The neoliberalism debate in the ISA – Majority positions July 2020

We publish below the second part of the documents concerning the “neoliberalism debate” that took place in the ISA. This is the document of the Majority (signed by Eric Byl and Tom Crean) criticizing the Minority positions, circulated on July 2020.
You can read the Minority document of July 2020 here.
To get the general picture for this debate, read our introduction to the publication of this material here.
You can also read the initial documents:
-Majority positions of May 2020 here.
-Minority positions of May 2020 here.

Reply to Greek IC Members on the End of the Neoliberal Era, Consciousness and Perspectives for Struggle

By Tom C and Eric B, 3rd of July2020

Part 1: A decisive turning point

The discussion in the international about the current turning point in world relations and its implications for the approach of the ruling class, for consciousness and for perspectives for struggle, is very necessary.

New data is confirming the ISA’s perspective that the pandemic has triggered a deep global depression and that a “V shaped” or rapid recovery is excluded. In April, the International Monetary Fund projected that the world economy would shrink by 3% in 2020; by comparison, the world economy shrank by less than 1 % in 2008-9 during the height of the “Great Recession” (anything below 2.5% global growth is in reality a recession). But in its latest projection, the IMF now expects a catastrophic 4.9% drop. As Martin Wolf of the Financial Times put it, “we are in the midst of the deepest recession in peacetime history over the past 150 years.” (FT, June 17).

This may still be an underestimate as it is clear that, globally, the first wave of the pandemic is getting worse, not abating, with serious economic consequences. Moreover, most economists’ gloomy forecasts also do not take into account the potential for a catastrophic second wave of the pandemic in key countries which seem to have, for now, “flattened the curve”. The crisis, while triggered by the pandemic, has deeper roots in capitalism’s increasing senility and parasitism. Ten years ago, the capitalists already faced an historic economic and social crisis and were forced to take “unthinkable” measures to restart the economy including massive stimulus and temporary nationalizations. Now they face a qualitatively worse situation and in order to preserve their system they will be forced both by objective necessity and mass resistance to go significantly further than they did then.

Of course there remain a number of unknowns affecting perspectives including, how soon or whether there will be an effective vaccine or new therapeutics. But it is also extremely clear that the reopening of economies and the force of the pandemic is creating all sorts of new difficulties, exacerbated by the lack of any coordinated international response due to sharpening inter-imperialist rivalries. It will take a number of years to return to the level of global GDP that existed at the end of 2019. This will have devastating consequences for hundreds of millions around the world.

The importance of defining eras

While the capitalist mode of production has certain underlying features which have characterized it since its full emergence at the end of the 18th century in Britain, it has also gone through a number  of distinct phases in the past two centuries. These are important to understand because the parameters within which the working class wages its struggle against capital have shifted in important ways from one phase to another. For example, the failure to understand the key features of the new period emerging after World War II acted to significantly disorientate most Trotskyists at that time.

At the beginning of the 20th century, Lenin in his pamphlet, Imperialism, the Highest Stage of Capitalism, argued that capitalism had gone from being a system which developed the forces of production to being a system in decline, an absolute fetter on the further progress of humanity. The underlying contradiction, first described by Marx and Engels, was between the development of the productive forces on a world scale with an increasingly complex international economic division of labor (which we would now call “globalization”) and the nation state, capitalism’s basic political form.

Lenin’s perspective was dramatically confirmed by the slaughterhouse of World War I brought on by the imperialist powers’ competition for global markets. This opened up a period of unprecedented crisis for capitalism, including a global depression beginning in 1929, which lasted until World War II. The working class took power in Russia and threatened to do so again and again in a number of countries during this twenty year period. The counterrevolutionary resistance of the ruling class, particularly in the form of fascism, was ferocious.

As we know, the phase of capitalism that opened up after World War II had quite different and exceptional features which laid the basis for capitalism’s longest and most extensive boom. The strength of the workers movement as well as the threat posed by the Soviet Union and the extension of the planned economies to Eastern Europe led to major concessions, including the “welfare state” measures in Europe, otherwise termed “structural Keynesianism.”

