an, at best, abstentionist position in relation to the struggles of the mass trade-union movement. And at least on paper the Northites now project building something akin to the Socialist Labor and Trade Alliance. According to the 1993 Northite pamphlet, The Globalization of Capitalist Production & the International Tasks of the Working Class:

“Transnational corporations are systematically shifting the most labor intensive aspects of production to impoverished regions, where wages are a fraction of the existing levels in the advanced capitalist countries. Even high-tech and skilled labor can be purchased on the cheap in India, parts of Latin America, eastern Europe and the former Soviet Union. The inexorable result is a downward leveling of wages and living standards and a relentless assault on past social reforms and legal limitations on the exploitation of labor by capital in the imperialist centers”

As we have indicated earlier, the Northites are here advancing, with a thin veneer of Marxist rhetoric, an argument currently propounded by a wide range of bourgeois and petty-bourgeois liberals. Thus, a recent article in Foreign Affairs (May-June 1996) warns that “inequality, unemployment and endemic poverty” are the “handmaidens” of the “global economy.” And in a special issue of the liberal Nation (15 July 1996), British “Green” spokesmen Colin Hines and Tim Lang assert:

“Globalization unquestionably leads to lower-wage economies. The British economist Adrian Wood has calculated a not insignificant shift of 9 million jobs from North to South [i.e., from the industrialized countries to the Third World] in recent years.... Meanwhile, Britain is advertising itself as a low-wage country to attract industry. The trend is clear.”

The version of the “iron law of wages” pushed by North and others based on the supposed globalization of production is no more valid than the various 19th-century versions. Wages in the advanced capitalist countries are not going to be driven down to anything close to Third World levels for two fundamental reasons: one political, the other economic. As we shall see, increased investment by Western/ Japanese banks and corporations in backward countries, especially in the manufacturing sector, requires the maintenance of strong imperialist states to protect those investments. U.S. capitalists are not going to produce a large part of their steel output in South Korea and Brazil, because they need guaranteed access to this steel in case of war with their imperialist rivals – Germany and Japan – or for military intervention against popular revolutions in former colonial countries, like South Korea and Brazil.

The Communist Manifesto, written by Karl Marx and Friedrich Engels in 1848, defines the “executive of the modern State” as “a committee for managing the common affairs of the whole bourgeoisie.” One of the tasks of that executive committee is to ensure that individual capitalists, seeking to maximize their own profits, do not harm the vital interests of the national bourgeoisie as a whole. Thus, a few years ago Washington prevented the management and stockholders of Continental Oil from investing in the modernization of Iranian oil fields, because building up the Iranian economy went against the currently perceived interests of U.S. imperialism. In the next few years, the U.S., Germany and Japan may well impose – against the immediate interests and desires of sections of their own capitalist classes – high levels of trade protectionism, controls of foreign-exchange transactions and strict limits on the inflow and outflow of capital. There is in addition a fundamental economic limitation to the “globalization” of production. Manufacturing wages in East Asia and Latin America have been a small fraction of those, in the advanced capitalist countries for decades. Why then does Siemens still produce most of its electrical machinery in Germany and General Motors most of its autos in North America? Because 15 unskilled workers in Indonesia (earning well under a dollar an hour) cannot replace a skilled machinist in the U.S. (earning $15 an hour) or Germany (earning $25 an hour) in the process of industrial production. The technical-cultural level of the labor force in Europe, North America and Japan is qualitatively higher than in the Third World. Annual expenditure per student for primary and secondary education is over $5,000 in the US., almost $4,000 in Japan, $600 in Latin America and the Caribbean, and $70 in the Indian subcontinent! These vast differences cannot be appreciably narrowed within the framework of the capitalist-imperialist system. The basic premise of Trotsky’s theory of permanent revolution is that in the imperialist epoch countries of belated capitalist development cannot attain the overall level of economic productivity of the pioneer regions of the bourgeois revolution – West Europe, North America and, later, Japan.

This is the geo-economic basis for the division of the world between imperialist countries and neocolonial countries exploited and oppressed by the former. If India’s labor productivity approximated that of the United States and Japan, India itself would be a major imperialist power, since the numerical size of its industrial labor force (about 30 million workers) is the same as that of the U.S. and 50 percent greater than that of Japan. The Northite notion of “globalization” is in its theoretical essence a repudiation of the Trotskyist understanding of permanent revolution, because it posits a tendency to equalize economic conditions throughout the world by leveling up productivity in the backward capitalist countries and leveling down productivity in the advanced ones. The genuine globalization of production requires an internationally planned socialist economy, which alone can raise the peoples of Asia, Africa and Latin America to the technical-cultural level of what is now called the First World.