Gerry Healy


A Marxist Analysis of the Crisis

Socialist Labour League pamphlet re-printed from the Workers Press,

(SLL paper), 15 February 1973

Editors Foreword

  As stated above, Healy wrote this work in 1973. It is a unique historical record of the most crucial and formative period of the process of the decline of the capitalist epoch, and a Marxist scientific analysis of this process. All that has happened since is, in one way or another, the result of the events described below. As Healy predicts:


   “Only the violent elimination of capital values on a vast scale can now restore the ‘correct’ proportions between the pool of constant capital and the available surplus extracted from the working class. A destruction of capital along these lines must take the form of stock price collapse, bank failures leading in turn to the forcible closure of many of even the largest European and Japanese monopolists who will be totally incapable of meeting the American financial war.”

  All of these things have happened repeatedly and on unprecedented scale since this work was written. The fact that the capitalist system is still in being is solely due to the treachery of Stalinism and social democracy, the twin political tendencies which have come to the aid of capitalism time and again by holding back the revolutionary working class struggle to overthrow this system. Healy’s insistence that a revolutionary party must be built to lead the working class in such a struggle remains the most urgent necessity.


The Development of the Post-war Economic and Financial Crisis

Draft resolution presented by the Central Committee

of the Socialist Labour League


The latest moves by the Nixon administration in devaluing the dollar mark a rapid acceleration of the capitalist system towards breakdown and crisis deeper than at any time in its history.


All the political work of the Socialist Labour League must start from a grasp of the profound nature and utter insolubility of this crisis. The building of a mass revolutionary party is no longer a propaganda demand, as it has always been for revisionists. It is the urgent, burning question of the hour.

   Either the working class, under the leadership of the revolutionary party, takes power and puts an end to capitalist anarchy, or the ruling class will be forced to impose brutal dictatorship on the European, Japanese and American working class.

   What is at stake here is the training of workers in a revolutionary party, workers who start, in everything they do, from the nature of the epoch as one of wars and revolutions. As the working class now moves into its decisive and historic struggle with the capitalist enemy, it will need to combat every reformist, centrist and Stalinist, with their opportunist recipes for once again adjusting the relations between the classes.

   But these relations cannot be adjusted. Fundamentally, the period requires revolutionary action to smash the state power of the bourgeoisie and establish socialism.

   Only the international betrayals of social democracy and Stalinism have permitted the capitalist powers, for longer or shorter periods, to obscure this nature of the epoch. But now the contradictions have once more accumulated so explosively under the surface of the boom that the choice is starkly revealed once again - the crisis of humanity demands the removal of capitalism. But capitalism survives because of the crisis of working-class revolutionary leadership. Therefore this crisis of revolutionary leadership must be resolved as the primary task. In that lies the essence of the nature of the epoch. Only the Trotskyist movement has been built in struggle on this basis.

1. The Revisionists and the Crisis

   The latest stage in the break-up of the world capitalist money and trade relations is a vindication of Marxism and the struggle of the International Committee of the Fourth International against all brands of revisionism and Stalinism.  The revisionists, more than anybody, stand nakedly exposed by the rapid development of the crisis.

   Throughout the last 20 years and more, it has been the revisionists, led by the so-called Unified Secretariat, who have preached the theory of ‘neo-capitalism’. According to this spurious, anti-Marxist theory, capitalism in the post-war period has changed fundamentally.

   It was no longer capitalism of the old type, as analysed by Marx. No longer was it prone to crisis and breakdown. Through the action of the state, combined with a series of ‘science-based’ industries which in turn provided the foundation for a ‘Third Industrial Revolution’, capitalism was now more or less permanently stabilised.

     Instead of the preparation for social revolution, this clique of revisionists, deserting everything Trotsky and the Fourth International had fought for, advocated ‘structural reforms’ as the basis for their political activities.

   Of essentially the same nature were those theories of the ‘permanent arms economy’, advanced by the petty bourgeois ‘state-capitalist’ International Socialist Group. This was the tendency which announced in the late 1940’s that Russia was ‘state capitalist’ and could no longer be defended against imperialism. It was this blatantly anti-communist theory which led to their desertion from the Trotskyist movement at the outset of the Korean war.

