Foreclosures, Unemployment, Union Busting:

Capitalism U.S.A.

Part Two

Part One of this article appeared in WV No. 910 (14 March).

The collapse of the U.S. housing boom is but the most recent visible manifestation of the debt-ridden financial house of cards that is the capitalist economy. The financial crisis that began last summer is now impacting the domestic economy as a whole. In February, payroll employment fell by 63,000, the biggest monthly drop in nearly five years. On March 20, the Labor Department reported that the average of applications for jobless benefits for the prior four weeks had reached over 365,000, the highest level since Hurricane Katrina hit the Gulf Coast in 2005. Almost all business sectors are shedding jobs, with the biggest decline in manufacturing and construction. Another index of a downturn is that last month retail sales declined, especially for autos, furniture and consumer electronics.

Meanwhile, financial turbulence continues to batter Wall Street. Witness the spectacular collapse earlier this month of Bear Stearns, a venerable, major investment bank whose risky investments backfired. One financial analyst commented: “Once you have a run on the bank you are in a death spiral and your assets become worthless” (New York Times, 17 March). If Bear had gone bankrupt outright, it would have caused heavy losses for the many financial outfits that have lent money to the investment bank or that market their securities through it.

Thus the masters of Wall Street and Washington organized a “rescue” operation. The Federal Reserve (the U.S. central bank) has agreed to guarantee $30 billion of the firm’s “most toxic” investment holdings, while financial giant JPMorgan Chase moved to buy up Bear’s stock at $2 a share, less than one-twentieth the firm’s market price a few days before. Bear stockholders, including many of its employees who have their retirement funds tied to Bear stock, are furious and are trying to scuttle the deal and force JPMorgan or another bank to put up more money. Whatever the outcome, no one thinks that the “rescue” of Bear Stearns will ease the financial crisis. The question of the day on Wall Street is: who’s next?

Indeed, the Fed has allocated some $400 billion for a series of emergency short-term loans, including for investment banks. For many of these, the government would accept risky investments, including hard-to-sell securities backed by mortgages, as collateral in order to prevent a panicked run on the banks. Moreover, in announcing the Bear deal, the Fed also stated that it was launching a new program to lend money to the 20 largest investment banks that serve as “primary dealers” and trade Treasury securities directly with the Fed. According to the New York Times (18 March), “Fed officials raised the stakes by offering investment banks a new loan program without any explicit size limit.” This could lead to the wholesale transfer of losses from investment banks to the Fed (i.e., taxpayers), “nationalizing” the potential losses of Wall Street parasites caused by the mortgage crisis. Bear Stearns and other investment giants get rescued while working people suffer, many unable to even escape their debts through bankruptcy because of a 2005 bankruptcy “reform” law that received support from Democrats as well as Republicans.

The panicky financial conditions and economic downturn have also demonstrated the bankruptcy, so to speak, of monetarism, which has been the dominant economic doctrine of the bourgeois right since the ascendancy of Ronald Reagan and Britain’s Margaret Thatcher in the 1980s. The ideologues of monetarism maintain that the government, in particular, the central bank, can effectively control economic activity by adjusting the amount of money in the banking system along with interest rates. Like many capitalist theorists before them, the ideologues of monetarism believed they could minimize, if not eliminate, economic downturns—i.e., resolve the inherent boom-bust cycles of capitalism. A practitioner of monetarism, former Federal Reserve head Alan Greenspan was hailed as a maestro in bourgeois circles for overseeing for 18 years a massive expansion of financial wealth. But now the bubble has burst and much of that wealth has disappeared. There is real panic among Wall Street bankers and corporate executives while working people are fearful—and rightly so—about what the economic future holds in store for them.

When the Fed lowered interest rates earlier this month by another unusually large 0.75 percentage point—sending stocks up the following day—it revealed a certain improvisational panic. The impending recession has been accompanied by increasing inflation. The Associated Press (18 March) reported that wholesale prices rose again in February, with prices, outside of food and energy, shooting up at the fastest pace in 15 months. Notwithstanding the recent drop in the price of commodities such as crude oil and gold, the costs of energy, such as gasoline for your car, and basic foods (neither of which are counted in “core inflation” figures) have been consistently rising, hitting working people hardest. A cut in the interest rate by the Fed could serve to further drive down the dollar and fuel inflation. As the Washington Post (19 March) stated, “By reducing the interest rate financial institutions charge each other for short-term loans, the Fed makes money more readily and cheaply available.” The Post went on to note: “Through higher consumer prices, all Americans would effectively help pay for the rescue of the financial industry. The decline in housing prices might be tempered, but inflation would eat away at real housing values.”