The limits of this phase were reached with the crisis of profitability in the 70s which led the ruling class to search for a new approach. However, the full turn to neoliberalism required the major defeats of the workers movement under Reagan and Thatcher. Neoliberalism was reinforced by the collapse of Stalinism at the end of the 80s and the counterrevolution that followed. We have previously explained that neoliberalism as a phase of capitalism was characterized by a further extension of the role of finance capital; by the attempt to remove barriers to the movement of capital within societies and internationally; and by a fundamentalist “free market” ideology. Concretely this meant a relentless offensive against the gains made by the working class in the postwar period, privatization of public services and a series of international trade agreements which pushed against the limits of the nation state. Trade deals and international institutions like the IMF were used to enforce neoliberal policy.

But there were also limits. In some countries the process went further while in others the workers movement was strong enough to maintain some elements of the welfare state. In France this resistance has continued to the present day. Even in the U.S., the neoliberal era never reached a point where there was no state interference in the workings of the hallowed “free markets.” Far from it. Even under Reagan, the massive level of military spending could be characterized as a form of “military Keynesianism,” ie as a measure taken to bolster demand.

Deglobalization

In its reply to the International Committee statement, the Greek IC members dispute the characterization of an “end of neoliberalism.” We should underline that what is meant is the end of the neoliberal era or phase of world capitalist history. We don’t mean this is the end of all neoliberal policies such as privatization and deregulation. We certainly don’t mean that this is the end of austerity and attacks on the working class which is a feature of every capitalist crisis as the ruling class seeks to make the working class shoulder the cost.

The most important indication that this era has come to an end is that the neoliberal project of globalized free markets has reached its limits and been set into reverse. Comrades are well aware of the steep drop in world trade this year. This follows on from years of slowdown in the growth of world trade and of course the sharp increase in protectionist measures, especially due to the inter-imperialist conflict between the U.S. and China. We have explained that this cannot be reduced to Trump’s ascendancy but reflects a reorientation of the U.S. ruling class away from the policy of engagement they pursued with China since the 1970s.

There has also been a sharp drop in Foreign Direct Investment (FDI) – a key driver of globalization along with global trade – even before the pandemic. But like other features of deglobalization, the pandemic has greatly accelerated this process. According to the UN Conference on Trade and Development, global FDI flows are expected to contract by 40% during 2020/21, hitting the neocolonial world particularly hard.

From the time he came into office, Trump articulated a nationalist “America first” policy which came to include “decoupling” the U.S. from China. This decoupling is well underway. Even a year ago, 40% of U.S. multinationals were looking to relocate at least part of their supply out of China. But it is not just Trump who now puts forward the need for a more aggressive national policy to defend “strategic” sectors of the national economy and reduce reliance on imports from countries with antagonistic geopolitical interests. Modi in India declared a new policy of economic “self-reliance” in May while the E.U. speaks of “strategic autonomy.”

The Greek IC members are of course correct to say that globalization will not be completely reversed but they significantly underestimate the extent of the process underway and how long it can continue. Globalization began in the 19th century (vividly described by Marx and Engels in the Communist Manifesto) but it has not been constantly developing in a forward direction ever since. The first major phase of globalization came to an end in World War I. The level of foreign investment did not again reach the level of the year 1900 until the 1990s. The interwar period, especially the 30s, was characterized by a high level of protectionism, far more limited international trade and sharp inter-imperialist rivalry. This is the direction world relations are heading in today although the outcome is not likely to be a world war for reasons we have discussed in our World Congress material.

But deglobalization and the accompanying turn to protectionist policies points to another crucial element of the situation, namely the inability of the capitalists to base themselves on the same “free trade,” anti-statist ideology as they did during the neo-liberal era.

Capitalism’s ideological crisis

We need to contrast the current situation with the beginning of the neoliberal era in the 1980s when there was a significant base of support and an even wider layer of passive acceptance in a number of countries for free market ideology, This was linked to a vision of human fulfilment through endless consumerism. The level of support/acceptance for these ideas was significantly reinforced by the collapse of Stalinism and the perception that there was no alternative to capitalism.

Neoliberal ideology had its reflection within the labor movement. It contributed to the “bourgeoisification” of traditional workers parties. This was also true in the neocolonial world where Stalinism and left nationalism had failed to deliver a decisive change in the position of the masses.

Neoliberalism promised economic development through expansion of global trade and unleashing the magic of the market.