   Like all revisionists, both these trends displayed a deep hatred of the revolutionary power of the working class and a firm belief in the strength of capitalism. Their thoroughly false analysis of capitalism was but a thin cover for their scepticism about the working class, a scepticism which made them willing tools of the Stalinist and Social Democratic bureaucracies.

   It has only been through the most tenacious struggle against these ideas, for long periods under difficult objective conditions, that the Socialist Labour League has been able to analyse the unfolding of the present crisis and, on the basis of this analysis, train and educate a cadre of revolutionary fighters in the working class who now have the historic responsibility, in this entirely new situation, of transforming the Socialist Labour League into a revolutionary party.

2. The Basis of Bretton Woods

   The hallmark of the revisionist method is that it is governed entirely by surface impressions. It is this method which dominated the response of these groups to developments in post war capitalism. For both Pabloism and the International socialists, the ability of capitalism to avoid a major slump over the last 30 years was a sign of renewed strength and vigour. In fact the very opposite was the case.

   The ruling class felt completely unable to impose the kind of solution to its crisis after1945 that it had done after World War I. The fact that after the Bretton Woods 1944 conference it was forced to establish a series of agencies through which the economy was artificially stimulated by means of inflation was its recognition that the working class was too strong to be dealt with at this stage.

   Inflation represented a retreat before the working class. This retreat was a reflection of the decline of the capitalist system and the losses it has sustained in 1917 and in eastern Europe and China in the immediate post war period. Capitalism survived the convulsions at the end of the war only through the betrayals of Stalinism and Social Democracy, both of which collaborated openly with imperialism in the restoration of capitalism in western Europe.

   This overall decline of capitalism must be stressed when considering the present crisis. For it is not one which takes place in the system’s growth and expansion, but one in its death agony.  This theoretical conception has always stood at the centre of the work of the International Committee and is one for which it has fought against all revisionists.

   This historic decline of capitalism can be seen in the very nature of the Bretton Woods agreements.  Their basis was the setting up of the International Monetary fund, which commenced operation in March 1947. The IMF was to be provided with a pool of gold and currency, contributed according to an agreed plan by a number of nations. This pool was to be used to allow any country suffering balance of payments difficulties to overcome them without precipitating a major international crisis.

   The second element of Bretton Woods was the privileged position given to the dollar. The cornerstone of post-war monetary arrangements – until President Nixon’s August 15, 1971, announcement  - was the fact that the dollar was guaranteed at a fived rate against gold for the purpose of international trade and capital movements. It was only because the dollar holders could, if they wished, exchange their dollar holdings into gold at the fixed rate of  $35 to a fine ounce of gold, that the dollar could become the main reserve asset throughout Europe during the post-war period.


   But these arrangements were not like the old Gold Standard which existed for much of the 19th. Century during capitalism’s expansionary period.  Bretton Woods had to allow the use of substantial quantities of paper money alongside gold. The contributions which each country made to the IMF pool consisted of 75 per cent in local currency and only 25 per cent  in gold. On this pool any debtor country could draw in return for a promise that currencies would fluctuate by only 1 per cent either side of their ‘par’ value against the dollar.

3. The Growth of the American Balance-of-Payments Crisis.

   The inexorable growth of the post-war crisis can be seen in the steady increase in the American balance-of-payments deficit when compared with the continual reduction in the American gold reserve. There have been several factors behind the growth of this payments crisis. But they all reflect the ever-growing unevenness of capitalist development in its period of decline.

   After 1945 only American capitalism could shoulder the overall responsibility for the future of the entire world system against the threat of both the working class and the challenge to its future which was implicit in the existence of the Soviet Union, eastern Europe and China.

   But the eruption of the present crisis has proved once more the soundness of Trotsky’s judgement that no matter how strong American capitalism appeared, the contradictions of imperialism were even stronger.

   In the first place America had to make considerable loans to Europe after the last war in order to prop up a number of near destitute regimes and preserve the capitalist social structure intact. Following the war-time Lend-Lease programme, the ‘aid’ programme initially took the form of Marshall Aid ( The European Recovery Programme) which came into operation at the end of 1947.

   The Americans had also to make even greater overseas military expenditures to preserve their strategic and economic interests. Again, this was never a purely ‘economic’ question. War and the preparation for war can never be divorced from capitalism as the theories of ‘permanent arms economy’ imply.

