`A kind of economic gloom hangs over the community of Western nations,' Jean Bourbaix wrote in the Belgian journal Pourquoi pas? in September 1974. 'The fall in share prices is only one symptom of it, perhaps premonitory, accompanied with a wave of failures, a general inflationary conflagration, and growth of unemploy- ment.'^^1^^ In 1975 the capitalist world experienced its deepest recession in industrial production in the past forty years. The crisis affected almost all industries, international economic relations, and other spheres of the economy, and spread to many regions and countries of the capitalist world. The overproduction crisis of 1974-5 was interwoven with deep structural crises that continued into 1976 and 1977. The crisis affected not only all aspects of the economy but also the political, ideological, and moral spheres of capitalist society.
The fact of economic and political shocks and upheavals of various kinds in the capitalist world in the 1970s allows us to speak of a far-reaching, all-embracing crisis of capitalist society with serious consequences for all the working people of capitalist countries.
The crisis of the 70s has worsened the position of a substantial part of the working class, the peasantry and small farmers, the intelligentsia, and the urban and rural middle classes. The rise in the cost of living and growth of unemployment, the standstill or even decline in real wages, and the deterioration of the workers' other working and living conditions are all social consequences of the j
crisis witnessing to the anti-people nature of the capi- talist mode of production.
_-_-_~^^1^^ Pourquoi pas?, 1974, 2911; 64.
9As Leonid Brezhnev stressed in his report to the 25th Congress of the Communist Party of the Soviet Union:
Now everyone can see that one of the main myths created by reformists and bourgeois ideologists has collapsed- the rriyth that present-day capita]ism is able to avert crises. The instability of capitalism is becoming more and more apparent.^^1^^
Economic crises are not something new in the history of capitalism, hut in the era of imperialism a general crisis of capitalism has developed in addition to them, a crisis that expresses the constant shrinking of the sphere of imperialist domination in connection with the rise and development of socialism, the break-up of the colonial system, and the sharpening of the inner contradictions of the economies of capitalist countries and of the policies and ideology of the big bourgeoisie.
The most characteristic features of today's crisis, namely, the combination of a cyclic overproduction crisis with longer structural economic crises, and with a deep ideological and political crisis, are evidence that the 70s crisis is part of the general crisis of capitalism and marks a qualitative shift in the development of its present stage.
The specific features of the 70s crisis are due to the changes that have taken place in the modern world under the impact of the development of a world system of socialism and the upsurge of class struggle in capitalist countries and of the national liberation movement in developing countries. In addition, the scientific and technical revolution, and the processes caused by it in the development of society's productive forces, the organisation of industry, and the role of science, are having an immense impact on the nature of the crisis itself and the way it is expressed.
The crisis of the 70s struck the highly developed economy of state monopoly capitalism, which is marked by a much closer merging of the state and monopolies than _-_-_
~^^1^^ Documents and Hesolutions. XXVth Congress of the CPSU (Novosti Press Agency Publishing House, Moscow, 1976), p 34.
10 before, and on that basis by development of the regulating activity of the state monopoly machine.The state monopoly system's varied control of the economy could not prevent the long accumulating contradictions of capitalist reproduction from exploding. The inner contradictory character of state monopoly control, furthermore, deepened the crisis shocks of the West's economy, made inflation permanent, and was one of the factors complicating the character of the crisis and its 'multilevel' nature, depth, and duration.
The effect of the scientific and technical revolution was also very complex. The growth rates of separate sectors and industries have been accelerated and the course of the renewing of fixed capital has been given additional stimuli by the impact of scientific and technical progress, which even limited the scale of the recession during the steepest fall in production, and made for a certain stabilising of the economic situation.
On the other hand the structural cracking of the capitalist economy caused by the scientific and technical revolution had already led at the end of the 60s and especially at the beginning of the 70s to a marked acceleration of the squeezing of labour out of production. Unemployment reached particularly high levels during the cyclic crisis of 1974-5, but continued at a very high level in 1976 and 1977, and in some countries even increased, because of the close connection of today's unemployment with the contradictions of capitalist exploitation of scientific and technical progress.
Exploitation of the advances of science and engineering in the interests of monopoly capital also exacerbated the structural crises (ecological, raw material, fuel, etc.), which complicated the picture of the 70s even further.
The evolution of the crisis went hand iu hand with a sharpening of the class struggle; ruling circles in capitalist countries were forced to resort to social manoeuvres and reforms to try and weaken the pressure of the democratic forces and reduce the acuteuess of socio-economic contradictions. At the same time there was an increase in the activity of right-wing and leftist extremists to push Western society onto the road of authoritarian solutions and rejection of democracy.
11In these circumstances the struggle of the working class and democratic forces to defend the working people's interests is becoming particularly important. The progressive political organisations of capitalist countries, trade unions, and other mass organisations are fighting the monopolies' attempts to shift the weight of the crisis onto the workers' shoulders. They are fighting the activity of the state monopoly machine that is sharpening the socio-economic contradictions of capitalism, and are proposing a democratic road to save society from the mounting danger of what Marx called in 1864 'the social pest called a commercial and industrial = crisis'.^^1^^
In the struggle for a democratic way out of the crisis that is developing throughout the capitalist world, a scientific analysis of the nature and consequences of this crisis has a not unimportant role to play. Studies of problems of the crisis of the 70s have been published in recent years in the Soviet Union, the German Democratic Republic, Italy, France, and other = countries.^^2^^
The complexity and new features of this crisis gave rise to a number of discussions among Marxists, many of which have been reported in World Marxist Review and other = periodicals.^^3^^ In this book special attention will be paid to bringing out the special character of the 70s crisis as a crisis of capitalism, and its social consequences, and on describing the struggle being waged by the democratic forces of the West in defence of the working people's interests, democracy, peace, and socialism.
_-_-_~^^1^^ Karl Marx. Inaugural Address of the Working Men's Tutornational Association. Karl Marx and Frederick Engcls, Selected Works, Vol. 2 (Progress Publishers, Moscow), 1977, p 15.
~^^2^^ See in particular such works as Uglublenie obshchego crizisa kapitalisma (Tho Deepening of the General Crisis of Capitalism), IMEMO AN SSSR, Moscow, 1976; E. Poggio, La Crisi economics italiana (Milan, 1976); L'Imperialisme franfais aujourd'hui ( Editions sociales, Paris, 1977).
~^^3^^ See in particular: World Marxist Review, 1976, 19, 2 and 3; 1977, 20, 1, 2, 4, 5, 6, and 9; = Mirovai/a ekonomika i mezhdunarodnijc otnoshentya, 1977, Nos. 1, 2, 3, 5, 6, 9, etc.
[12] __CHAPTER_LVL1__ PART I __SECTION_LVL1__ WHAT IS THE CRISIS OF CAPITALISM TODAY? __SECTION_LVL2__ [introduction]At the turn of the 1960s and 1970s the new trends and processes developing deep in the capitalist world evoked wide discussion among Marxist economists in various countries. While unanimously noting that the acceleration of economic growth of capitalist countries during the early 60s had led to a sharpening of the profound contradictions of capitalism and that state monopoly capitalism was proving incapable of controlling the spontaneous forces of the market, they disagreed in their concrete evaluations of the new period of marked intensification of the economic and political instability of capitalist society.
At the international Marxist discussion on new features of state monopoly capitalism and the class struggle in developed capitalist countries, held in the autumn of 1972, in which representatives of 35 Communist and Workers' Parties took part, various descriptions of the crisis of the 1970s were put forward.»In the view of some it was a cyclic crisis, though not a"simple one. Others characterised it as a deep, diverse structural crisis of the system of state monopoly = capitalism.^^1^^ One of the speakers remarked:
Can we say that we are witnessing a qualitatively new phenomenon in the whole history of capitalism, one unprecedented in its all-emhracing scope? Evidently we = can.^^2^^
The years since have confirmed that a whole aggregate of economic and socio-political crises is characteristic of modern capitalism.
The facts indicate that the crisis of the 1970s was _-_-_
~^^1^^ See: Imperialism in the Seventies: Deepening Crisis of the System. World Marxist Review (British edition), 1973, 16, 2: 3-12.
~^^2^^ Ibid., p 5.
13 a complex, many-sided affair, in which at least threti main, very different, complicated processes merged together.It was a matter, first of all, of a cyclic crisis of the capitalist economy that broke the quite long boom phase in 1974-5 and threw the capitalist world back. Underlying the cyclic crisis were capitalism's traditional contradictions and its domination by private ownership of the means of production, anarchy of production, and competition. But this cyclic crisis had a number of specific features associated with the high level of state monopoly control of the capitalist economy, the developing scientific and technical revolution, and the tension of the class battles in capitalist countries.
The economic structural crises that constituted the 'second level' of the 70s crisis also had an essential effect on both the content and the forms of expression of the cyclic crisis. The most important of these structural crises were the crisis of the monetary and financial system, upheavals in the fuel and energy sphere, in the supply of food and raw materials, the ecological crisis, and the urban crisis and the crisis of state monopoly control of the economy.
These crises affected important elements of the general economic structure of capitalist countries. Their effect, as a rule, went far beyond the limits of the economic cycle of the 70s. Some of them, e.g. the monetary and financial crisis, had begun several decades earlier; others (the energy and urban crises) had arisen in the mid-60s. 13ut in the 70s all these chronic ailments of the capitalist economy were suddenly aggravated.
The interaction of the cyclic and structural crises was very complex and contradictory. On the one hand their coincidence in time intensified the general fall in industrial production, sharpened the contradictions of capitalist accumulation, and made for a dragging on of the crisis. On the other hand, however, the separate phenomena associated with the structural crises, for example the need to develop new energy facilities in connection with the lack of traditional sources of power, or the need for extra outlays to create a new technology enabling industrial wastes to be utilised, operated as factors increas- 14 ing the interplay of forces in different industries, regions, and countries.
Finally, the 'third level' of the 70s crisis, though also linked with the foregoing, but having its own independent significance, was the ideological and political crisis of capitalism. It is the biggest such crisis of bourgeois society since World War 11 (1939--1945) and is manifested in an extreme sharpening of the class struggle, general weakening of the political and ideological position of the bourgeoisie, and a decline in the influence of its state and social institutions.
The coming together of these crisis processes in one nexus both in the sphere of production and in the field of social policy, ideology, and morality, and in the whole system of intergovernmental capitalist relations, was generated by deep-lying objective factors. (1) The qualitatively new international situation, characterised by the growth of world socialism, by the new balance of power between socialism and imperialism and between capitalist and developing countries, by the deepening of detente and extension of co-operation between the states of the two systems, by a sharpening of interimperialist contradictions, and by the powerful upsurge of the working-class and national liberation movements, had a big effect on the crisis. (2) The complex character of the 70s economic crisis, and the meshing together in it of the cyclic and structural crises, were largely associated with the modification and deepening of capitalism's main contradiction, viz., the contradiction between the social character of production and the private form of appropriation of its results. The further socialisation of production linked with the development of monopolies, state monopoly capitalism, and the scientific and technical revolution, given maintenance of private capitalist appropriation, immensely sharpened all the contradictions of capitalism, and intensified the conflict of opposing class interests.
The cyclic, structural economic, and socio-political crises did not simply coincide in time. Qualitative shifts in the development of the general crisis of capitalism were manifested in their coming together, which gave the 70s crisis an unprecedentedly complex character.
15The general crisis of capitalism, which began during World War I (1914--1918) and the Great October Socialist Revolution of 1917, consists in the dying of capitalism and its replacement by a new, socialist mode of production. As socialism develops and the balance of power between the two socio-economic systems changes, the general crisis of capitalism passes through various stages. In the first stage socialism existed in fact in one country only. In the second stage, in the years after World War II, a world system of socialism took shape. In the middle of the 1950s peaceful social development began more and more to be determined by the co-operation of the socialist countries, and by the degree of development of the international working-class and national liberation movements, and a third stage of the general crisis of capitalism began.
The crisis of the 1970s marks a further development of the general crisis of capitalism, a considerable deepening of it, and a further undermining of the capitalist system's foundations.
[16] __QUESTION__ Move "1" to separate object? __CHAPTER_LVL2__ 1 __SECTION_LVL2__ The Overproduction Crisis of the 1970s. The Old and the New __SECTION_LVL3__ CRISES-150 YEARS OLDThe present economic crisis of capitalist society marks the 150th anniversary of the explosion of the first general cyclic crisis in history that rocked England, 'the workshop of the world', in 1825.
From 1857 onward capitalist crises took on a world character and began to affect several developed capitalist countries, and sometimes all of them.
