Capitalism has failed. This fact conditions all future developments. Since the fall of the Soviet Union, all the mouthpieces of capitalism repeated the mantra, “socialism has failed, capitalism has won, there is no alternative.” Francis Fukuyama declared it was “the end of history.” Free-markets, privatization, corporate tax-cuts, deregulation, and outsourcing were seen as the only […]

Capitalism has failed. This fact conditions all future developments.

Since the fall of the Soviet Union, all the mouthpieces of capitalism repeated the mantra, “socialism has failed, capitalism has won, there is no alternative.” Francis Fukuyama declared it was “the end of history.” Free-markets, privatization, corporate tax-cuts, deregulation, and outsourcing were seen as the only way forward. In short, there was a massive transfer of wealth from the poor to the rich. The workers had lost and there was very little pity from the victors.

Those defending the idea of socialism were isolated and ridiculed for defending “old, outdated, 19^th century ideas.” Internationally, the labour movement moved far to the right, as typified by Tony Blair’s “3^rd Way.” The boom-slump cycle was supposed to be abolished due to technology, the so-called “New Economic Paradigm”, or more lately, the diversification of risk through complex equity products and derivatives. All these “new” ideas, which are not new at all, have proved to have no basis in reality.

Now, with the collapse of the free market capitalist model, millions upon millions of workers and youth are facing a new reality. “The capitalist system cannot provide you a job. The capitalist system cannot provide you a home. The capitalist system only provides war and poverty. Those who told you that capitalism was the only possible system lied to you.” It is impossible to over-estimate the effect of the current crash on the psychology of the mass of the population, of all classes. The task of this document is to attempt to gauge the impact of the economic crisis on consciousness and politics so that revolutionaries may orientate their forces for maximum effect.

Human Consciousness

The most revolutionary observation about human consciousness is that it is inherently conservative. People do not expect or welcome change. The empirical philosophy of “what you see is what you get” is how most people live their lives. For most of their lives, this philosophy is a close enough approximation of reality that it does not cause people too much distress. However, during times of great change and crisis such as the period we are currently passing through, the philosophy of empiricism is woefully inadequate. Capitalism has failed, and yet the psychology of the mass of the population is more reflective of the past than the present. If psychology faithfully kept track with objective reality, we would have been living in a socialist society for at least 100 years.

The relationship between reality and psychology, the objective and the subjective, is not linear. However, there is obviously still a relationship. This relationship is contradictory and dialectical – in other words, after doing everything possible to resist change (taking on increased overtime, a 2^nd or 3^rd job, sacrificing health and family, etc.) a limit is reached where there are no more “individual” solutions. It is impossible to determine exactly when this limit will be reached; people are willing to endure more in some periods than others. But eventually, people start looking for collective, systemic explanations and solutions to the change going on around them. They reject the old justifications (and those who peddled them) and look for ideas that explain reality. Consciousness does not catch up to reality in a gradual, linear, reformist manner; it catches up in a convulsive, sudden, and revolutionary way. A conservative consciousness leads to revolutionary conclusions – dialectical philosophy calls this phenomenon the unity and inter-penetration of opposites.

The “old” discredited idea of socialism is coming back with a vengeance. Newsweek magazine even declared, “We Are All Socialists Now.” Those who extolled the virtue of small government and free markets are now spending billions of dollars of taxpayers’ money to intervene in the economy. They are even nationalizing banks. The captains of industry, the best and the brightest with their multi-million dollar bonuses, have driven the largest banks, corporations, and the entire economy into the ground. In this environment the ideas of genuine socialism can again get the ear of the masses. When every other “solution” has failed, when the so-called experts have failed, and when workers are faced with the prospect of unemployment and homelessness, the idea of occupying your factory to save your job no longer seems so outlandish. People ask themselves, “Why should the bosses receive billions while there is no money to help workers facing foreclosure and bankruptcy? Why couldn’t we use that money to nationalize industry to save jobs? What purpose do these bosses play anyway?” Marxists have long explained that it is not revolutionaries that cause revolutions. It is capitalism that creates the conditions that lead workers to revolutionary conclusions.

The Root of the Economic Crisis

Capitalism is entering its most serious crisis since the Great Depression. None of the capitalist governments predicted this and none have any coherent explanation of why it came about. The reason is that the only explanation lies in the ideas developed by Karl Marx and Frederick Engels 150 years ago.

A detailed treatment of the events that led to the bursting of the bubble is to be found in the “The Crisis: Make the bosses pay! – Manifesto of the International Marxist Tendency.“ Suffice to say, the sub-prime mortgage scandal was not the “cause” of the crisis. In the same way as high oil prices were not the cause of the slump in the 1970s, dot-coms were not the cause of the recession at the turn of the 21^st century, and the assassination of Archduke Franz Ferdinand was not the cause of WWI. These triggers for wider events are merely the weakest link in the chain. It is no explanation at all to explain the breakage on a single weak link; with increased stress another weak link will always be found. The only explanation lies in the source of stress in the entire system. To go back to dialectical philosophy, this is known as necessity expressing itself through accident.

The sub-prime mortgage bubble was merely the worst example of a massive increase in credit that has been particularly acute over the last decade. People who could not normally afford houses were sold mortgages at very low initial rates that increased with time, the idea being that they would re-finance in the future. Financiers extended this credit as the market was growing and housing prices were increasing, so even if the borrower defaulted, it would still leave the lender with a property worth more than at the time of purchase. A “virtuous” circle was created where increased lending caused increased house buying. This, in turn, increased construction employment and higher house prices so that people felt richer and felt that they could take on more debt, and so on and so forth. These mortgages were then packaged up and sold on to other banks and corporations. Ironically, this process of diversification was heralded as bringing stability to the economy as a whole because risk was supposedly spread around the entire system. Risk was indeed spread around the entire system, but instead of leading to stability, it has brought the entire edifice crashing down.

Credit can play a positive role in the capitalist economy at the start of the economic cycle. It helps to mobilize capital and promote growth into new spheres of investment, giving a kick-start to the system. However, instead of being used to get out of a crisis and to start a new boom, credit was used to prolong a boom that had reached its end. One way of viewing credit is that it is spending tomorrow’s money today. This works as long as the economy continues to grow. The extension of credit works upon the assumption that there is production in the future to back up the spending of today. If the real economy slumps and this assumption is proved false, then the credit becomes what is known as fictitious capital. Money was spent for non-existent production and now has to be paid back with interest.

Fictitious capital is also created when the value of stocks and shares become over-inflated. Shares represent no actual value; nobody worked a day’s labour to produce a share. They are simply a promissory note for a share of future profits. However, stocks and shares are bought and sold as if they had real value. There is a kind of double accounting where both the production and the share are seen to have value, when in reality one just represents the (speculative) value of the other. In the recent speculative bubble, Western consumers felt richer as their house price, their stock portfolio, and their pension plans went up. They bought up billions of dollars of consumer goods from around the world that helped develop the productive forces in places like China and India. The most obscene extension of fictitious capital is the derivatives trading market. Global Research estimates that the amount of outstanding derivatives worldwide as of December 2007 was over $1,100 Trillion. This is 22 times larger than global GDP, which is approximately $50 Trillion (all figures in US dollars).

