[page 20]
CURRENCY CRISIS Omen of Capitalism's collapse The events of the last few weeks have thrown the institutions of international finance world since 1918, has received a terrific blow in the midriff. in some obscure colonial peasant nation, or from the Weathermen in New York, but basically from a group of eminently respectable bankers and industrialists in France, that the dollar can confidently be used in world markets to bring them the profits they German marks, Japanese yen or gold bullion seem much more attractive Why were Nixon and the US imperialists forced first to introduce a 10% surcharge on foreign imports, stop the convertability of dollars into gold and then to devalue the Was it really in the "interests of the American people and world To find the answer we must look more closely at the history of US and world In 1944 at Bretton Woods, USA, the world capitalist powers met to reorganise the That meant that no longer would countries settle their debts in gold bullion alone, but they could also use paper currencies in payment viz. the dollar and to a lesser extent the - military, political and economic - of US capitalism was formally acknowledged. The tremendous power of the US capitalist class was demonstrated in the fact that in 1945 they produced well over half the total production of the world! (see other economic This vast economic and military power in the hands of US capitalism was the only capitalist regimes of France, Italy, Germany, Austria, etc., from the growing threat of the new world force of Stalinism, as presented by Russia in the East. vast reinvestment programme and US capitalism needed a strong European market for its aid programme and to build NATO and US bases to defend 'free Europe' trade and payments of the US capitalists financed the revival of European capitalism and allowed the US to act as the world's policeman for capitalism against 'Communist subversion' cap italism into panic and confusion.
'subversives'
west Germany, and in the USA itself.
are looking for:
articles to hold and use.
dollar outright ?
stability"?
capitalism since the second world war.
Immediate Post-War Period international trade and ment reached there.
pound sterling as international reserve indicators below) weapon left for developing political was supported by a spine of greenbacks.
commodities - and throughout the globe.
payments system.
Firstly, that all dollar in the eyes of starving Europe as good as gold. The mighty American dollar, the mainstay of the 'free And the reason is simple:
There were two overriding features of the agreecountries would end the gold-exchange standard. power in Europe and preserving the weak and battered If European industry was to recover it needed a The dollars flowed to finance the massive Marshall By BOB McKEE This blow has come not from They no longer believe Secondly, the overwhelming supremacy It also made the British and European capitalism The large surplus of 19
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The last twenty five years have seen the success of these objectives of US policy. European industry recovered and thrived on US investment, while they were protected by The political stability in Europe allowed a new upsurge in the world division New industries and techniques were developed, and world trade expanded to incentive for a new lease of capital accumulation for world capitalism (See World Perspectives, published by University of Sussex Socialist Club, 1968) The Relative Decline of US Imperialism Yet while the economic superiority of the United States remains in absolute terms, the last quarter century has seen a decline relative to the growth of other capitalist nations. This relative decline is reflected in the following important sectors of modern industry. Between 1953-65, Japan's real Gross National Product grew at 8.3% p. a. while West Germany's rose by 4.9% p.a., USSR 4.3%, UK's by only 2.5% and the USA's by a miserable Between 1963-70 labour productivity increased by 55% in France, 46% and 44% by west Germany and Italy respectively while the UK increased by only 30% and the US by The failure in relative terms of US industry is reflected in the ratio of investment in fixed capital to GNP: only 17.9% p.a. between 1953-65 compared to Japan's Only the UK ratio (15.7%) was lower amongst advanced capitalist This relative decline is reflected in the competitive position of US capitalism The parallel feature of the decline of US (and UK) imperialism has been the rise of military expenditure needed to protect their investments. Unlike the US and the old colonial powers France and the UK, Japan still spends little more than 1% of its GNP on defence. Imagine what could have been achieved if British capitalism could have diverted its of product spent on defence to more productive investments. US marines.
of labour.
encompass every area of the capitalist world. % Share of Total World Production Moter Veh.