In the first half of the nineteenth century crises occurred periodically over a more or less definite interval, which became shorter as capitalism developed. At first they were separated by a period of ten or eleven years (the crises of 1825, 1836, 1847, 1857). In the second half of the century overproduction crises became more frequent and began to occur every seven to nine years (the crisis of 1857 was followed by those of 1866, 1873, 1882, and 1890). In the era of imperialism crises have tended to become even more frequent; before World War I there were those of 1900 and 1907; in the period between the wars there were the crises of 1920--21, 1929--33, and 1937-8, i.e. three in less than 25 = years.^^1^^
The theory of economic crises developed by Karl Marx above all established their inevitability within the capi- _-_-_
~^^1^^ The leasons for, and course ol, the economic crises of capitalism in the nineteenth and twentieth centuries have been analysed, in particular, in the monographs of the Soviet economist L. A. Mendelssohn, Thi-on/ and Jliston/ oj Economic Crises and Cycles, Vol. 1, Moscow, 1950; Vol. 2, Moscow, 1959; Vol. 3, Moscow, 1964; Political Economy, Vol. 1, The Capitalist Mode oj 1> reduction, Moscow, 1977 (all in Russian).
__PRINTERS_P_17_COMMENT__ 2-0372 17 talist mode of production, since they were a consequence of the root contradictions of capitalism, especially of its main contradiction, viz., that between the social character of production and the private capitalist form of appropriation. This contradiction reflects the main features of the capitalist mode of production, the existence of two antagonistic classes in bourgeois society, viz., the bourgeoisie, owners of the means of production, and the proletariat exploited by them, whose sole possession is its labour power.The main contradiction of capitalism determines all the class contradictions of bourgeois society and manifests itself in the antagonism between the proletariat and the bourgeoisie and in the contradiction between production and consumption.
The pursuit of profit, which underlies the tendency to expand production constantly, is inherent in capitalism. But the pursuit of profit itself, and capitalists' drive to increase surplus value to the maximum, and the whole system of capitalist exploitation limit the consumption of the masses.
The anarchy of the capitalist economy is also an expression of the contradiction between the social character of production and capitalist appropriation. The constant disturbance of the proportions needed for a smooth course of reproduction, the contradictions of the accumulation of capital, and the class antagonisms all intensify the chaotic character of social production to the extreme in spite of the rising level of organisation of production within individual enterprises.
The contradictions between the social character of production and the private capitalist form of appropriation in capitalist society make crises inevitable because the goal of capitalist production is in irreconcilable contradiction with development of the productive forces. The capitalist system does not provide the productive forces scope for continuous, harmonious development in the interests of society as a whole, as Frederick Engels remarked in 1880:
The necessity of this transformation into capital of the moans of production and subsistence stands like a ghost between them and the workers. It alone prevents the coming 18 together of the material and personal levers of production; it alone forbids the means of production to function, the workers to work and = live.^^1^^
Under capitalism a crisis disrupts the process of production, which is expressed in massive overproduction of commodities compared with the market's capacity to absorb them. But it is only a matter of relative overproduction; and it is precisely because it is relative, i.e., represents a surplus of commodities only in relation to the limited purchasing power of the workers, that it is first felt in the sphere of circulation. Overproduction is signalled by a slowing down of commodity turnover and an accumulation of stocks not finding an outlet. A crisis then breaks out in its most general form of a rupture of the acts of purchase and sale.
The slowing down of the turnover of capital in the sphere of circulation, the difficulties in selling and accumulation of stocks disturb the whole course of social production. The marketing difficulties inevitably lead to a cut-back of production and the dismissal of workers, to inactivity and freezing of fixed capital, i.e. to a farreaching disturbance of the whole process of capitalist reproduction.
__SECTION_LVL3__ CHANGES IN THE EVOLUTION OF ECONOMIC CRISES IN THE IMPERIALIST ERAAt the end of the nineteenth century and beginning of the twentieth, with the transition of capitalism to the monopoly stage, the thesis that the rise and development of monopoly would lead to the elimination of crises became common in bourgeois and reformist economic literature. The bourgeois economist Lujo Brentano and the right-opportunist ideologist Eduard Bernstein wrote that the consequence of overproduction, 'the crisis in marketing, would be overcome, like overproduction itself, through the activity of = monopolies'^^2^^ and that cartels _-_-_
~^^1^^ Frederick Engels. Socialism: Utopian and Scientific. In: Karl Marx and Frederick Engels, Selected Works, Vol.~3 (Pro- gre ress Publishers, Moscow, 1977), p 143.
~^^2^^ See: Lujo Brentano. Ueber die Ur/achen der heutigen socialen Noth (Verlag von Duncker und Humblot, Leipzig, 1889), p 26.
19 would eliminate the `purely economic causes of = crises'.^^1^^Lenin gave a sharp rebuff to these falsifications in 1901, when analysing the reasons for and character of the crisis of 1900.
The crisis sliows how near-sighted were those socialists (who call themselves 'Critics', probably because they borrow uncritically the doctrines of the bourgeois economists) svho two years ago loudly proclaimed that crashes were becoming less and less = probable.^^2^^
The growth of monopoly leads to an intensifying of the anarchy of production and a deepening of crises. The transition from free competition to the dominance of monopolies causes certain changes in the course of crises: the forms, sequence, and character of the separate crises are altered, hut they remain an inevitable component of the capitalist system. As Lenin said:
The statement that cartels can abolish crises is a fable spread by bourgeois economists who at all costs desire to place capitalism in a favourable light. On the contrary, the monopoly created in certain branches of industry increases and intensifies the anarchy inherent in capitalist production as a = whole.^^3^^
In the imperialist era the disruptive power of crises increased. The crisis of 1929--33, which is called the Great Depression even in bourgeois literature, is clear evidence of this = pattern.^^4^^
Another important feature of the crises of our time is the intensification of their international character. Their nature and special features cannot be understood without taking the conditions of world development into account.
A third feature of crises that is important in the _-_-_
~^^1^^ Eduard Bernstein. Die Viirammetzuiigen den Sozialisniux und die Aujgaben der Socialdemokratie (Diet/, Verlag, Stuttgart, 1899). p 82.
~^^2^^ V. I. Lenin. TliO Lessons of the Crisis. Collected Works, Vol. 5 (Progress Publishers, Moscow, '1961), p 92.
~^^3^^ V. 1. Lenin. Imperialism- the Highest Stage of Capitalism. Collected Works, Vol. 22. p 208.
~^^4^^ See in particular Philip A. Klein. Jin.\iness Cycles in the Postwar World (American Enterprise Institute for Public Policy Research, Washington, 1976), pp 2-4; = and L. A. Mendelssohn. Op. cit., Vol. 1, p 204; Vol. 3, p 499.
20 period of monopoly domination, finally, is the complexity of their concrete forms and symptoms. General cyclic overproduction crises are more and more often accompanied with additional, intermediate ones. Structural crises that affect one sector or sphere or another of the capitalist economy are acquiring an immense role.All these features are due to the objective development of the productive forces in the new conditions, in particular to the scientific and technical revolution and the system of state monopoly control of the economy aimed at affecting the trade cycle and softening the impact of overproduction crises. A tendency for the structure and mechanisms of business cycles to become more complicated has been particularly noticeable since World War II, in the second and third stages of the general crisis of capitalism.
__SECTION_LVL3__ NEW FEATURES OF THE CAPITALIST ECONOMY IN THE 1960s AND 1970sThe world historical achievements of the USSR, the rise in the political, economic, and military power of the world socialist system, the collapse of colonial regimes, and the scope of the working-class movement have all had a mounting effect on social progress throughout the world.
In striving to maintain their position the monopolies are endeavouring to adapt themselves to present-day conditions. Because of the historical antagonism of the two systems, capitalism is being forced, as the socialist community develops, to take steps that contradict its own nature and essence. Marxists see in that the main difference not only between modern imperialism and the old, classical capitalism but also between it and the imperialism of the beginning of the = century.^^1^^ This adaptation in no way, of course, means a change in the essence of imperialism. The nature of imperialism also puts limits to its possible adaptation. Capitalism remains capitalism in its imperialist stage.
_-_-_~^^1^^ See: N. N . I no/.emlscv . Sorreiiieiini/ kii/iiltilizin: nnrii/e i/iirli'iiii/a i /irutirorecl.'ii/a (Modern Capitalism: New Phenomena and Contradictions), Moscow, 1972, p 26.
21The change in the conditions in which the system of imperialism exists and operates is laying a deep impress on all the processes taking place in capitalist countries, including the mechanism of the business cycle and economic crises. An important effect in altering the cycle is exerted, in particular, by such factors as the quickening of industrial growth rates in a number of countries linked with the scientific and technical revolution, the spread of monopolisation of the capitalist economy, the merging of the monopolies and the state and the conversion of monopoly capitalism into state monopoly capitalism, and the rapidly developing internationalisation of production and capital.
Lenin had already noted in 1916 that~
it is undialcctical, unscientific and theoretically wrong to regard the course of world history as smooth and always in a forward direction, without occasional gigantic leaps = back.^^1^^
The evolution of modern capitalism's economic potential has proved Lenin right.
Modern capitalism, disposing of a highly organised industrial apparatus, great natural resources, and reserves of skilled labour, still retains certain possibilities of economic growth. Suffice it to recall the very intensive and protracted phase (in terms of the past 50 years) of the cyclic boom of the 1960s, when the mean annual growth rate of industry in the USA alone was approximately 8 per cent for a short time (1962-6). In 1974 the United States' gross national product was nearly four times that of 1939, and the volume of industrial production six times. Over the period 1950 to 1975 the industrial production of capitalist countries rose by 210 per cent (generation of electricity by 510 per cent, output of machine tools by 930 per cent and of plastics by 2600 per = cent).^^2^^ This expansion was linked primarily with the developing scientific and technical revolution.
The development of the complex 'science- engineeringindustry', the 'industrialisation' of science itself, and the _-_-_
~^^1^^ V. I. Lenin. The Junius Pamphlet. Collected Works, Vol. 22, p 310.
~^^2^^ U. N. Monthly Bulletin <>/ Statistics, 1977, 5; 22--99.
22 `scientisation' of production, and the revolutionary changes being brought about in the instruments and objects of labour are creating an intensive demand for means of production that is encouraging expansion of the home market. An example is the intensive introduction of computers and the rapid growth in the total number of them in use. In the first years after World War II the number of computers was counted in units, but by 1971 there were already around 95 000 in the capitalist world. Another reason for expansion of the home market in several capitalist countries was the growth of personal consumption observed over a number of years, which was largely due to the consequences of the rise in wages, especially in the period of comparatively favourable conditions.A third source is the vast growth of government consumption, primarily associated with militarisation of the economy and the arms race. The official figures of the growth of military spending are indicative. In 1937 military spending per capita in the leading capitalist countries taken together was $25 ($58.80 in fascist Germany); in 1972 per capita expenditure was already $399 in the USA, $121 in France, $124 in the Federal Republic of Germany, $125 in Great Britain, and $90 in Canada. In 1977 an average of $169 was being spent on military purposes for each inhabitant of the European members of NATO. The absolute figures for NATO countries' direct military spending increased from $18.7 billion in 1949 to' $125.2 billion in 1973 and $165.3 billion in = 1977.^^1^^
The sectoral structure and economic proportions of the economy have been altered in developed capitalist countries under the impact of the scientific and technical revolution and other factor?. Many new industries with a promising future ensuring high technical equipping of all spheres of the economy have been greatly developed. The significance of the non-productive sphere has markedly increased and its weight in the gross national product exceeds that of industry in some countries. _-_-_
~^^1^^ L. M. Gromov and R. A. Karamazyan. Voennai/a ekonomika sovremennogo kapitalisma (The Military Economy of Modern Capitalism), Moscow, 1975, p 119; Pravda, 11 December 1977.
23 In the USA, for example, more than 40 per cent of all jobs were concentrated in the non-productive sphere in the mid-70s (in 1950 less than 30 per = cent).^^1^^These structural shifts in the capitalist economy characteristic of the postwar years in no way eliminated its instability. On the contrary, even in favourable market conditions capitalism exhibited an incapacity to use the productive forces to the full, and resorted to squandering a vast part of its productive resources. Many of the factors quickening growth rapidly exhausted their stimulating effect and began to be important causes intensifying modern capitalism's crisis processes.
A very notable change in present-day capitalism's development is the marked increase in the degree of monopolisation. At the beginning of the century monopolies held the key positions in only a few industries in several developed countries; since then they have developed more widely and deeply and have become the decisive force in all spheres of world capitalist economy.