According to the New York Times (18 March), the Fed currently has a total reserve of some $800 billion, half of which has already been pledged to rescue failing banks and investment firms. As former treasury secretary under Clinton, Lawrence Summers, pointed out: “There is a fundamental issue, which is that the financial system is short of capital and is under pressure to contract” (New York Times, 17 March). As it is, since last summer the Fed had already opened the loan spigot to banks at lower interest rates. But the banks have jacked up their interest rates to borrowers, whether businesses or households, while imposing more stringent conditions for making any loans at all and shunning all but the safest securities. Meanwhile, corporate executives are disinclined to borrow to expand production and employment with an economy that is likely already in recession.

For Class Struggle!

The economic downturn has become one of the central factors in the Democratic primaries between Barack Obama and Hillary Clinton, with each of them proposing plans to stimulate the economy while laying the impending recession on the doorstep of the Republican administration of George W. Bush. But the economic ills suffered by America’s working masses are not fundamentally the product of the particular policies of an administration, notwithstanding its overt hostility to workers and the poor. For decades, workers’ productivity has drastically increased while real wages have fallen. Economic crises are a result of the irrationality of capitalism, under which social production is based on the private ownership of the means of production.

From the militancy shown by immigrant and black workers in the years-long bitter struggle to organize the Smithfield pork processing plant in Tar Heel, North Carolina, to the 2003-04 strikes by grocery workers in Southern California, to the 2005 New York City transit strike and the ongoing strike against American Axle by the United Auto Workers, working people have shown their willingness to fight to defend their livelihoods. But they face formidable obstacles. Union-busting is a billion dollar industry, and the bourgeois rulers have on their side a panoply of anti-labor legislation and the entire state apparatus—consisting at its core of the police, courts, prisons and military—which exists to defend the rule and profits of the bourgeoisie.

Within the labor movement, the proletariat is saddled by a pro-capitalist union bureaucracy that promotes the lie that the interests of labor and capital are compatible. This bureaucracy, which parasitically sits atop the unions, is on the one hand susceptible to the demands of its working-class base. At times, it is pressured both by labor’s ranks and the provocations of the bosses into strikes and other labor action. On the other hand, they have often thrown in the towel or signed egregious give-back contracts. Unions will not get anywhere playing by the bosses’ rules. It is necessary to revive mass picket lines that stop the scabs, sit-down strikes and plant occupations, secondary boycotts and other methods of class struggle that built this country’s industrial unions and that the trade-union tops have by and large renounced today. This poses the need for a struggle against the politics of the current crop of union misleaders in both the AFL-CIO and Change to Win union federations.

Wall Street is not a world unto itself, governed exclusively by the actions and interactions of investment bankers, money managers, corporate CEOs and other “players.” The increasing disappearance of good jobs and their replacement by McJobs, the slashing of pensions and health care benefits, the enormous weakening of the unions—all this and more takes place with the acquiescence of the labor tops. Instead of mobilizing in struggle, they tie working people and the oppressed to the capitalist system, especially through support to the Democratic Party, the other party of American capitalism, racism and war. Every year, millions upon millions of dollars of union members’ dues are wasted on backing one capitalist politician or another as a “friend” of labor, as has already begun to happen this election year with some unions supporting Clinton and others Obama (while others are biding their time to see who gets the nomination).

What is necessary is a fight to build a new, class-struggle leadership in the trade unions that begins with the understanding that the interests of labor and capital can never be reconciled. Forged in struggle, such a leadership will link the struggles of the working masses to the fight for immigrant rights, mobilizing for full citizenship rights for all immigrants, and against black oppression, the cornerstone of American capitalism. The need for a fighting union leadership must be part of the struggle to build a revolutionary workers party, independent of and opposed to all the capitalist parties and their politicians, that fights for working-class rule. Within the framework of the capitalist order, trade-union struggles for higher wages and better working conditions are essentially a type of guerrilla struggle. The working class will be subjected to continual attempts to increase the rate of exploitation and to the threat of deepening immiseration until it expropriates the capitalist class through a socialist revolution and establishes a planned economy in which production is for the benefit of the whole of society.