Steel 1953 1968 1953 1968 41 73 43 23 USA 8 5 9 UK 1 20 19 USSR 10 13 3.5 Japan - 13 8 5 9 Germany 4 5 9 France 5 8 1.5 3 2 Italy (From UN Yearbook 1969 in raw form) 1.7% p. a.
as little as 21%!
28.3% and Germany's 23.3% nations.
in world markets for manufactured goods. % Shares of Man. Exports USA W.Germ.
UK 19.8 1955 24.5 15.5 16.3 1960 21.6 19.3 13.5 20.5 19.2 1965 19.4 10.7 1970 19.7 UN Yearbook 1970) (Source:
West German and Japanese capitalism.
20 These new markets in turn provided an Electric Power 1968 1953 34 41 5.5 6 15 11 6.5 4 4.5 5 3 3 2.5 3 France 9.3 9.7 8.8 8.5 TV Sets 1968 1953 76 26 13 5 15 1 - 24 7 4 - 3 Italy 3.4 5.1 6.8 7.0 Japan 5.1 6.9 9.4 11.5
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However, this relative decline must not be over exaggerated. he leadina imperialist power by a lona way as these fiqures below show: With their large investments, the US imperialists have bought up vast sections of Up to 1966, the total value of US investment in Europe reached $17,500M, at which time American monopolies controlled 80% of European computer production, 24% of their motor industry, 15% of synthetic rubber and 10% of petrochemical production. that Ted De Gaulle and even Wilson to complain about the loss of 'national sovereignty' and nations, it remains the mightiest nation in the history of capitalism. have a larger turnover than the budget of the UK, and the budget of General Motors is greater than the budgets of the governments of Italy, Japan or Canada. and Shell each exceed the budgets of Sweden or Holland and No wonder Mr. Henry Ford II was treated with great ceremony by Heath when the American monopolist visited England recently. ut the purchase of Europe's industry and the finance of investment there by American the US could maintain these expenditures with its overwhelming surplus of exports of However, with the increasing demands of military expeditions abroad and the incorrigible greed of US companies wishing to invest abroad, this surplus spent $57,700M on military activities abroad and $35,800M on grants to foreign military This year the US deficit on the balance of payments will reach $10,000M. Nothing has more sharply confirmed the 'dogmatic' Marxists in the labour movement than the panic and chaos caused by the present crisis and the stringent measures of deflation because they cannot understand that growth of production cannot be perpetually maintained motion the labour power of the working class to produce surplus value can do that. such productive investment brings its own contradictions in the form of declining rate of The Power of US Imperialism France Germany UK Italy Japan USSR USA European industry.
to point to the bogy of Yankee imperialism. budgets of Belgium or Austria.
The Price of Imperialism monopolies has been made at some commodities and services $30,000M!
and cutback which will follow.
profit and over production.
Comparative levels of real output and output/head 1965 GNP 17.0 21.8 19.0 12.2 23.0 60.6 100.0 (Source: Maddison 'Economic Growth in the West') 16% of British industrial investment is held by American was not adequate to meet outgoing expenditure. forces, to prop up ailing totalitarian regimes and NATO. by injecting fictitious capital into the economy. GNP/head 67.4 74.6 67.8 46.0 45.7 51.1 100.0 owned companies.