We must note, above all, the increase in the scale of monopoly enterprises. At the beginning of the century firms employing more than 50 persons were considered big in Germany and the USA; now big enterprises are those employing more than 10000 persons. There has also been a steep growth in the number of monopolies with assets of a billion dollars or more. At the beginning of the century there was only one such company—United States Steel; at the beginning of the 1950s there were four—three American (Standard Oil of New Jersey, General Motors, and US Steel) and one Anglo-Dutch (Royal Dutch/Shell). In 1963 the number of billionaire companies had reached 57, arid in 1974 was already 344. Soviet economists estimate that these 344 monopolies, which constitute a tiny fraction of the number of capitalist companies (only 0.002 per cent), have concentrated a gigantic production apparatus in their hands—roughly two-thirds of all the labour force and around 70 per cent of the assets and profits. General Motors alone employs more than 734000 persons in 130 factories, _-_-_
~^^1^^ A. I. Shapiro. The USA in the Spectrum of the Contradictious- of the General Crisis of Capitalism. SShA. Ekorwmika, /»<//- tika, ideologii/a, 1976, 7, 1 (73): 17.
24 and its annual sales of goods and services exceed $33 billion, which is much more than the gross national product of capitalist counlries like Australia, Denmark, and Norway.^^1^^The sphere of monopoly dominance is expanding, and now prevails not only in heavy industry but also in light industry, transport, and commerce. Monopoly capita] is also penetrating more and more into agriculture. Monopolies operating in the food industry, like Unilever, the Anglo-Dutch trust (margarine) and Nestle (in the dairy industry), and those in light industry like Procter and Gamble and Reynolds Tobacco, whose assets exceed $3 billion, arc well-known. Particularly big changes have taken place in recent years in retail trade. Supermarkets and other forms of big shop are playing the main role in the USA, Japan, and many West European countries.
Faster growth rates have been characteristic of the monopolisation process in recent years. The number of mergers arid takeovers has increased more than tenfold. An example is the steel industry in West Germany, France, Italy, and Belgium, in which two or three monopolistic groups only have a decisive position as a result of mergers. Ten big monopolies control more than half the total output of the capitalist world's chemical industry. The five biggest electrical engineering monopolies alone produce two-thirds of the capitalist world's electrical equipment. And one monopoly, the American International Business Machines (IBM), produces more than 70 per cent of the computers made in the capitalist world.
Under the impact of the structural shifts in capitalist countries' economies, technical progress, and militarisation considerable changes have taken place in the balance of power between the separate monopolies. Estimates for 100 French industrial monopolies indicate a considerable strengthening of those operating primarily in the newest sectors of the chemical and oil and _-_-_
~^^1^^ See: Mli'ornijti t'koninniku I niczlnluinirodniii' otno^ii'iiiijti^ I97(>. i'O. 3: IVi-1,r>7; = Fortune. MKi'i, 7: ISO 11(5; 8:151M 55; 1975, 5: 210- 229; 8: 15(i-l(i1; = Business Week, 18.8, I975: 53--72; = Moody's Industrial Manual. 1975, 1:2.
25 gas industries, radioelectronics, the aerospace industry, and atomic power engineering.Substantial changes have also occurred in the forms of concentration and centralisation of capital and of monopoly firms. The complication of the technological interconnections of the separate sectors is raising the significance of combination. At the same time, however, the process of diversification is becoming more intense and monopolies are including facilities in their structure that have no technological relation to their main operations.
Computers are being widely used in the powerful production complexes of the giant monopolies, and internal management and planning are being perfected, which is encouraging growth of productivity, lowering of production costs, and improvement of the quality of output. In trying to avoid the overproduction that was inherent in capitalism before World War II, the monopolies are giving priority attention to studying the market and market trends, and are developing their investment and production programmes in accordance with demand.
The mechanism of the business cycle has undergone certain modifications in the years since World War II under the impact, as well, of the increasing merging of monopolies and the stale. Under the general crisis of capitalism, especially in its present stage, the growing of monopoly capitalism into state monopoly capitalism is acquiring several new features and is increasing in pace, mainly through the influence of the struggle of the two world systems and the class struggle within capitalist countries. State monopoly capitalism has become the main form of capitalism's adaptation to the new circumstances. The intensification of the economic need for a merging of the monopolies and the state is due to the further deepening of the main contradiction of the capitalist mode of production. State monopoly control is the palliative by which capitalist society is trying to weaken its contradictions.
The current scientific arid technical revolution is playing an immense role in speeding up development of state monopoly capitalism. A single mechanism of the 26 monopolies and the state is becoming a sine qua non of this revolution's further development.
State monopoly capitalism functions as an instrument ensuring high profits for the monopolistic rulers of society through increased exploitation of the working class, peasantry, intelligentsia, and of the peoples of developing countries.
The forms of state monopoly capitalism with probably the greatest effect on the business cycle are public financing through the national budget, the state's activity as entrepreneur, and economic programming. At the beginning of the century the proportion of the budget to the national income was relatively small; now, in the United States, Great Britain, Japan, the Federal Republic of Germany, Italy, and several other countries, the budget absorbs between 30 and 55 per cent of the national income. The weight of taxation has risen steeply. The workers in capitalist countries are being forced to pay up to 40 per cent of their earnings in direct and indirect taxes.
In the early 1970s roughly one-third of the annual increment of the gross national product of the United States went into the federal, state, and local = budgets.^^1^^ These financial resources are a powerful lever of the US state monopoly system. The public sector in investment is also rising. In France, for example, more than 30 per cent of all investment is made by the government as against 5 per cent before the = war.^^2^^
The government exerts a certain influence on demand through the system of orders and through various payments to the public (pensions, grants, and so on). State control over prices and government regulation of credit terms are also of no little importance. Their effect is comparatively high, however, only in the public sector, the activity of which has noticeably increased in most _-_-_
~^^1^^ Cited From SSliA'. gusudarstro i ekunomika. Mekhanism gosudarsti>eiin<>-mf>nupolisticht;skog<> rcgitliroi-a/iii/a ckonorniki (The USA: The State and the Economy. The Machinery of State Monopoly Control of the Economy), Nanka Publishers, Moscow, 1976, p 175.
~^^2^^ L'Imperialisms fra/n'ais aujourd'hui, (Paris, 1977), p 13; Gosudarstvenno-monopolistichesky /capitalism (State Monopoly Capitalism), Nauka Publishers, MOSCOW, 1973, p 425.
27 capitalist countries in recent years. National and mixed enterprises are important in the fuel and power industries, some sectors of engineering and the chemical industry, transport, and hanking and credit.Government involvement in financial and economic control and the development of a public sector have encouraged the institution of systems of programming the capitalist economy. The economic programmes are being developed in circumstances of the dominance of private ownership of the means of production, by virtue of which they have an indicative (or recommending) character and their indicators are not binding on capitalist firms.
Capitalist programming has had a certain success, but it cannot do away with the unevenness of economic development, imbalances between sectors, and competition between firms. While it enables certain elements of planning to be introduced into spontaneously developing industry, on the one hand, the role of these elements is limited, on the other hand, by the very nature of capitalist production.
Changes are being brought about in individual features of capitalism through the development of state monopoly capitalism, especially as regards the growing internationalisation of industry and capital.
Factors like the international division of labour, and various world connections (commercial, scientific and technical, patent and licencing, engineering consultancy, and so on) based on it, have played a much bigger role in the development of capitalism since the war, and especially in the past 15 or 20 years, than they used to do.
In the 1960s 1he mean annual growth rates of the physical volume of commodity exports of a number of capitalist countries, including the United States, were half as fast again as the growth of national income. As a result, the weight of foreign trade in these countries' economic activity increased.
The export of capital grew enormously and became a most important weapon in the struggle for economic redivision of the capitalist world and a means both of ncocolonialist policy in relation to developing countries and of putting pressure on the policies of economically 28 developed countries. The balance of power among countries exporting capital altered (see Table 1).
In the middle of the 1970s the 'club' of capital exporters was joined by several developing oil-exporting countries.
Table I. Growth of the Overseas Investments nj lli.e Main Exporters oj Capital
(in billions of US dollars at current, prices)
Country li)i;i-'i I'.l.'iS ,,/,:, ISMiO li)72 All exporters of capital 44 53 51 123 345 United Stales 3.5 12.0 1C. 8 06.4 180.9 Great Britain 18.0 23.0 14.0 22.5 56.0 West Germany = 5.81 = l.O1 4.0 2:1.0 France !).() 4.0 6.0 5.2 23.6 Japan 2.0 6.8 Others 7.7 13.0 13.2 24.0 48.7 1 All GermanySources: Leninshnifa teurii/n inii'Crinlizmn i sooremennost (Lenin's Theory of Imperialism and Today), Nauka Publishers, Moscow 11)77, p 1^1; T,. Lewis. Dehlor and Creditor Countries: 1<J3K, 1944 (Tho lii-ookiiiKs Institution, Washington), 1945, pp .r)0-!)ll; the national statistics of the capital exporting countries.
The present period is marked by a substantial change in the main directions of capital exports. The chief change is the conversion of industrial capitalist countries into an important sphere of investment. Some 70 per cent of all direct foreign investment is now in them. Underlying this change are such phenomena as the breakdown of imperialism's colonial system, growing interimperialist contradictions, and the major shifts brought about by the scientific and technological revolution. Developing countries, however, remain an important source of enrichment for capitalist monopolies.
A clear sign of the growing internalionalisation of capitalist business is the great development of the manysided process of imperialist integration since World War II, which lias taken two main forms, namely, state 29 monopoly integration and private monopoly integration, which are closely interconnected.
The integration of countries, as the example of the European Economic Community (EEC) indicates, can have a stimulating effect on the economic situation and the course of capitalist accumulation at a certain stage. At the same time the integrated groupings do not alter the capitalist economy's inner laws of capitalist economic development, the anarchy of production on the scale of society as a whole, capitalist competition, or interimperialist contradictions. That fully applies also to international monopolies.
Under modern state monopoly capitalism the growth of international monopolies is acquiring a hitherto unprecedented scale. In fact, all the world's biggest monopolies have an international character to one degree or another. They create their own raw material bases in dozens of countries, carry on research and development, and organise the production of goods of one kind or another, adapting it to the conditions of the local market.
The growing internationalisation of economic affairs has given rise, in addition to the factors listed above, to changes in the mechanism of the capitalist trade cycle.
__SECTION_LVL3__ EVOLUTION OF THE TRADE CYCLEThere have been substantial shifts in the cyclic development of capitalism since World War II. The boom phase has become rather longer and more intensive. The main point, however, is that the postwar crises have been less deep, until that of the 1970s, than between the wars. In many cases the crisis showed itself not in an absolute reduction of the annual volume of production but only in the volume of output for a quarter or a month, and sometimes only in a steep fall in growth rates. In the postwar years, until the crisis of the mid-70s, the fall in annual production was not more than 7 per cent in any one capitalist country (see Table 2).
After World War II, until the crisis of the mid-70s, there was almost no synchronousness of the cycle in the various capitalist countries. In most cases the recession phase in the United States did not coincide with that 30
Table 2. Change in Annual Industrial Production from the Pre-crisis High during the Crises of the 1940s to 19611s
(in percentages)
Knd of the Country End of the, 1 940s-early 1950s (mainly Mid-1960s End of the 1960s 1 95(>s 1957-8) United — 7.0 -6.9 + 1.2 -4.1 States (1948-9) (1957-8) (1966-7) (1969--71) Great Bri- -2.6 — 1.2 0.0 -0.8 tain (1950--51) (1957-8) (1966-7) (1969--71) France + 1.0 + 1.3 + 1.8 +5.3 (1951-2) (1958-9) (1964-5) (1970--71) West Ger- +6.0 +2.8 — 1.7 + 1.6 many (1950--51) (1957-8) (1966-7) (1970--71) Japan +8.0 0.0 +3.4 +4.9 (1953-4) (1957-8) (1964-5) (1970--71)Sources: Calculated from The Economic Report of the President, 197-3 (Washington, 1973); OECD. Historical Statistics, 1959--1969 (OECD, Paris, 1969); U. N. Monthly Bulletin of Statistics January issues for 1956--1960; Ibid., 1974, 1; 1975 11; 24; S. M. Mensliikov. Sovremennyi hapitnlizm (Modern Capitalism), Mysl Publishers, Moscow, 1974, pp 140--141.
in Western European countries or Japan. Even in 1957-8 only a standstill in growth was observed, while production rose in West Germany and France, although less than the average for the preceding years. Despite certain modifications of the trade cycle after the war, the pattern of its development continued to hold. Economic instability and waste of productive resources acquired a gigantic scale. General overproduction crises sometimes manifested themselves in partial crises affecting separate industries and economic regions.Finally, we must not forget that crises were more frequent after the war in many countries, primarily in the United States. In the sixty years beginning 1857 there were seven general overproduction crises in the United States, for example, i.e. at an average interval of 8| years. In the 27 years from 1913 to 1940 there were five crises, i.e. one every 5| years on average. And in the 27 years after World War II a crisis occurred every 4~1/2 years.
31The reality of the postwar decades, viz., repeated economic recessions and shocks, and more frequent crises, lime and again refuted Hie myth of capitalism's crisisfree development. But this became particularly evident in the 1970s.