The ideologists of capitalism harped on that the boom would never end and the good times were here to stay. This promoted the extension of credit and the over-extension of the stock market. These bubbles continued to grow even while the real economy had reached a turning point. It is reminiscent of Wile E. Coyote running over a cliff – he only falls once he looks down (but the longer it takes him to look down, the worse things get). All this fictitious capital now has to be squeezed out of the system. The Dow Jones, after reaching an average of almost 14,000 in October 2007, stood below 7400 in mid-March 2009, wiping out 48% of its worth ,or approximately 12-years growth. The Toronto stock exchange has seen similar declines. This takes away real capital that could be used to find a way out of the crisis; it prolongs and exacerbates the slump. However, none of the above is an explanation of the actual cause of capitalist crisis.

Crisis of Overproduction

All tendencies, from the far-right to the left-reformists, believe that capitalism is a system of equilibrium which, despite this or that distortion, essentially works. Marxists, on the other hand, explain that there is no tendency towards equilibrium under capitalism. Crises, unemployment, poverty, and even war are built into the metaphorical DNA of the system. The inherent tendency is for the ability to produce goods to increase at a greater rate than the ability of the market to consume those goods at a profitable price. This is known as the crisis of overproduction, and overproduction is the root cause of the current slump.

The motor force of the crisis of overproduction is the desire for the capitalist to increase profit. That does not mean we agree with those who blame a few greedy individuals for ruining a system that was working fine. We are currently witnessing a wave of moral indignation against corrupt financiers such as Bernie Madoff or the AIG executives, whose greed is supposedly responsible for bringing down the system. With the skilful agitation of revolutionaries, this entirely justifiable anger can be used to promote socialist solutions; however, these individuals are not responsible for bringing down the economy on their own. It is the entire capitalist class that is responsible and it is their system that is built upon greed. Asking for capitalism without greed is like asking a tiger to eat lettuce. Any capitalist who decided to forego exploitation, profit, and greed would quickly find himself out-competed and taken over by another capitalist who did not have such moral reservations.

There are two main ways that the capitalist can increase profit. The first is to push down wages, lengthen the working day, and increase the exploitation of labour. Marx referred to this as the increase of absolute and relative surplus value. Increased profit is produced at the expense of the health, nervous systems, and family life of the working class. In the recent period, with the entry of China and India into the world market, the capitalists have been very successful in using the competition of millions upon millions of new workers to push down wages and conditions internationally. In effect, the price of labour power (i.e. wages) is pushed below its historically recognized value. Profits and productivity have exploded in the last 30 years; at the same time total hours worked have increased, average real wages have stagnated, and earnings have contracted for the poorest half of society.

Some reformists have focused on low wages of workers as the cause of the crisis and that the system would be healthy if only everybody got a “fair” wage. They say that if wages were higher there would be a larger market for consumer goods – that the crisis is a crisis of under-consumption, not overproduction. Higher wages do temporarily boost the consumer market, but at the expense of surplus value (profits) and therefore do not offer a solution to the crisis. Marx discussed this issue in Das Kapital:

“It is sheer tautology to say that crises are caused by the scarcity of effective consumption, or of effective consumers… If one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and “simple” (!) common sense, such a period should rather remove the crisis. It appears, then, that capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis.”
Das Kapital, Volume 2, Ch 20, Part 4

There is a genuine contradiction within capitalism that the workers are never paid the full product of their labour and therefore cannot buy back the product of that labour. Workers are paid for their ability to work and not for the total value they add to the product. However, capitalism relies on this contradiction, as without it, there would be no surplus value to develop the means of production or export capital to foreign markets. In the crisis, capitalists cannot realize surplus value and they will do everything in their power to restore the rate of profit. Therefore lessening the surplus value to the capitalist will not delay the crisis and may even bring it on sooner.

Marxists fight for better wages and conditions of the workers but we understand that in the final analysis, the system is not capable of providing them. It is a reformist utopia to imagine that the capitalists will come to a collective agreement to permanently raise wages. Any capitalist who breaks this agreement will have a massive advantage over his competitors. The only way to ensure decent wages and conditions is to break the profit motive, to eradicate the capitalist system. A movement large and powerful enough to enforce universally high wages is a movement that is also capable of overthrowing capitalism. The fight for better wages and other reforms under capitalism organizes the working class into a force that can achieve this aim.

The second main way capitalists increase their profit is by developing the means of production. By investing in new machinery and technique the capitalist can improve the productivity of labour. With increased productivity, more can be produced with the same number of workers, or the same number of products can be produced with fewer workers. For example, General Motors sold 4.4 million vehicles in the US in 1992 and employed 265,000 members of the United Auto Workers union. In 2007, GM sold 4.5 million vehicles, but only employed 73,000 UAW members, a drop of over 70%. Even though the capitalist has invested more money in machinery (Constant Capital in Marxist terminology), this is more than compensated for by reduced labour costs (Variable Capital). Thus the net cost per commodity for the capitalist is reduced and he either makes additional profit relative to his competitors, or he can sell at a cheaper price and undercut his competitors. Eventually, all capitalists in a market are forced to adopt the new technique or be out-competed.

This tendency for increased investment in Constant Capital (machinery) works to undermine capitalism. All profits come from human labour, but investment in “labour saving” machinery means that it takes less labour to produce each commodity. Therefore, there is a tendency for the rate of profit to fall. In other words, the profit per item sold goes down. The capitalist can live with this if the total number of items sold increases and therefore the mass of profit increases. However, the tendency for the rate of profit to fall is just a tendency and not a law; this tendency can be reversed by a number of different factors, one of which is by increasing the exploitation of labour as explained above.

All the capitalists invest more and more wealth into improving the productivity of labour. This results in a revolution in productive capacity – more and more commodities can be produced by fewer and fewer people. Eventually a crisis point is reached where the market can no longer buy back all of these commodities at a profit. The inherent tendency is for productive capacity to increase faster than the market. Even though there is a massive expansion of wealth, this wealth is of no use to the capitalist if he cannot sell it at a profit. Marx explained that in the final analysis, all crises of capitalism are crises of overproduction. Inventories increase as goods cannot be sold at the old prices. Massive discounting occurs as capitalists try to find a price to sell their commodities. Eventually a price is found, but this price is below the actual value of the product and provides the capitalist with no profit. This can be demonstrated in a number of different ways in the present crisis.

Houses are a commodity; they are a commodity that contains a very large amount of human labour, but they are a commodity nonetheless. It is in this sector that the crisis first began to express itself. In the period up to 2002, housing starts in the USA totalled approximately 1.5-million units. Then, fuelled by cheap credit and increasing house prices, production boomed to about 2-million units per year between 2003 and 2006. After this period of overproduction, sales contracted 44% from the peak of the bubble, prices fell to their pre-bubble levels, and inventories, boosted by foreclosures, are 6-million units in excess of requirements. Not surprisingly, production has slumped, going from a rate of 2-million houses per year in mid-2006, falling to 1.5-million in early 2007, to 1-million in early 2008, and to its present level of just above half-a-million. One can just imagine the effect that this has had on workers in the construction industry and production in associated industries (lumber, cement, metals, etc.)

The auto industry is also a textbook case of overproduction. One only has to look at the following Statistics Canada graph of Canadian motor vehicle manufacturing to see the whole story:

The majority of Canadian auto production is sold in the United States; however, even in Canada, auto sales were down 22.6% for the 12-month period ending January 2009 (Statistics Canada / Statistique Canada).