But 2008-9 was a decisive turning point. Through bitter experience, the working class came to associate neoliberalism with endless austerity. There were mass revolts against austerity in Southern Europe and bitter defeats, especially in Greece. A more developed working class revolt internationally could have brought the neoliberal era to an end in that period, as the CWI discussed. In the absence of a decisive challenge, neoliberalism continued in a zombie state.

But the defeats in Greece and elsewhere do not mean consciousness returned to the point where it started. This is also reflected in the profound polarization in politics in many countries with traditional bourgeois parties and social democratic parties which had adopted a pro-neoliberal position seeing their share of the vote shrinking and in some cases decimated.

Ordinary people in country after country want more, not less, public healthcare, education and social services. The rise of Bernie Sanders and Jeremy Corbyn was a reflection of this. Their demise, while a real setback, is not in any way a reflection of their message becoming less popular. Quite the opposite.

Then came the global revolt at the end of 2019, driven by working class youth which stretched from Ecuador and Chile in Latin America to Lebanon, Iraq and Iran in the Middle East, all the way to Indonesia and Hong Kong. This was a revolt against corruption and austerity, in reality a revolt against neoliberalism and its political representatives. This is not to mention the revolutions in Algeria and Sudan and the mass movements of working people in France over the past two years driven by the growth of inequality and precarity which are also by-products of neoliberalism.

At any given point, the dominance of the ruling class over society depends on support or at least acceptance by sections of the population for the legitimacy of their rule. We have pointed to the crisis of legitimacy of capitalism and its institutions when its underlying justification, namely its ability to improve the living standards of ordinary people, has been so clearly undermined.

Straightforward neoliberal ideology will no longer work as a justification for bourgeois rule. Who could imagine a major political figure today boldly proclaim “there’s no such thing as society” as Thatcher did in 1987?

How will capitalism respond?

What direction will the capitalists take under the pressure of objective economic necessity and working class resistance? Obviously we need to stress that our answer to this question must be provisional given the many unknowns about the future course of the crisis.

One direction that is already clearly indicated is the growth of nationalism, protectionism and right populist authoritarianism. The Greek comrades correctly point to these features and the complications they create but they don’t acknowledge that these phenomena are in fact part and parcel of the beginning of the post-neoliberal era.

Another element is the turn to more extensive Keynesian-type measures by many governments. Again we must stress that we are in no way suggesting that there is a material basis for a return to the “structural Keynesian” welfare state policies of the post-World War II period in Western Europe. Nor have we at any point described the era we are entering as a “new Keynesian era” as though this is the decisive, overriding feature.

We have instead drawn a comparison to the Keynesian and state interventionist policies of the 1930s because that’s the closest analogy we have in terms of the scale of the economic crisis.

The first reason the ruling class needs to turn to extensive stimulus measures – including state subsidies to companies to keep workers on the payroll or extending unemployment insurance, direct investment in job creation, loans to big business, small business etc. – is because they have no choice if they are to keep demand from collapsing completely. Only a few months into this crisis, the scale of stimulus measures in the U.S. and the E.U. already far surpasses what was done in 2008-9.

The U.S. Federal Reserve chairman Powell has been urgently calling for more stimulus not less. Responding to Republicans in Congress moaning about the deficit he recently said, “Those concerns are always going to be there, but I wouldn’t prioritize them at a time like this.” (The Hill, 6/16/20) Now we have the remarkable spectacle of the right populist British prime minister, Boris Johnson, promising significant government investment in infrastructure and education, declaring: “what you can’t do at this moment is go back to what people called ‘austerity’…I think this is the moment for a Rooseveltian approach to the UK.”

The Greek comrades cite the scale of the measures taken by Roosevelt in the 30s and argue that these are essentially excluded today. We need to remember that the first set of New Deal measures were not actually brought in until 1933, ie four years after the 1929 crash. In the beginning this was not a response to a militant labor upsurge which only began in 1934; rather it was a desperate attempt to restart the economy. Roosevelt subsequently went far further than he intended under the pressure of the working class. The U.S. ruling class was extremely divided; one wing strongly opposed Roosevelt. And only the U.S., because of its reserves, was able to bring in measures on such a scale while maintaining bourgeois democracy during the Great Depression. So, even in the 30s, the New Deal measures were exceptional.