From the early 70s the capitalist world began to experience market fluctuations unprecedented in the postwar years. Their beginning can be taken as the crisis of 1969--71, which developed in a number of countries (the United States, Italy, Canada, Sweden, Finland, Austria, etc.), but uot at the same time and not to the same degree. At the end of 1971 and beginning of 1972 there was a protracted recession in the United States that gave way to a revival and in the autumn of 1972 to a hoom. The boom phase occurred in most developed capitalist countries at the same time, but was shortlived. State monopoly 'injection' of funds made it possible for growth to continue still without surplus capacity, veiling for a time the mounting overaccumulation of capital. But this overaccumulation, which was accompanied with a reduction of utilised productive capacity, a growth of budget deficits, inflation, devaluation, a decline in the public's purchasing power, and a marked exacerbation of difiiculties on the world energy market, was the detonator that set oft a new crisis.
From March 1973 economic growth began 'grinding towards a stop' in the twenty biggest industrially developed countries, as The Economist (London) wrote with alarm in = November.^^1^^ In thefourth'quarter of 1973 industrial growth almost completely ceased in the United States. In Japan and West Germany it fell by 50 per cent compared with the beginning of the year, and in Great Britain there was an absolute fall in production of 1.8 per cent.
The slowdown in industrial output led to a decline in general economic growth rates. In the United Stales, for example, the increment of the gross national product, which had been 5.5 percent in the first half of 1973, fell by 63 per = cent.^^2^^
_-_-_~^^1^^ The Economist, 1973, 249, 6711(1: II.
~^^2^^ See: U. N. Monthly Bulletin i,j Sin Unties, 1!)74, 0: 23--33.
32In most capitalist countries the state of production continued to deteriorate during 1974. The economic committee of the Organisation for Economic Co-operation and Development (OECJJ) reported Ilia I 1974 would be marked by a further slowing, and in some cases by a complete discontinuation of economic growth, a retarding of home consumption, and a substantial deterioration of several financial and economic indicators in = Western countries.^^1^^
__SECTION_LVL3__ THE SCOURGE OF CRISISFrom the second half of 1974 the capitalist world experienced shocks unprecedented in depth and force since the Great Depression of 1929--33. During 1974-5 the gross national product fell in almost all industrially developed capitalist countries. Industrial output declined steeply while unemployment reached levels unprecedented for the past forty years. The economic crisis was accompanied with a rise in prices, a cut-back in foreign trade, and increase in bankruptcies, a sharpening of interimperialist contradictions, and a growlh of class battles between labour and capital.
The depth and acuteness of the crisis proved so considerable as to evoke serious alarm among bourgeois governments, economists and ideologists about the future of capitalism. Speaking at the end of September 1974 at the first national economic conference of representatives of the Administration, Congress, business, and the trade unions held in the United States, President Ford remarked that the very future of the United States' political and economic institutions and, moreover, the whole American way of life, were literally at stake. In 1975 the Japanese Prime Minister Takeo Miki declared that Japan had never been faced with such a complicated and serious economic situation as then. President discard d'Estaing of France repeated much the same thing, remarking that no recession they had so far experienced had produced such deep changes involving global consequences.
_-_-_~^^1^^ See: Le Monde, 3/4 March 1974.
33The seriousness of the situation was confirmed by the holding of a conference of the leaders of the biggest capitalist powers at Uambouillet in France in November 1975 (the USA, Japan, the Federal Republic of Germany, France, Great Britain, and Italy). For the first time in history the sole subject discussed at a top-level meeting was economic problems, in particular the measures needed/to attenuate the depth of the crisis facing the capitalist world.
The years 1974-5 brought the gloomiest results in all the postwar history of capitalism. Because of the sharp deterioration in the conditions of reproduction the aggregate gross national product, of the developed capitalist countries fell by 1 per cent (in lixcd prices) in 1974, and by a further 3 per cent or so on 1974 during 1975, and as a result was thrown back more or less to the level of 1972 (see Table 3).
Table 3. Gross National Product of the Main Capilalixl
Countries (in billions of US dollars at 1(17.) prices)
C.oiinl ry Von r 11)72 1D7.; 1117/i 1117:. I'ecline in Iil7(i on ll)7/i (poi'i-cnla^e) United Stales 10!!4 .0 1155.7 1131 5 lu%. 4 = 5.21 .la])an KKG 22! 1.3 1'.)(.).6 252.6 210.2 248.0 211.0 251.2 203.2 -1.8' 4.0 France Hi l.'l 171.5 178.2 173.7 2.5 Great Britain I27.:i 134.7 135.2 132.1 2.3 Italy '•7.1 103.4 100. 8 102.0 -4.5 C.anada <>2.7 !)().() 101.7 100.7 -1.0 All developed capitalist count vies 2111.3 2242.1 2231.5 21 71). 8 2.3 ( 3.'.) for the seven countries listed) i .l''all in l!)7.i front Iho = I!'?.1! ptv-ciixis liiL'.h. S')iu = re1.;: Ks t itn a los of I ho USS1! Academy of = Si1 loners ' 1 ns 1 i! n Ic of World Ke ono n lies and International Isolations and ui I tic USSli M in is i i y of I-'oi ciun Ti ado's Ma i Kol Kc.sca i ch I us lit.ulo. Sec also: = I.1. I\. MtiiU,ly Jiullctinrf ^lui i.- tlr^ 1977, 5: 193--199; A. C.iochikhin. Tlic Capitalist Kcoimrny in 11)7;). MiroTftiift ''hmioinihu i niczhiiinmrixhiifc otno^hcnit/n, 1H7(J, 20\ :i: 71; tthotwini<'lieKltntin tfdzetd, \^7\'i, 14. 34The crisis was an explosion of the contradictions of capitalist reproduction I hat had been accumulating over a long period. The renewal of fixed capital caused by the scientific and technological revolution, and slate monopoly spurring of the situation could not, eliminate the cyclic character of economic development, underlying which is the main contradiction of capitalism.
The deepening of the crisis was encouraged by the marked weakening of the operation of all the main market-forming factors, especially at the end of 1974 and during 1975, and in several countries also in the second half of 1976. Consumer demand fell drastically, undermined by the continuing rise in the cost of living and mass unemployment. No less important, too, was the cutback in investment in private companies caused in particular by the increase in marketing difficulties, chronic underuse of capacity, lack of certainty in the outlook for economic development, and ever increasing upheavals in Lhc field of credit and world monetary relations.
A factor aggravating the crisis was the inner contradiction of state monopoly control, which was expressed in a clash of contra-inflationary and contra-crisis measures. In trying to gel inflation under control bourgeois governments took steps to limit credit, raise laxes, and remove some financial resources from circulation, but this policy also led lo a further deterioration of the situation. The shifting of the centre of gravity to contracrisis measures in the second half of 1975 did not yield the desired results, because it went hand in hand with a further rise in prices and worsening of the workers' position through cuts in spending on social needs.
The serious disturbances of balance in the reproduction process were a reflection of a crisis in the whole system of state monopoly control of the economy, and were closely linked with the deep changes in international relations, especially in relations between capitalist arid socialist countries and between industrially developed capitalist countries and developing countries.
Among the most important features of the cyclic crisis of 1974-5 we must also include its depth, international scale, and universal affecting of almost all the main sectors of the capitalist world's economy.
35 __SECTION_LVL3__ THE FALL IN PRODUCTIONDuring the eleven cyclic overproduction crises of the nineteenth century and early twentieth century (up to World War I), the annual fall in production did not, as a rule, exceed 1U per = cent.^^1^^ These crises seemed catastrophic to their contemporaries, hut they did not compare with the even deeper ones typical of the first stage of the general crisis of capitalism, especially that of the 1930s. In the United States, for example, the fall in industrial production was 22.7 per cent in 1920--21, and 21.6 per cent in 1937-8. During the Great Depression of 1929--33, however, American industrial production fell by 46.2 per cent, such being the relation between the maximum boom level in 1929 and the lowest level of the slump in 1932. In Germany this relation between the pre-crisis high and the low of the slump was 46.7 per cent, in France 31.6 per cent, in Great Britain 16.5 per cent, and in Japan 8.4 per cent. In the years since World War II, as we have already said, the decline in production did not, as a rule, exceed 7 per cent.
Now let us look at the picture of today's crisis (see Table 4).
The crisis of the mid-1970s substantially exceeded the indices of all those since World War II and of the nineteenth and early twentieth centuries. In intensity and depth of the slump in industrial production it reached the level of the crises of the first stage of the general crisis of capitalism in 1920--21 arid in 1937-8, and in some countries was even more severe than the Great Depression of 1929--33. This refers, moreover, to countries like Japan, the second industrial power of the capitalist world, and such small but highly developed countries as Sweden and Belgium. On average, however, taking the greater part of the capitalist world as the basis, the crisis of the 70s affected the economy about half as severly as that of 1929--33.
The absolute losses from the 1974-5 crisis either equalled the 'record' of the 1930s or came close to it. According to American estimates, the crisis losses of the United _-_-_
~^^1^^ L. A. Mendelssohn. Op. cit.; S. M. Menshikov. Op, cit.
36 Table 4, ('/inline in Industrial Production in Selected Cii/>ilnlist Countries in 1973--1976 (1070=.- KKl) Country Volume of Industrial Production 1973 1974 1975 l're-<:risis hinli Crisis low Percentage fall United 118 117 107 122 (Sept. '74) 101 (July '75) 17.2 States Japan 129 126 113 139 (March '74) 107 (May '75) 24.0 West Ger- 113 112 103 123 (June '74) 91 (Aug. '75) 26.0 many Great ' Bri- 110 106 102 113 (Nov. '74) 101 (June '75) 10.5 ( :n n France 120 123 113 132 (Feb. '74) 112 (May '75) 15.1 Italy 114 120 109 132 (July '74) 105 (May '75) 20.4 Canada 123 126 122 130 (July '74) 109 (July '75) 16.1 Belgium 116 121 108 134 (Oct. '74) 80 (July '75) 40.0 Netherlands 118 121 115 136 (Oct. '74) 108 (June '75) 20.0 Norway 115 122 128 137 (Nov. '74) 115 (May '75) 16.0 Sweden 111 118 115 132 (June '74) 55 (July '75) 58.0 Switzerland 110 111 98 115 (June '74) 90 (March '75) 21.6Sources: Cairn I a I cd from M. N. Mimllilij Ittillrlin of Statistics, 197'i, li; l'.)7.r>, !); I'.I7:>, 11; H)7(i, 4: :>;!-.'!;!; I!I7«, 5: 23, .').'(.
States in the first half of 1975, for instance, were $100 billion in 1963 prices.The length of the recession was rather shorter than in the 1930s. The world economic crisis began in the second half of 1974 and reached its low in the middle of 1975. The slump in production lasted 15 months in France, 14 months in Japan and in the Federal Republic of Germany, 13 months in Canada and Sweden, ten months in the United States and Italy, nine months in Belgium and Switzerland, eight months in the Netherlands, seven months in Great Britain, and six months 37 in Norway. From the autumn of 11)75, and especially from early 1970, there was a tendency for industry to pick up, in particular in the United States.
In most capitalist countries the first half of 1976 was marked by moderate industrial growth rates. The revival of business, however, proved short-lived in many cases. In the second half of 1976 what Western economists called 'a pause' began, and then a new decline in production occurred in several countries. The depth of the new recession varied between 20 per cent in Italy and 1.5 per cent in = Sweden.^^1^^ In several countries there was only a reduction in growth rates. As the French economist Gilles Rasselet noted, the tendency for economic growth rates to slow down at the end of 1976 and beginning of 1977 was very strong.^^2^^
As a result, industrial production in several countries did not reach the maximum attained before the 1974-5 crisis either in 1970 or early 1977. In Great Britain, for instance, production was 7.8 per cent lower in 1976 than in 1973; in Japan the gap was around 2 per cent, and in West Germany around 1 per cent in January 1977.^^3^^
The main indicators for the general results of eco nomic activity for the group of developed capitalist countries as a whole were higher than the 1976 crisis level. Industrial production, for instance, was up 8 per cent on 1975. These indicators did not, however, yet mean a substantial advance compared with the procrisis maximum. The 1976 level of production was only 1.6 per cent higher than that of = 1974.^^4^^
All this was evidence of a very protracted restoration of the pre-crisis level, and of the unstable character of the depression and revival phase about which there was much talk in Western countries. The instability of the economic situation was also confirmed by the stagnation _-_-_
~^^1^^ In Italy ill August, 1!M> compared \\illi August 1975, in Sweden in 1!>7(> compared \\illi I97.r>. See:! . X. Mmtlhli/ liulletin iif Sltilii-lirx. 11177. .ri: = I!!!-.1!!.
~^^2^^ Gille's Rasselet. C.onjonclure dan? le Minndr capiUilislu. 1977: = une annee dil'licilc. l^rninniiir el /nililiijiif. I97(, Li/2: 89--97.