There has been much talk about how Canada is immune to the financial crisis. We will return to this issue later, but it is clear that the crisis of overproduction is also affecting Canada. A key indicator of overproduction is the rise of inventories relative to sales:

All Canadian economic indicators show a similar trend – they either fall off a cliff over the last 6 months (growth, sales, employment, etc.) or rocket up (inventories, unemployment, etc.)

It is not the job of this document to be a compendium of statistics. In previous perspectives documents we spent a significant time highlighting statistics to show that the fundamentals of the capitalist economy were unsound and a huge crisis was in preparation. This is no longer a contentious issue, although we encourage people to re-read our past writings and compare them with those of bourgeois economists and reformist apologists for the system to see which analysis was closer to reality. Any of the disastrous statistics that we could present now will surely be superseded by even worse numbers in the following months and years. Those needing confirmation of this can visit the Statistics Canada website. The task at hand is to explain the trends in the economy and society in general as they relate to the class struggle.

Capitalist Confusion

The mainstream capitalist commentators have shown that they understand nothing about how their system works. For 2008, they initially predicted the Canadian economy to grow about 2.5%. This was then revised to 2%, to 1.5%, and then to 1%. The real figure ended up being 0.5%, essentially stagnation. During the October 2008 election, Canadian Prime Minister Stephen Harper commented that he thought that there were a lot of good buying opportunities on the market. He also said that, “if we were going to have some kind of big crash or recession, we probably would have had it by now.” One wonders whether any of his supporters followed his advice. Had they invested $1000 on the Toronto Stock Exchange on October 1^st 2008, they would only have $650 remaining on March 1^st 2009.

The January 2009 Harper budget was based upon a 2.7% contraction in 2009 and a bounce back starting in the second half of the year to 3.8% growth in 2010. This figure has been roundly ridiculed after David Dodge, former governor of the Bank of Canada, said, “I think anybody would be dreaming in Technicolor to think that you’re going to get through this by the third quarter of this year.” Currently, corporate strategists are predicting a 3% slump this year and stagnation in 2010. The fact is that none of these predictions are worth the paper they are printed on. Canadian GDP has fallen at a 9% rate since October 2008, the quickest since Statscan began collecting data in 1961. All of the “models” the bourgeois economists use are based on extrapolating from past experience and past recessions. However, under capitalism, the past is no predictor of the future. They are just guessing. Their confusion is compounded by their lack of understanding of the actual cause of the crisis. The contradictions caused by overproduction, huge debts, and fictitious capital run very deep. During the Great Depression every minor piece of positive news was heralded as the turnaround, that the crisis had reached “rock bottom,” but their hopes were all dashed. In the second half of March 2009, there has been a rally on the stock markets of the world – we can confidently predict that this too is another false dawn for the capitalists. We may be facing a crisis even deeper than that of the 1930s, and the actions that the bourgeois will have to take to get out of this crisis will put their entire system in danger.

“Stimulus” no Solution

US and British capitalism have decided that the solution to the crisis is massive spending. To date, approximately $2-trillion of “stimulus” has been pumped into the capitalist economy by the major powers. They are doing this because they think that it will provide the necessary credit to re-start investment. In other words, they are trying to re-inflate the bubble that exacerbated this mess in the first place. They have decided that the reason the slump in the 1930s was so long was because governments raised taxes, made cuts, and tried to balance their budgets. So they have decided to take the opposite approach and throw the policy of “sound finance” out the window. The formerly discredited ideas of John Maynard Keynes have been resurrected to save capitalism in its time of need.

It has been amazing to see all the bankers and economists, who had presented budget deficits as the worst crime imaginable, now jumping on the Keynesian bandwagon. Even Gordon Brown, George W. Bush, and Stephen Harper are in this club. The Bank of Canada, Bank of England, and the US Federal Reserve have all reduced interests rates to between 0%-0.5%. They are practically giving money away. And yet this has not served to stimulate the economy. Capitalists are supposed to take this money and invest it – but what is the point of investing when nobody will buy the goods that you make? They can’t artificially create a market for goods nobody wants or can afford. Faced with the problem of not being able to reduce interest rates below zero, (that would mean that a borrower would be given money for borrowing), they have turned to what they call “quantitative easing.” This is another one of those delightful euphemisms the bourgeois class is so fond of, just like “collateral damage”, “economic correction”, or “ethnic cleansing” – the pretty words that are supposed to hide the dirty truth. In this case, quantitative easing means that they have resorted to printing money! The US central bank is planning to buy $2-trillion of US government debt over the next year. The Bank of Canada is musing about doing the same. This accounting trick is the equivalent of printing money; central banks are not the same as private banks and this new money is not backed up by any real wealth. Deflation is a significant danger for the system at the present time. Companies are cutting prices to sell off excess inventory and this leads to consumers delaying purchases in the hope for a better bargain a few months down the road. However, printing money dilutes the value of money. Money is supposed to represent the total wealth of a society and commodities are priced accordingly. If wealth remains constant (or goes down) while the money supply increases, then each dollar in your pocket ends up being worth less and less. From slump and deflation the danger is stagnation and hyper-inflation. Prices sky-rocket while wages remain constant and the quality of life plummets. Every action the capitalists take makes the situation worse.

The $2-trillion of so-called stimulus also creates huge contradictions in the system. Up until recently the only supporters of Keynes were the left reformists, but the bourgeois have turned to the dead British economist in their time of need. Keynes was supposed to be liberal capitalism’s answer to Marx. He advised that you could smooth out booms and slumps by resorting to debt and infrastructure spending to “prime the pump” in times of slump. His ideas were universally discredited when they led to massive debt, structural deficits, and hyperinflation in the 1970s. All the money for this production has to come from somewhere – it is either printed, which has the inflationary consequences detailed above, or it has to come from taxes and public expenditure.

Under Marx’s economic theory, taxes are subtracted from surplus value. The capitalist objects to this reduction in profits and subsequently wages an endless battle to reduce taxes. However, the capitalists also recognize the need for a bureaucracy, (to govern their common interests), the police (to prevent the wage-slaves getting out of hand), and an army (to secure foreign markets and for when there are not enough police). In addition, the working class has been able to seize concessions from the capitalists in the form of pensions, welfare, Medicare, etc. These form part of the “social wage” that is taken from the collective profits of the capitalists through taxes and are distributed to the workers. None of this deficit financing solves the crisis of overproduction. At best, investment in public works such as schools, hospitals, transport, etc. can improve the productivity of labour and reduce the costs of production, but this will not take effect until the market recovers.

Eventually the massive debt needs to be paid back and the deficit returned to balance. In January, the chief economists of the big five Canadian banks advised the following course of action to deal with the slump. First, implement substantial short-term spending and permanent tax cuts to stimulate the economy – do not care how much of a debt you get into. Second, one or two years down the road when the economy is growing again, end the spending programs but do not raise taxes. Instead, conduct massive cuts in the social wage to balance the budget. Other capitalist economists call this sector of state expenditure “entitlement programs” that are to be avoided at all costs because, “they create a culture of dependency.” With millions unemployed due to the slump caused by the capitalists, and inflation eroding the standard of living of those with a job, the capitalists will then try to remove the few social safety nets that the workers have gained in the previous period. The policy the bourgeois is entering into is the policy of class war.

