Bretton Woods to August 15 1972: International class struggle unleashed

[p005] Bretton Woods to August 15 1972: International class All revolutionary perspectives today depend on the necessity of starting from the watershed of August 15th, 1971. President Nixon’s decision on that day to end the convertibility of dollars for gold and to scrap the system established at Bret- ton Woods in 1944 was a decision forced upon US imperialism by the accumulated contradictions of the long inflationary boom. But the measures taken themselves marked a qualitatively new stage in the crisis. All the tendencies towards uncon- trollable inflation, trade war and slump were fin- ally unleashed without restraint. The immediate and inevitable consequence of Nixon’s determina- tion to force the burden of the US crisis on to Europe and Japan has been that every ruling class must now shed all the apparatus of ‘consensus’ politics and go to war against the working class. Not a single capitalist country is free of the curse of galloping inflation. Not one bourgeois economist is able to understand this phenomenon, and not one capitalist politician has found mea- sures to avert or retard it. Consequently inflation works inexorably to prepare the factor which will turn crisis into collapse: an accelerated decline in the value of money which ‘suddenly’ reveals itself in complete lack of confidence in the monetary unit. The already insoluble crisis in the world monetary system is hopelessly aggravated by these developments, and every sign that the working class maintains its strength intact in defence of its wages throws into difficulties one ‘national’ capi- talism after another. The background of the new stage of the crisis is all-important, At one stroke, and without con- sulting any of US imperialism’s ‘partners’ in the banking houses and governments of the world, Nixon kicked aside the Bretton Woods system. As the Trotskyist movement alone insisted at the time, the consequences were incalculable. Bretton Woods had established the dollar as the dominant currency after World War II, a dollar accepted as convertible into gold at the price of $34 per fine ounce, the price established by Roosevelt in 1934. Every other currency was stabilised in terms of the dollar and these relations were subject to rigid conditions maintained by the International Mone- tary Fund (IMF). The fixed parities between nat- ional currencies, and the mechanisms for sustain- ing them, were carefully designed in order to prevent the type of competitive exchange depre- Editorial struggle unleashed ciations carried out by a series of countries to snatch market advantages after the slump of the 1930s. All this, the framework within which capitalist economy has worked since 1944, and which has provided a basis for the policies of containment of the working class, is ended. Within the capitalist world after 1944, the most important problem was how to deal with the working class. The Stalinist bureaucracy, aided by social-democracy, provided the treacherous class- collaboration without which the Bretton Woods system could not have been established, particu- larly in Europe. With this assistance, the now defi- nitive superiority of US capitalism could become a dominant factor for a generation. One manifes- tation of this strength was that in the 1940s the greater part of world monetary gold was safe in the vaults of Fort Knox. The dollar was scarce and sought-after currency throughout the world. Japan lay prostrate, having once been the newest and greatest threat to US expansion, European capi- talism was on its knees, dangerously dependent on the Stalinist parties. The European working class, in many cases armed and confronting an utterly discredited bourgeoisie, was lacking only in leader- ship. The US capitalists were called upon to put their vast productive resources to the salvage of the world capitalist system. The economies of capitalist Europe were revived on the basis of dollar loans, the Marshall Plan, and military aid programmes; Japanese capitalism rose from the ashes; discredited and corrupt regimes all over the world were shored up and protected from collapse. The new international monetary system enabled governments to pump credit into the economy to finance post-war recon- struction and pursue Keynesian domestic policies. The working class, although held back by the Stalinist and reformist leadership within the con- fines of this capitalist programme, nonetheless found itself strengthened by full employment suffi- ciently to win a long series of wages concessions and social gains. These gains seemed to impres- sionists to constitute new chains binding the work- ing class to capitalism, but they were to become something quite opposite when capitalism required that they be surrendered. One of the consequences of the revival of European and Japanese capitalism in these circumstances was that US capital took over significant sections of the most modern in- dustries in these countries. The great multinational

