Globalization: The Third Stage of Imperialism

This text draws from writings of the ICFI (International Committee of the Fourth International) on globalization.

(Note: This 2024 Edit has been subject to various small edits.)

Globalization: The Third Stage of Imperialism

Part A

1. The dynamics of capitalist growth and globalization

It has been asserted by those unwilling to recognize the implications of globalization that it is nothing but a capitalist myth aimed at deflecting the proletariat from the fight for better conditions. They contend that any changes to the global economy have not resulted in a qualitative shift. The global economy was allegedly more globalized before World War I than it is now, and the internationalization of finance capital is purportedly not a recent phenomenon. These arguments are absurd on one level. It is difficult to claim that an economy where international phone calls were first made only very slowly and then with great difficulty is more globally integrated than one where telecommunications systems are used to manage production processes across national borders and instantly transfer billions of dollars of capital from one side of the world to the other.

Furthermore, arguing that the pre-1914 economy was more globalized than the modern economy ignores the reality that at the turn of the century, the capitalist economy had only recently begun to spread throughout a significant percentage of the world. The current stage of capitalist globalization might be seen as a step back in time in some sense. The arguments regarding the viability of nation-states and unions with national bases, however, are not supported by this, as an examination of 20th-century economic history will demonstrate. 

Analyzing the mechanics of capitalist development is crucial. Such a study does not demonstrate that pre-World War I capitalism was more globally linked. Instead, it shows that global capitalism is fundamentally reverting to the course of growth it first started on during that time, albeit at a higher degree.

The "globalization" process prior to World War I did not result in a harmonious growth of the productive forces. Instead, it caused the collapse of global capitalism and the start of World War I. And the political ramifications of this were extensive. The Second International parties and the trade unions, which had previously dominated the working class movement, lined up to support their own ruling classes as the war broke out, exposing the true nature of the national-reformist perspective they held.

Additionally, the internationalization of economic processes and the struggle between the imperialist countries that resulted from the historic capitalist crises' eruption caused enormous social convulsions. These shifted the balance of power in the workers' movement between socialist internationalism and nationalist opportunism. At the beginning of the conflict, Lenin and Trotsky's internationalist tendency, which appeared to be an unimportant minority, rose to the top of an insurgent working class in Russia and oversaw the first successful socialist revolution. It established a new international, the Third International, which within a short period of time gained the support of the most class-conscious and revolutionary-minded workers worldwide.

The 1920s and 1930s were notable for two reasons: first, the bourgeoisie failed to rebuild the pre-war equilibrium of the global capitalist system and the economic order, and second, the working class was unable to overthrow the bourgeoisie due to the betrayals of its leadership, first social democracy and then Stalinism.

The gold standard's attempts to restore the pre-war system failed. The US was still unable to maintain the global financial system, and Britain was no longer able to do so either. Between 1929 and 1932, global trade shrank by two thirds, and global financial flows all but ceased. A severe economic downturn followed and yet another conflict engulfed the whole planet.

The post-World War II process of economic reconstruction was not intended to return the pre-war interconnected structure of the global capitalist economy. In many respects, it was an effort to utilize the national state to restrain the exact transnational trends that had caused the collapse of world capitalism some thirty years earlier.

Under American leadership, the pre-war trade blocs were gradually abolished and the previously cartelized and tariffed European market was integrated. International trade, which had almost completely ceased in the 1930s, started to pick up again. The Bretton Woods arrangement, to which we shall return in more detail, meant that currencies could be exchanged at fixed values, eliminating the prospect of damaging currency devaluation wars. This resulted in a growth of commerce.

Capital was still mobile internationally, although it was not as mobile as it had been before to 1914. In actuality, according to the new system's designers, particularly Harry Dexter White and John Maynard Keynes, the global flow of capital was what actually caused the Great Depression of the 1930s. They argued that allowing capital to freely flow between nations would weaken the program of social welfare measures and demand stimulation through government expenditure, both of which were vital to prevent the reemergence of widespread unemployment. Keynes had emphasized when he initially outlined his views in the 1930s that while products and ideas may go across borders, it was crucial for capital to stay "homespun."

Reviving the national economy as the focal point for capital accumulation was at the core of the post-war rebuilding of global capitalism. The social democratic parties and unions were subsequently integrated into the state's governance as a result of this. They took over management of the national economic regulation and social reform Keynesian projects.

Despite being an attempt to counteract the economic factors that had caused capitalism to collapse in 1914, the Bretton Woods system was unable to resolve the conflicts inside the global capitalist system. The elimination of the US dollar's gold underpinning in 1971 and the adoption of floating exchange rates in 1973 both undermined the Bretton Woods system's foundations.

When fixed currency exchange rates were eliminated, the barrier of national regulation was broken, and additional changes appeared swiftly. During the 1970s and 1980s, all of the main capitalist nations - the United States, Germany, Britain, Japan, and the rest of Europe - abandoned their restrictions on capital transfers. As capital restrictions were gradually lifted and national regulatory frameworks were abandoned, the so-called emerging nations followed suit.

The worldwide capital flows that Keynes and others deemed to be so hazardous for the stability of capitalism have expanded at a rapid rate since the Bretton Woods system's collapse in 1971–1973. When compared to the GDP of the majority of advanced capitalist nations in 1980, cross-border bond and equity transactions accounted for more than 100% of GDP by 1995. Between 1984 and 1990, the flow of direct foreign investment from the main industrial nations doubled. In contrast, the gross flows of portfolio investment and foreign investment in advanced countries more than tripled in the latter part of the 1980s and the early 1990s.