The way the capitalists will attempt to get out of the crisis of overproduction is to put the burden of their crisis on the back of the working class. As explained earlier, the rate of profit goes down when Constant Capital (machinery, plant, etc.) balloons in proportion to the value added by the workers (wages plus profits). The solution then is to reduce Constant Capital. In another capitalist euphemism, the Austrian economist Joseph Schumpeter popularized the term “creative destruction of capital” to describe this process. Factories are closed, millions of workers are fired, businesses collapse or are taken over, billions of hours of human labour are cast away, and whole regions are turned into industrial wastelands. And yet they have the gall to call this anarchic system efficient and creative! Faced with competition from the unemployed, workers with a job accept wages below their true value. Factory closings reduce society’s productive potential until there is no longer overproduction. Low wages help to restore the rate of profit. The weak perish while the strong survive and the cycle renews itself again. There is no “final” crisis of capitalism – the cycle will only end when the workers overthrow the entire system – but now the means by which the capitalists can get out of crises become narrower and narrower.

Workers are not prepared to take these attacks lying down and in that way the actions of the bosses to restore the rate of profit put their entire system in danger. Already there is a return to factory occupations in Britain, France, Canada, and the United States. We will discuss this movement of the workers in more detail later on, but first it is useful to look at the other proposed solutions to the capitalist crisis of overproduction.

Economic Nationalism

In June of 2008, several months before the financial collapse became a generally recognized fact, General Motors announced the closure of their Oshawa truck plant with the loss of 2,600 jobs. The workers responded angrily and blockaded GM’s headquarters. A few days later, a militant demonstration was organized by the Canadian Auto Workers union and 5,000 workers and community members marched around the plant with the main slogan being, “SAVE OUR JOBS!” This was a very good slogan that expressed the pressing need of the workers, even though it contained no method by which to achieve its aim. However, since then, the union leaders have stepped back from even this partial demand. Instead, “Save our jobs” is replaced with the fundamentally defeatist call to, “Save our severance.” The bureaucracy has accepted the logic of capitalism and their only solution is to mitigate the workers’ transition to unskilled labour at poverty wages. Their only demands that speak to the saving of jobs are economic nationalist calls to “Buy Canadian” and “do not export our jobs to Mexico.” This call for the implementation of trade tariffs and quotas is a dead-end for the workers’ movement.

No job has ever been saved by any of the unlimited number of Buy Canadian (or British, American, French, etc.) campaigns. These campaigns work on a false premise and are an excuse for the labour bureaucracy to pretend they are actually doing something. It is utopian to expect a working class family that is facing unemployment and huge debt loads to forego a cheaper (and sometimes better quality) product in favour of the more expensive domestic alternative. These campaigns cannot be successful and have never been successful. The CAW leadership even passed out bumper stickers to their members with the slogan, “Out of a job yet? Keep buying foreign!” In effect, it puts the blame for the loss of auto workers’ jobs on the rest of the working class, rather than on the capitalist class that is actually to blame! This attitude of blaming the rest of the working class is a gift to the reactionaries who mobilize public opinion against “lazy, overpaid, unionized autoworkers.”

The “don’t send our jobs to Mexico” line promoted by the bureaucracy also gets dangerously close to a racist division of the working class. We are not in favour of any section of the workers over and above any other section. That path lets the boss divide and conquer us. We are internationalists because, amongst other reasons, that is the only way to achieve victory. What we demand is the maintenance of pay, conditions, and union rights for all workers internationally. We advise that the unions wage international solidarity campaigns to fight for decent conditions for workers in Mexico, Indonesia, China, etc. and we always put the burden of blame on the boss and not on the so-called “foreign” worker.

Taken to its logical conclusion, economic nationalism leads to the imposition of trade barriers and protectionism. This is precisely the activity that deepened and prolonged the slump of the 1930s and contributed to the start of the Second World War. There is an international division of labour; some products are produced more efficiently and cheaply in one part of the globe and other products in other parts. The extension of world trade was one of the main motor forces of the world economy after WW2. In this way the bourgeois were, in some way, able to temporarily overcome the contradiction between the international nature of private property, which is hemmed in by the nation state. The imposition of trade barriers and protectionism mean that rather than buying the product most efficiently produced in a foreign country, a less efficient and more expensive domestic alternative is purchased. The inherent tendency of capitalism to revolutionize the productivity of labour goes into reverse. Extrapolated onto a world scale, protectionism exacerbates the slump as it takes more labour to buy fewer goods. In layman’s terms, everything gets more expensive and inefficient. In the 1930s, this forced the imperialist powers to wage war on each other to seize each other’s protected markets. It took the death of 50-million people and the victory of US imperialism to reverse the protectionist trade barriers and re-build the world economy.

The major capitalist powers live in abject fear of a new trade war and sign anti-protectionist agreements at every turn. And yet, 17 of the G20 countries have been accused of protectionist measures to defend their domestic markets. Protectionism need not be a simple import tariff to make foreign goods more expensive. A bailout, such as that to the US and Canadian auto industry, can be seen as a massive subsidy to make goods cheaper on foreign markets. Currency devaluations have a similar effect. Right-wing governments are also suddenly being converted into staunch “environmentalists” and defenders of the public health. This is of course only the case when the threat to the public’s heath and the environment comes from a foreign product. Just to be safe (of course), the offending foreign product is blocked and potential dangers are studied over several years. The political representatives of capitalism may speak out against the protectionism of other powers, but it is an all too easy trap to fall into at home. The US House of Representatives has already stipulated a Buy American policy on Obama’s $800-billion stimulus package.

The explosion of a full-scale trade war would be a disaster for the world economy and for Canada, especially. Canada has one of the highest trade-to-GDP ratios in the G20; the majority of Canada’s manufactured goods, oil, and primary resources are consumed in the United States. The capitalist powers may not be able to resist the slide into a trade war that will have disastrous consequences for the world economy and may encourage the formation of new belligerent alliances and trade blocs. However, at least the capitalists recognize this as a danger, in opposition to the labour bureaucrats who are proposing this mess as a solution!

Canada’s Banks

After months and months of denial it is grudgingly accepted that the crisis has hit on a global scale. However, while this is recognized, it is frequently followed by the caveat that things are much better in Canada. Stephen Harper has said that Canada was the last economy to go into recession and will be the first out. Underpinning this is a statement that Canada’s banks are much healthier than their American and European counterparts. This has to be taken with a grain of salt; we should not forget that the people who are saying this are the same people who only 12 months ago said that the Canadian economy was “decoupled” from the US economy and would not experience a recession. At the time, we pointed out that the idea of decoupling was fundamentally false and now nobody talks about it any more.

The Canadian big five banks — RBC, TD, Scotiabank, CIBC, and BMO – may or may not be in a better position than their global competitors. However, this does not fundamentally change the cause of the crisis of overproduction. The Canadian banking sector is one of the most concentrated on the planet with the big five holding upwards of 65% of retail deposits. Arguably, their relative success is due to their monopoly position and is at the expense of the Canadian consumer and small and medium size businesses. A July 2008 study by the Bank of Canada revealed that the cost of equity in Canada is significantly higher than in 19 other major economies and 20-40 basis points higher than in the United States (Source: The Cost of Equity in Canada: An International Comparison). Upwards of 50% of the revenues of Canadian banks comes purely from their retail arm and, even by their own admission, 5% of that is from nickel-and-diming consumers with bank and ATM fees. Now, the banks have been bailed out with the Canadian government buying up $125-billion in mortgages to bolster the assets of the big five. However, there is no evidence that this money is trickling down to the consumer and frequently, rate cuts by the Bank of Canada do not result in reductions in the Prime lending rate.