   The military Expenditures were to gain in importance with the outbreak of the 1950 Korean war. In the 1960’s the Vietnam war also hade a major impact as a source of worsening the US payments deficit. Much of the means to fight the war were purchased outside America and this meant either a loss of gold or a further poling up of external dollar balances. Spending on armaments were financed almost entirely out of budget deficits and have thus been one of the major causes of inflationary instability with which capitalism must now deal so ruthlessly.  

   Finally, the American payments deficit has been considerably worsened by the vast outpouring of private capital from the US.  Here again we are dealing with no ‘accident’ which as earlier change of policy might have corrected. For the outflow of capital was testimony to the powerful operation of the tendency of the rate of profit to fall. It was in an attempt to avoid the consequences of this law that the American monopolists sent their capital abroad.

   The net result of all these developments was a constant piling up of external debt along with a steady decline in the US gold holding. At the outbreak of the Korean war the US held roughly three-quarters of the world’s mined gold. Today the figure has fallen to under a quarter.

4. Gold and the Dollar

   In the post-war period, the dollar replaced sterling as the major international currency which, along with gold, provided the major source for the finance of world trade and payments. But one more, we should be clear that the dollar was unable to occupy the powerful position enjoyed by sterling for much of the 19th. Century.

   During the Gold Standard’s operation down to 1914, sterling was used as the main means of financing capitalist investments throughout Europe and north America. But so powerful was British capital and so overwhelmingly important was sterling that this did not lead to crises of anything approaching  the depth of those after Word War II.

   This was so because although considerable capital flowed out of London throughout the 19th. Century, Britain was able, in the main, to force those countries which borrowed it to purchase British goods. I other words, considerable capital outflow did not lead to a serious balance-of-payments crisis.

   Although by far the most powerful capitalist country since the last war, the US has never been able to achieve the relative dominance which Britain achieved for much of the last century. American capital has moved into Europe and has, in part, been used to build up local industry which was later able to compete against American firms in world markets. Japan and West Germany are classical examples of this development.

   So although the Americans tried to make the dollar ‘as good as gold’, it was an aim which could never be accomplished. For capitalism, only gold can constitute money. There can be no new ‘international currency’ which detaches itself from gold. The truth of this was established once more in 1943 when John Maynard Keynes proposed a new world paper currency, Bancor, to replace gold. The Americans were forced to reject such a scheme: the world capitalist system had to remain firmly tied to gold which, unlike paper money, represents real value, that is, the expenditure of human labour.

   Since the IMF started operations in 1947, the growth of the American payments deficit has developed alongside a decline in the proportion of gold, as against paper, in the world monetary supply. In the early 1960’s gold constituted around 60 percent of total world liquidity, (that is gold plus foreign exchange); today the figure has fallen to a little over a third. In other words, roughly two-thirds of world trade assets no longer have any value because they are no longer convertible into gold.

   When this decline in relative gold holdings is measured against the expansion of world trade, the extent of the crisis and the tasks which it presents to the capitalist system are immediately apparent.  In the early 1960’s as the present crisis was beginning to gather momentum, gold held as reserve assets within the capitalist system represented around 30 per cent of total world imports. Today that figure is a little over 10 per cent. Here again are the seeds of a  catastrophic collapse of world trading relations.

5. Development of the Crisis

   From the late 1950’s onwards, the first signs of the contradictions of capitalism as analysed by Marxists began to assert themselves. From this point onwards the US payments deficit was growing at an alarmingly fast pace as against its reduced gold holdings.

   Fears grew that the Americans would be unable to maintain convertability of the dollar into gold. Several European governments, most notably the French, began to convert their dollar and other currency holdings into gold. This further accelerated the loss of gold in American reserves and, in turn, forced other governments to follow the French lead.

   The first response of the American administration, under President Kennedy, was to slash the ‘aid’ programme to the colonial and semi-colonial world. Expenditure abroad to countries like India and several African states was reduced as much as 25 per cent and restrictions imposed on the export of private capital to these areas were considerably tightened.

   The political results of this move are a warning to the whole European working class today. For the result of the Kennedy move was a sharp swing to the right in countries like Ghana, Algeria and Indonesia. ‘Left’ national bourgeois governments which had managed throughout the 1950’s to balance between the State Union and imperialism were removed and replaced by reactionary regimes immediately subordinate to the direct needs of American imperialism.