This succinct examination of economic history highlights the importance of the recent, worldwide shift. The world's capital has recently resumed, at an even faster rate, the path of development it had started in 1914 after several decades during which its internationalizing impulses were obstructed by a variety of economic and political causes. The results are turning out to be much more explosive.

2. Globalization: a third stage of imperialism

The rise of computer technology has significantly altered capitalist production during the past decades, which has profoundly changed the global capitalist economy. The globalization of business and the organization of production have once again highlighted the fundamental conflict that has defined capitalism in the 20th century: the conflict between the nation-state system, which sustains bourgeois rule and private property, and the global economy, which expresses the growth and spread of the production process.

The workers movement's crisis has its roots in this historical crisis of the capitalist system. However, this crisis itself supports another crucial prediction made by Marx: no problem ever develops without the material prerequisites for its solution appearing. The worldwide working class has greatly expanded as a result of the globalization of production. Billions of people have become workers as a result of capitalism's expansion into previously undeveloped parts of the globe. The comparatively privileged status of many who were formerly thought of as portions of the middle class has been ended in the advanced countries because of the brutal downsizing carried out by companies in the fight to cut costs and improve profits. On a global basis, the proletariat has surpassed all other socioeconomic classes in terms of numbers.

Common circumstances of exploitation have been created by the same forces that have proletarianized an ever-increasing percentage of the world's population. Thus, the globalization of production has created more opportunities than ever for the working class to unite globally in the face of multinational businesses and global capital. The objective groundwork for the creation of a planned, socialist global economy has been objectively established by globalized production, which undermines the national basis for regulating economic activity.

Marxism's goal has always been predicated on the idea that the nation state, like the bourgeois property forms it maintains, is a creation of historical processes and would eventually disappear into history with other archaic social structures like slavery and feudalism. However, if the claims of those who reject globalization as a fiction are accurate, the nation state will continue to exist despite scientific socialism's forerunners' predictions. If the nation state still dominates the economy, regardless of how far technique has advanced, the Marxist program of abolishing nation states and the whole bourgeois property system is utopian.

Marx put it this way: “If we did not find concealed in society as it is the material conditions of production and the corresponding relations of exchange prerequisite for a classless society, then all attempts to explode it would be quixotic.”

We must infer that the entire Marxist worldview is nothing more than a moral or ethical ideal if the development of productive processes is not destroying the nation state structure. Given the enduring economic viability of the nation state, the concept of a planned world socialist economy in which production is coordinated by "associated producers" is not just a romantic fantasy but also a blatantly detrimental policy.

Furthermore, the idea of the global unity of the working class, which has served as the socialist movement's rallying cry since the Communist Manifesto's publication 150 years ago, is no less unrealistic. The bourgeoisie and its agents in the workers movement will always have an unshakeable material basis for their agenda of nationalism if the national state maintains its viability as the primary economic unit of capitalist production. In order to concentrate on the qualitative change in the globalized economy's structure, several fundamental aspects of capitalist production must be outlined.

Marx distinguished three types of capital: financial capital, productive capital, and commodity capital. These three types of capital are continually transformed into one another as part of capitalist production, which is driven by the accumulation of surplus value.

Money capital initially appears on the market in the first stage. The raw materials, equipment, and personnel necessary for production are purchased with this financial capital. Money capital is converted into productive capital during these exchanges.

In the second stage, productive capital is converted back into more valuable commodity capital during the manufacturing process. This extra value - also known as surplus value - is the result of a discrepancy between the cost of labor that the capitalist paid for on the open market and the value that employees contribute during the course of a typical workday.

The process of accumulation then repeats once the newly manufactured commodities are brought back to the market and converted once again into money capital (realizing the surplus value embedded in them).

Capital accumulation, or self-expansion, occurs through this ongoing transformation of money capital into productive capital into commodity capital, and back again to money capital. The source of this expansion is the surplus value taken from the working class during the production process.

These three types of capital have been internationalized throughout capitalism's existence. The 19th century witnessed the globalization of capital in the form of commodities as the goods generated by the factory system and capitalist farms were sold on the burgeoning global market. Based on securing import and export markets as well as the depletion of the domestic market as a source of demand, this gave rise to the first types of capitalist mercantile-imperialism. 

At the end of the 19th century, the advent of industrial capitalism brought with it an increase in banking and financial capital, which as a result of the growth of foreign investments grew more and more globalized. The domination of financial capital exports and the depletion of the national market as a source for investment signaled the beginning of a new period of imperialism, as described by Lenin.

While money and commodity capital both expanded their global reach, productive capital continued to be largely restricted to the boundaries of the national state. The core of the accumulation process, the surplus value extraction process, continued to take place within a given national state even though the surplus value extracted from the working class and embodied in commodities was increasingly realized on the global market and the money capital derived from this process was reinvested by the finance houses on a global scale. This is no longer the case, which in turn leads to the third stage of imperialism, globalization, which is founded on the national market's exhaustion as a basis for the creation of value. 

The term "globalization of production" refers to the transnational movement of productive capital involved in the extraction of surplus value. It denotes a qualitative shift in the capitalist mode of production rather than just a quantitative rise in the worldwide activities of capitalist businesses. For the first time in history, productive capital - like commodity capital and money capital before it - can move around the world.

3. A revolutionary shift in the organization of world capitalism

The movement of manufacturing is only one aspect of the globalization process. In order to reduce costs and boost profits, previously unified production processes are instead being broken up, dispersed to different parts of the world - either to advanced capitalist countries or developing ones - and then integrated across entire continents.

That is, for the first time, the process of surplus value extraction, which is at the heart of capitalism accumulation, has become internationalized. This is the qualitative shift in the foundations of global capitalism that globalization represents. The unique feature of globalized production is the simultaneous globalization of specific manufacturing processes. Only a new infrastructure, made possible by improved communication tools and transportation methods, could support such a situation.