There are still possible dangers on the horizon, even for the Canadian banking system. CIBC lost $2.1-billion in derivatives gambling in 2008 and is cutting back and reducing risks in a manner that leads one to believe that there are a lot of bad loans they have yet to declare. RBC, TD, and the Bank of Montreal have recently expanded into the US market which is obviously a risky bet. Scotiabank is heavily invested in Latin America and is vulnerable to the revolutionary movement of the masses. However, the biggest danger lies with the Canadian consumer itself.

A lot has been said about the low level of sub-prime mortgages in Canada, but this ignores the fact that the US mortgage insurers Fannie Mae and Freddie Mac went under without holding a single dollar of sub-prime. The consumer credit crisis and housing bubble in Canada is about two years behind that of the United States. The Canadian housing bubble only started to burst in the summer of 2008 and up to this period construction was the best performing sector of employment. Now, layoffs and business closures in construction are rivalling those in the manufacturing sector. Statistics Canada has reported that consumer bankruptcies are up 22% during the period of January 2008-2009, and this is only at the start of the slump. The Vanier Institute of the Family, in their annual report on family finances, highlighted the following:

“Debt loads are in the danger zone – Average household debt soared to over $90,000 in 2008. The total debt to disposable income ratio climbed to 140% in 2008. The ratio of consumer debt plus mortgage debt climbed to 127% of disposable income in 2008 and has now crept up to “only” three percentage points below the US rate. This ratio is now above what the US rate was in 2006, just before the bubble burst.”
The Current State of Canadian Family Finances – 2008 Report (PDF)

Housing prices are beginning to turn with the largest drops in the most over-heated markets (Edmonton -12.2%, Saskatoon -8.7%, Calgary -7.1%, Vancouver -6.1%, and Victoria -5.8%). Disturbingly, from a capitalist perspective, housing starts are still increasing as condo developers have not been able to stop production on buildings in the planning stage. Comedian Rick Mercer even ran a skit about “Ritz Pitz Vancouver,” a luxury hole in the ground. The US crisis of overproduction in housing is repeating itself north of the border and the bursting of the bubble will result in the same degree of bankruptcies and foreclosures. This is the true Achilles heel of the Canadian banking system.

Concentration and lack of competition means that the Canadian banks are a parasite feeding not just off the working class but also on farmers and small and medium sized businesses. Nationalizing the big five banks is the only solution. As part of a socialist plan of production, cheap credit could be provided to small businesses and farmers to prevent them being squeezed from the top down. Instead of gambling billions of dollars on derivatives we could put these resources to work building schools, hospitals, public transport, environmental upgrades, social housing, etc. while revolutionizing our productivity of labour. Millions could be employed in this endeavour. Private ownership of the banks and major corporations means slump, poverty, and unemployment. Nationalization of the commanding heights of the economy under democratic workers control and management is the route to full employment and a rational and efficient economy.

Disequilibrium in Canadian Politics

Twelve months ago we analyzed the perceived stability of Canadian politics. We pointed out that the apparent steadiness was illusory and reminiscent of an unstable equilibrium. All that was needed was an outside shock to destabilize the system. Six months later our predictions were bourn out. Who would have guessed that under the quiet hum-drum life of Canadian politics slept the constitutional crisis brought forward by the proposed Liberal-NDP coalition?

The NDP under Jack Layton gained support in the 2008 election because, for the first time in decades, they actually proposed reforms that put a significant dividing line between them and the capitalist parties, especially the Liberals. The promises to withdraw troops from Afghanistan and repeal the $50-billion corporate tax cuts actually gave workers something to support. At the height of the campaign the NDP was polling in the 21-22% range, in a statistical tie with the Liberals. When the financial crisis hit the public’s consciousness two weeks before the end of the campaign, millions were looking for answers. If Layton and Co. had put the blame precisely where it belonged, on the capitalist system and the capitalist class, they would have polarized the debate in society between left and right and effectively sidelined the weakened Liberals under Dion. Unfortunately, the reformist bureaucracy of the NDP is just as beholden to capitalism as the leaders of the capitalist parties and therefore, they were even more confused by the crisis. All Layton could do was to vaguely utter that the crisis would be much better if we all “stuck together.” The only concrete statement put forward was that the NDP’s reforms would be delayed or cancelled if it would lead to budget deficits. There was a brief window where the electorate was looking for clear solutions and ideas, but they found all parties wanting. Unsurprisingly, only 59% bothered to vote and the NDP polled a disappointing 18%.

However, the tops of the NDP were not going to be denied power due to a mere absence of ideas on how to solve capitalism’s crisis of overproduction. There is a large degree of anecdotal evidence that the top echelons of the party were looking for any opportunity to propose the coalition and leap into government. Harper provided the NDP bureaucracy with just the opportunity they were looking for with their clumsy attempt to hobble the Liberals by removing the state funding of political parties.

The Marxists in the NDP were the first and the loudest to oppose the class-collaborationist coalition as a complete sell-out of the working class and the rank-and-file of the party. All of the NDP’s reforms – the removal of troops from Afghanistan, the abolition of corporate tax cuts – were jettisoned in exchange for a few cabinet seats. The entire labour bureaucracy came behind the coalition, as did the soft lefts and even the lefts outside the party such as the International Socialists and the Communist Party of Canada. These people, who normally reject the NDP, were more enthusiastic about the prospect of a coalition with the bosses’ party than they had ever been about the NDP on its own!

However, despite the support of the petit-bourgeois lefts and the bureaucracy that has no connection with the working class, the workers saw straight through the coalition and rejected it utterly. Even the Marxists were surprised at how quickly our perspectives were bourn out. We expected a certain honeymoon period where people would have ignored the content of the hybrid coalition beast and just be happy to see the back of the Conservatives.

In this environment Stephen Harper was able to take the unprecedented undemocratic action of proroguing parliament for two months and appealing to the representative of the Queen of England! Just imagine if Hugo Chavez, facing a no-confidence vote, even considered taking similar action. The international calls against “dictatorship” and analogies with Hitler dissolving the Reichstag would have been deafening. The use of the hereditary monarchy in Canadian politics has set a precedent that must not be ignored by class-conscious workers. Similar actions could be taken to launch a constitutional coup against a genuinely socialist NDP government. All working class organizations must demand the removal of the Queen as head of state and the removal of the unelected Governor General and Senate. These may seem like trivial matters, but they matter a huge deal in times of political crisis and are amongst the last lines of defence of the regime. The tragedy is that it was the actions of the NDP bureaucracy that made these undemocratic actions seem acceptable and even popular!

The NDP leadership should have just voted down the Conservative financial statement back in December, while maintaining their opposition to corporate tax cuts and the war in Afghanistan. This would have led to the weakened Liberals either bringing down the Conservatives, or humiliating themselves as they propped them up. Either option would have placed the NDP in an ideal position to overtake the Liberals and offer a genuine alternative to the financial crash, unemployment, and war proposed by the two parties of corporate Canada. Instead, they opted for a class-collaborationist coalition that saved the Conservatives.