Myths of the Clinton Administration

It is today a widespread illusion—promoted by both the Democrats and the trade-union tops—that the time of the Clinton administration represented “golden years” for America’s working people. In fact, the Clinton administration oversaw the massive slashing of social services, such as welfare, the unprecedented rise in the rate of incarceration, especially targeting young black men, and the further weakening of the unions.

One of the main structural changes in the U.S. economy under the Bill Clinton presidency, highly touted by both Barack Obama and Hillary Clinton, was that federal government budget deficits gave way in the late 1990s to surpluses for four straight years for the first time since the boom years of the late 1920s. From the outset, reducing government expenditure was the number one economic priority of Clinton and the “New Democrats.” Shortly after winning the election in November 1992, he remarked: “We’re Eisenhower Republicans here…. We stand for lower deficits, free trade, and the bond market. Isn’t that great?” (quoted in Robert Pollin, Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity, 2003).

The Eisenhower administration in the 1950s came to power only a few years following U.S. imperialism’s victory in the Second World War, which was accompanied by the devastation of European and Japanese industrial capacity. By the early-to-mid 1950s, the U.S. had by far the largest and most technologically advanced productive capacity of any capitalist country. American-manufactured products dominated world trade, while the dollar, then considered “as good as gold,” dominated international financial markets. Under these circumstances, American capitalism could thus afford to improve the living standards of most working people while still maintaining more than healthy profits. Not so during the Clinton years.

Spokesmen for the Clinton administration, notably treasury secretary Robert Rubin, maintained that reducing the government debt was necessary to revitalize the U.S. economy. Financing the large, persistent deficits, they argued, resulted in higher interest rates and crowded out corporate investment in new plants and equipment. In some circumstances, a government budget surplus would—à la Rubin—stimulate additional productive capital investment, but not in the circumstances of the U.S. economy in the late 1990s. In paying down the federal debt, the U.S. Treasury transferred hundreds of billions of dollars from taxpayers to wealthy bondholders. (Eighty percent of the domestic holdings of government and corporate bonds are owned by the top 10 percent of U.S. households in terms of income.) The financial windfall received by these bondholders from Clinton, Rubin & Co. in the late 1990s was mainly rechanneled into stock market speculation and an orgy of spending on creature comforts by the rich and the more affluent sections of the petty bourgeoisie.

Frantic speculation on Wall Street, centered on dot-coms and other technology companies, drove stock prices to irrational heights. In early 2000, the average corporate share was selling for 39 times the company’s annual earnings per share. (By way of comparison, just before the Great Crash of 1929 the price/earnings ratio for corporate stocks was 32.) Nonetheless, many bourgeois economic ideologues denied that the stock market was being driven by speculative frenzy, instead claiming that the IT (information technology) “revolution” had fundamentally rewritten the laws governing the capitalist mode of production by creating a “new economy” of boundless prosperity.

But far from fundamentally changing the way in which capitalism operated, the IT “revolution” generated a classic boom-bust investment cycle of the kind described by Karl Marx. As Marx explained, capitalists invest in expanding production capacity on the assumption that the additional output, whether automobiles or Internet services, can be sold for the existing rate of profit—or at a higher rate of profit if they’re investing in cost-cutting technology. However, during periods of expansion the average rate of profit tends to fall. Even if productivity rises and wages don’t, increased profit per worker does not offset increased capital per worker.

This dynamic was clearly exhibited by the telecommunications industry, one of the mainstays of the “new economy” of the late 1990s. The return on capital for telecom companies fell steadily from 12.5 percent in 1996 to 8.5 percent in 2000. Telecommunications was an extreme case of what happened throughout the economy as the boom went bust. Business Week (9 April 2001) summed it up—from the standpoint of capital, of course, not labor:

“After years of frantically investing to build up the human and physical capacity to keep up with soaring growth, the U.S. economy is struggling with overcapacity as far as the eye can see. From Intel’s half-finished building in Austin, to the multitudes of identical retail stores that seem to dot every other corner, to the gaping, empty billboards that loom over New York’s Times Square, every sector is struggling with the hangover caused by too many years of too much investment.”