Those who are ignorant of this process contend that nothing new has occurred because finance has always invested worldwide. This would be ignoring the enormous quantitative growth of international capital flows and the countless different forms they have taken. A qualitative difference may be seen in the elimination of exchange restrictions, the establishment of international futures markets, worldwide share and bond markets, and instant money transfers, to mention a few. They simply omit one important fact: multinational corporations' foreign production operations have taken over a sizeable amount of global trade.

Previously, commerce entailed the buying and selling of either raw resources or completed items. Transfers of goods or semi-finished products inside a single transnational corporation make up an increasing portion of global commerce today. Every statistic demonstrates the international economy's increasing integration under the control of transnational corporations. In the 1970s, domestic investment, domestic output, and FDI all rose at comparable rates. Beginning in the early 1980s, FDI growth started to dramatically outstrip the other two, and between 1985 and 1990, global FDI increased more than twice as fast as domestic investment and almost four times as fast as domestic output.

The sharp rise in foreign direct investment is the manifestation of a qualitative shift in the way that multinational corporations organize their production. Under this system, planning processes are developed within the transnational corporation in an effort to counteract the unplanned operation of the market. 

Now, different sections of a production process may be situated throughout the globe to reduce costs. Previously, this was not feasible for two reasons. First, transportation was too expensive. The decreased cost of both air and sea travel has significantly decreased that barrier. A certain manufacturing process had to be arranged within a single facility, or at least in plants adjacent to one another, in order to meet the needs of monitoring and the enforcement of standards. Different steps in a production process can now be outsourced out to businesses all around the world. The separation of what were formerly required to be unified processes is made possible by quick, reasonably priced transportation and computer-based information systems. 

The upholding of national-based trade unionism is one of the main political drivers behind the effort to downplay the historical importance of globalized production. Such forces contend that the union bureaucracy, which has simply capitulated to the capitalists and refused to mobilize the union membership to play hardball, is solely to blame for the unions' betrayals of the working class.

Fundamentally, certain historical and economic circumstances are what caused the old working-class organizations to decay. We do not relieve the leaders of these organizations from accountability for what has occurred just because we are aware of these circumstances. Instead, it helps us realize that the leaders' corruption is only a subjective outgrowth of a more fundamental process. The underlying geo-economic framework that supported the operations of the traditional working class organizations has been destroyed by the global integration of capitalist production under the control of enormous multinational companies and the systemic crisis of the nation-state. 

Simply put, national labor unions are unable to successfully contend with multinational firms. In the end, the function of the nationalist trade union bureaucracy is the reflection of ingrained objective trends connected to changes in the global capitalist economy's structure. The assertion that the betrayals of the national trade unions are only attributable to the corrupt nature of the bureaucracy, like other subjective explanations, ultimately explains nothing. The connection of the class struggle with the national-based trade union forms it took on in the post-war era is one of the axioms of the politics of all petty-bourgeois radicals.

What explains the simultaneous adoption of the identical policies by every trade union bureaucracy worldwide? How come the working class used to be able to make some modest tangible advances through the national unions but is now being driven backward all the time? Does this imply that today's union officials are more corrupt than the nasty anti-communists of the 1950s? And what explains the fact that union officials serve the same function regardless of their political affiliations?

It was conceivable to exert pressure on capital through the national state for reforms and concessions to the working class to the degree that the extraction of surplus value still took place inside the borders of a particular state. This was the national labor bureaucracies' program. This is no longer feasible. The age of national reformism, in which the working class attempted to preserve and enhance its social position by exerting industrial and political pressure on nationally based employers and the national state, is finished.

In Volume III of Capital, in the “Equalization of the General Rate of Profit Through Competition,” Marx showed that an individual company's profit levels are not based on the amount of surplus value that business directly exploits from its employees. Instead, each company gets a part of the overall surplus value that was taken from the working class in proportion to how much capital was employed to do so. The partition of surplus value into profit is a social process that develops as a result of rivalry between the various capitalists. Greater profits than average will be earned by capitals that produce at below-average costs; profits at a rate below the societal average will be earned by capitals whose expenses are higher than normal.

As new manufacturing techniques and processes are created, these averages themselves are susceptible to change. As new techniques are created, a production process that produced average or below average costs one time will produce costs that are higher than average in another period.

When corporations used to largely operate within national markets, there was internal competition over who would get to keep the excess value. A new scenario has emerged as a result of globalization. Regardless of the proportions of their revenues that businesses get from the domestic market, costs, labor productivity, efficiency, and profit rates are all now decided on a global level. It makes little difference if a certain company works on a global, national, or even just a regional or city-wide scale. The cost structure it faces is the result of global economic forces that proceed completely independently of it.

Capitals must adhere to costs and criteria that are established internationally, even if they are manufactured and sold in a national market. It has been computed that in the greatest domestic market, the United States, while international competition affected just 4% of domestic output in the 1960s, that percentage rose to almost 70% by the late 1990s. Additionally, regardless of the market for their products or services, all businesses must follow the rules of the global capital and financial markets. Capital will be more expensive for businesses that don't adhere to international cost norms or profit rates that are set globally.

4. The birth of the nation-state and capitalism

As commerce and the use of money increased and destroyed feudal regimes, the capitalist nation-state emerged as a result of significant economic change. It wasn't primarily due to military force. Engels clarified: “Long before the new field-pieces shot breaches into the knightly castle walls, these had already been undermined by money; indeed, gunpowder was, so to say, only an executor in the service of money. Money was the great political leveller in the hands of the burgherdom.”