Instead of using the miscalculation of the Conservatives to sideline the Liberals and become the real voice of opposition, Layton and the party are now taking the blame for the coalition debacle. Polls put the NDP at historical lows, and the Liberals under new leader Michael Ignatieff have recovered from their near-death experience. A series of op-ed columns have appeared labelling Layton as a dead-duck while his personal popularity has never been lower. One piece in the Globe and Mail even asked the question why was the party doing so badly in the time when capitalism has never been so discredited.

By their actions, the NDP leadership have said that the Liberals are a preferable alternative to the Conservatives and that nothing the NDP leadership says can be trusted. Insanely, in this time of capitalist crisis, the party bureaucracy is moving even further to the right. Giving a speech to the businessmen of the Toronto Board of Trade on 23^rd Jan., Layton said that workers will need “to take a pay cut so your friends at the plant can keep their job,” (Toronto Star, Jan 23rd 2009). If Layton is not removed as NDP leader, and if the party does not take a clear stand against any coalition with the Liberals, the NDP will be destroyed in the next election. The only circumstance that could overturn this perspective is a massive movement by the workers against the financial crisis that rejects the Conservatives and Liberals and leaves the NDP as the only alternative.

Foresight over Astonishment

There is a fair amount of historical revisionism going on about the coalition events. The die-hard pro-coalitionists grind their teeth and blame the workers for their stupidity in not realizing that the coalition was perfectly legal. The more intelligent accept that the coalition was a mistake, but then some follow this up by saying that one shouldn’t be too hard on those who supported the coalition as they just made a bad judgment call. The fact is, the coalition and its downfall was perfectly predictable. It is not a question of good or bad judgment; it is a question of method. Trotsky called this the superiority of foresight over astonishment. The Marxist method proved itself far superior to all the other methods of bureaucratic careerism, left eclecticism, and ultra-left sectarianism. Theory was a guide to our action which helped us to gain an echo – that is why we are writing this very document. The Marxists in the NDP were able to react forcefully because we were not surprised by events. Five years ago, in an article titled “2004 Canadian Federal Election – Canada is entering a new period of turmoil” we wrote the following:

“Unfortunately the leaders of the NDP have no perspective of taking power and do not have confidence in their platform or in the working class. They are in fact mistaken; the barrier to victory is not the NDP’s program but the doubt that the workers have in their leaders being serious… workers still know that all the NDP leaders are aiming for is a role as junior partner in a minority Liberal government. All the reforms would be dumped for a few cabinet portfolios and the Liberals would have no problem appointing an NDPer as minister for windmills! There is also a mythology, promoted by the NDP right wing, that the good things in Canada have only come about during a minority Liberal-NDP government.

“While propping up the Liberals may be initially popular within the NDP, it will rapidly fall into disfavour. The youth and the Marxists will be at the forefront of opposing the coalition and any further watering down of the NDP’s platform (which is already too watered down). Appeasing the Liberals and maintaining cabinet portfolios is not an excuse for letting poverty, homelessness, and unemployment increase. The first major attack by the government on the working class will cause every contradiction to come to the fore. It is possible that a section of the right wing will split away to stay with the Liberals (like we have already seen former BC NDP premier Ujjal Dosanjh and IWA leader Dave Haggard do). It is not even certain which side of the divide Layton will find himself on. Suffice to say, the perspective for both society and the NDP is not stability.”
2004 Canadian Federal Election – Canada is entering a new period of turmoil, by Russ Piffer and Alex Grant, 1^st Jun. 2004

Supporting the coalition was just a weaker version of the Popular Front policies the Stalinists proposed to oppose fascism. In the 1930s the Stalinists proposed the unity of Communists, Socialists, and Liberals against the Fascists, most notably in France and Spain. This led to defeat after defeat. Fascism is a product of the capitalist system and it is not possible to overcome it without also fighting against capitalism. It is also not possible to fight against capitalism while you are in a coalition with capitalist parties. Marx commented that history repeats itself first as a tragedy and then as a farce. In this farcical “un-popular front”, the labour bureaucrats were prepared to sell out their principles to defeat humdrum Conservatives, not fascists. They united with a Liberal Party which has opposed anti-scab legislation, supported the war in Afghanistan, and enacted cuts while in government that far exceed anything the Conservatives have managed. A whole series of other historical analogies can be brought forward to highlight the importance of class independence. That is why the Marxists were not surprised.

Some on the ultra-left use these events to state that this is proof that the NDP is a bankrupt capitalist party. This approach failed to predict the coalition and completely fails to understand the events as they occurred. If the NDP is a capitalist party, then why does it exist separate from the Liberals? Wouldn’t a fusion be perfectly logical and stable? Why also did these people oppose the coalition – surely the correct position from their standpoint would have been neutrality? Why was there such opposition from the broader working class? To these questions, the ultra-left mindset has no answers. What is true is that the leadership of the NDP is bankrupt and pro-capitalist, but at the base the party is linked with the working class. In the same article we previously highlighted we explain this:

“The NDP is fundamentally a working class party (despite its leadership) and the class forces acting on the party will eventually force it to break the coalition with the capitalist government. Those on the “left” who do not recognize that the NDP is organically linked to the working class will be at a loss to explain these movements. If the NDP was just another capitalist party then a Liberal-NDP (capitalist-capitalist) coalition would be perfectly stable when doing the bidding of the capitalists. In fact the intense class forces inherent in the situation raise the possibility of a real left-wing force developing within the NDP. We do not know who will lead this movement, or what form it will take, but it was under similar conditions during the last Liberal-NDP coalition that the radical Waffle movement formed within the NDP.”
Ibid.

There is a great deal of confusion in the rank-and-file of the NDP and the working class in general. There is an extreme crisis of leadership at a time when people are desperate for answers. This can lead to incredibly convulsive events both inside and outside the party. Just like sub-prime was the accident that set off the necessary crisis of overproduction in the economy, the political conjuncture is now waiting for an “accident” to unleash the pent up contradictions simmering below the surface.

Riots, Racism, & the Defence of Civil Liberties

In a time of crisis, the workers and the oppressed cannot just sit back and wait for their leaders to discover how to lead. In many countries around the world the elemental rage of the masses has exploded in spontaneous riots. The crisis of capitalism, combined with the racism of the police in the most oppressed immigrant communities, provides a particularly incendiary mix. We have already seen this on the streets of Montreal Nord, and without leadership from the organizations of the working class, there will likely be more riots in more cities. Unfortunately, regardless of the romanticism of the anarchists, rioting does not represent any danger to the capitalist state. The problems of unemployment, oppression, and racism are not going to be solved by any one part of the working class alone. It demands united action by black workers, Latino workers, women workers, young workers, unemployed workers, native workers, all workers whether they be unemployed, minimum wage, or organized into a union. Instead of spontaneous rioting, mass demonstrations bringing together all sections of the working class against unemployment, racism and, oppression is the way forward. This broad movement will provide a genuine threat to the capitalist state when it explains that the problems faced by the oppressed are the result of the capitalist system and we must fight in unity to overthrow this system. The logical bodies to call such mass demonstrations are the unions and especially the local labour councils with the support of the NDP, Québec Solidaire, and all the organizations of the oppressed. Where necessary, community defence squads under the direction of, and accountable to, the labour councils can be set up to defend the community against the police and racist violence. In the initial stages this could be conceived as analogous to demonstration marshals who are permanently organized – although it is important that these bodies are kept accountable to the movement and do not degenerate into a gang of “heroes” looking for a fight.