~^^3^^ U. N. Monthli/ Bulletin of Slntiflia;, ' l!)77. 5: 22-'M.
~^^4^^ Idem., 1977, 10: 22--31.
38 in investment in the material production sphere and the growth of mass unemployment in the second half of 1976 and during 1977.In the second half of the 1970s capitalism was overcharged with unresolved contradictions. It was not only a matter of its being impossible to consider the problem of the business cycle fully resolved (bearing in mind the length and instability of the period of depression and revival), but was also a case of deepening structural crises in the sphere of production and exchange (monetary, financial, energy, etc.). High rates of inflation persisted. Interimperialist contradictions intensified, and so did the disagreements between developed capitalist and developing countries.
The economic development of capitalist countries was extremely contradictory in both 1977 and 1978. Their total gross domestic product and volume of industrial production increased by 3.8 and 4.1 per cent respectively in 1977 compared with 1976, and continued to grow in 1978 as well, though at lower rates, but on the whole the dynamics of economic processes was = unstable.^^1^^
The economic situation in 1977-8 was marked by a growing disproportionateness in the most important spheres of capitalist reproduction and an increase in the unevenness of the development of individual countries and groups of countries. Such very important branches of industry as the iron and steel industry, several branches of the engineering industry (in particular shipbuilding) certain branches of the chemical industry, and many textile firms, etc., found themselves in a serious position at this time. The 1977 volume of iron and steel output in the capitalist world, for example, was 2.6 per cent below that of 1976. In Western Europe production of steel fell by 4.6 per cent, in Japan by 4.7 per cent, and in the United States by 2.6 per cent. The biggest drops occurred in Great Britain (8.5 per cent), the Federal Republic of Germany (8 per cent), and Belgium (6.6 per cent). The total production of steel at the beginning of _-_-_
~^^1^^ See: the Supplement. In Mirnrni/n ckoiioniika i mczhdunarodnye iitiiusltrnii/a (1978, 8), survey ing I he economic, situation of capitalist and developing countries in 1977 and the beginning of 1978 (page 4).
39 1978 was still 10 per cent below the pro-crisis level of 1973.^^1^^Production of machine tools, motor vehicles, many kinds of textiles, and other goods was also below the 1973 pre-crisis level in 1977 and 1978, and the order books of capitalist shipyards were the thinnest for the past ten = years.^^2^^
The features of the economic situation's development in 1969--71, 1974-5, and the turn of 1976/7 considered above allow us to suggest that we have here, in fact, a single cyclic crisis, the picture of which is greatly complicated by the effect of state monopoly control of the economy, the contradictory effect of the structural crises, the continuing scientific and technical revolution, and the immense upsurge of the class struggle in capitalist countries.
When we look at the long-term effect of the factors determining the specific features of the crisis of the 70s, we can suggest that the growth curve of the biggest capitalist powers' will creep slowly upward in 1979 and possibly in 1980.
The report of the European Economic Community published in November 1977 stressed the slow economic growth rates of the United States and several other Western countries. In that connection the world capitalist economy 'clearly lack(ed) dynamics', and it was suggested, moreover, that 1978 would not make any substantial = changes.^^3^^
OECD experts estimated that the growth rates of the gross domestic product of its 24 members would fall in the second half of 1978 by 3 per cent in yearly = terms.^^4^^
The protracted character of the economic difficulties is largely linked with the synchronisation of the crisis storms in the mid-70s, which essentially complicated recovery by shifting the burden of the crisis onto neighbours and partners.
_-_-_~^^1^^ Ibid., [i 411.
~^^2^^ Ibid., pp 50, 5lf[.
~^^3^^ See: Revue du Man-he Cummiin, 1977, 12.
~^^4^^ See: The Times, 17 November 1977.
40 __SECTION_LVL3__ THE INTERNATIONAL CHARACTER OF THE CRISISA very characteristic feature of the 1970s crisis is the curtailment of monopolies' opportunities to manoeuvre at each other's expense with capital, orders, and markets, a curtailment associated with the synchronous character of the current cycle.
The crisis primarily affected the most developed capitalist countries. The U.S. economy suffered heavily. According to the American Marxist economist Victor Perlo, it was worse than all the crises that have hit capitalism in the United States and the world since the 1930s, and in some cases even more serious than the crisis of the 30s. The special depth and length of the 1970s crisis in the United States was due to the strong effect exerted on its maturing and development by inflation and the structural crises of the world capitalist system (in particular the monetary and financial, energy, and ecological crises).
The fall in production in 1973-5 in the United States had no parallel in American postwar history. The economy was thrown back to the level of early 1972. In some industries the fall in production was even deeper than during the 1929--33 crisis. Output of motor cars, for example, was down 30.5 per cent in 1975 compared with 1973, and gross housing starts fell by nearly = half.^^1^^ It was no accident that the highest level of unemployment was recorded in precisely those industries.
The crisis undermined the financial position of many firms. The decline in the flow of orders, dear credit, and fierce competition caused mass bankruptcy. The fall in production strongly affected the workers' financial position. A serious crisis struck the labour market. American business research economists estimated that the 'excess unemployment' projected by the Administration for the next five years would cost the U.S. economy from $320 billion to $350 = billion.^^2^^
In spite of the improvement in the situation in 1976-8 the main sectors of the U.S. economy thai determine _-_-_
~^^1^^ U. N. Monthly liiillctln of Slntittii-s, 1977, 5: <S7, 94.
~^^2^^ Cited by Hobarl Hcnven in the Washington Post, 5 May 1975.
41 its general state continued to suffer from the effects of the crisis. The process of renewing fixed capital was hampered by the considerable underutilisation of industrial capacity. The weak purchasing power of the public held back expansion of consumer production.The economy of Japan ran into serious difficulties in the 1970s. After relatively high growth rates, interrupted periodically by a slowing down (in 1961, 1965, 1968, 1971), there was a suhstantial absolute fall in industrial production in 1974 and 1975. Output of the mining industry, for example, was cut back by 21.5 per cent, production of steel by 13.9 per cent, and output of various branches of the textile industry by 25 to 30 per = cent.^^1^^
Japan was swept by inflation of unprecedented scale. Bankruptcies of small and medium-sized firms increased in number (12 606 during 1975 against 11 681 in 1974). Not only did small and middling firms crash but also big companies. In August 1975, for instance, the Kojin Company, engaged in the production of chemicals and in property deals, failed with liabilities of 150 billion yen. It was the biggest bankruptcy in Japan since World War II. A factor heightening the crisis was sales difficulties on world markets. The critical state of the economies of most of Japan's capitalist customers restricted exports, which are of immense importance for many sectors of the Japanese economy.
In the Federal Republic of Germany the crisis began in the second half of 1973. In 1974-5 it affected all sectors of the economy: industrial output fell, trade turnover and the volume of freights declined, and more and more companies went bankrupt. Productive capacity was used to only 75 per cent in 1975. The depth of the crisis was marked by a very substantial reduction in demand simultaneously on both the home and foreign markets. Investments declined. The steep fall in foreign demand had particularly serious consequences in view of the West German economy's great dependence on the state of world trade (22 to 24 per cent of its output is exported). Exports to the USA, for example, declined by 26 per _-_-_
~^^1^^ U. N. Monthly Bulletin of Statistics, 1977, 5: 32--60.
42 cent compared witli 1974. Only an expansion of trade with socialist and developing countries enabled the fall in exports to be halted. The improvement in the situation in 1976 was again succeeded in 1977 by a tendency for economic growtb to slow down. The growth rates of the gross national product fell by almost 60 per cent compared with 1976, which was the lowest increment in the wltole history of the Federal Republic, not counting years when production = fell.^^1^^ The 1970s finally dispelled the myth of the 'crisis-free' development of the West German economy and the 'West German miracle'.Industrial growth rates had already slowed down markedly in France at the end of 1973 and during 1974, but in 1975 there was an absolute fall in production that went hand in hand with a reduction of private investment and in foreign trade. Serious difficulties were experienced in the development of most industries. Consumption of power declined. Steelworks were operating at only 60 per cent of capacity. Output of steel fell by 20 per cent in 1975, i.e. to the level of 1968-9 (between 2! and 22 million = tonnes).^^2^^ Production and use of capacity fell in the motor car, chemical, and textile industries, and others. After a certain improvement of the economic situation in 1976, the position in France worsened again in the second half of 1977. The steep fall in the growth rates of production led to stagnation. This was due (as the spokesmen of the country's progressive forces noted) to the 'economy' policy of the ruling circles which had led to a reduction of consumer = demand.^^3^^
The crisis was especially long and deep in Great Britain. The British press unanimously reported that the country had experienced nothing like it since the 1930s.
Most economists described the position in Italy in much the same way. Industrial production fell steeply there in 1974-6, investment was substantially curtailed, the cost of living rose, and the employment position deteriorated.
Stagnation of business activity and a fall in production _-_-_
~^^1^^ U. N. Mont/ili/ Hulli'liii o{ SluUslics, l'J78, 4: ,'iO.
~^^2^^ Bulletin mensiicl dc stnlisliquc, 1970, 0: = 19--20.
^^3^^ Economic et politiquc, 1977, 272: 91.
43 also occurred in Spain, Sweden, and many other capitalist countries in 1974-6.The crisis also affected developing countries, where there was a steep fall in their industrial growth rates. The annual increment of industrial production fell from 9.G per cent in 1973 to 8.6 per cent in 1974, and to only 1 per cent in 1975.
__SECTION_LVL3__ THE GENERAL CHARACTER OF THE CRISIS (ALL SECTORS OF THE ECONOMY)In the second half of the 70s, especially in 1977 and 1978, the differences in the growth rates of industrial production in Latin America increased steeply in the different countries. Difficulties arose in several of the extractive industries producing raw materials for developed capitalist countries.
In Chile the consequences of the anti-national economic policy of the military junta continued to be felt; the 1977 volume of industrial production was 25 per cent below that of 1972 and was even lower than in = 1969.^^1^^
A worsening of the position of almost all the main sectors of the capitalist economy was typical of the cyclic crisis of the 1970s, but industry was affected most of all.
The overproduction crisis did not miss a single industry. The manufacturing industries were primarily affected, especially the steel, metal-working, chemical, oil refining, and motor car industries, i.e. those that determine the state of the whole economy. In 1975, for instance, the percentage fall in total volume of capitalist production was as follows: iron and steel 18.4 per cent, chemicals and oil-refining 18.4, motor vehicles more than 10; only in electricity generation and the gas industry did output rise by 0.8 per cent.
The steel industry of developed capitalist countries was in a sick state in 1974-8. Output fell in the United States, for example, by more than 33 per cent in July 1975 compared with the pro-crisis high, and reached its lowest level. In Great Britain the fall was 43 per cent, in West Germany 34 per = cent.^^2^^ Production of non-ferrous _-_-_
~^^1^^ See: Mirovai/a ckiiiiiiinika i mezhdtinnrodniie otrioyliriiit/u, 1978, 8, Supplement, p 17.
~^^2^^ U. N. Monthly Bulletin of Statistics, 1977, 5: 70--70.
44 metals also fell steeply. The industrial troubles were largely the consequence of a deterioration of the situation in the engineering industry, in which production had fallen on the whole by 8 per cent in 1975, including more than 10 per cent in electrical engineering and machine tools.The deep crisis in manufacturing industry affected the position in most branches of the extractive industries.
A number of branches of the textile, clothing, and shoo industries in West European countries, which had been experiencing chronic difficulties in the pre-crisis years, found themselves in a critical position during the crisis. In Sweden, for instance, where the textile and shoe industries were in danger of complete extinction because of mounting difficulties and foreign competition, the government was forced to impose stiff quantitative restrictions in 1975 on imports of shoes and textiles. Cotton and woollen mills in a number of areas of France hardest hit by the crisis were working at only 50 to 60 per cent of capacity.
Another important sector of the economy that suffered very heavily was building. The decline in the public's income, the serious state of government finance, and the marked deterioration in the outlook for economic development combined to cause a substantial reduction in house building in capitalist countries. It has been estimated that it was the biggest cutback in the whole period since the war. In the United States, for example, investment in housing fell by half in 1975 from the pre-crisis = peak.^^1^^ A serious position arose in the building industry in West Germany, where construction, after a fall of 5 per cent in 1974, fell by another 11 per cent in 1975. The volume of house building in Italy fell by nearly two-thirds.
An indication of the building industry's troubles is also given by the fall in production of building materials. Production of cement in the United States, for example, fell by 14 per cent in 1975 compared with 1974, and by 24 per cent compared with 1973. Its level (59 million tons in 1975) was below that of = 1968.^^2^^ There was also a sub- _-_-_
~^^1^^ U. N. Month/i, llullflin <>j Statistics, 1977, 5: 92--93.
~^^2^^ Ibid., p 7r>.