Economics served as the nation-state's main impetus for establishment. A national market had to be established, and guild privileges, governmental constraints, regional customs barriers, and tariffs that enveloped production on all sides had to be abolished, in order for capitalist production to expand and capital to accumulate.

The growth of capitalist production brought together underdeveloped villages and provinces, connected the countryside with the city, and established a national market that was interconnected by a common language, set of laws, and currency. The creation of national states and markets did not, however, stop the expansion of the productive forces. Capitalist production progressed and started to go beyond the confines of the nation-state. This growing contradiction connects with the whole history of the 20th century, starting with the escalating imperialist rivalry and the start of World War I in 1914. All of the Marxists of the period stated that World War I was an indication that the productive forces were transcending the confines of the nation state.

"The present war," Trotsky wrote in 1915, "is at bottom a revolt of the forces of production against the political form of nation and state. It means the collapse of the national state as an independent economic unit. ... the real, objective significance of the War is the breakdown of the present national economic centers, and the substitution of a world economy in its stead.”

The emergence of international industry has increased the intensity of this contradiction to a new high. Like the feudal-absolutist state before the start of capitalist growth, the national state still has a political and military function. But much like its predecessor, its economic importance has been diminished, and it is this that makes the conditions for its overthrow possible.

The international market emerged historically before the emergence of national markets, and it was in fact one of the elements causing the dissolution of locally based production based on feudal connections and the emergence of generalized commodity production for the market. The bourgeoisie attempted to create the governmental structures required to protect its property and economic interests, wealth that was itself a result of the expansion of the global market, and this is how the capitalist nation-state emerged. In other words, the bourgeoisie simultaneously created the system of nation-states and the global market.

The logic of capital is universal. It clashes with all earlier methods of production due to its innate need to accumulate. In its unrelenting quest for accumulation, capital tries to overcome all obstacles and cross all boundaries. However, the nation-state form is predicated on the construction of walls and boundaries since they establish its power and domain. The objective conflict between capitalism's aspiration for global expansion and the nation-state's restrictions serves as the foundation for the capitalist system. This dichotomy, which has existed inside capitalism from its inception, has grown explosively in the 20th century and resulted in two global wars.

The bourgeois can find no way to reconcile this conflict. It cannot abolish the nation-state structure in which its ownership is anchored. The productive processes cannot be restricted by national boundaries either. The objective logic of capitalism itself drives the bourgeoisie. It must therefore constantly go beyond and undermine the nation-state structure in its economic operations.

Karl Marx and Friedrich Engels wrote of this in the Communist Manifesto: "The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere."

"The bourgeoisie has, through its exploitation of the world market, given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All the old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw materials, but raw materials drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the productions of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal interdependence of nations. As in material, so in intellectual production. The intellectual creations of individual nations become common property. National one-sidedness and narrow-mindedness becomes more and more impossible, and from the numerous national and local literatures, there arises a world literature.”

Part B

5. Stockholders who care?

It is not a matter of whether the directors and stockholders "care" about the power of the nation-state or anything else. Marx showed that the objective logic of the process of capital accumulation itself, rather than the subjective desires or intentions of the owners of capital, is what propels the capitalist production process onward. This is essential to Marx's theory of Capital, not just some "aspect" of Marxism.

“The functions fulfilled by the capitalist,” said Marx, “are no more than the functions of capital viz the valorization of value by living labor executed consciously and willingly. The capitalist functions only as personified capital...”

Major firms are under pressure to maximize their earnings at the expense of their "own" national state or face competition from more nimble rivals. The constant flow of financial capital maintains this regime. Major firms' shareholders' funds now include investments from banks, life insurance funds, pension and superannuation funds, mutual funds, and other kinds of accumulated assets. Whatever the intentions of its directors, these funds constantly explore the world for the best rates of return, driving firms to improve their production processes in order to guarantee a competitive rate of return on shareholders' money. The share prices of companies that fail to maximize their profits on a global scale, regardless of the effects on the national state from which they originated, will fall as the money of the top savings institutions leaves to look for higher rates of return elsewhere.

Due to the depreciation of its assets, the corporation will discover that it must pay a higher premium on capital to attract investors or higher interest rates to banks. If not completely driven out of business by more profitable competitors, it will also become a target for takeover or merger.

The core of Marxist criticism of all social reformist nostrums that claimed that workers' buyouts or adding more "socially responsible" directors to boards could eliminate the worst excesses of capitalism and change its socially destructive nature was analysis of the objective logic of capitalist production.

If boards of directors can be persuaded to "care" about their "own" nation-state's future, regardless of the implications for profit maximization, then they can be persuaded to "care" about other issues as well, such as the provision of higher working-class wages or expanded social welfare programs. Indeed, it would be possible to construct an entire reformist program.

Paul Hirst and Grahame Thompson, two representatives of the British middle class left, compiled the viewpoints of all of them in a book. Their book, Globalization in Question, had taken on a religious quality for these tendencies. The authors characterize their viewpoint as a “mixture of skepticism about global economic processes and optimism about the possibilities of control of the international economy and of the viability of national political strategies.”

They admit that national-reformist goals within capitalism, such as full employment, have become “problematic,” but contend that: “...this should not lead us to dismiss or ignore the forms of control and social improvement that could be achieved relatively rapidly with a modest change in attitudes on the part of key elites. It is thus essential to persuade reformers on the left and conservatives who care for the fabric of their societies that we are not helpless before uncontrollable global processes.”