   But the results of the crisis could not be confined to the colonial and semi-colonial countries. This was the ‘theory’ of Ernest Mandel and the Pabloite revisionists. Impressed by the upsurge of the struggle in the colonial countries, they wrote off the revolutionary potential of the working class in Europe and north America.

   Indeed the present crisis will expose mercilessly the Pabloite ‘theory’ of the ‘Three Sectors’ of the revolution.  It was this  theory which allowed Mandel and his fellow renegades from Trotskyism to reject the role of the working class in the metropolitan countries, while at the same time prostituting Trotskyism by lending their uncritical support to the petty-bourgeois nationalist leaders in the colonial and semi-colonial countries.

   But now the crisis is joined throughout Europe and north America. The workers of the big capitalist countries are moving into revolutionary struggle along with workers and peasants in the colonial countries. This is bound to have a direct impact on the working class and intellectuals of eastern Europe and the Soviet Union. Once more the unity of the international working class is reasserting itself as the most powerful force in history.

   Developments in Britain were to establish the utter bankruptcy and counter-revolutionary nature of such ‘theories’. In 1961, sensing the changed international situation, the Tories, with Selwyn Lloyd as Chancellor, introduced their ‘pay pause’ designed to reduce wages and halt inflation. At this stage they were forced to retreat. On the one hand they faced determined and widespread opposition to their unemployment policies, (unemployment rose to above the million mark in the winter of 1962-1963), and on the other the government was plunged into first-rate crisis in the form of the 1963 Profumo scandal.

   It was under these conditions that the Tories, from the spring of 1963 onwards, began their reflationary pre-election boom. Working class opposition to the Tory unemployment policies and determination to preserve all their gains of the 1950’s produced a Labour victory in October 1964, although with only a small majority.

   It was a government which came into power in the midst of s balance-of-payments crisis produced directly by the Maudling inflationary boom. The payments deficit for 1964 was a record £800m.. At his stage, however, the Labour Leaders were able to turn to the Americans for financial assistance. James Callaghan was able to negotiate considerable loans from the IMF and directly from the Johnson administration in return for promises to introduce legislation to halt wage increases.

   For three years after taking office help continues from the Americans in a desperate attempt to avoid a sterling devaluation. Here again is revealed the basic instability of the capitalist system, despite all appearances of prosperity during the 1950’s.

   At Bretton Woods, although the Americans rejected Keynes’ plan for a ‘new money’, they could not dispense entirely with sterling’s role as a reserve currency. Despite the dominant position of the dollar, sterling still accounted for over a quarter of world trade in the immediate post-war years, a legacy from its 19th. Century position. And although continuing to decline, it was still the second most important trading currency after the dollar.

   Johnson and the American ruling class knew that if the pound was devalued again, (it had already been devalued under Stafford Cripps in 1949), the spotlight of the crisis would inevitably fall on the dollar.  The fight to save the pound was therefore a fight to defend the dollar.

6. The Sterling Devaluation

   The forced sterling devaluation of November 1967 was therefore a defeat not merely for the Labour government’s economic policies, but, much more important, a defeat for the strategy of American imperialism.  From this time onwards, the world crisis of capitalism has developed at an ever-increasing pace. From November 1967 the Americans have had no choice but to prepare for economic and financial warfare against the rest of the capitalist world, and particularly against Europe.

   The next stage of the crisis came with the March 1968 run on gold.  So great was the demand for gold and the loss of confidence in the dollar that the Americans were driven to introduce a two-tier system. This ended dollar-gold convertability other than for ‘official’, (that is government), purposes. From that date there were in fact two gold markets, an official one, in which the dollar-gold price was held to its Bretton Woods level, and a ‘private’ market which saw the gold price continuing to rise.

   Despite the fond hopes of all the reformists and revisionists, such a two-tier system was inherently unstable and could not hope to survive. It was a mere holding operation on the part of the American ruling class while the 1968 presidential elections were dealt with. All attempts even to arrest the development of the crisis could only aggravate it. This was already clearly the case with the creation of Special Drawing Rights, (SDR’s or ‘paper gold’), which was designed to ease the liquidity crisis. In fact it only made worse a situation where paper debts were accumulating and gold declining in a world money system.

7. The Meaning of August 15, 1971

  The most decisive turning point in the whole crisis came with Nixon’s August 15, 1971 announcement that the dollar-gold link was broken for all time. Bretton Woods was dead and could never be resurrected.