45 stantial reduction in cement production in Japan, West (iennany, Franco, and = Italy.^^1^^The overproduction crisis, which developed with greatest 1'orce in manufacturing and the building industry, also affected traiisparl. The decline in industrial production and the curtailment of building in many countries and regions lowered the indices of the activity of most sectors of transport. The total freights of the railways, merchant marines, and airlines were down greatly in 1975 on 1974. In the United States, for example, the volume of air freight fell by 35 per cent in 1975 compared with the pre-crisis = peak.^^2^^
The cyclic crisis was deepened by the chronic difficulties engendered by the protracted agrarian crisis. The fall in farm output in many capitalist countries is having an unfavourable effect on the development of industry, especially on those sectors that process farm produce or supply farm machinery and fertilisers.
The crisis also affected the services sphere in most capitalist countries, above all home trade, various household services, and the home and international tourist business. The difficulties of 1974-8 were largely linked with the decline in consumer demand, which found direct reflection in the activity of the services sphere. In almost all capitalist countries the growth rates of retail and wholesale trade lagged behind the rate of price rises, which meant in fact a reduction in the physical volume of trade.
The credit system, too, suffered extraordinary shocks in 1974-8. In 1974 the discount rates of the commercial and central banks were raised substantially. Lack of liquidity became one of the most acute problems for many small and middling companies and caused a vast wave of bankruptcies. The USSR Academy of Sciences Institute of World Economics and International Relations estimated that more than 121 000 firms with a capital of a million dollars or more went bankrupt in ten of the biggest capitalist countries in 1974-5 alone (in the United States, Japan, the Federal Republic of Germany, France, _-_-_
~^^1^^ Ibid., pp 73--75.
~^^2^^ U. N. Monthly Bulletin of Xtatixlics, 1975, 9: 147.
46 Great Britain, Italy, Canada, Spain, Australia, and Sweden). including (>(> 000 in = 1975.^^1^^ Most failures occurred in small and middling eulorprisos. hill even widely known firms and banks proved insolvent during the crisis. In the United States, the Federal Republic of Germany, Great Britain, and Switzerland several big banks wilh assets of billions crashed. __SECTION_LVL3__ THE STOCK EXCHANGE CRISISShocks on the issue market equal to the immense fluctuations in Ihe sphere of productive capital and the fall in production were registered by capitalism's financial barometer, the stock exchange.
As in the 1930s a deep stock exchange crisis preceded the cyclic overproduction crisis; arid as then this crisis, being an expression of the overaccumulation of loan capital and a symptom of the profound contradictions of capitalist reproduction, was interwoven with the cyclic crisis and encouraged an ever greater deterioration of the economic situation and dragging out of the recession in industry.
The stock exchange crisis showed itself in a steep general fall in share prices that led to a reduction in market capitalisation and a steep decline in business on the exchanges, and made for an increase in the number of bankruptcies and failures of companies. The fall in share prices had begun in 1972 in several countries (Australia, West Germany, Switzerland, Great Britain, and the USA), but acquired special dimensions in 1973 and 1974, as will be seen from Table 5 (see. p. 49).
The low of the stock exchange crisis was thus reached in the fourth quarter of 1974, but the pre-crisis level was not restored in most cases in 1975-7, despite a certain recovery of prices. A state of stagnation existed. A new fall in prices was sometimes even observed, especially in Belgium (in 1976), France, West Germany, Italy, and Great Britain. Many bourgeois economists compared the depth of the 1970s stock exchange crisis with the Great Depression of 1929--33. Evidence for this view is _-_-_
~^^1^^ A. Grochikliin. Art. cil.,
47 provided by the biggest stock exchanges, especially the biggest of them all, the New York Stock Exchange. Jean Pourbaix wrote a propos of it in the Belgian journal I'ourquui pa?? in September 1974:At the end of August I97'i, and leaving aside the passing weakness of May 1970, Wall Street is at the bottom of its deepest slump of the past ten = years.^^1^^
In the fourth quarter of 1974 the general index of share prices on the New York Stock Exchange fell by 48 points (by nearly half compared with the pre-crisis peak of 1972). The position remained very unstable in 1975 and 1976.
Of the capitalist world's second exchange, the London Stock Exchange, Jean Pourbaix remarked:
But the London decline went on in the ensuing months. At the end of 1974 the average of prices had fallen by very nearly two-thirds from 1972.If Wall Street has ceased to be a pleasure resort, what are we to call the Gehenna that the London Stock Kxclumge has become?... tn 27 months (From May 1972 to August 1974.....G. Ch.) the London Exchange has Fallen by 03 pelcent. That is a matter of a worse and steeper slump than the one that sowed despair among investors at the lime of the Great Depression from 1929 to 1932. when the index weakened by 'only' 52 per cent in = 37~months.^^2^^
The situation on the Tokyo Stock Exchange, which has risen to third place in scale of business in recent years, was a little better, but even on it there was a record drop in prices for the whole postwar period, and a greater slump than in the 1930s. (A decline of 37 points in average quotations at the end of 1974 compared with the 1973 high.)
The yearbook of the Paris Bourse, characterising the position on it, wrote at the beginning of 1975 that 1974 was a year of trials... It witnessed a real stock exchange crisis which was manifested above all in the fall of the exchange rates of the shares of most enter- prises.^^3^^
_-_-_^^1^^ I'ourquoi />asi', 12 September 1974.
~^^2^^ Ibid.
^^3^^ See: L'Aimer liniirxicre, 1974 (Paris, 1975), p 6.
48 Table !>. Course of Share Prices of Industrial Companies on Ike Stock Exchanges of Selected Countries in 1972--1975 (1970 ,: Year ~1974~ f \ 197T, L< o u n i r v ~1972~ ~1973~ ~1974~ 1 97 r. 3rd -4 quarter 4th -4 quarter 4th -4 quarter 1976 Nov. 1977 Feb. Australia 100 94 70 65 57 53 73 74 77~~ Belgium 125 149 119 113 110 100 110 94 103~~ Canada 123 138 115 108 107 93 103 100 103~~ Franco 107 130 97 107 88 82 100 78 831~~ Great Bri- tain 150 130 76 96 67 52 112 98 1071~~ Italy 74 96 88 65 79 70 56 47 47~~ Japan 173 223 188 191 186 167 192 212 233~~ Netherlands 114 125 97 90 95 82 91 85 89~~ Switzer- land 111 103 78 70 74 63 70 74 79~~ United States 133 132 102 110 93 85 109 124 123~~ West Ger- many 106 101 84 95 82 79 100 93 95~~Note: 1-December li)7(i
Source: U. N. Monthly Bulletin of Statistics, 1975, 11: 239; 197(5, r>: 241; 1977, li: 243.
Stockbrokers estimated that the average quotation fell by 50 per cent over the year compared with the pre-crisis high. The fall was steep and rapid, the Bourse yearbook stated. The slump in share prices affected 75 per cent of French securities not only on the Paris Bourse but also on all seven French stock exchanges. The market valuation of capital declined steeply (by 26.8 per cent from 169.1 billion francs in 1973 to 123.8 billion francs in 1974).
Comparison of these figures with the picture for past years indicates that the crisis on the French stock exchanges came close in the 1970s to the level of the Great Depression. On the Paris Bourse, for example, the fall in the general share index was a little less than 50 per cent in 1929--33 (from 507 in 1929 to 245 in 1932, taking 1913 as = 100),^^1^^ but the fall in the 1970s has already reached _-_-_
~^^1^^ See: L'Annuairc slulistique d<: la /''ranee, Vol. 02, 1950, Partie retruspectu'i, p 70; = L'Anncc bonrsii-rc, 1970 (Paris, 1971).
__PRINTERS_P_49_COMMENT__ 4-0372 49 50 per cent at the time of writing. True, the decline in the 1930s lasted longer, right until 1935 when it reached its low (180), but in today's circumstances, we must note, one cannot consider the stock exchange crisis over either in France or in the rest of the capitalist world.The stock exchange crisis also affected the other stock markets of the capitalist world. The slump in share prices during 1974, for instance, according to the bourgeois press, was as follows: Montreal 26.6 per cent; Toronto 23.0 per cent; Sydney 48.0 per cent; Johannesburg 32.7 per cent; Frankfurt 22.4 per cent; Diisseldorf 22.2 per cent; Amsterdam 26.8 per cent; Zurich 37.3 per cent; and Brussels 21.0 per = cent.^^1^^ As Jean Pourbaix wrote in Pourquoi pas?:
__SECTION_LVL3__ STAGFLATION, CAPITALISM'S LATESTEven it' prices have fallen everywhere in proportions that will sooner or later evoke appreciable correctives, we still do not know it rock bottom is about to be touched, from which there will assuredly bo a powerful rebound.
At the moment the only certainty we,have is that a kind of economic gloom hangs over the community of Western nations.... The fall in share prices is only one symptom of it, perhaps premonitory, accompanied with a wave of failures, a general inflationary conflagration, and growth = in unemployment.^^2^^
The 'inflationary conflagration' really is one of the features of capitalism's current economic crisis, in the nineteenth and early twentieth centuries inflation was normally regarded as an obstacle to the occurrence of overproduction. The crises were then accompanied, as a rule, with a fall in prices, and not with price rises. Bui in the period of the general crisis of capitalism the position began to change, already in its first stage.
During the crisis of 1920-1, for example, inflationary issues of money and currency chaos were powerful factors in the growth of overproduction, which was a new phenomenon in the history of crises and business = cycles.^^3^^ The Soviet economist L. A. Mendelssohn suggested des- _-_-_
~^^1^^ Pourquoi pas?, 1974, 29: 60.
~^^2^^ Ibid., ]> 64.
~^^3^^ See: L. A. Mendelssohn. Op. cit., Vol. 3, pp 479--480.
50 cribing this situation as a `war-inflation economic = crisis'.^^1^^ The inflation at that time (mainly in Western Kurope) was closely linked in several capitalist countries with the consequences of World War 1 and the development of wartime state monopoly capitalism.A combination of inflation and a fall in production was first recorded in the peacetime conditions of a peace economy (after World War II) in the United States in 1957-8. The decline in production of goods and services was then accompanied with a rise in prices and not a lowering of them as used to happen before World War II, and as occurred in part during the first two postwar crises. But this phenomenon developed to the highest degree precisely during the economic crisis of the 1970s.
This combination of stagnation and crisis in the economy; with inflation has been called 'stagflation' in the West. It is the result of the sharpening of the deep contradictions of social production associated with the development of monopolies and state monopoly capitalism, intensification of the instability of the capitalist economy, and sharpening of interimperialist contradictions. 'Stagflation' is a symptom of the deep structural monetary arid financial crisis of capitalism that is intensifying the acute conflicts, imbalances, and disturbances of modern capitalism's whole reproduction mechanism.
_-_-_~^^1^^ find., p 473.
[51] __CHAPTER_LVL2__ 2 __SECTION_LVL2__ Capitalism's Monetary and Financial CrisisCapitalism's present-day monetary and financial crisis is a component of its general crisis that has been engendered by the growing divergence between the character of its monetary and financial relations and the development needs of the productive forces. One of the deepest grounds of the crisis is the breaking down of commodity production by the development of monopolies and state monopoly capitalism. The monopolies, while subordinating the classical instruments of controlling commoditymoney relations to their interests by means of the bourgeois state, cannot at the same time revoke the objective laws of development of the capitalist economy, in particular the law of value and the law of competition.
The concrete symptoms of the crisis are varied, though they also reflect a single process of the breakdown of commodity production and adaptation of the monetary and financial system to the new conditions of reproduction both in individual countries and in the capitalist world as a whole. Within this variety, however, two main groups of phenomena can be identified.
There is, on the one hand, the derangement of capitalist countries' internal monetary systems, which shows itself in chronic inflation and depreciation of the currency. On the other hand there is the crisis of capitalism's international financial system, the monetary crisis proper, which is expressed in collapse of the whole former system of exchange rates, disruption of the machinery of international settlements, and deepening both of monetary and other interimperialist contradictions, and of the contradictions between capitalist and developing countries.
52Both aspects of the monetary and financial crisis are closely linked with one another. Currency inflation, for example, promotes foreign exchange inflation; conversely the current position in the domestic monetary system of many capitalist countries cannot be properly understood without allowing for 'imported inflation', which is the result of international currency speculation, the flooding of the whole capitalist world with paper dollars, and the operations of multinational concerns.
The sharpening of the monetary and financial crisis in the 1970s, which has coincided with a cyclic overproduction crisis, made the latter particularly acute and contradictory. As L. I. Brezhnev, the General Secretary of the Central Committee of the CPSU, said at the Party's 25th Congress:
__SECTION_LVL3__ MODERN CAPITALISM'S PROBLEM NO.~1The sharp cutback in production and the growing unemployment in most capitalist countries intertwine with such serious convulsions of the capitalist world as the monetary, energy and raw material crises. Inflation has made the crisis processes especially acute. Impelled by the continuously growing military expenditure, it has attained dimensions unprecedented in = peacetime.^^1^^
_-_-_Inflation is spreading like a poisoned tide over all the West. Unless it is chocked promptly it will inflict heavy damage on social structures__(Jacques Rueft).