How far the ruling class may be forced to go today cannot be definitely stated in advance. This applies not just to stimulus spending but also to other forms of intervention in the economy including nationalization and industrial policy, higher taxes on the rich, and even the introduction of capital controls. Martin Wolf’s description of the likely features of the new era includes this “There will also be little toleration for another round of ‘austerity’…A greater likelihood is higher taxes, especially on the more prosperous, and persistent deficits, financed, either explicitly or implicitly, by central banks.” Broadly speaking as national governments tend to pull out of international institutions, towards an element of nationalist “self-reliance,” they will be more susceptible to pressure from the local elites as well as the working class.

What is clear is that there will be widely differing situations. The wealthiest countries will be able to use their reserves to take quite extensive measures like paying companies to keep workers on the payroll as Germany, Britain, France and a number of Northern European countries have done. In doing this they have kept unemployment low for now. Southern European and “developing” countries which are far more indebted as a result of the previous crisis are in general taking far less extensive measures. Some are facing catastrophic situations. While the Spanish government, for example, has had a program to keep workers on payroll, its stimulus measures have otherwise been quite limited, and with the paycheck program set to wind down, the country is projected to have 25% unemployment by the end of the year.

The U.S. which has the benefit of still having the world’s reserve currency but also has a deeply dysfunctional political system, has managed to take measures that point in several directions at once. The extension and $600 top-up to unemployment benefit voted by Congress actually meant the average worker on unemployment received a 34% pay rise over the past three months compared with their regular wage! But this top-up is set to run out at the end of July and the underlying reality of mass unemployment will assert itself with a vengeance. Furthermore, the federal stimulus is combined with a wave of savage austerity budgets at state and local level leading, for example, to the layoff of hundreds of thousands of teachers.

In large parts of the neocolonial world, particularly in Africa, precarious state finances, collapsed commodity prices and the general effects of lockdowns, threaten to plunge hundreds of millions into deep poverty and decimate the middle class. As we have pointed out in the IC document, the threat of defaults on debt payments triggering a massive financial crisis has caused the G20 to suspend debt payments for one year. At the same time, some countries in the neocolonial world with more reserves have also undertaken significant stimulus spending. For example, India, facing 30% unemployment in May, has announced stimulus measures equal to 10% of GDP.

It is extremely important that we continuously explain in our propaganda that while Keynesian measures may provide relief or prevent worse economic disaster, they will not prevent the oncoming depression. While having stimulating effects, they will compensate for only a share of the collapse of demand and the accompanying turn to protectionism will have a negative effect on the global economic crisis. Nor will they prevent massive suffering especially in the neocolonial world but even for tens of millions in the advanced capitalist countries. This was also the case in Roosevelt’s America. In fact in the U.S. the economy collapsed again in 1937 and only began to really grow during wartime production with elements of a command economy. We certainly don’t agree with the advocates of “Modern Monetary Theory” who believe that deficit spending and money creation can be used to create semi- permanent full employment.

A provisional description

The Greek comrades cite paragraph 24 of the European perspectives document for the World Congress which stated that, “A fundamental shift in policy [away from the approach in the neoliberal era] will require revolutionary class struggle. Until then, the system will be kept afloat by injecting more liquidities while continuing further attacks on wages and services.” This was clearly an overstatement but it pointed to the need for a decisive shock to shift the system in a different direction away from “zombie neoliberalism.” This shock was in practice not provided by the class struggle but by the pandemic-induced global economic depression which began a few weeks after the World Congress.

The bottom line is that the ruling class will shift its approach under pressure of objective necessity including the threat of economic collapse and genuine mass movements of the working class.

Again we don’t and can’t know all the features of this new phase of capitalist history that is opening up or the exact balance between different features. Analysing the situation and elaborating perspectives will require an application of the method of Marxism to the living situation. The Greek comrades say we should not characterize the new situation because it’s in flux.. We don’t agree; we must give an approximate characterization and then refine it over time based on further developments. This was Trotsky’s method in relation to complex phenomena like the degeneration of the Russian Revolution and the Comintern. The alternative would be to take an overly cautious approach, in effect only developing our characterization in retrospect.