The public is becoming increasingly aware of the role of the police in class society. The Dziekanski enquiry into taser use has revealed how the so-called trustworthy Mounties consistently lie to defend themselves. Now there is a crackdown on anybody using video to record the actions of the police. These stories have an important impact on consciousness and reduce the ability of the state to fool the people about their “impartiality.”

We have also seen the return of fascist gangs in some parts of the country, especially Alberta and the BC interior. These virulent thugs need to be opposed by the entire working class movement using the methods outlined above. However, it is important to keep a sense of proportion. Some in the media raise the spectre of the financial crisis to make analogies with Weimar Germany and the rise of fascism. Unfortunately, some on the left have echoed these sentiments. The corporate media then use the neo-Nazis as an excuse to increase police powers and further erode civil liberties. These new powers are then used against the working class while the fascists are left untouched. The perspective is not for the rise of fascism – to go back to the German analogy; it took 15 years of unsuccessful revolutionary struggle by the working class before fascism came forward. In addition, fascism was largely based upon the ruined petty bourgeois which were a large part of the pre-war European population. Now the population in most advanced capitalist countries is over 80% working class so this removes fascism’s mass base. Hitler lost the capitalists half of Europe and therefore they are not likely to put their money on this option again. The movement against the financial crisis is to the left and not the right. The working class will have many opportunities to overthrow capitalism before fascism becomes a mass force. At the present time, the fascist gangs can even be a danger to the capitalists as the most likely outcome of their actions is to provoke a mass movement of the workers.

Recent actions by the Harper Conservatives lead us to believe that they are preparing a red-scare campaign to detract attention away from the financial crisis. Immigration Minister Jason Kenny is stepping forward to head the McCarthyite witch-hunt that is targeting immigrants, Palestinians, trade unionists, students, community groups, and anybody opposed to the government’s foreign policy. Kenny started by attempting to tighten up language requirements for new immigrants, a racist move that hits especially hard against the family members of existing immigrants. They then moved to target non-profit organizations who criticize the government, such as the Canadian Arab Federation. Together with the corporate media, Kenny has been the lead proponent of labelling anybody who opposes the imperialist actions of the State of Israel as anti-Semitic. And to top it all off, in response to a demand by the right-wing Jewish Defence League (JDL), they barred anti-war British MP George Galloway from entering the country to speak at a series of events.

The laws they used to prevent Galloway’s freedom of speech are so broad as to be almost universally applicable. They apply to all non-citizens, including permanent-residents who may have lived in Canada since childhood. In a debate with Galloway, Meir Weinstein, director of the JDL, revealed how far the right wing would like to go, “We are extremely determined to uncover any proxy-agents of Hamas and Hezbullah. We will be looking into these organizations in Canada that have invited [Galloway] and their links to terror groups as well.” It is clear that the Canadian state intends on creating a climate of fear to silence opposition and create scapegoats.

This has not just been confined to issues of foreign policy and immigration. CUPE 3903, which led an 85 day strike at York University and was legislated back to work, has been victimized as “militant”, “pseudo-Marxist”, and an emboldening example to the rest of the labour movement. The capitalists, through their political and media representatives, are looking to cut the head off any focal points of working class opposition. They understand that they will have to impose draconian cuts on the working class and are preparing the ground beforehand. Clearly, the next period will be a difficult one for those genuinely fighting against the system who will come under the scrutiny of the state and their mouthpieces. However, it is unlikely that they will succeed in swaying the majority of public opinion their way. The Canadian population is not ready for such a witch-hunt and if they are not careful the right-wing could increase sympathy for the people they are trying to vilify – just like what happened with Galloway.

Turning the Tide in Québec

For the first time in a generation there is an opportunity for class politics to come to the fore in Québec. After the defeat of the 1972 Common Front general strike, the national question cut across the class question in the province. The only options available to the workers were to be sold out by the bourgeois federalist Liberals or sold out by the bourgeois nationalist Parti Québécois. However a process has begun, starting after the 2001 Québec City FTAA demonstrations, where all bourgeois options are becoming discredited and workers are looking to the class struggle to solve their problems.

The 2008 Québec elections represent an important turning point. After these elections everything has changed and nothing remains the same. The reactionary right-wing ADQ, with their anti-immigrant and anti-worker agenda, was demolished. This is a significant development as the rise of the ADQ was symptomatic of the population searching for a solution outside of the old federalist/separatist divide. But the workers and middle class quickly realized that right-populism was a dead end and are looking for other solutions. Incidentally, this development supports our previous statement about the limited prospects for fascism in the near future. The tendency is to the left and not to the right.

The most important development in Québec is the election of Amir Khadir of Québec Solidaire to the National Assembly. This gives an opportunity for the fledgling left party to gain a foothold in the consciousness of the workers, especially during the capitalist crisis.

Bitter class struggles are on the order of the day as Charest’s Liberals, united with the capitalists and their parties, attempt to make the workers pay for the crisis in their system. In this situation the bosses from New York, Toronto, and Montreal will all unite on a class basis to beat down all sections of the working class. The workers cannot help but unite to fight back against these attacks.

This is a historic opening for Québec Solidaire. It cannot be squandered. An immediate campaign needs to be begun to put the last nail in the coffin of the PQ. QS, its supporters in the Montréal Central Council of the CSN, and sympathizers across the labour movement should demand that the labour leaders break their ties with the PQ once and for all and link up with QS. QS should offer spots for voting representatives from every union that affiliates to it, on all of its leading bodies, including the national executive. It should extend voting rights on the congress floor to unions that link up with the party. These are the links necessary to guarantee the future of the party as the representative of the working class in the National Assembly.

QS must show the way forward by providing the unity and foresight in the coming struggles. By being at every picket line, every labour dispute, every major union congress, and putting forward a bold socialist program. It is not enough to stand for redistributing the wealth, as Amir said in his victory speech. It is not enough to be against the rule of the private sector, as he put it. It is not enough to be for sovereignty over our resources and our economy. As Charest begins his attacks on the labour movement, Québec Solidaire needs to provide a clear, socialist solution and become Québec’s true party of labour.

The Labour Movement

Nowhere has the degree of confusion in response to the economic crisis been greater than at the tops of the labour movement. The crisis of capitalism first expresses itself as a crisis of reformism. There can be no reformism without reforms – and the capitalists will not agree with reforms during the capitalist downturn. The leadership of the Canadian Auto Workers were traditionally on the left of the union movement but have now lost any perspective of fighting against capitalism and have adopted the logic of the system. With this mindset, the sell-out no-strike deal at Magna becomes acceptable and they have no answers to the auto crisis. New CAW president Ken Lewenza can only propose economic nationalism while muttering about toughing out the economic downturn and hoping things turn up in the future. The rank and file of the union is seething while the union leadership accepts concession after concession. This is a leadership that uses fear to demobilize the membership combined with Stalinist tactics within the union to ensure compliance. They could not even stomach the limited democratic debate of a leadership race between three representatives of the bureaucracy. In this environment the smallest event could spark off a movement of massive proportions.