Obviously, for working people there cannot possibly be too many job opportunities and goods and services available. What business executives and their ideological spokesmen mean by “overcapacity” is that the U.S. has the actual capacity to produce more goods and services than can be sold at a satisfactory rate of profit. Writing in the 19th century, Marx explained in Capital (Volume III):

“There are not too many necessities of life produced, in proportion to the existing population. Quite the reverse. Too little is produced to decently and humanely satisfy the wants of the great mass….

“Too many means of labour and necessities of life are produced at times to permit of their serving as means for the exploitation of labourers at a certain rate of profit.”

The stock market boom of the late 1990s was driven by speculation, with Wall Street manipulating both the demand for and supply of corporate shares. The price of a corporate share usually contains what Marx called “fictitious capital.” That is, the market value of the outstanding shares of a given corporation is greater than actual value of its productive assets such as plant and equipment. The difference arises because the share price includes an expectation of future profits. During a stock market boom, the volume of fictitious capital reaches stratospheric levels because the expectation of higher stock prices becomes the main factor driving up their price.

Beginning in the 1980s, corporate America, encouraged by changes in tax laws, shifted from pension plans with defined benefits to contributing a certain amount to workers’ 401(k) plans or other types of individual retirement accounts. Working people were in effect forced to provide for their old age by investing in the securities market, weighing potential gains against risk. Wall Street launched a hard-sell advertising campaign to convince the American public that stocks were the best possible long-term investment. “You can’t beat the S&P 500” became the conventional wisdom propagated in brokerage offices, bank trust departments, the financial columns of daily newspapers and TV ads by big Wall Street firms.

During the 1990s boom, most large corporations repurchased on a massive scale their own outstanding shares, expending for this operation an average of $120 billion a year between 1994 and 2000. Some 40 percent of after-tax corporate profits, rather than being invested in increasing productive capacity, was instead expended in giving mainly wealthy stockholders windfall gains to artificially inflate share prices. These financial manipulations thus had a negative effect on expanding productive capacity, especially in manufacturing. The share of industrial plant and equipment as a percentage of all business assets fell to 18 percent in the 1990s, the lowest level in the entire post-World War II era. Since then, the decline of the manufacturing sector has continued apace. The mainstay of the economy in the first years of the 21st century was the now-collapsed housing boom that added not one whit to real productive capacity.

How Wall Street Fueled Housing-Price Bubble

Not that long ago, most residential mortgages were held by commercial banks or companies specializing in home finance. Then, about the time that the stock market boom went bust in 2000-01, large institutional investors such as corporate and government pension funds, insurance companies and hedge funds (private investment pools accessible only to financial institutions and the wealthy) went into the residential real estate market in a big way. Abetting the massive influx of finance capital into residential real estate was Greenspan’s Fed, which kept interest rates low by historical standards (or even in the negative once inflation is taken into account).

Financial operators now victimized low-income families, heavily black and Latino, with so-called subprime mortgages—home loans with sky-high commissions and interest rates, often disguised by low initial rates that were then jacked up after a few years. The tidal wave of subprime mortgages had its origins in banking deregulation of the 1980s and ’90s. A 21 March piece in the New York Times by liberal mainstream economist Paul Krugman noted that to bypass government regulations, Wall Street created a “shadow banking system” that “took over more and more of the banking business, because the unregulated players in this system seemed to offer better deals than conventional banks. Meanwhile, those who worried about the fact that this brave new world of finance lacked a safety net were dismissed as hopelessly old-fashioned.”

The sharp increase in cutthroat competition caused many banks to close branches in minority areas and relocate them in higher-income, more profitable areas. The result:

“Subprime lenders took their place. Because many of these are mortgage and finance companies, they are not regulated as closely as are banks and other depository institutions.... Indeed, it may be that depository institutions set up subprime affiliates for these very reasons.”

—Richard Williams et al., “The Changing Face of Inequality in Home Mortgage Lending,” Social Problems, May 2005

As Bill Clinton was leaving office, a record 47 percent of black people owned their own homes. For many, it would prove to be a cruel illusion.

The financiers involved in the subprime business knew full well that many of those loans could not be repaid. But they figured that as long as housing prices continued to go up, homeowners in financial difficulty, instead of defaulting on their loans, would refinance their mortgages or sell their homes to pay off their debt.

However, the housing-price bubble was not mainly fueled at the low (subprime) end of the mortgage market. Many affluent petty-bourgeois families and some better-off working-class families were burned when the stock market boom went bust in 2000-01. They were then convinced that housing was a much more secure and even lucrative financial investment than corporate securities. By 2005 over one-third of houses sold were not for primary residences but were rather vacation homes or purely speculative ventures. People were buying houses financed by mortgage loans with the intention of “flipping” them, that is, reselling them at a higher price.