Part II: Consciousness and perspectives for struggle

The Greek comrades also object to what they see as “over-optimistic” perspectives for struggle and for the potential to develop the forces of Marxism in the next period. They claim that the conclusions in the IC document are based only on developments in a few countries with the most favorable objective situations.

For us these are the most serious questions under debate but to answer them we must begin with an estimation of the period we are entering into and the position of the working class and the capitalists at this stage.

To reiterate, a central point for us is the scale of the crisis that is opening up, how this will strip away illusions and how the hammer blows of objective reality will force massive shifts in consciousness. While we see this process as already having begun, we completely agree that this will not happen in a straight line or lead to inevitable revolutionary victories for the proletariat. In the immediate sense, mass unemployment can have a stunning effect on the class struggle as those with jobs fear losing them, a point that was made in the IC document. If the left and labor movement do not develop a more decisive response than ten years ago, the door can be opened for the further development of the populist and far right.

It is useful to again briefly point to the 1930s. The period began with possibly the greatest defeat suffered by the modern working class in its history: the victory of fascism in Germany in 1933. But this was rapidly followed by the emergence of the Congress of Industrial Organizations in the U.S. which Trotsky characterized as a workers movement with revolutionary potential, the developing revolutionary situation in France and the Spanish Revolution. Parenthetically we were surprised to see the Greek comrades only point to the role of the unemployed in a negative way: “the ‘reserve army of labor’ which is used by the bourgeoisie to force the workers to defeat or submission, to destroy labour relations and living standards.” In the U.S., Britain, Ireland and many other countries, the struggles of the unemployed in the early 30s were a crucial harbinger and preparation for the struggles of the organized working class. Nor are these the only historical examples. We feel this is a very important lesson for today.

Despite the many differences, we believe this coming period will similarly feature sharp revolutionary and counterrevolutionary turns in country after country. This is not the same thing at all as saying the struggle of the working class and the youth will move at the same pace in all countries nor is it denying that the outcomes could be radically different in different countries. However, for Marxists the most “developed” situations in key countries should indeed be focused on in order to see those features which can come into play in other countries at a later stage and to prepare for them.

What are the main trends?

The IC document gave many qualifications to the overall perspective and pointed to many complications. Developing these points further would be entirely correct. But, in looking at all sides of the question, we must also ask what is the dominant trend?

Consciousness at any given point is, of course, informed by the prior experiences of the class. While we agree that the effect of serious defeats and the failures of new left parties to measure up to the tasks posed by the crisis of capitalism do indeed weigh on the consciousness of the working class in many countries, this is not the only factor, or the main factor in the situation.

In looking at the young generation which will play the key role in the next period, it is clear that internationally there is a broad advance in consciousness since ‘08-’09. This is a generation affected precisely by growing up in an era of crisis and precarity. In addition to the explosive upheavals in country after country at the end of last year, which we cited earlier but which the Greek comrades’ document omits, we have seen the youth movement on climate change and the women’s movement, both of which will definitely continue to be key features of the coming period as well.

Our World Perspectives document agreed at the World Congress made the following assessment: “Working people will not be as shocked by the next crisis, in the way they were by the previous one of 2008-9. While a serious slump can have a ‘stunning effect’ especially as people cope with mass unemployment and evictions, this phase can be expected to be of far shorter duration than after 2008. When struggle resumes it will very quickly be on a wider scale, more determined and with more far reaching demands.”

The Greek IC members seem to be drawing different conclusions now. They assert that, “Consciousness in the period of the coronavirus is a much more complicated issue than in the course of the 2008-9 crisis.”

The effect of the pandemic on consciousness

The comrades develop this point further: “To sum this up, in 2008-9 it was much clearer, in most countries, who the enemy was – the bankers in the US were responsible for millions losing their jobs and their homes, the Troika in Europe for the Memoranda imposed on the South, etc. Now this is not clear – the cause of the crisis, on the surface, is a virus, and this is used by Trump and others of his kind, by the media, etc.”

First of all, this is not a complete description of the situation after ‘08-’09. In a number of countries at the beginning of the crisis, the bourgeois sought to whip up hostility to the “bloated” public sector and paint a picture of societies which had “lived beyond their means.” At least initially, this won some support, or at least reluctant acceptance, for neoliberal attacks and austerity.