The lack of leadership combined with the crisis of manufacturing, especially in southern Ontario, has led the movement to break out in spontaneous actions and factory occupations. Factory occupations are spreading on an international scale, the workers having no choice but to seize the plants to attempt to save their jobs or at least their severance and owed wages. The correct method to save these jobs is to link up the occupied factories and demand that they be nationalized under workers’ control. The workers are still learning through the struggle. At the last Canadian occupied plant, Aradco in Windsor, the workers were owed $1.7-million in collective severance and back wages. The CAW’s Lewenza instructed the workers to end the occupation because he had negotiated a deal. Only when the workers had left the plant did the union bureaucracy reveal that the deal was only worth $400,000. Next time, it is unlikely the workers will end the occupation without reading the small print.

At the time of writing, GM is facing almost certain bankruptcy and Chrysler may also follow suit. The union is raising the issue of protecting the pensions of retired autoworkers while the Ontario and Federal governments are refusing to guarantee them. It is a sad irony that the autoworkers are being betrayed by the Ontario Liberals that they supported in the last election. These right-wing politicians are prepared to bail out the banks and corporations but there is nothing for workers who toiled their entire life so the bosses can make super profits. Yes, the pensions must be protected, but so too must the jobs of the workers in what are some of the most productive plants on the planet. The demand of nationalization of auto must gain an echo at some point as the only slogan that can save both pensions and jobs. It cannot be ruled out that the workers may spontaneously occupy all the GM plants in response to the mass layoffs and pension cancellations coming from a bankruptcy filing. The union leadership would be dragged along by the workers, and new leaders may come to the fore from the rank-and-file.

While the CAW leadership has moved from the left to the right, it appears as if the leadership of the Steelworkers union is moving in the opposite direction. The Steelworkers seem to be more open to supporting occupations and other militant actions by the workers. The steel town of Hamilton has a long history of working class struggle. The effect of the Steelworkers was seen during the recent Ontario NDP leadership election. All of the candidates were mouthing platitudes and it looked like Peter Tabuns, the bureaucracy’s favoured candidate, was going to sleepwalk to victory. However, in the last few weeks of the campaign, the Steelworkers union got behind Hamilton based Andrea Horwath. Overnight her campaign became about saving manufacturing jobs and organizing workers. She even said, “we New Democrats won’t check our socialism at the door when it comes to building a better future.” In response to those on the ultra-left who say there is no link between the NDP and workers, and those on the right who say that links with the unions bring defeat, Horwath’s working class turn was the key to her victory. Since then, key Horwath supporter Peter Kormos has been talking about purging the bureaucracy from the provincial NDP office. We have no illusions in Horwath, and her solutions are still the same old economic nationalism, but this development is symptomatic of the desire of the rank and file, and the wider working class, to fight back. Probably nobody was more surprised of her victory than Horwath herself. What it shows is the organic link between the NDP and the labour movement which will be renewed again and again by workers in struggle. Through a series of progressive approximations more conservative elements will be kicked out and replaced by leaders closer to the rank-and-file. Eventually this process allows for the crystallization of a mass left wing with the Marxists coming forward as the “left of the left.”

Over the coming months and years, as we explained previously, all levels of government will be forced to put the burden of the crisis on the backs of the working class. Mass layoffs and wage cuts are on the order of the day in the public sector as the bosses attempt to pay off the debts they are going to accrue from their “stimulus” measures. Privatization will be another method that capitalist governments use to generate revenue and provide new spheres of exploitation and profit. Inevitably the more advanced sections of the working class will fight back against cuts and privatization. Persistent rumours exist about the selling off of Canada Post and breaking the back of the Canadian Union of Postal Workers. When workers strike against these measures it will not be just a normal economic battle for better wages and conditions – it will be a battle against the capitalists, their media, and their state. Everything will be done to isolate the workers in struggle, “how dare they demand job security when millions are losing their jobs!” This is pretty rich when it comes from the people doing the laying off and who are responsible for the crisis! But increasingly the isolated movements of workers will coalesce and the class will become conscious of the fact that a victory for any section is a victory for all workers. The bosses and their state cannot allow this and whenever workers seem set to win they will take Draconian restrictions on the right to strike through “back-to-work” legislation, fines, and even imprisonment of workers. Even these measures have their limits. There would be no trade unions today if workers were not prepared to break unjust laws – in the 19^th century any worker forming a union was jailed for joining “a conspiracy to raise wages.” There is a big difference in the mind of the population between breaking a law and defying a law that was designed to break you. In this situation mass illegal walkouts and even general strikes are inherent in the situation. However, in order for these movements not to go down to defeat, they must have a leadership that is prepared to go all the way.

The Need for a Socialist Alternative

Throughout this document we have explained how the crisis of capitalism is endemic in the system. We have also explained that the working class comes to understand that capitalism has failed, not through the intervention of revolutionaries but through the objective crisis itself and the methods the capitalists are forced to use to save their system. In the words of Marx and Engels, capitalism produces its own gravediggers. However, this is not enough on its own to achieve victory.

The leaders of the working class organizations, the unions and the NDP, are wedded to a pro-capitalist reformist ideology. As we have seen, this ideology holds the workers back and demobilizes them. When lava cools, a crust is formed that acts as a barrier to a new flow. Only when sufficient pressure is built up is the plug blown away by a new eruption and lava once again flows down the same channels as before. No bureaucracy is stronger than the movement of the working class, but these bureaucrats are organized and even when in a minority, can manoeuvre to ensure they maintain their positions. The working class also needs to be organized to overcome the undemocratic actions of the bureaucratic minority. The ideas and methods by which the workers can triumph over the bureaucracy and achieve victory are the ideas and methods of the revolutionary Marxist tendency.

The task at hand is to organize the class-conscious workers and youth into a force that can be a viable option within the mass organizations. In the coming period workers will enter these organizations in their millions looking for answers. Those who have become used to swimming against the stream and speaking to rooms of just a handful of people will find that the tide is turning and thousands are prepared to listen to the ideas of socialism. A recent poll in the United States, the heartland of capitalism, found that 20% thought that socialism was the best economic system. This rose to 33% amongst those under 30. Canadian figures are probably even higher. All of this is happening at the start of the crisis when no organization or prominent figure is defending socialist ideas!

Now is the time to organize the socialist alternative to capitalism and bureaucratic reformism. Workers, who in the past would think that socialism and nationalization are extreme and foreign ideas, will be presented with the option of seizing these ideas or walking quietly into unemployment, poverty, and defeat. Every working class militant won to Marxism now means 100 or 1000 more workers fighting for victory in the struggles to come. All the workers need are the correct ideas and methods-they will provide the power themselves. The presence of even a single socialist in a factory or school can make all the difference. At Republic Windows and Doors, the first occupied factory in the US in decades, the leader of the workers said he was inspired to propose this action after visiting Inveval, the worker-occupied plant that was nationalized by Hugo Chavez in response to a campaign led by comrades of the International Marxist Tendency. The Greek philosopher Archimedes stated, “Give me a fulcrum, and I shall move the world.” Marxism is the fulcrum from where the working class can stand and then the world will be moved as never before.

Toronto, April 15^th 2009