While the US has lost relatively to other cost to the US capitalist class as a whole. Bourgeois economists cannot understand the situation, US capitalism remains It was this Three US monopolies Standard Oil, Ford are twice as large as the Initially, Between 1946 and 1968, the US government The Vietnam war alone cost Only productive investment setting in 21
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The convulsions in the international monetary system are both the reflections of the growing production crisis of worla, particularly US, capitalism; and also a possible As the US imperialists attempt to maintain the artificial superiority of the dollar on exchange markets as a price for the defence of the 'free world' and to enable them buy up Europe on the 'never-never'; they place the whole international monetary system in They are spreading the disease of inflation and stagnation Already, the crisis had reared its head openly in the rush for marks in 1968, which led to the break-down of the gold exchange system.In its place a temporary two-tier system was introduced, where private holders of dollars could buy gold on the free market at a competitive price, while all gold in the hands of the respective governments and goldproducing countries must be exchanged at the official price. tarlier this year, the Germans were forced to float the mark (allow its rate to be free) above its official Fate to stop dollar holders buying up marks indefinitely. flooded into German banks in the space of one hour on May 5th and German dollar reserves but the Japanese would not relent, provoking the US leaders. These convulsions have already threatened the unity of capitalist Europe - the Common One of the aims of the EEC was a common currency, or at least stable currencies to take unilateral action to float the mark; as Herr Brandt said on German TV: are times when Germany has to put its own interests first." ministers to discuss the German action was described as a "wrangle in a thieves' kitchen Now we see the individual nation-states of Europe, including the prospective new 'fraternal brother- the United Kingdom, squabbling amongst themselves about who should suffer to revalue in terms of dollars to a greater extent than their 'European friends' and thus weaken their competitive position vis a vis other manufacturing nations. would like to make a disguised devaluation so that entry into Europe is less painful on their balance of payments, even though it would mean an increased cost of living to the British Germany wails pathetically 'but we have revalued twice in two years - its • the prospect is not good for the German industrialist who sees his profit margins ruling classes is only for pious speeches at the United Nations, not for the bargaining rooms As Marxists have always explained, it is impossible for real economic and political unity to be achieved by national capitalist classes when faced with the contradictions of their The crisis of international money has more than demonstrated that. US imperialism cannot avoid the monetary barrier forever. heading for $50 an ounce on the free market as speculation against the dollar increased. Monetary Panic cause of the beginning of a general jeopardy.
bodies of Germany and Japan.
into revaluation to stop the flow reached $16,000 during the crisis.
turned their attention to the Japanese.
A Thieves' Kitchen Market.
so that the Common Agricultural policy may work. when spoil has to be distributed."
the most from the US imperialist whip.
working-class.
not fair'
squeezed even further.
started the immediate crisis in the first place. of high finance.
own system.
Impasse for Capitalism 22 of dollars and weaken German exports in world markets. (Spectator May 15th) rance as always wishes to give nothing to the healthier The German mark was forced The US, having succeeded in pressurising the Germans, It was the turn of the yen to be under pressure, Yet, the crisis forced the German Govt.
"There The first meeting of EEC Neither Japan, Germany or France or the UK wishes Heath and the Tories away and Japan's obstinacy Internationalism and brotherhood for the Before the crisis, gold was
[page 24]
On all this paper, capitalism has had a new lease of life. Nevertheless, as more and more dollars have streamed into Europe, the European finance-capitalists have increasingly converted their paper into hard bullion. And the total reserves including dollars held by European governments before the dollar crisis was now twice as large as those held by the USA. the relative decline of us imperiatism and the reduces confidencer that Europes bankers $35 an ounce of gold by the Bretton Woods agreement and could be converted into gold at readjustment to real values - credit cannot break the monetary barrier. readjustment proposed in some circles during the present crisis (5-10% increase) will not be enough for the future. The price of gold is arbitrary not only because dollars no longer match the export surplus of US goods, but because there has been a gradual increase in real value of gold as the costs of extracting gold ore have continued to rise in the Increasingly, it is in the interests of the European finance capitalists, holding the greater proportion of gold and determined to assert their new power, to oppose the by buying up gold with their surplus of dollars. This attempt failed, mainly because the price of this attack for French capitalism was too great - the revolt of the French working-class in 1968, followed by the devaluation of the franc. US have not been able to maintain this artificial position. that Germany, Japan and France re-adjust their currencies upwards relative to the dollar, as the US satellite, Canada, had done two years ago, so the position of the dollar was not sacrificed in correcting the breakdown in the payments system. Necessarily, the national capitalist classes of Europe resent this political blackmail which forces them to weaken the competitiveness of their industries on world markets by revaluation (increasing the dollar price of their exports), while the the international monetary system to make it fairer and more stable.What the US imperialist autocracy really want is to maintain their grip on the world's resources and trade: including their grip on the other advanced capitalist nations. and Japan go on rations in order to prop up their ailing superiority. and Japan were allowed to ride after the war to boost trade and help US profits. Now Gold Int. Credit Currency TOTAL USA UK Europe Japan Europe v USA to buy up Europe with paper.