Today, while the situation is certainly not the same in all countries, there are very important countries where anger at how the ruling class handled the pandemic is playing an important role in radicalization: these include the U.S., Brazil, Britain and in a submerged way, China. Others like Russia could soon follow. What all these countries have in common, on top of their great weight in the world economic and political situation, are right populist regimes (or in the case of China a most brutal dictatorship) which use some mix of nationalism, xenophobia and racism to mobilize support. Now they have to take responsibility for how they handled the pandemic (in all cases with extreme incompetence, particularly Trump and Bolsonaro) and the economic crisis.

More broadly, the neoliberal cuts to healthcare which significantly exacerbated the covid crisis, for example in Italy, are a real factor in mass consciousness. The Greek comrades also take issue with the IC document’s description of how the role of healthcare and other essential workers has affected mass consciousness. Since the original documents were written, healthcare workers have gone on strike in Tunisia, doctors have gone on strike in Nigeria and healthcare workers have organized protests and actions in a number of other countries. We should also point to the role of teachers in developing battles about how to reopen schools. In country after country, teachers have been radicalized in recent years by the fight against neoliberal attacks on education and can play a critical role in the struggles ahead. Already before Covid, health workers and teachers were among the most combative and organized sectors, with strikes and struggles in many countries.

Key lessons of the BLM movement in the U.S. and internationally

Just as we foresaw the current economic crisis in 2019 but could not be definitive about how deep it would be, so of course we could not be definitive about what form struggle would take as societies emerged from lockdown. With the massive Black Lives Matter upheaval which began in the U.S. a little over a month ago and then spread across the world, we have the beginnings of an answer. While the movement has focused on racial justice it cannot be separated from the context of the pandemic and looming depression and the desire of the youth for a radically different world. It expresses the same hatred of ruling politicians and the system as the revolts of 2019.

The key feature of the mass movement in the U.S. has been its multiracial character and the effect it has had on mass consciousness. It has consolidated a growing rejection of racism in wide sections of the white population which is enormously progressive from the point of view of the development of the class struggle. It has also put the reactionaries, including Trump and the reactionary wings of the police unions, firmly on the defensive. Combined with his disastrous handling of the pandemic, this could be the beginning of the end for Trump.

At the same time, while Joe Biden has sailed ahead in presidential polls, the leadership of the Democratic Party nationally and in many cities has been more widely rejected among young people than at any point since the 1960s. The situation has had some elements of a pre-revolutionary situation with the ruling class and state apparatus divided and unsure how to proceed.

The most radicalized youth who number in the hundreds of thousands have now firmly taken to the road of struggle to achieve black liberation. There is massive support for radical pro-working class reforms along the lines of what Sanders called for. After all those out in the streets overlap heavily with his base. Of course, his capitulation means that a massive political opportunity was missed but this movement also shows that his capitulation was not a decisive setback.

And while much confusion and many illusions persist, there is a significant layer which is now open to a more serious discussion about revolutionary change.

What is also remarkable is that this largely leaderless movement which objectively has numerous weaknesses, has organically developed its demands in the direction of challenging the priorities of bourgeois society. This is what is posed by the call to “defund the police” which is now becoming the basis of a new struggle against austerity budgets.

We can similarly expect the enormous energy of the protests in many other countries to be channelled into the struggle against austerity and other attacks on working people in the months and years to come. Internationally the movement is clearly a continuation of the movements on climate change, the women’s struggles, Occupy, the Yellow Vests and the 2019 global revolt which were also overwhelmingly characterized by an internationalist spirit. It shows that the pandemic, far from retarding the development of consciousness is if anything accelerating it.

Conclusion

In the building document adopted by the World Congress, we pointed to the potential for the rapid growth of our forces in the next period especially among young people. We pointed particularly to the movement against climate catastrophe which will also reassert itself in the next period.

All the features of the situation as they have unfolded since the World Congress reinforce why we should have an optimistic perspective for struggle and the development of our own forces while also being brutally realistic about the enormous obstacles and challenges ahead. On the other hand, the approach outlined in the document of the Greek IC comrades, in particular their apparent view that the situation now is more complicated than in ‘08-’09, is based on an underestimation of the scale of the crisis now unfolding, the impact this will have on consciousness of the working class and the youth and the favorable features of consciousness as it emerges from the last period.

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