This tendency to nationalist views is neither accidental nor exceptional. The working class was long ago disregarded as a revolutionary force by the middle class left. It used the labor bureaucracies, Stalinism, and nationalist movements to dampen imperialism globally and put pressure on the domestic ruling class for changes. The left-wing organizations searched for new social forces to exert pressure on the government as a result of the fall of these old leaderships. Their nationalist stance aligns them with the most backward and provincial bourgeoisie segments, whose reactionary political spokespeople, like Le Pen in France, also oppose globalization.

6. International finance vs. the capitalist state

The power that the World Bank, the IMF, etc. routinely exercise over the ostensibly independent states of Latin America, Asia, Africa, and the Middle East over its colonial subjects is not even close to what the British Empire had at the height of its power. The robbery of colonial wealth is primarily accomplished through economic, rather than military, means. Not firearms, but low-cost cotton textiles and the railways were the main tools used to destroy the Indian economy and enslave it to the British Empire.

International finance, not military might, is the driving force of all capitalist economic activity. The governments of the semicolonial nations must carry out the so-called "structural adjustment" initiatives of the International Monetary Fund and the World Bank in order to secure the resources needed to fund investments, create infrastructure, and run essential facilities. These programs, implemented in the middle of the 1980s in response to the Mexican debt crisis, have emerged as the most efficient way to drain the life out of entire geographic areas while transferring enormous sums of wealth via the automatic operations of the financial markets into the coffers of the major banks and multinational corporations.

For the middle class left, the national market and the national bourgeois state are the only realities that matter. The global financial system and international financial institutions are viewed as either the sum of national markets or merely the tool of national states'. Despite its apparent radicalism, this obsession with the nation-state has nothing in common with Marxism, which, as Trotsky argued, "takes its point of departure from world economy, not as a sum of national parts but as a mighty and independent reality which has been created by the international division of labor."

As explained by Lenin: “Finance capital is such a great, such a decisive, you might say, force in all economic and in all international relations, that it is capable of subjecting, and actually does subject, to itself even states enjoying the fullest political independence...”

Lenin was studying global capitalism at the start of this process, and the trends he noted have since vastly expanded.

As products of the bourgeoisie, the national state and banks have a long and intertwined history. The management of credit and finance, the lifeblood of the capitalist economy, is where the banks' power comes from, not from the nation-state. It may be claimed that the post-war era's banking and financial system's history is a story of the banks' ongoing battle to remain independent of the national state. Furthermore, the expansion of international finance capital and the world financial markets have taken place in complete opposition to the state.

The development of the international financial system during the post-World War II era is inextricably linked to the development of the Bretton Woods international monetary system. Leading figures in the Roosevelt administration were worried about creating a workable post-war financial structure practically from the moment the United States entered the war. A realization emerged from the painful experiences of the previous two decades that, absent the establishment of the prerequisites for an expanding global market, the removal of tariffs and import restrictions, and the creation of a reliable international payment system, the world economy would quickly slip back into depression, raising the possibility of social revolution.

7. The rise and fall of Bretton Woods

A highly regulated global currency system was developed at the Bretton Woods conference. As the world's standard currency, the US dollar was set at $35 per ounce of gold. The introduction of fixed exchange rates between the major currencies served as the system's cornerstone. The International Monetary Fund was created to provide money for those nations having trouble with their balance of payments in order to stop the kind of competitive devaluations and destabilizing currency swings that had caused such destruction in the 1930s. The World Bank was founded to provide money for long-term loans for the recovery of the economies of Western Europe.

The development of a system of fixed exchange rates required the central banks and political authorities of the national state to control global financial flows. The tale of the collapse of this national control over financial capital and the emergence of an international financial system is bound up with the history of the post-war monetary order.

In the shape of a gold crisis, contradictions first started to show up at the end of the 1960s. The United States' promise to redeem dollars at the rate of $35 per ounce served as the system's foundation. Due to the constant demand for dollars to cover the cost of desperately needed US exports, very little gold was actually leaving Fort Knox in the early 1950s. However, as the economies of Europe and Japan started to recover and thrive, there was a decline in the demand for US exports, which led to an increase in the stock of dollars outside of the US relative to the gold that backed them. Foreigners' dollar holdings surpassed the nation's gold stock for the first time in 1958.

The Bretton Woods system was in a developing crisis during the 1960s. American gold holdings, which were valued at $18 billion in the 1960s, were falling by between $0.5 billion and $1 billion a year. However, the de Gaulle administration in France started a battle against the US dollar in 1964–1965, which caused a $1.5 billion decline in gold stockpiles. By 1968, the gold stock had dangerously dipped below $10 billion, the amount deemed necessary for the Bretton Woods system to function. US gold holdings were now almost half of what they were in 1950.

In 1968, President Johnson tried to place a number of limitations on the departure of American capital in response to the growing gold crisis. However, the mere fact that these measures were being implemented forced US banks to find ways to circumvent exchange regulations. Their activities set the groundwork for the current global financial system, which operates independently of any one nation-state or group of central banks.

The development of the so-called Eurodollar market in the 1950s is where this new system got its start. This initially comprised modest sums of money held in American and European bank branches in Europe. The majority of these dollars were utilized to buy exports from the United States as long as the Bretton Woods system ran fairly successfully. The amount of Eurodollars, however, started to increase near the end of the 1950s as the relative demand for US goods decreased.

Due to this development, a market for lending in Eurodollars was created, and banks were able to offer loans backed by their foreign currency holdings. Towards the end of the 1960s, as the US government tried to restrict the flow of dollars out of the country, multinational corporations eager to get money to invest in Europe and banks eager to meet their needs looked for ways to get around these restrictions.

Following the final collapse of the Bretton Woods system in the years 1971–1973, the so-called "Eurocurrency markets" readily entailed a global financial market dealing in currencies issued by countries other than the nation-state issuing them. The US transnational businesses and banks, which looked for ways to thwart the most powerful imperialist state's attempts at control, were the single biggest factor in this development.