US continues to maintain such this present crisis shows that.
What does US capitalism want?
World Reserves of Gold and Currency '000M$ 1951 1965 33.9 41.9 1.7 5.4 13.7 22.9 49.3 70.2 has been a dramatic drop in US gold reserves. 1962 16,057M 2,581M 14,887M 289M artificially maintained dominance of the dollar. 1970 37.2 10.8 43.9 91.9 1970 11,072M 1,349M 17,395M 532M for the first time since the war.
This arbitrary price cannot escape eventual drastic a vast balance of payments deficit.
Nixon tells the world that he just wants to reform (Int.Fin. Stat. June '71) Total US gold reserves All this reflects The dollar remained pegged in value at Even the small DeGaulle attempted to attack the dollar Nevertheless, the The US capitalists demanded The US could then continue Something must give - They demand that Europe Capitalist Europe
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Europe and Japan are getting too big for their boots and the US is determined to make share of surplus-value that these nations can realise from world markets, and thus That the situation before the recent dollar crisis was getting worse, not better, is shown by the startling fact that imports of commodities actually exceeded May 1971 by $420M and there is a real possibility of the first annual visible trade deficit for the US since 1893 - the first since US capitalism became a major imperialist power! The United States capitalists have increasingly financed and bought European industry on the cheap with paper dollars not backed up by any real commodities. It is the most ideal and abstract expression of value, the universal measure of the labour as a store of value, money must take the form of a real commodity - historically gold. As Marx pointed out, world money has been based on gold in the form of bulTion, acting as produced by the working-class which is hoarded by each national capitalist class and gained "The wealth of society exists only as the wealth of private individuals who are individuals mutually exchange qualitatively different use-values for the the social nature of this wealth is incarnated". (Capital Vol.3.p560). Other currencies on the other hand, are mere tokens representing pledges in lieu of commod- This form of credit will function as means of payment as long as there is no interruption in the circulation of commodities, as long as faith and confidence in the paper tokens is backed up by a flow of real commodities. if any particular paper token no longer fully represents in lieu of gold or commodities then the whole basis of credit system begins to disintegrate. "So long as production is in a state of flux this is forgotten. likewise a social form of wealth, crowds out money and usurps its place. faith in the social character of production which allows the money-form of products to assume the aspect of evanescent and ideal, something merely imaginative. as soon as credit is shaken...all the real wealth is to be actually and suddenly transformed into money, into gold and silver - a mad demand which however grows Gold is potential money-capital capable of universal exchange for any commodity capital which is used with living labour to produce surplus-value. stocks and shares, bills of exchange etc., are mere titles or pledges for the share of the possession of exchange-value then the system of credit breaks down and the money "Capitalist production continually strives to overcome the metal barrier which is simultaneously a material and imaginative barrier of wealth and its movement but again and again it breaks its back on this barrier" (Capital Vol.3 Production for profit not needed reaches its logical conclusion in such a crisis of credit - the desperate search for money: gold, and at the expense of production of these shoes fit again without changing the size. maintain the lions share for themselves. This explains the need for that 10% import surcharge. The Monetary Barrier but a gigantic swindle which cannot last forever. Why this is a swindle lies in the nature of money. time expended on commodities.
commodities and means of hoarding value in reserve. the universal means of payment.
by the sale of commodities on the world market. expression of the social character of wealth. its private owners.
satisfaction of their wants.
so by means of money.
wealth only through the medium of money. ¡ties or real money-gold.
necessarily out of the system"
that value - they are fictitious capital. barrier to further production reasserts itself: use-values in the form of commodities.