   From this point onwards a vast pool of money was in circulation outside the United States with no gold backing. Estimates now place this pool of paper at around $70 billion.

   In no way could the implications of the crisis after August 1971 be likened to those of 1931.  Despite the depth of the earlier crisis, it was one in which the world’s major trading currency, sterling, was replaced by another currency, the dollar. The blunt fact today is that nothing can replace the dollar. Here, once more, is expression of both the enormity of the uneven development of world capitalism, which has concentrated all economic and financial power in the hands of American capital, and at the same time the historic decline of this system. The fact that in August 1971 Nixon took the dollar ‘off gold’ means that he destroyed the basis whereby the vast proportion of world trade has since the war been conducted.

   All measures taken since August 1971 to alleviate this crisis have collapsed almost as soon as they were introduced. This has been the case of both the Washington ‘currency re-alignment’ negotiations of December 1971, as well as all attempts to hammer out a unified European financial strategy in response to the American declaration of economic war.

   Significantly the latter agreement was broken first by the Tory government in Britain which was forced to ‘float’, (in effect devalue), sterling in June 1972. This, in itself, was the clearest indication that Bretton Woods, with its agreement on ‘fixed parities’ was now finished. The efforts at a common European financial policy are also doomed to utter failure. As the trade and financial war intensifies, the conflicts between the capitalist states – economic, financial and military – controlled during the period of capitalist expansion since the war, are bound to sharpened enormously. This must call into question the immediate future of the Common Market, to which the Stalinists and Pabloites in all countries are giving their increasingly enthusiastic support.

   The revolutionary of 1943-1947 was betrayed by Stalinism and social-democracy especially in western Europe. US imperialism, in its role of world policeman, poured in masses of paper dollars and dollar credits to rehabilitate European capital and enable the bureaucracies to hold back the working class. Military loans to NATO to ‘contain communism’ in the Cold War were part of the same process in which the framework of the post-war boom was constructed.

   The decisions forced on US imperialism today by the fall in the rate of profit are thus the direct negation of the basis on which the revolution was avoided at the end of the war. The contradictions of imperialism, built up beneath the surface for 25 years, now mean the rapid and ruthless transformation of the relations between the capitalist states and between capital and the working class into their opposites.

8. Not Merely Trade War

   The implications of the present stage of the crisis, of course, involve the immediate start of s trade war between all the major capitalists countries.  This is the meaning of the latest Nixon dollar devaluation and the threat of a 15 per cent tariff wall if the Europeans and Japanese do not at once step in line with his requirements. In such a war, all the devices of the 1930’s – price cutting, dumping etc. – will be employed in an even more ruthless manner.

   But the crisis must extend far beyond that of trade war, important thought this undoubtedly will be.

   For it is one thing to conduct a war under conditions where there is a stable means in which to conduct trade; it is quite another to engage in such a war when all the rules of international trade and payments, created at Bretton Woods, have been destroyed.

   With gold now supporting perhaps 10 per cent of the value of world trade, the implications of the crisis must be a collapse of much of the other 90 per cent. For no matter how much the revisionists sneered at the analysis of the monetary crisis made by the SLL, golf and commodities are tied together inseparably. This was the whole purpose of Marx’s analysis in Capital, a work which all these gentlemen said was now ‘out of date’.

   Now the correctness if its analysis haunts every capitalist financial centre and banking house throughout the world. Monet grows out of commodity production as the means by which the particular values of all commodities are expressed in some universal form.  Money is not, as Mandel and others thing, merely a device for overcoming the problem of barter. It is the necessary base on which commodity production alone can take place and it can never be replaced by paper, despite all the technical devices which the capitalists try to invent to dislodge it from its pre-eminent position.

   The crisis of the capitalist system, in any case, is not fundamentally a crisis of commodity over-production, but one involving the over-production of capital. All the institutions of Bretton Woods have for the last 25 years and more been employed to build up a huge superstructure of credit. The vast majority of trade has not been carried out with either gold or dollars but through credits arranged against the dollar. These credit institutions have in turn been used to invest in machinery and equipment on a huge scale through the capitalist world. In this process, share values have been inflated beyond their remotest connection with their real value.

   Now this hugely inflated volume of capital must seek to earn its rate of profit through the exploitation of labour power. But not even the most brutal increase in the rate of exploitation of the working class of Europe and America can solve this crisis for the capitalists, although of course, they must be driven to attempt a solution in this direction.