At the same time, many families took advantage of the lower interest rates to extract equity from their homes by refinancing. Consider a family that purchased a house for $300,000 ten years before. Suppose that through a decade of mortgage payments the family had built $150,000 in equity in their home and reduced the outstanding balance on their mortgage to $150,000. They then borrow $200,000 against their house at a lower interest rate, repay the balance of the old mortgage and use the additional $50,000 to pay for their children’s education, buy a second car or some other form of consumption. Thus the housing boom of the past half decade has actually resulted in a decline in family home ownership in net financial terms. While homeowners’ equity has increased by $4.3 trillion since 2000, outstanding mortgage debt increased by $5 trillion.

A Rickety Financial House of Cards

Over the past several years there has been an enormous expansion of debt among all major components of the U.S. economy—households, corporations and the federal government. The past decade and a half has seen the effective disappearance of household savings, which three years ago actually turned negative. That is, American families consumed more than they earned mainly by converting home equity into additional mortgage debt. For most working-class families, the disappearance of household savings and escalation of debt has been mainly caused by the stagnation of real income. The New York Times (8 March) noted, “Most American households are still not earning as much annually as they did in 1999, once inflation is taken into account. Since the Census Bureau began keeping records in the 1960s, a prolonged expansion has never ended without household income having set a new record.”

To make ends meet, working people have borrowed against the equity in their homes, maxed out their credit cards or otherwise had recourse to the loan sharks of Wall Street. In 1995, on average U.S. households owed 62 cents in debt for every dollar in income. A decade later the indebtedness ratio had almost doubled reaching $1.16 for every dollar in income. Many working-class families are one or two paychecks from foreclosure on their homes, repossession of their cars, telling their children that they cannot afford to continue their college education or filing for personal bankruptcy.

In the banking sector, the tremendous expansion of risk and instability since the late 1980s is linked to important changes that have taken place in the structure and functioning of U.S. and global financial markets. The current financial panic was in part set off by a collapse of confidence in the value of CDOs (collateralized debt obligations) and other similar bonds that are issued based on the value of different classes of bundled mortgages, including subprime. The volume of such mortgage-backed securities soared from less than one trillion dollars in 2000 to over $3 trillion in 2003. The current volume of CDOs circulating in financial markets totals $6.5 trillion, an amount greater than the market for U.S. Treasury bonds.

A key component of the new financial architecture has been the explosive development of derivatives, securities whose value derives from that of an underlying asset. A major attraction of using derivatives for speculation is that the amount of money that can be won if the bet pays can be enormous compared to the initial investment. Hillary Clinton—with a little help from a friendly trader—famously parlayed $1,000 into almost $100,000 by trading cattle futures. However, the losses in derivative operations can also be astronomical. The French bank Société Générale discovered this recently when a rogue trader’s secret bets on stock market indices went, in the space of a few weeks, from a gain (on paper) of almost $2 billion to costing the bank a $7 billion loss.

CDOs, derivatives and other new forms of money capital that were touted as spreading financial risk instead spread financial panic. What we are witnessing is a classic financial crisis such as described by Marx in Capital (Volume III):

“This confusion and stagnation paralyses the function of money as a medium of payment, whose development is geared to the development of capital and is based on those presupposed price relations. The chain of payment obligations due at specific dates is broken in a hundred places. The confusion is augmented by the attendant collapse of the credit system, which develops simultaneously with capital, and leads to violent and acute crises, to sudden and forcible depreciations, to the actual stagnation and disruption of the process of reproduction, and thus to a real falling off in reproduction.”

Writing in the op-ed page of the New York Times (5 March), Stephen Roach, head of East Asian operations for the giant Wall Street investment bank Morgan Stanley, called attention to the parallels between Japan’s financial crisis in the early 1990s and that in the U.S. today. During the late 1980s, Japan’s central bank pursued a “loose” monetary policy fueling enormous speculative bubbles in both the corporate stock and real estate markets. When the bubbles burst, a large fraction of the “capital” of Japanese banks suddenly was transformed into “nonperforming” loans. As a consequence Japan suffered years of economic stagnation—the 1990s were later called the “lost decade”—followed by a weak and halting recovery. Roach pointed out: “In Japan, a banking crisis constricted lending for years. In the United States, a full-blown credit crisis could do the same.”