The US wants to plan and ration the Ahead looms a titanic international trade war. exports in April and This is nothing After all, what is money?
Because of this it becomes a means of payment for To function as a means of payment and Gold reserves represent the share of surplus-value Gold, the money commodity is the ideal As Engels put it:
It preserves its social character only in that these Under capitalist production they can only do Thus the wealth of the individual is realised as social It is in money, in this thing, that If that is lost, Credit, (Capital Vol.3.p560).
Paper currency, If confidence is lost in these titles to
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United States investment in Europe has not been financed by real money-capital, gold, position have been carrying out a swindle produced by the capitalist system itself. If the US capitalists cannot pay for investments by a real commodity surplus, In fact, the size of US gold reserves was insufficient for such investment and dollars have been imposed by the US as the main method of payment. Without this large increase in fictitious capital, world trade would not have expanded Parallel to this international confrontation, there is the growing contradiction of stagnation and inflation acting like a cancer to the insides of each capitalist country. Every advanced country in the 'free world' is now suffering from inflation. The As we have shown elsewhere (See MIR No. 4 & Militant 71 1971) inflation is not caused by 'excessive' wage-rises, but mainly, though not solely by the fantastic in- In particular, arms expenditure is the most obvious form of fictitious capital in the The arms manufacturers produce neither constant capital in the form of plant or machinery for productive use, nor consumer goods to be used by tremendous burden on the productive sector of the capitalist economy, creating fictitious Nothina could be further from the truth than the arguments that arms expenditure solves the problems of capitalism by inflationary problem, the capitalist nations are steadily moving into a crisis of especially true of those big arms spenders, the US and the UK. tilisation of machine capacity in various industries for 1971 which show how the arthritis So much for those in the labour movement, like John Strachey, who, after the war, saw Anglo-American imperialism as a great example for having solved the problems of the hungry Fictitious Money but by fictitious capital - dollars.
pay for it by gold bullion.
in the post-war period as it has.
average increase in prices in 1970 was:
modern era.
Yet, the arms manufacturers and their and thus inflation.
of the 'state capitalists'
and over production, it rate of all corporations before tax (See H.J. Sherman 'Profits in the USA'). in capitalist production has set in.
W. Germany 3.8% Belgium 3.9% Italy 4.9% crease in fictitious capital which has taken place produced by society as a whole, in wages or profits. creating a permanently full employment economy. unile the us continues to nave a dramatic 0% rate Textiles Metals Building Mat.
Capital goods Vehicles Elec. Eng.
Mech.Eng.
Paper & Printing Chemicals Food The US capitalists by virtue of their predominant France 5. 3% 5.9% USA 6.4% UK in all the capitalist countries.
workers have to get their share of the product as the rate of profit in each country tends to decline. has declined from 18.8% in 1950 to 10.9% in 1961 Unemployment in the UK is heading for 1 million Utilisation % 62 65 55 51 49 49 45 45 43 35 they could the labour force.