   Only the violent elimination of capital values on a vast scale can now restore the ‘correct’ proportions between the pool of constant capital and the available surplus extracted from the working class.

   A destruction of capital along these lines must take the form of stock price collapse, bank failures leading in turn to the forcible closure of many of even the largest European and Japanese monopolists who will be totally incapable of meeting the American financial war.

   It is in this context that the American devaluation – following that after August 15, 1971 – must be seen. For each devaluation, at a stroke, reduces the value of the $70 billion pool outside the US, much of it held by governments or used by the European monopolists to finance capital expansion.

   What we are witnessing in short is the operation of the law of value. As an objective law which asserts itself against both classes, it is, in a sense, seeking its violent revenge for the last 25 years in which the capitalist class and its revisionist and reformist hangers-on have tried to ignore it or wished it away. And, like all laws of social development, it does not operate in a smooth manner, not in one which can be anticipated beforehand, but only in the most convulsive way.

9. Defence of the USSR, China and Eastern Europe.

   The great depth of the capitalist crisis also raises as an immediate and vital question the defence of the USSR, eastern Europe and China. Despite the counter-revolutionary role of the Stalinist bureaucracy, which becomes more naked as it moves closer to the imperialists in their crisis, the gains of 1917 and those which followed after the last war have not been lost. In these countries, the property and means of production remain nationalised and the state, through its monopoly of foreign trade, regulates all economic relations with the capitalist world market.

   It is these gains which the ‘state capitalist’ International Socialists reject. Under the direct pressure of imperialism they abandoned the Trotskyist movement on the outbreak of the Korean war, exposing themselves as a thoroughly anti-communist group. Their ‘theory’ leads them to write off not only the revolutionary potential of the British working class, but the whole of the international working class which alone made October 1917 possible. The role of such groups as the International Socialists can only become more reactionary as the crisis deepens and imperialism seeks to regain the great losses it has sustained in the USSR, eastern Europe and China.  

   For us, the defence of all rights and gains made by the British working class over the last 200 years is inseparable from the defence of all the gains of the international working class, the greatest of which have been the Russian and Chinese revolutions. Only those who defend these gains will be able to struggle to defend the rights of the British working class.

   This is a question, because the depth of the crisis must involve the drive to war by the capitalist class. To destroy capital on the scale now required means to destroy vast quantities of surplus labour. Under such conditions, imperialism cannot for long tolerate apposition where a large area of the world is closed to its plunder and exploitation.

   Every worker and serious socialist must ask himself the question: would the re-conquest of the Soviet Union, eastern Europe and China strengthen capitalism all over the world? Clearly it would. It is for this reason that we reject utterly the anti-communism of the Cliff ‘state capitalist’ group, [International Socialist group – Ed.], and affirm the unconditional defence of the USSR as the cornerstone of the revolutionary party.

10. The Position of Britain

   British capitalism and the British ruling class are at the very heart of this crisis. This poses enormous tasks before the ruling class as well as the working class. We have entered a period of intensive revolutionary struggles. In the outcome, either the capitalist class will impose a bloody dictatorship on the working class, or else the working class, under the leadership of the revolutionary party, will smash the capitalist state, establish its own power and use that power to eliminate capitalist anarchy and chaos.

   The crisis is not at all merely a ‘loss of competitiveness’ by British capital. The relative decline of British industry and finance has been a common theme for all the reformists and revisionists. But the crisis is infinitely more serious.

   The chaos into which the capitalist international economic and financial arrangements are now plunged finds the most direct reflection in class relations in Britain. The armoury of legislation which the Heath government is now assembling is not just for the purpose of wage-cutting, as the revisionists naively imagine. It is designed to put an end to trade unionism and working class rights as they have been established in struggle over the last 200 years.

   Only the SLL has warned the working class of this situation and roused the advanced workers to the enormous dangers inherent in it.

    Any stability retained by the declining British capitalism of the last 28 years depended entirely on the maintenance of the international inflationary boom and the Bretton Woods arrangements. The rapid deterioration of Britain’s relative position in the capitalist system has been obscured. But now the decline must become absolute.

   For such a situation, wage-cutting is hopelessly inadequate. To survive, capitalism is faced with the destruction of every basic right of the working class, every historical gain through which the workers have organised themselves into a class. When the revisionists reject the political implications of the fight against the Tory government, this is not just a ‘mistake’ on their part. What is at stake, we repeat, is the whole nature of our revolutionary epoch. The crisis once again lays bare this fundamental problem.

