National Sections of the L5I:

A balance sheet of our perspectives

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At the December 1998 International Executive Committee (IEC) of the LRCI we set out our perspectives for the class struggle in the year ahead. We predicted a year of turbulent struggle in the semi-colonial world and in the former Stalinist states, underpinned by a stock market crash that would seriously destabilise the response of the ruling class. We were only half right: the stock market crash still lies ahead of us, and its impact may be less dramatic because some of the world's weakest economies have had a further year to recover.

Here we outline the revised perspectives of the LRCI as it prepares for its Fifth World Congress in the year 2000.

Economic background

The perspectives passed at the December 1998 IEC contained serious errors at the economic level. The core of these lay in our underestimation of the USA's ability to delay the "major correction" of the stock exchange which we saw as overdue and imminent.
We said:

"A violent 'readjustment' between the vastly inflated stock market and the shrinking rate of profit is inevitable in 1999. This will tip the US into open recession."

A year later, that has not occurred. Instead the North American economy and stock exchanges have continued to expand. The European economy also went into an upward phase. And most of Asia began to pull out of recession.

Only a major crash on Wall Street and an immediate slide into recession, if these occur within the in the next six months or so, are now likely to produce the severe world recession which we thought was imminent at the turn of the year. This combination is not impossible. Certainly the US stock market is vastly overvalued. The expansionary phase of the US cycle will end in the near future - but the downturn may not be on a scale sufficient to create a world slump.

In the first six months of 1999 the US stock market continued to set new record highs. However, by the second half of 1999 the speculative bubble began to shrink and by November Wall Street was back at April's levels. This reflected the slowdown of capital flowing into Wall Street: the 1997 Asian collapse and the collapse of stock markets in Russia and Latin America in 1998 all stimulated a "flight to quality", flooding the US stock market and hiking prices. The flight to quality has ended and even begun partially to be reversed.

By historical standards Wall Street remains hugely overinflated. But the significant factors in the last six months are that profits have revived (with US firms posting their best figures for two years) and productivity is up. Naturally these reduce the gap between the "real" value of shares as measured by expected profits and their speculative value, which is a result of too much money chasing too few stocks.

A stock market crash or slide that knocks one third off the value of the world's stock markets is not excluded. If it happens it will plunge the USA into recession. The crash could be triggered through one or more developments: a sharply increased flow of capital out of the USA; further interests rate hikes; a spate of profit warnings and losses; a falling dollar due to the growing trade deficit.

Everything will depend on the scale of the correction and of over what time-scale it occurs. The end result also depends whether the recession can be offset by US government actions. The US government has money in the bank: it can afford tax cuts or a renewed arms spending programme. Alternatively, it could engineer a lower dollar to compensate for falling demand at home and launch an export offensive in the recovering Asian and EU markets.

An important factor in the USA's escape from financial disaster has been absence of inflation. In fact there are strong deflationary tendencies: the very tendencies the Financial Times, the Economist and a whole string of stock broker analysts were so worried about last year. This deflationary tendency (falling prices of raw materials, falling or stagnant real wages, falling business costs as new technology enables job losses and productivity gains in the white collar sector) already allows the USA to operate with very cheap credit, bringing low savings and massive private debt.

The strength of the US economy allowed the world's financial institutions to launch successful rescue packages for Indonesia, Brazil and Russia. Each of these threatened a financial collapse that would bring down the world credit system with it.

In 1998 we thought that these crises might severely stretch the resources of the IMF and World Bank, especially if the US recession materialised. But the IMF was able to meet the exigencies of the crises in Asian and Latin America. It pumped money into Russia and propped up the billion dollar investment funds that were threatened with bankruptcy.
US economic strength also lay behind Clinton's agreement with Beijing that the Chinese Renminbi would not be devalued. If China had devalued its currency and launched an export offensive this would have worsened the Asian crisis. In the end, China's refusal to devalue (an act set to be rewarded by admission into the WTO) headed off the Asian slump we predicted. As a result, another part of our economic perspectives were proved wrong. A marked recovery began in Asia in the second quarter of 1999, with the exception of Indonesia which is still in recession in real terms.

Despite the errors we made in 1998 on the economy, much of our political perspectives were correct. There has their been no general trend towards stabilisation on the world political scene.

The attempted genocide and an imperialist war of intervention in Kosova; struggles by youth and students in Greece, Britain, France, Iran, Mexico, Indonesia, Zimbabwe; workers' and students' demonstrations in Iran; the war between India and Pakistan; two governmental crises in Russia and the launching of a second Chechen war; the attempted genocide in East Timor and the Australian-led intervention; the eruption of political struggle in Indonesia over the presidential elections; the mass mobilisations and continued guerrilla war in Colombia. All of these show that we are in a period of major upheavals, not one of peace and quiet.