Thus, arms production becomes a For at the same time as this spiralling stagnation In the US, the average prot- The CBI published figures of the 25
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Now the UK and the US are in a more disastrous position compared to the full Just after the war it was claimed by the bourgeois economists and followers of Keynes in the labour movement like Strachey and Crosland, that with the state managing the economy through budgetary deficits financed by fictitious capital, that unemployment was a thing of Only dogmatic Marxists could maintain the absurd theories of a crisis in capital Now the economists and revisionists in the labour movement have been thrown into confusion by the occurrence of unemployment alongside inflation and stagnant growtn. was buried and the old quantity theory of money was revived supply of banknotes going into the economy, and if the state steadies this flow then inflation will subside so that production and employment may expand. a rise in prices induce an increase in money supply, then a reduction in money supply reduce prices) has been refuted by the experience of President Nixon who abandoned Friedman's theory after one year as inflation and unemployment remained unabated, despite new financial will find credit whatever the state does if they need to maintain accumulation and profit - which no 'monetary management' of the economy by the bourgeois economists or by reform- The US government's recent measures had been aimed at avoiding devaluing the dollar Such a measure opens the possibility of retaliation and the production increasing the danger of a general world recession. some economists call for the floating of all currencies relative to the dollar: would relieve the pressure on the dollar, allowing it to maintain temporarily Its present parity with gold at the expense of the other capitalist powers. anarchy in commodity markets as no businessman could be sure of what price he was getting of gold to say $50 an ounce, which would recognise the relative gains of a tacit devaluation of the dollar would still not solve the problems of the US deficit except temporarily and is hardly acceptable to US imperialism. A temporary glossing-over of the crisis has now been dictated by the USA: has been slightly devalued, in return for an end to the import surcharge. commentator has any confidence tha this will solve the problem. can be no permanent solution which does not pose world planning and the ending of the very cardinal feature of capitalism, the nation-state and private property. trade war is inevitable if not immediately, at least in the future, as soon as the present Whatever happens, revaluation or devaluation means the same to the working classes of forced the German Govt. to combat inflation by a cut in social serves to the tune of 1,800M While the capitalist system of exchange and production is maintained, the working class Nixon has announced a 90 day price-wage freeze in the USA and has appealed to the 'work ethic' thirties.
employment situation existing in Japan and Germany. the past.
-ism, now that it was modified by the state. state but by the great new expansion in trade and end.
of the system, Milton Friedman.
restrictions inspired by Friedman's supporters. ists in the labour movement will be able to stop. Trade War Inevitable in terms of gold.
competition on woria markets.
eginning of an international trade war.
acceptable to Europe or Japan for long.
for his goods from month to month or year to year. the US, but such Japan over patch-up job breaks down.
the world - an attack on their living standards. a cut back in social serves and will suffer whatever the solution of the economists of American workers - shades of Heath and Wilson (?). 26 What will end inflation will be its drastic opposite: Instead, they have imposed import surcharges to overcome increased food Yet, full employment was achieved not by the production which is rapidly coming to an Keynes under the guise of a new apologist Friedman says the cause of inflation is the uncontrolled This facile theory (that because The capitalist system and the monopolies a crisis of over production foreign Such a trade war would have a drastic affect on As an alternative, This Some economists call for the revaluation the Europeans and the dollar No bourgeois For under capitalism there An international Devaluation of the pound in 196/ meant Revaluation of the German mark has
[page 28]
The long period of upswing that capitalism has experienced since the war was partly made possible by the very conditions that place the whole system in jeopardy now - the flood of It is clear that that upswing is drawing to a close and will shortly be replaced The downswing will be equally as dramatic as the upswing has been. However, just as the upswing was tempered with short recessions, so the downswing which has reached fantastic proportions will make the readjustment under conditions of slump even more The first slump may only be of short sharp character, quickly replaced by a are evidently flowering in the system of international credit and money which the United the result of the struggle between imperialism and the world working class which must reach ENGINEERS® A SOCIALIST ANALYSIS A MILITANT PUBLICATION greenbacks.
by the reverse process.
painful.
temporary boom, only States has dominated since the war.
its most decisive stage in the period to come. THE to give way to an even greater reversal. CLAIM CONTENTS:
ECONOMIC CRISIS FIGHT FOR THE FULL CLAIM A SOCIALIST PERSPECTIVE Send for Copies to MILITANT PUBLICATIONS 375. CAMBRIDGE HEATH ROAD.
LONDON EZ 9RA The seeds of such a crisis What this heralds for the fate of humanity depends on 5P
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