    The revisionists are carrying out the class role historically assigned to centrism. Centrism feeds only on the defeats of the working class. In attempting desperately to tie the working class to purely syndicalist horizons, the revisionists, Stalinists and centrists are working for the defeat of the working class, just as their predecessors did in the 1930’s.

   The fact that the capitalist crisis now takes the form of an unprecedentedly severe financial crisis also has the gravest implications for British capital. The self-satisfied revisionists throughout the boom of the 1950’s and 1960’s poured scorn on Lenin’s theory of imperialism, the final stage of capitalism dominated by a financial oligarchy centred on the banks.

   But the great power of this theoretical conquest is more apparent every day. The fact that world capitalist finance is in crisis must create a crisis for the merchant banks, which in turn must react back on industry as the banks ruthlessly destroy capital in order to enforce repayments of their debts.

   Britain was able to avoid the consequences of her loss of industrial hegemony at the end of the last century only because of the position of the City of London as the leading centre of world trade and finance. The City was able to bring in a huge income which offset the losses sustained by industry. With sterling’s role finished, and the Empire a thing of the past as a means of escape, all the powerful contradictions of British capitalism accumulated over the last century are now erupting in the most violent and decisive manner. What the working class now faces is not another stage in the steady decline of British capitalism, but the social revolution.

   The purpose of our analysis of the contradictions of post war capitalism is in no was merely to ‘prove’ who was right on all the main questions. In any case that is abundantly clear and beyond argument. The crisis of the capitalist system has exposed the theoretical and political bankruptcy of every reformist and revisionist tendency in the working class movement in a manner which until now would not have been possible. The purpose of a re-examination of the nature of the present capitalist crisis is to warn the working class and the revolutionary party of its implications and the tasks which it imposes on them.

   The time has come to arm the movement with a real conception of the revolutionary nature of the period in which we are living and fighting, and to combat every vestige of reformist and middle-class pressure which encourages scepticism about the urgency of the situation or capacity of the movement to rearm and transform itself in time to defeat the capitalist class enemy. There can be no middle-of-the-road solution to the crisis. At stake is the preparation for the struggle for working-class power. It demands the immediate fight to build the revolutionary party, to transform the Socialist Labour League into that party.

A Chronology of the Crisis

1943 Keynes’ proposal for Bancor, a new international paper currency, rejected.

1944 Bretton Woods talks. Dollar as major currency for capitalist world trade and finance

1947 (June) IMF and other Bretton Woods institutions begin operation.

1947 (November) Marshall Plan (European Recovery Programme) launched

1950 (June) Outbreak of Korean war

1950 Cliff, [leader of International Socialist Group – Ed], deserts Trotskyist movement via ‘theory’ of state capitalism.

1958-59 Growing fears expressed in Europe at American ability to maintain dollar convertability. French begin to swap their paper money for gold.

1961 Tory (Selwin Lloyd) ‘Pay Pause’. Unemployment begins to grow

1962 US slashes aid to colonial and semi-colonial countries

1963-64 Tories retreat in Britain. Maudling pre-election boom

1964 (October) Labour government elected. £800m payments deficit. Large borrowings from IMF. ‘Strings’ willingly accepted

1966 (March) Labour re-elected with large majority.

1966 (July) Savage credit squeeze in an attempt to save pound. From this time onwards ‘basic’ unemployment trend is upwards, despite temporary fluctuations.

1967 (November) Sterling devaluation. Immediate run against the dollar

1968 (March) Gold crisis. Gold market closed for several weeks.  Two-tier system introduced. Creation of Special Drawing Rights later that year.

1971 (August) Gold-dollar link broken. Bretton Woods finished

1971 (December) Currency re-alignment talks. Dollar devalued against gold.

1972 (June) Sterling ‘floated’ by Barber. Currency agreements of previous December in ruins.

1972 (November) Nixon re-elected for second term

1972 (December) Italy and Britain refuse to repay EEC debts in gold

1973 (January) US decision to get out of Vietnam in order to concentrate on economic war against Europe

1973 (February) Share prices slide on all leading stock exchanges. US announces second dollar devaluation in less than two years and prepared for world-wide trade war.