It was the absence of an underpinning economic crisis that allowed imperialism to "keep its cool" in the face of severe political and military challenges in 1999.

Latin America

We underestimated the effects of the currency devaluation and of the huge stabilisation package that the IMF had already undertaken in Latin America. Brazil's GDP dropped not by 5% but by only 0.8%. Again the IMF rescue package acted as a firebreak preventing the crisis spreading to Mexico or the USA itself.

However some countries - in particular Venezuela, Colombia, Argentina and Chile - were severely hit. Venezuela's GDP fell by 9.6%; Colombia's by 7.6%; Argentina's by 4.9% and Chile's by 3.7%.

The response to the recession in Latin America has been a radicalisation of politics, in terms of increased support for the "left" official parties, the re-emergence of populist "left nationalism" and in massive street protests.

The Chavez regime in Venezuela did not (as we predicted) rapidly betray and disillusion its voters by surrendering to the IMF. Chavez supporters swept the Constituent Assembly elections and took radical measures against the old parliament and the judiciary. Chavez was in the forefront of successful moves to raise world oil prices.

In Mexico, despite continuing economic expansion, the political difficulties of the PRI regime deepened. Mexico City University was occupied by 350,000 students who won active support from workers in demonstrations and mass pickets.

In the Corrientes province in northern Argentina, the urban poor and small farmers protested and forced concessions. In Chile there were militant student demonstrations and a dock workers' strike against privatisation. The Socialist Party candidate is running miles ahead of the Right in the polls before the presidential elections and there is widespread talk of arraigning Pinochet in Chile.

Meanwhile in Colombia the military has launched a new wave of repression against the left wing guerrilla movements, sparking a protest march of hundreds of thousands on the streets, but leaving the FARC guerrillas in control of one third of the country's land.

The war in Kosova

The Kosova war demonstrated a central paradox in the global military balance. The collapse of the USSR has left the USA as a world power of overwhelming military predominance. It can act unilaterally, and its allies are powerless to act without it, except where they are facing low-tech opposition. Yet the USA has not overcome the Vietnam syndrome.

A forced entry into Kosova would have tested Nato very severely as the disputes between the US military and the Administration showed clearly (for example the sacking of Wesley Clarke, the refusal of Britain's paratroops to obey Clarke's order to seize Pristina airport etc.). As long as the EU imperialists have not established an effective strategic military force we are unlikely to see an open split between Europe and America on the political-military level.

Probably the most destabilising consequence of the Kosova war, in the longer term, is the deterioration of relations between the USA and Russia and China. Fear of US military might has driven the political and social forces running both Russia and China into a more independent foreign policy vis-a-vis the USA, one in growing conflict with imperialist interests.

We can expect a continuing deterioration of relations between Russia and the US. Clashes over the oil supply in the Caucasus and Russian assertiveness in Central Asia, are highly likely. Open clashes between the USA and China will be fewer, because of the need for a continued trade relationship. However, sabre-rattling over Taiwan could continue since it plays a significant role in the internal conflicts within the Beijing bureaucracy.

The former Soviet Union

Russia was able to put off the danger of a total economic collapse in 1999, but this failed to stop the ever-deepening political crisis of the regime. Yeltsin not only had to change his government twice this year: he is isolated within the elite and his camarilla is ridden by factional struggles.

This deep political crisis forces the regime to look for a way out by more and more adventures. The invasion in Chechnya and the whole Caucasus crisis is a clear expression of this. The failure of the attack on Chechnya or its conversion into a bloody embroilment in guerrilla war, would quickly deepen the crisis of the regime.

From 1991 up to August 1998 the Russian restorationist regime was built on a certain social base: the new capitalist class (called the "oligarchs") and the pro-capitalist bureaucracy plus the new (but small) middle layers. The onset of the crisis one year ago destroyed this restorationist alliance. It signalled the decline of the power of the oligarchs, bitter factional struggles inside the ruling elite, the impoverishment of the middle layers, the end of the smooth collaboration with Washington and the IMF. Last but not least, it stimulated a new wave of working class resistance.

While there are several reports of militant and sometimes successful strikes in enterprises, by and large the working class has not played a significant or independent role in Russian policy since the miners' strikes and blockades last summer. The economic crisis - and the betrayals of the CP and trade union leadership - have led to a setback.

The terrible social atomisation of the working class, inflicted by seventy years of Stalinist rule, also remains a barrier to resistance. But there are reports of regional strike committees, proto-soviets and union and political forces attempting to build a workers' party. The poor state of the Russian left and the isolation of these struggles makes it difficult to judge whether we are in for a major fightback across Russia in the next 12 months.