The fundamental contradiction between the limitless geography of profit accumulation and the constrained political geography of national governments is one of the key characteristics of the capitalist economy. There are numerous instances in the twentieth century that demonstrate how the national state had to give in to the pressure exerted on it by international financial markets: the Callaghan government in 1975–1976; the Mitterrand government in 1982–1983; Brazil and Mexico in the 1980s; and the United Kingdom's withdrawal from the European currency arrangements in 1992.

Part C

8. The end of national reformism

The most prominent Marxists of the day were already analyzing the limitations of national reformism by the end of the 19th century, and by the end of the 1930s, Trotsky had pointed out the unions' growing propensity to grow in the direction of corporatism. This propensity greatly accelerated during World War II and the post-war boom, when the trade unions served as co-administrators of the welfare state.

The trade unions, far from functioning well, proved wholly unable to fend off capital's encroachments when the postwar boom came to an end in the mid-1970s and capital's orientation shifted from one of limited concessions to the working class to perpetual reductions in real wages and working conditions. Over the past few decades, the situation has been the same in all the main capitalist nations: real wages have fallen, the working class has experienced a succession of setbacks, and the fruits of earlier victories have been increasingly dismantled. In line with this process, the old social democratic and Stalinist parties of the working class, such as Labour in UK, the NDP in Canada, the Communist Party of India etc. have completed their transformation into capitalist parties.

Real wages have decreased, and social welfare programs are being curtailed in all the main capitalist nations as a direct result of the globalization of production. The bourgeoisie can now move various parts of the production process in order to save taxes as well as benefit from lower wage levels. Because of this, capitalist nation states are in a race to lower wages and tax and other payments in order to entice multinational firms to their borders. Additionally, even in jurisdictions where corporations are compelled to pay tax, they may largely dodge it thanks to the globalization of finance.

Wage pressure comes not only from typically low-cost locations. One study put it this way: “ ... the alignment of labor conditions across countries does not take place only because of competition from low-cost areas: it also forces Europe, America and Japan to converge. The pressures towards greater flexibility of the labor market and toward the reversal of the welfare state in Western Europe come less from the pressures derived from East Asia than from competition with the United States. It will become increasingly difficult for Japanese firms to continue life employment practices for the privileged 30 percent of its labor force if they have to compete in an open economy with American competitors practicing flexible employment.”

9. The rejection of a revolutionary and internationalist perspective

If the working class's material needs can be met within the confines of the profit system and the nation state by nationalist organizations that can purportedly function well provided their leadership is sufficiently militant, there is no material reason for the working class to advance the struggle for socialism and internationalism. As a result, the creation of global organizations for the working class is merely an ideal rather than an actual material requirement. The world revolutionary party and its organizing effort are not the essential tool for the working class's self-emancipation; at best, it serve as a propaganda group for this utopia.

The working class is faced with the requirement of organizing worldwide in order to protect even its most basic rights, the simple and everyday demands. By establishing international organizations, the working class will be able to free itself from the control of nationalist bureaucracies.

The working class faces new challenges as a result of altered objective conditions brought about by globalization. Those who insist that the working class can just carry on as before when it is obvious that everything has changed are the true capitulators. Not only are there no further concessions, but the bourgeoisie is also working to recoup every concession it has already been compelled to make. The working class cannot protect anything unless it opposes everything, including the nation-state structure and capital's hegemony.

As Trotsky explained: "The Fourth International does not discard the program of the old ‘minimal’ demands to the degree to which these have preserved at least part of their forcefulness. Indefatigably, it defends the democratic rights and social conquests of the workers. But it carries on this day-to-day work within the framework of the correct actual, that is, revolutionary perspective. Insofar as the old partial, ‘minimal’ demands of the masses clash with the destructive and degrading tendencies of decadent capitalism—and this occurs at each step—the Fourth International advances a system of transitional demands, the essence of which is contained in the fact that ever more openly and decisively they will be directed against the very bases of the bourgeois regime. The old ‘minimal’ program’ is superseded by the transitional program, the task of which lies in the systematic mobilization of the masses for the proletarian revolution.”

In the past, under the old system of national production as opposed to global production, workers' earnings and living conditions were influenced not only by the type of work they performed but also by the nation in which they resided. That is, nationality played a significant role in determining living standards and social conditions, and it was this material factor that allowed the bourgeoisie, in cooperation with the reformist and Stalinist parties, to obstruct the growth of a true socialist and internationalist outlook in the working class.

The argument that what was good for General Motors was also good for American workers, Holden workers in Australia, or Opel workers in Germany had some foundation from the perspective of the short-term, immediate interests of workers, and as a result there existed a material basis for nationalistic appeals.

Those circumstances have irrevocably changed. Today, there is an increasing connection between the socioeconomic position of the working class globally and its conditions in a given nation. Unparalleled material conditions have been made possible by the globalization of production for the growth of true internationalism - not as some type of external solidarity between working classes with national bases, but as the mode of struggle for a single global working class. The idea of creating international organizations to serve as the proletariat's organizing centers has this as its objective foundation.

Because they instinctively understand that globalization has destroyed the underpinnings of their own nationalist and opportunist politics, the centrist and revisionist petty-bourgeois radicals are so frantic to perpetuate the myth that nothing has changed. The changed relationship between Marxism, the working class and reformism has also impacted the relationship between the working class and centrist and revisionist tendencies. 