(I say with all seriousness) today it is our public Enemy No. One. If long continued, inflation at anything like the present rate would threaten the very foundation of our society (President Ford).
(Inflation is) the enemy of our society, a dry rot destroying our institutions (Shirly Williams, U. K. Secretary of State for Prices and Consumer = Protection).^^2^^
Inflation is now proclaimed the critical problem of industrial society, and probably will become its obsessions (Charles Levin = son).^^3^^
~^^1^^ Documents and Resolutions. XXVlli Congress of the CPSU, p 33.
~^^2^^ Cited from: A. Bolchuk. Capitalist World: Inflation a.'' It Is. International Affairs, 1975, 21, 7: 68.
~^^3^^ Charles Lcvinson. Capital, Inflation and the Multinationals (Allen & Unwin, London, 1971), p 11.
53 These statements by the ideologist of French imperialism, the ex-President of the United States, a British Cabinet minister, and a Canadian trade union official very aptly convey the general atmosphere and the changes that have taken place in recent years in the world of capital in relation to inflation. From a quite legal and even desirable means of stimulating economic activity, on Keynesian lines, it has become one of 'the most alarming phenomena of our = times',^^1^^ and a 'world problem' of capitalism.The change in attitudes toward inflation is explained both by the change in its character and by the vast increase in its scale and the mounting rate at which it is proceeding.
In the past inflation was episodic. With the transformation of free competition capitalism into imperialism the position began to alter. In the era of the general crisis of capitalism, especially in its second and third phases, inflation has become a chronic complaint of the capitalist economy, its alter-ego. Now inflationary processes accompany its development not only in wartime and immediate postwar years but also in peacetime, and not only in the period of comparatively brisk economic activity but also during recessions and crises.
The evolution of prices over the past 150 years, which gives an approximate picture of inflation, is indicative. In France, for instance, taking the price level of 1914 as 100, the wholesale price index was 499 in 1920, 2247 in 1945, and 22 807 in 1965. The retail price index for the same years stood at 357, 2700, and 25756 = respectively.^^2^^ The wholesale price index fluctuated between the wars but was considerably above the 1920 level, and from 1937 onward was rising steadily (except in the period 1952-5). The same can be said of the retail price = index.^^3^^
On the other hand, if we compare the 1914 price level with that of the early nineteenth century, we find that the wholesale price index was 130 in 1820 (with the same _-_-_
~^^1^^ F. W. Scliulthess. I/fi//lnliii/i, /imbU'iiir mondial (('.red it Suissr, Zurich, 11)75), p ,'i.
~^^2^^ INSEE. L'Aitiiuaire slatistique dr la I'ruiice. lietiiinie retros/ icctif, 1966 (Paris, 1907), p 3.
~^^3^^ Ibid.
54 base year, i.e. 1914--100), 94in 1850, and 84 in = 1900.^^1^^ There was thus a movement of prices in the nineteenth century, but not in the direction it has taken in the past 50 years.In the opinion of French Marxists two conclusions follow from analysis of the data given in the official statistics. Essential quantitative changes have taken place since 1914 such as suggest qualitative shifts; and since 1945 there has been a marked trend toward a steady rise of = prices^^2^^.
Similar changes have occurred in many other capitalist countries.
Inflation's assumption of a permanent character in recent decades is due to its very nature. Underlying the process is the state monopoly structure of the contemporary capitalist economy and the contradictory principles of monopoly and competition. Inflation has become a component of the machinery of monopoly price-formation, and has been converted into a most important instrument for redistributing national income in favour of the monopolies.
A basic cause of inflation is the militarisation of capitalist countries' economies and the arms race, the scale of which we have already mentioned in our description of modern capitalism's economic development.
The special features of modern capitalism's credit and monetary system have been of no little significance in the rise and development of inflationary processes: namely, the growing expansion of banks, growth of the national debt, and the chronic budget deficits of capitalist countries. In the past 45 years, the U.S. Federal Budget has had a deficit 36 times, revenue having exceeded expenditure only nine times. An unbalanced budget has been a chronic phenomenon in France in recent decades. Whereas only 20 of the 43 annual budgets of the period 1871--1913 were not balanced (the deficit never exceeding 5 per cent of revenue), only four of the 25 budgets of 1914- 38 (those of 1924-8) were balanced. And since World War II almost all French budgets have been unbalanced, the _-_-_
^^1^^ Ibid.
~^^2^^ Traite marxisle d'economic politique. Le capitalisms monopnlisle d'Ktat. Vol. 1 (Editions socialos, Paris, 1971), p 380.
55 average deficit in individual years (for 1946--57 for example) being 23 per cent of the total budget = revenue.^^1^^But it is not simply a matter of the permanent character! of modern inflation. The increase in its scale and acceleration of its rate of development are playing no less a role. It is this transformation from more or less 'moderate', 'creeping' inflation in the past to 'galloping' inflation that the main feature of the inflationary crisis of the 1970s consists. The American economist Victor Perlo stresses that the overproduction crisis is the worst that capitalism has experienced since the = war.^^2^^ An idea of the scale of the 'inflationary conflagration' is given in the figures in Table 6.
Table 6. Growth of Prices in Selected Capitalist
Countries, 1951--1977 (average annual percentage increase)
Country l!)f)l-(iO 1901--70 1971-3 1'.)7/, ~1075 Ill/li 1SI77 United States 2.1 2.8 4.0 11.0 !l.4 6.0 0.8 Japan 4.0 5.8 7.5 24.5 12.1 9.2 4.8~~ West Germany 1.9 2.7 6.0 7.0 0.0 5.0 3.5 France 5.8 4.2 6.4 13.7 11.6 0.3 9.0 Great, Britain 4.0 3.!) 8.6 16.0 23.1 16.0 12.1 Italy 2.3 3.!) 7.1 11). 4 10.0 17.0 15.0
Sources: Calculated from: OEC1J. Main Economic Indicators (OECU.
Paris, 11)76). See also: V. Shenaev. Mechanism and Causes
of Modern Inflation, Mirovnya ehnnnmiha i mezlulimnroilra/e
otnosheniya, 1976, 20, 1: 23;
A. Grechikhin. The Capitalist Economy in 11175. Idem.,
1970, 20, 3: 75: U. N. Monthly Bulletin of Sliilistic:;, 1977,
5: 178--187; October 1978.
Thus, whereas prices rose on average by 2 to 4 per cent in developed capitalist countries in the 1950s, the growth rate swelled to around 3 to 5 per cent, in tho l%0s. In the 1970s, however, there was a jump that broke all records of previous years. The growth rate of prices jumped in 1974-6 to 10 or 15 per cent, and in some cases 20 per cent per annum or more.
_-_-_~^^1^^ Louis Trotabas. Acs /i mince /uihlitities t'l Irs ini/iuls (It: In Franca (Librarie Armarid Colin, Paris, 1973).
~^^2^^ See: Victor Pcrlo. U. S. Decline and Fight for Living Standards, World Marxist Review, 1975, 18, 4: 17--20.
56Another indicator of the 'inflation explosion' of the 1970s is the steep increase in the growth rates of money in circulation, which has in fact outstripped both the volume of industrial production and the total output of goods and services. In the United States, for example, the total of bank deposits and cash in circulation rose by 36.2 per cent in the period 1969--74, while the gross national product increased by only 13.2 per cent and total industrial production by 12.7 per cent. The growth rates of money supply in Great Britain were six times as high in the 1970s as the growth rates of the gross national product, in France nearly four times as high, and in Italy more than eight = times.^^1^^
The chronic character, scale, and mounting tempos of inflation are characteristic of all developed capitalist countries. It has struck Japan, of the three centres of imperialism, hardest, and then the countries of Western Europe. It has also engulfed the countries of Latin America. The highest rates have been registered in Chile, where the cost of living rose nearly 700-fold in = 1972-7.^^2^^ Then come Argentina, Uruguay, and Brasil. In the Middle East Israel takes first place for rates of inflation, and in Asia South = Korea.^^3^^
The rapid acceleration of the inflationary processes and extension of their scale are having an adverse effect on the process of capitalist reproduction. Inflation is leading to a rise in the cost of credit, which is hampering investment and making for a general deterioration of the market situation. By provoking a feverish 'scramble for material values' it is adversely affecting the general accumulation of capital. Uncurbed inflation, which superficially operates in the guise of a specific 'money sickness', can disturb and even disrupt the production mechanism, since it upsets normal operation of the currency system.
_-_-_~^^1^^ U. N. Monthly ltiillclin <>j Statistics, 1975, 12: 220--225 1977, 5: MISSING: 222-227
~^^2^^ The retail price index changed UK follows in Chile, according l.o the official figures (1970= 100): 21,''. in 1972, 907 in I97.'i, 5840 in 197'i, 27 752 in 1975, <S6 505 in 1970, 145 250 in 1977 (March). See: U. i\. Monthly Bulletin <>/ Statistics, 1977, 5: 178--179.
~^^3^^ Ibid., pp 178--187.
57 Table 7. Foreign Trade of Leading (in billions Capitalist Countries, 1973--1976 of dollars) 197,'i ~1074 Country Imports Exports Balance Imports Exports Balance United States 68.5 70.2 -I-1.7 107.1 07.1 — 10.0 West Germany Japan 54.4 38.3 67.4 36.0 + 13.0 -1.4 68.0 62.1 80.1 55.5 +20.2 —6.6 France 37.4 36.0 —1.4 52.0 45.8 — 7.1 Great Britain 38.8 30.5 -8.3 54.1 38.6 —15.5 Italy 27.7 22.2 —5.5 41.0 30.4 —10.7 Canada 23.3 25.4 +2.1 32.3 32.0 +0.6 Netherlands 23.9 24.0 +0.1 32.6 38.6 +6.0 t!)7,r. l!)7li Imports Exports Balance J mpor ts Exports Ha la rice •102.0 100.1 3.2 128.8 113.3 — 15.5 74.2 00.0 + 15.8 87.7 102.0 -1-14.3 57.8 55.8 —2.0 64.8 67.2 +2.4 54.2 52.2 - -2.0 64.4 55.8 —8.5 53.4 44.1 0.5 55.0 46.2 —9.7 38.3 34.8 -3.5 43.4 36.0 — 6.5 34.3 31.8 —2.5 37.0 38.1 +0.2 34.5 35.0 +0.5 30.6 40.1 +0.5Source: Calculated from: U. N. Monthly Bulletin of Statistics, 1977, :,; 108-1 l.'i; 10: 108.
This is connected, in particular, with its having now become much more 'contagious' than before. The ' vectors' are international capitalist economic relations, above all monetary ties. It is typical that the United States proved to be in only third place as regards rates of inflation in 1974-5, largely because it had managed to 'export' its inflation to other capitalist countries.
__SECTION_LVL3__ THE CRISIS OF WORLD ECONOMIC RELATIONSConstant rivalry and competition and the monopolies' struggle for markets and spheres of investment and to maintain and extend their domination of other countries and peoples are typical of capitalist countries' international economic relations. This is manifested particularly clearly in the effect of the capitalist economy's cyclic crisis, when competition between capitalist countries and the major monopolies becomes sharper.
L. I. Brezhnev, in characterising the position then, noted at the 25th Congress of the CPSU that:
intorimperialisl rivalries anil discord in tlic Common Mnrkol and NATO have grown sharper. The greater power of the international monopolies has made the competitive struggle still more ruthless. The governments of capitalist countries are making repeated attempts to moderate the contradic- 58
tions and come to terms on joint anti-crisis measures. But the nature of imperialism is such that each endeavours to gain advantages at the expense of others, to impose his will. Differences surface in now forms, and contradictions erupt with new = force.^^1^^
The present position permits us to speak of a crisis of capitalism's world economic relations that is further aggravating the grave position of industry and other sectors of the capitalist economy. Evidence of this crisis, in addition to the sharpening of competition, is the marked reduction in foreign trade and worsening of the trade and payments balances of developed capitalist countries. The gross foreign trade of the industrialised capitalist countries fell by 10 per cent in 1975 (in fixed prices) from the 1974 level.
There was a decline in the physical volume of foreign trade in almost all the leading capitalist countries in 1975. The reciprocal trade of the developed capitalist countries declined most, while their trade with developing and socialist countries continued to expand.