In the absence of mass workers' resistance Russia could go down the path of an authoritarian regime led by the most intact national institutions - the security services plus sections of the military apparatus. Prime minister Putin is promoting himself as the embodiment of that solution. This would be a kind of bonapartist state-capitalist regime trying to resolve its crisis through an nationalist-adventurist foreign policy and open suppression of the working class.

A second alternative would be a peaceful hand-over of power to the Luzhkov/Primakov bloc - consisting of nationalist new rich politicians and remnants of the Stalinists - who could retain, at first, some of the trust and illusions of the working class.

China

China's agreement not to devalue the Renminbi was obtained at the cost of allowing a continued increase in its trade surplus with the USA, which is expected to reach $70 billion in the current year. However, this has not made up for the loss of exports to other Asian markets and production within China has been maintained by a continuation of subsidies to state industry and increased investment in infrastructure and other big projects.

Officially, economic growth is running at 7.4 per cent which is significantly lower than previous forecasts above 8 per cent. Even if the figures are true, this is perilously close to the minimum growth rate necessary to keep pace with population, rather than the signal of a buoyant economy that it would be practically anywhere else.
Politically, the resort to state subsidies has strengthened the more conservative wing of the bureaucracy in their opposition to further market reforms.

Current policy is towards the creation of "asset management corporations" which will undertake debt-equity swaps with the indebted banks and state enterprises, thereby, theoretically, freeing them from the burden of debt and allowing them to adopt more "commercial" attitudes. Past experience suggests that in many cases this new device will simply be used to allow bankrupt firms to continue in business and run up new debts.

Opposition from bureaucratic conservatives and managers was not the only factor in forcing Beijing to sanction a further lease of life for state industry and a round of state investment. Urban and rural unrest has been widespread in China for the last two years and, while all workers' self-organisation has to be clandestine, it is likely that the working class has developed sophisticated networks of activists and militants, as it did after the Tiananmen massacre.

East-Asia

In Indonesia the attempt by the political élite to keep Megawati Sukarnoputri from becoming president led to violent disorder throughout Java and Bali. Megawati's inclusion, alongside Wahid, as vice-president was necessary to stabilise the situation. This was because she and her party, the PDI-P, are the focus of massive expectations among the workers, the poor and the students.

Economic recovery and the Wahid-Megawati government will probably now bring a "honeymoon period" of six months to a year in Indonesia. The expectations of the masses in her and Wahid are considerable - yet this will not stop the IMF demanding that debts run up during the last three years be paid for by the poor. The military may have withdrawn only to the wings but ultra-reactionary forces amongst them will doubtless try to destabilise the new regime.

In the longer term the students and workers will learn by bitter experience the inability or unwillingness of Megawati and Wahid to meet their basic demands. New unrest will probably focus on political questions particularly the demand for a trial for Suharto and other corrupt bureaucrats and the end of dwinfungsi, (a constitutionally guaranteed role of the army in civilian affairs).

The central problem remains the crisis of leadership. In practice this is posed by the danger of the separation of the workers and students: with the workers focusing on economic reform and students on political change.

In South Korea the political crisis has lessened considerably. The Kim Dae Jung government clearly generates many more illusions than the previous right wing and military governments could ever do. It can trade on its "democratic" credentials to persuade workers make sacrifices and limit the scope of their resistance to austerity.
Until the working class builds its own political alternative to the ruling bourgeois parties it will be condemned to rally to the flag of middle class-led opposition.

While there seems to be no progress in the formation of a workers' party in South Korea, there have been some left-wing splits from the Stalinist forces in the Philippines (the Revolutionary Workers Party and the Socialist Labour Party). The Indonesian PRD, with around 10,000 members and which is the centre of the political radicalisation in Indonesia, clearly contains many subjective revolutionary socialists. A key task for the LRCI over the next 12 months is to strengthen our contacts with these left movements in East Asia

Europe

In Europe, the rapid fall of the Euro against the dollar and the resignation of the entire European Commission put the EU on the back foot against its US rival. Trade disputes over bananas, hormone-treated beef and GM products indicate the continuing friction, which will carry over into the next round of world trade negotiations.

The relative quiescence of workplace struggles in Western Europe in this period is due to the economic upturn and the presence of "Left" coalitions or Social Democratic governments.

Our perspectives predicted few major clashes in Europe "until the effects of the world recession were felt". As we have seen, the main powerhouse economies of the EU have swung upwards not down - though rationalisation, redundancies and merger mania have meant that the working class has not benefited from it. Nevertheless there have important struggles over the past year.