Centrism had been conceived of as a tendency vacillating between two wings of the workers movement - the revolutionary Marxist wing and the reformist wing. The transformation of the "reformists" into capitalist parties upended the foundations for this form of centrism. In response to this, it was necessary to elaborate a categorization of the crystallized right-centrist tendencies as "pseudo-left" to deal with the ambiguities of the designation of tendencies as "centrist," particularly layers that had crystallized into "professional centrists," determined mis-leaders of the working class, over a long period. Syriza in Greece, Die Linke in Germany, the Nouveau Parti Anticapitaliste (NPA) in France and Socialist Alternative in the United States are examples of such tendencies today.

10. Falling living standards

There has been an unrelenting assault on previous social reforms and legal restrictions on the exploitation of labor by capital in the imperialist centers, as well as an inexorable downward leveling of wages and living standards as a result of the shifting of production to nations with wages that are lower than those in the advanced capitalist nations. The labor power of the working class, both skilled and unskilled, is unquestionably a commodity, thus its price will tend to decline in all other marketplaces if capital can acquire that commodity for less elsewhere.

Marx demonstrated that capitalism's propensity to universalize, spread to every part of the world, and establish a global market set it apart from all prior models of social production. This innate propensity is linked to capital's constant efforts to increase the working class's surplus value production.

The introduction of computerized, automated techniques of production and information processing over the past few decades has drastically changed the lives of hundreds of millions of employees, both white collar and blue collar, and resulted in the massive destruction of well-paying jobs.

Two interrelated trends in the labor market that have emerged as a result of globalization of production are the growing ability of capital to buy labor in any region of the world and the enormous growth in the global labor supply. The proletariat, a class having nothing to sell but its labor force, makes up the majority of humanity due to the huge destruction of the peasantry brought about by the activities of global capital in the final decades of the 20th century.

While rejecting the "iron law of wages," Marx pointed to inexorable forces within the capitalist production process that worked to drive down the price of labor power, i.e., wages. Above all, the constant improvement of technique and the development of new technologies disadvantaged the working class by decreasing labor demand and increasing labor supply. This has been the influence of computerization and automation of manufacturing operations during recent decades. The technological revolution of entire manufacturing processes has enabled the elimination of large amounts of labor while also allowing production processes to be integrated across vast distances, allowing capital to relocate high-labor activities to low-wage locations.

One need not agree with the bourgeois commentators' predictions that robots will displace the working class to acknowledge the profound changes automation has brought about in the workplace and the egregious failure of the nationally based unions to protect workers from its immediate effects or give the working class a way to use these changes to its longer-term advantage. It is an undeniable fact that the introduction of robotics and other automated techniques has significantly decreased the chances for young unskilled and semi-skilled workers to find a secure, well-paying job in the mining, automotive, and many other industries compared to their fathers or grandfathers.

11. Economic Nationalism

Due to the global economy's high degree of integration, protective measures like tariffs would not only impede trade but also have the same calamitous effects as in the 1930s. They would also cause a significant disruption in the factories and production methods of large firms, who now combine many production factors on a global basis rather than running national-based factories and procedures. A financial and industrial catastrophe of unimaginable dimensions would result from the implementation of such tariffs and limitations on capital flow. This is not only a matter of speculation. It has already been rendered distinctly evident in outline. 

These actions would not only result in a financial collapse but also in a new inter-imperialist conflict as each imperialist state sought to strengthen its position at the expense of its competitors.

The formation of a privileged labor aristocracy in the advanced capitalist countries had its material foundation in the super-profits that the imperialist powers reaped from the colonies and underdeveloped capitalist countries, as Lenin and other Marxists explained in the early years of this century. This layer will seek tariff protection, financial regulation, and finally military action under the justification that doing so is required to defend salaries, living standards, and "our way of life."

When all manufacturing operations had to be carried out in one site in the past due to technical considerations, the location of these industries depended heavily on the availability of skilled personnel and capital equipment backup facilities. However, skilled labor can be created anywhere in the world. Today, skilled professionals and unskilled labor are both in demand on the global market. A US computer programmer is pitted against an Asian programmer, and an American machinist against a South American machinist. Because wages have declined so much, firms in the developed capitalist nations have discovered that "Third World" conditions already exist in their own countries. Massive amounts of labor that were formerly, practically speaking, out of reach for productive capital are now at its disposal. 

As Trotsky explained: “In contrast to the economic systems which preceded it, capitalism inherently and constantly aims at economic expansion, at the penetration of new territories, the surmounting of economic differences, the conversion of self-sufficient and provincial national economies into a system of financial interrelationships. Thereby it brings about their rapprochement and equalizes the economic and cultural levels of the most progressive and the most backward countries. Without this main process, it would be impossible to conceive of the relative leveling out, first, of Europe with Great Britain, and then, of America with Europe; the industrialization of the colonies, the diminishing gap between India and Great Britain, and all the consequences arising from the enumerated processes upon which is based not only the program of the Communist International but also its very existence.”

12. Globalized production, the nation-state and war

Under the auspices of imperialism, the nation-state structure that is the foundation of capitalist authority is pitted against the globalization of production. War results from imperialists' attempts to circumvent the nation-state system's limitations on their ambitions for the world economy. The complex network of alliances being forged by diverse multinational firms demonstrates the natural desire of the productive forces to unite on a global scale. The escalation of various types of national and communal conflict, however, is the other side of this same trend.

Marxism's central tenet regarding imperialist war is that the nation-state system is antiquated and reactionary because it opposes the global development of the productive forces, and that the conflict between this development and the national state system is what causes imperialist wars. This perspective on the nation-state system has served as the dividing line between opportunism, which defends its "own" bourgeoisie and its national state, and the Marxist program since 1914, when World War I broke out and the internationalists fought for a united struggle for socialism.