[p006] firms based above all in the US, vastly extended their activities. Through the greater concentration and centralisation of capital, they attempted to offset the more and more threatening tendency for the rate of profit to fall. In this new phase of expanded reproduction of capital, which so impressed the reformists and revisionists, the key role was played by the con- tinual outflow of US dollars. By the end of the 1950’s this not only caused a chronic balance of payments deficit in the US, but it led also to a reversal of the position of the dollar in the world economy. From the safest it became the most infia- tionary of all currencies; its scarcity gave way to its superabundance. The United States’ stock of gold fell to only one quarter of what it had been at Bretton Woods, and the world monetary system was glutted with unwanted dollars. The continuation of the reproduction process through the 1960s was thus increasingly bound up inextricably with monetary infiation and monster volumes of credit, at the source of which was the unrestrained outpouring of paper dollars from the US. But now the revived capitalist economies of Europe and Japan began to challenge and threaten the same US master who had revived their fortunes after the war. At the same time the working class in the US, Europe and Japan pressed on unrelentingly with its economic demands. Having yielded to these demands in the old inter- national economic situation, the capitalist powers found it extremely difficult to impose cost-cutting to enable them to undersell their rivals in face of the slowing down of the rate of expansion of world trade. The dollar crisis could not leave other cur- rencies unaffected. Japan and Germany in parti- cular, strengthened over two decades in relation to the US economy and expanding their exports considerably, had continual payments surpluses and their currencies became undervalued in rela- tion to the dollar, again threatening the inter- national system of parities. Britain, now a weak capitalist country, but with a currency still widely used for international fin- ancial transactions, found its exchange rate too high. Failing, even with US assistance, to maintain the old parity, the Labour Government devalued in 1967, This action sparked off a series of cur- rency crises, particularly undermining the dollar and leading directly to the gold crisis of March 1968. The antagonisms between US imperialism and the rivals it had been forced to help to their feet now emerged into the full light of day. The political implications of the maturing crisis were highlighted by May-June 1968 in France. Nixon’s intervention of August 1971 was the sure signal that all attempts at an agreed solution to these problems were exhausted. Here was a declaration of economic war, with the ten per cent imports surcharge as the first shot to be fired. All the meetings of the next few months were used by Nixon’s envoys to arrogantly make it plain that the burden of the crisis was to be thrust on to Europe and Japan by every device at America’s disposal. Less than one year later, the price of gold on the free market rose to over $70 per fine ounce, nearly double the ‘new’ official 4 price. The so-called Smithsonian agreement of December 1971 solved nothing. Every conference of finance ministers and bankers has broken up without a positive outcome. The mass of unwanted dollars continues to increase. Even at the new rate the dollar remains grossly overvalued. The totter- ing pound sterling is floating downwards, the Japanese yen and the German mark are under- valued, but to alter them presents insuperable diffi- culties because both the Japanese and German economies depend on massive exports of manu- factured products and imports of raw material. For them a substantia] revaluation means an end to expansion and crushing reduction in profits. The world-wide slowing-down of the past two years has hit hard at the weakest sections of in- dustry in the less well-equipped countries. The trade war has begun. In this trade war, US imperialism threatens the very destruction of its rivals. Its domestic produc- tive power is supplemented by the multinational firms, so many Trojan horses in the enemies’ camps. A few stiff tariff impositions would effec- tively exclude its rivals from the greatest market of all, that of the USA. Japan has the advantage of an enormous, newly-equipped industry and a still relatively cheap labour market, but it is vulner- able to every advance by this labour force, as well as because of its dependence on imported raw materials and high export levels. A young and aggressive imperialism, jt now turns to China and the USSR to obtain the markets and materials it needs for continued expansion. Old Europe confronts both the US and Japan, but is divided into the national states which em- bodied the historical interests of each bourgeoisie, whose rise and conflicts dominated world history for so long. With the formation of the Common Market these historically established separate ruling classes attempted to overcome the stifling restrictions of the nation state by working towards a single economic unit. In admitting Britain to the EEC, the European capitalists know that they intensify the insoluble problem of reconciling their interests, but they are faced with the dual threat: on the one hand the might of America and on the other the power of the working class. They hope to use their combined strength to defeat the work- ing class and institute the new forms of rule which they would require if ever they were to rationalise and reorganise on the scale required to counter America and Japan, This is the meaning of the talk about an all-European statutory incomes policy and the accelerated agitation for political union. This all-embracing and univergal crisis is the latest and most extreme manifestation of the con- flict between capitalist production relations and the development of the productive forces. Now the capitalists of every country are engaged in a race against time. Can they defeat definitively for a whole period a working class which more and more seeks ways of going on to the offensive? Will they be able to do this before a complete collapse of the now very nervous and delicate system of international payments? These are the economic considerations behind world politics today. Fourth International Winter 1972/73