In fact, as Marx observed in Capital (Volume III) more than a century ago, “The credit system accelerates the material development of the productive forces and the establishment of the world-market…. At the same time credit accelerates the violent eruptions of this contradiction—crises—and thereby the elements of disintegration of the old mode of production.”

Finance Capital and the Imperialist Epoch

Between the time Marx had written Capital and the end of the 19th century, the imperialist system—the system of modern, decaying capitalism—had developed within the most advanced capitalist powers. Underlying the close link between financial crises and the contraction of production and employment is the dominant role of finance capital in capitalist imperialism today.

In his 1916 study, Imperialism, the Highest Stage of Capitalism, Bolshevik leader V.I. Lenin emphasized that the monopolization of production and the dominant role of finance capital impel the imperialist powers to divide the world as they strive for markets and spheres of exploitation in more backward capitalist countries in Asia, Africa and Latin America. Lenin underlined that large banks have become “powerful monopolies having at their command almost the whole of the money capital of all the capitalists and small businessmen and also the larger part of the means of production and sources of raw materials in any one country and in a number of countries.” In a 1920 preface to Imperialism, he wrote: “It is proved in the pamphlet that the war of 1914-18 was imperialist (that is, an annexationist, predatory, war of plunder) on the part of both sides; it was a war for the division of the world, for the partition and repartition of colonies and spheres of influence of finance capital, etc.”

The struggle of the imperialist powers to redivide markets and spheres of exploitation also led to the Second World War of 1939-45. But there was a major difference: the existence of the Soviet Union, which emerged out of the 1917 Bolshevik Revolution and remained a workers state despite its degeneration under the nationalist Stalinist bureaucracy. In its drive to dominate Europe, Germany invaded and sought to subjugate Soviet Russia. The defeat of the German Wehrmacht by the Soviet Red Army decisively affected the shape of the postwar world. The United States, with the defeat of its main imperialist rivals, Germany and Japan, became the hegemonic world 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.

In 1991-92, the Soviet Union, internally weakened by decades of Stalinist misrule, was destroyed by imperialist-backed capitalist counterrevolution. An important aspect of the ensuing bourgeois ideological triumphalism over this world-historic defeat for the international proletariat was expressed in the term “globalization.” Henceforth the financiers and industrial capitalists of North America, West Europe and Japan would supposedly exercise untrammeled economic domination throughout the world.

Many leftist critics of “globalization” accepted the basic premise that this constituted a new and fundamentally different form of capitalist rule. They maintained that large banks and industrial corporations had become genuinely “transnational,” that they were no longer tied to particular imperialist nation-states. Opposing this position, we wrote in our 1999 Spartacist pamphlet, Imperialism, the “Global Economy” and Labor Reformism: “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…. 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.”

The current international financial crisis has intensified the conflicts of interest between U.S. imperialism and its West European and Japanese rivals. Thus the downward slide of the dollar against the euro has caused alarm in Europe, especially in France. The European plane manufacturer Airbus, citing “life-threatening” losses (jetliners are priced in dollars), is reportedly considering plans to relocate production to Alabama and elsewhere in the dollar zone. Likewise, the recent sharp decline of the dollar against the Japanese yen has hurt major corporations such as Sony and Toyota that are heavily dependent on exports. The German newsweekly Der Spiegel (30 November 2007) warned: “Rarely has the world economy been so out of whack or have global imbalances been greater.” The magazine expressed the anxiety of the German bourgeoisie over the deepening financial crisis in the U.S.:

“In this case—when the ‘infection spreads,’ as a leading German banker puts it—banks would be forced to make far more drastic value adjustments. Not only would this poison the spending climate, but it would also undermine foreign investors’ confidence in the US economy. This in turn would lead to a far more substantial slide in the dollar’s value, and probably a crash on the markets, which are still at surprisingly high price levels today.”

The continued existence of the bourgeois nation-state—the central political pillar of bourgeois rule—is a fundamental barrier to the rational expansion of productive capacity benefiting working people throughout the world. To achieve that, it is necessary to overthrow the capitalist-imperialist system through a series of proletarian revolutions that lay the basis for an internationally planned, socialist economy.

[TO BE CONTINUED]