In January Greece was swept by huge wave of very militant school occupations by 16-18 year olds against tests designed to exclude poorer students. In Spain - the only major EU country with a conservative government - there have been a number of national and regional strikes. In France during the Autumn 140,000 French school students took part in two national days of action, followed by a mass workers' demonstration against unemployment.

The Euro-elections proved setback for the ruling Social Democratic parties with the important exception of France. In Germany the ruling socialist party suffered badly and has done so since in provincial elections. This shows that the forced resignation of Lafontaine has in fact proved a pyrrhic victory for the "German Blair".

Schröder is clearly committed to shift the balance of forces within the SPD and the government to the right. But he and his supporters face important obstacles from two sides within the workers' movement: a substantial part of the traditional labour aristocracy has refused to support Schröder in the recent elections because of his attacks on the welfare state. Secondly, a growing part of the West German trade union movement is toying with support for the ex-Stalinist PDS.

The Schröder government is continuing the attacks started by Kohl, sometimes in a more severe form than Kohl ever dared to attempt. But it is forced to carry out the attacks via integration of the trade union bureaucracy into class collaborationist schemes like the "Alliance for Jobs". This reflects the inherent weakness and instability of the German government which will continue for next period and which may even collapse before the end of the term to change into a cross-class "great coalition".

In Britain, Blair has strengthened his grip on the Labour Party and, through a renewed alliance with the right wing of the bureaucracy, on the trade unions too. In. England and Wales, despite Blair's poor showing in the Euro-elections, the space for a protest vote against Labour is limited by the continued loyalty of reformist workers and their leaders to the Labour project. Not so in Scotland where 100,000 voted for left of Labour socialists (23,00 in Glasgow) and Tommy Sheridan, leader of the Scottish Socialist Party (a coalition of right centrists and left reformists), was elected to the Scottish Parliament.

The results for the English SWP and Socialist Party were humiliating and no doubt added to the SWP's observable fall in morale and numbers since its disastrous adaptation to pro-Serb Stalinists in the Kosova war.

In France the bloc of the LCR and Lutte Ouvrière got 5.2 percent of the vote and around a million votes. That gained them five seats in the European. The LO-LCR vote approached 10 per cent in parts of the industrial suburbs of Paris and bore comparison with that of the declining PCF.

On the other hand the earlier hope of the centrist left, the renewed Stalinist parties such as Rifondazione Comunista in Italy and the Izquierda Unida in Spain, suffered heavy defeats. This strongly contrasts to the victories of the Swedish Left Party and the German PDS, who have capitalised from the discontent of the more class conscious workers and youth in the EU elections and are likely to do so in the future

Conclusion

Our political perspectives - an intensified period of inter-state and class struggles mainly located in Asia and Latin America - have been more or less borne out. But our short term economic perspectives were proved wrong.

The New World Order remains in remarkable disorder. However the prolongation of the US cyclical upswing has enabled the US dominated financial institutions to counteract the turning of the Asian and Latin American recessions into catastrophic slumps. Unless the US Stock exchange crashes and the US enters into a serious recessions it appears that the cycles of Europe and North America will not be synchronised. Europe may continue a Euro fuelled recovery.

But these are still "ifs" and "maybes" and not yet certainties. A stock exchange crash is still likely, although profit recovery over the last 12 months means that it need not be as spectacular. And it may not lead to the synchronised world recession that we thought probable one year ago.

Despite our short term errors of economic prediction, on a world scale the objective foundations of an openly revolutionary period (economic misery and uncertainty combined political/ military explosions) are increasing.

The emergence of new pre-revolutionary situations over the next six months is not excluded - in Russia or Indonesia, for example. But the restraining factor of the crisis of leadership needs to be given more emphasis than ever before.

In Western Europe and North America, as long the present economic buoyancy continues, the class struggle there is likely to express itself mainly in sectional trade union struggles, in pressure for reforms from the social democratic governments where they exist and in continued movements by young people around issues like education, third world poverty, the environment and sexual and cultural freedom.

The need for working class unity in action, against the global companies and the global effects of the profit system, is greater than ever. Yet the national programmes and national organisations of the workers and oppressed are imprisoned by reformism and trade union routinism. Only the revolutionary socialists offer a truly global answer: only revolutionary socialism offers a truly global organisation.

The gap between our aspirations and reality is huge: in most countries the left is tiny. But it is not because of the stability of capitalism's economy, politics or ideology. Solving the crisis of leadership within the working class remains the key task, a key that will unlock the cycle of struggle and defeat that has imprisoned the workers' movement over the whole past decade.