The trade deficit of the developed capitalist countries reached unprecedented proportions. The total for five _-_-_
~^^1^^ Documents and Resolutions. XXVth Congress oj the CPSU, pp 33--34,
59 countries alone (the USA, Japan, France, Great Britain, and Italy) came to $49.8 billion in 1974. Although the position improved slightly in 1975 (the total deficit of their trade balances being $13.6 billion), this improvement was achieved in the United States, Japan, Great Britain, and Italy through a cutback in trade and a greater reduction of imports than of exports, which was observed in all developed capitalist countries (except the Federal Republic of Germany). In 1976 the deficit again rose and came to $40.2 billion for these four statcs(see Table 7 p.58). As a result of the crisis of world economic relations, many capitalist countries' foreign trade was converted in the 1970s into a channel spreading reduction of production, inflation, unemployment, and other ailments from country to country instead of a factor promoting maintenance of the general economic situation and evening out of cyclic fluctuations, and even stimulating economic growth. The instability of capitalism's monetary and financial sphere is having an adverse effect on the development of world capitalist trade. __SECTION_LVL3__ COLLAPSE OF THE BRETTON WOODS SYSTEM. DECLINE OF THE DOLLARThe currency crisis, as an ingredient of the general crisis of capitalism in the sphere of international monetary relations, is a chronic ailment of the capitalist world. Its classic forms are (a) collapse of the gold standard, i.e. ending of the free exchange of banknotes for gold; (b) attempts to use the paper money of leading imperialist countries as international reserve currencies, and the rise of various kinds of closed currency zones and groupings; (c) the existence of all kinds of currency restrictions that complicate normal settlement of international accounts; (d) instability and imbalance of most capitalist countries' balances of payments; (e) frequent changes in the gold content of currencies and market fluctuations in their exchange rates; (f) deepening of the monetary contradictions between capitalist countries, and in recent years between them and developing countries.
A qualitatively new stage in the monetary crisis set in in the 1970s: namely, collapse of the West's whole 60 monetary system built up during World War II and after.
What were the most important principles of the postwar monetary system created at Bretton Woods in 1944? The throe main components of its machinery were the following: (1) adoption of the dollar as a substitute for gold without formal abandonment of gold (gold exchange standard), the link between gold and the dollar being ensured by free convertibility of the latter in international settlements at the official price; (2) stability of the dollar and of its gold content, which were guaranteed by the whole economic and financial strength of the United States; (3) firmly fixed exchange rates with the right to depart from the parity only within a range of 1 per cent; to ensure this stability an International Monetary Fund (IMF) was instituted in which the monopolies of the United States had a dominant position.
The objective basis of this system was American monopolies' domination of the capitalist world economy. In the early postwar years around 60 per cent of the industrial production of all capitalist countries was concentrated in the USA, i.e. more than twice the production of the countries of Western Europe taken together. The American monopolies controlled almost half the total trade of capitalist countries. In their hands were more than 10 000 tons of gold, bought at an artificially low price from other countries. The gold reserves of the United States constituted 75 per cent of those of capitalist countries, and 'dollar hunger' became a very acute problem.
For a long time the Bretton Woods system was successfully employed by U.S. finance capital, because it provided a chance of injecting the paper dollar into the world monetary circulation and so making extensive investment of American capital in other countries feasible and facilitating the financing of U.S. military undertakings abroad (maintenance of military bases, local wars, etc.), and extension of the United States'economic and political positions throughout the world.
A gradual change in the balance of power between the United States and the other capitalist countries came about, however, during the postwar decades. At the beginning of the 1970s its share in all spheres of the cap- 61 Table 8. Weight oj Selected Countries in the Total (in porccn Liquid Heserves oj Developed Capitalist Countries tagcs) All developed capital i.sl conn 1 1'io.s USA Canada \Veslei n Ku rope ( loin IMOII The Six ~1950 (1) Gold 1(10.0 75.0 1.0 22.0 6.0 (2) Reserve position in IMF 100.0 <)0.7 4.7 3.7 3.5 (3) Foreign exchange 100.0 17.7 46.8 18.4 Total 100.0 62.0 4.8 25.0 8.0 7975 (September) (1) Gold 100.0 2!). 6 2.4 65.2 42.8 (2) Reserve position in IMF 100.0 24.8 7.0 55.2 45.5 (3) Foreign exchange 100.0 0.3 3.7 76.5 44.6 (4) Special Drawing Rights 100.0 26.9 6.5 58.6 30.!) Total 100.0 11.4 3.7 70.2 43.0 Market West tiOi'niany Franco Italy Grfial l!i itain Switzerland .lapa n TinNine 15.5 2.2 0.8 0.4 4.8 0.0 3.7 33.5 18.2 2.8 0.5 1.0 2.0 7.2 1.0 8.6 8.0 1.6 4.1 8.0 1.6 45.5 12.7 10. 0 8.0 2.4 0.0 2.3 5 ).0 51 .0 21.2 28.2 7.4 6.7 2.7 3.0 5.1 5.8 0.0 13.2 51.1 ,r)i 1.0 10.8 23.1 3.1 7.6 1.5 4.2 0.5 4.2 6.0 6.0 0.5
Sources: V. N. Statistical Yearbook and Monthly Bulletin of Stalls tics, 1970--197:''); IMF International Financial Statistics, 1970--1975; U. N. Monthly Bulletin of Statistics, 1910, 4; 1970, 4; 1977, 10; Mirorayii ekonomi/ia i mezlidnnariiiliii/e olnoxlienii/a, 107(1, 20, 7: 153.
italist world economy had contracted substantially compared with the early postwar years, and in some cases in comparison with 1929. The weight of the USA in industrial production, for example, had fallen to 41.2 per cent in 1970 (44 per cent in 1929), 39.6 per cent in 1974, and 39.4 per cent in = 1975.^^1^^ In the postwar years West European countries attained 33 per cent of the industrial production of the capitalist world, almost catching up with the United States. Together with Japan they even overtook American production. Even bigger changes took place in international trade. The weight of the United States in capitalist world exports fell to 15 or 16 per cent. As a result of the deterioration of conditions for American exports the U.S. active trade balance gradually diminished, and in the 1970s the United States began to have a deficit on its trading = account.^^2^^ The changes in its _-_-_~^^1^^ U. N. Monthly Bulletin oj Statistics, 1976. 4; 1077, 5; 1077 10
~^^2^^ Ibid.
62 gold and foreign exchange reserves were particularly marked (see Table~8).The United States continues, however, to incur huge military expenditure abroad and to increase its export of capital. All this is causing a chronic deficit in the American balance of payments. By 1971 U.S. reserves of gold and foreign exchange were only a fifth of total American long- and short-term foreign indebtedness. On the other hand paper dollars had flooded the whole world, and ' dollar hunger' had given way to a 'dollar surfeit'.
By this time the hour of the Bretton Woods system, which had at any rate lost whatever objective basis it had had, struck.
A qualitatively new stage in the development of the monetary crisis can seemingly be taken to have begun on 15 August 1971 when the United States announced its 'temporary' suspension of exchanging dollars for gold, and later, when on 17/18 December 1971, it gave its agreement in principle to a devaluation of the dollar in rela- 63 tion to gold, the first devaluation of the dollar since = 1934.^^1^^ The U. S. Treasury, 'having barged down the cashier's window' converted the dollar into an ordinary capitalist currency inconvertible into gold and liable Lo devaluation. A second devaluation followed already in February 1973. As a result, all the billions of U.S. dollar indebtedness were deprived of gold backing.
The United States and other capitalist countries also abandoned the system of fixed exchange rates either unilaterally or by agreement, passing in practice to ' floating' rates (collectively or individually). In addition, it was decided, at the session of the IMF held in Kingston, Jamaica, in January 1976, to abandon obligatory fixing of exchange rates. The decision was directed toward a spontaneous fixing of exchange rates.
In this way the whole foundation of the Bretton Woods system was liquidated. As Heinz Wuffli, a director of the Credit Suisse, one of the biggest banks of the capitalist world, emphasised at the end of 1975, the . United States, by officially ending convertibility of the dollar, thus de facto abolished the Bretton Woods = system.^^2^^
The crisis of the American dollar, which is a consequence of the United States' gradual loss of its dominant position in the economy of modern capitalism and of growth of the internal contradictions of American society, in no way exhausts the content of the present stage of capitalism's monetary and financial crisis.
__SECTION_LVL3__ MONETARY HURRICANESAnother symptom of the monetary crisis is the excessive swelling of the cridit superstructure in international accounts, which is to be seen above all in the development _-_-_
~^^1^^ The beginning of the `collapse of tlie Bretton Woods system' (in the view of certain Swiss bankers) should be taken as March 1968, as a result of the approval of the United States, Great Britain, the Federal Republic o!' Germany, Italy, Belgium, the Netherlands, and Switzerland of a free market for gold on which support for the artificial dollar rate for gold would bo dropped. See: Hein/. R. Wulfli. La crise monetaire a la lumiere de. Vhistoire cnntemportiim; (Credit Suisse, Zurich, 1975), pp 30--31.
~^^2^^ Heinz R. Wuffli. Op. cit., p 13.
64 of the Eurodollar market and the operation of the Special Drawing Rights machinery.By the Eurodollar market is usually meant Lhe aggregate of credit operations completed in American dollars outside the United States. The particular character of Eurodollars as a form of international credit is due to the fact that while the American dollar serves as the object of the exercise the credits are granted by non-American banks for which the dollar is a foreign currency.
The bulk of operations in Eurodollars is concentrated in Western Europe (half of them are conducted by 50 London banks, known by bankers as the 'dollar = banks').^^1^^
The Eurodollar market developed through the effect of a variety of factors. Its evolution was encouraged, in particular, by the institution in the second half of the 1950s of full or partial convertibility. But the greatest effect on its development was and is exerted by the aggravated balance of payments crisis of the United States. The flood of paper dollars used to cover the deficit serves as one of the physical foundations of the Eurodollar market, which is being expanded by the effect of the U.S. policy aimed at underpinning the dollar's position as the main international reserve currency.
Through the qualities enumerated here the Eurodollar market became a gigantic source of currency speculation, which promoted its unprecedented growth rates in the 1970s. The volume of Eurodollars being used on the market rose from $7 billion at the end of 1963 (according to the estimates of the Bank for International Settlements in Basle) to $105 billion in 1972, $155 billion in 1973, $170 billion in 1974, and $200 billion in = 1975.^^2^^ Bourgeois bankers said this market had become dangerous because of the scale it had attained, and because, in addition, it contained a constant potential threat of a = major crisis.^^3^^
_-_-_~^^1^^ Christian Goux, Jean-Francois Landean. La />eril amerlcain. Lv fii/>i/nl (iniericiiiii 11 I'i'lrniiger (Cat maim-Levy, Paris, 1971), |) 10(1.
~^^2^^ Bank For International Settlements. 40lli Animal Kc/it>rt, HW1I-70; Ann,ml Jt,-/,orlx. 1971-1 !)7.ri; Tribune tie dene re, 12/13 August 1974.
~^^3^^ See: Triliiuir tie Cn/i-ir. 12/13 Augnsl. 1974.
65The events of the 1970s fully confirmed this evaluation. The F;iiromarket has now become a serious factor disorganising the credit system of Western Europe and the whole capitalist world, and an important nexus of interimperialist rivalry. Although it is far from the only sphere in which international currency speculation operates, its significance in this regard can hardly be exaggerated. This could be seen, for example, at the beginning of 1973 when an influx of American dollars triggered off a dollar = crisis.^^1^^ Indicative, too, were the movements on the Euromarket at the beginning of 1976, which were an important ingredient in the frequent speculative operations directed against the French franc and the Italian lira,
Capital looking for the quickest, most profitable application has found broad opportunities through the medium of Eurodollars. Charles Levinson, characterising the operations of this market, wrote:
An internatiomil gulf stream of hot money, billions of dollars long and wide, is coursing around the national money markets of the world in the direction from low to high interest rates, raising and lowering them continuously, usually in a contrary direction to domestic = policy.^^2^^
By increasing chaos and muddle in the monetary sphere and promoting dollar 'saturation' of the capitalist world economy, the Eurodollar market has been objectively furthering, as it evolves, a weakening of the dollar's dominant position as an international reserve currency. In these circumstances state monopoly circles in the United Slates have tried by various measures to maintain the dollar's privileged position and to shift the burden of the monetary crisis onto their partners and developing countries. The institution of a new international payments unit or 'paper gold' was linked with this.
__SECTION_LVL3__ `PAPER GOLD' AND `GOLD FEVER 'This payments unit was introduced by the IMF as Special Drawing Rights (or SDRs), which are an arbitrary currency unit without independent value, entered into the ac- _-_-_
~^^1^^ Tribune de Geneve, 12/13 August 1974.
~^^2^^ Charles Lovinson. Op. cit., p 71.
66 counts of IMF members, and intended to balance their payment accounts. Under Iho IMF's rules .SDKs were lied to the dollar, and after tlio hitler's second devaluation to the exchange rates of the currencies of twenty developed capitalisl countries.Strictly speaking the institution of SDHs did not make any fundamental change in the capitalist monetary system. (1) This arbitrary currency was