In Imperialism, Lenin argued that the war marked the end of capitalism's and its nation-state system's progressive function and established the socialist revolution as being absolutely necessary. The bourgeoisie attempted to split and redivide the world in an endless struggle for resources, markets, and profits; either the global working class would overturn the capitalist order, or it would be engulfed in a string of wars. Lenin's strategic view to turn the imperialist conflict into a civil war had this as its fundamental essence. This viewpoint was developed after extensive research on the newest modes of capitalist production and finance. 

Transnational production is significant because it expresses the natural desire of the productive forces to organize themselves on a global scale, a propensity that is in direct opposition to the nation-state structure. In his examination of the early development of multinational firms and the establishment of alliances amongst them at the turn of the century, Lenin specifically emphasized this issue.

In response to bourgeois assertions that the Marxist prediction of the "socialization" of production had not materialized despite the fact that the capitalist system was characterized by the "interlocking" of various companies, Lenin wrote:

"What then does this catchword ‘interlocking’ express? It merely expresses the most striking feature of the process going on before our eyes... Ownership of shares, the relations between owners of private property 'interlock in a haphazard way.' But underlying this interlocking, its very base, are the changing social relations of production."

"When a big enterprise assumes gigantic proportions, and, on the basis of an exact computation of mass data, organizes according to plan the supply of primary raw materials to the extent of two-thirds, or three-fourths, of all that is necessary for tens of millions of people; when the raw materials are transported in a systematic and organized manner to the most suitable places of production, sometimes situated hundreds or thousands of miles from each other; when a single center directs all the consecutive stages of processing the material right up to the manufacture of finished articles; when these products are distributed according to a single plan among tens and hundreds of millions of consumers (the marketing of oil in America and Germany by the American oil trust)—then it becomes evident that we have socialization of production, and not mere ‘interlocking;’ that private economic and private property relations constitute a shell which no longer fits its contents, a shell which must inevitably decay if its removal is artificially delayed, a shell which may remain in a state of decay for a fairly long period (if, at the worst, the cure of the opportunist abscess is protracted), but which will inevitably be removed."

The most important task is to destroy the private property/nation-state system, which has evolved into a shell that can no longer contain its original contents (socialized production) and must be taken down. He adds that the working class leaders who supported the national state when World War I broke out by embracing the cry for "defense of the fatherland" had to be removed in order to successfully complete this mission.

Lenin first observed the socialization of production in the oil industry, but it has since spread to every area of the economy. Transnational businesses control production in every sector, working alone or in coalitions to plan the production and global distribution of goods. But this socialization of production clashes with the private profit system and the fragmentation of the world into competing national states at every turn.

Marxist criticism of the nation-state system's reactionary nature is based on concrete evidence rather than a subjective condemnation of the working class's division as an ethical problem. The bourgeois nation-state system, like the feudal state system before it, has fallen out of favor historically because it impedes the growth of the productive forces and the global division of labor.

13. The productive forces strain the confines of the nation-state

The struggle of the productive forces themselves to get over the limitations of the nation-state system is what gives transnational production its historical relevance. By analyzing the significance of the formation of joint stock corporations and the expansion of the credit system, Marx started to understand this process that is now accelerating.

Turning towards joint stock companies, Marx wrote: "The capital, which in itself rests on a social mode of production and presupposes a social concentration of means of production and labor-power, is here directly endowed with the form of social capital ... as distinct from private capital, and its undertakings assume the form of social undertakings as distinct from private undertakings. It is the abolition of capital as private property within the framework of capitalist production itself." 

This “abolition of the capitalist mode of production within the capitalist mode of production itself” showed the significance of the joint stock company as a “mere phase of transition to a new form of production.”

Similarly, transnational production reflects the demise of the nation-state system within the nation-state system itself, and also denotes the advent of a new social order. In other words, transnational production starts to establish the objective groundwork for the emergence of a global socialist planned economy.

However, the expansion of transnational production within the framework of capitalism cannot destroy the national state structure. As a result, it amplifies all of the contradictions inherent in the capitalist method of production. As long as the nation-state system exists, the desire of productive forces to overthrow it leads to an exacerbation of inter-imperialist antagonisms and the prospect of world war. In other words, as long as the nation-state system exists, the expansion of technique threatens to plunge humanity into new forms of barbarism.

In his pamphlet Socialism and War Lenin wrote: "It is almost universally admitted that this war is an imperialist war. In most cases, however, this term is distorted or applied to one side, or else a loophole is left for the assertion that this war may, after all, be bourgeois-progressive, and of significance to the national-liberation movement. Imperialism is the highest stage in the development of capitalism, reached only in the twentieth century. Capitalism now finds that the old national states, without whose formation it could not have overthrown feudalism, are too cramped for it."

In his pamphlet The War and the International, Trotsky wrote: “What the politics of imperialism has demonstrated more than anything else is that the old national state that was created in the revolutions and the wars of 1789-1815, 1848-1859, 1864-1866, and 1870 has outlived itself, and is now an intolerable hindrance to economic development. The present war is at bottom a revolt of the forces of production against the political form of nation and state. It means the collapse of the national state as an independent economic unit.”

It would be acceptable for "socialists" to support the development of their own national state if the national state system were not the root of imperialist conflict, as the Marxist movement has argued. The response of the radical petty-bourgeois tendencies has been one of the most politically significant aspects of recent wars. They have urged imperialist intervention in one way or another, either directly or indirectly.

14. Fear of globalization’s revolutionary implications

In response to the revolutionary effects of globalization, the pseudo-left expresses the anxiety of a segment of the middle class. They fear that the familiar world they have known and the long-established political ties will be destroyed.

Lenin, in opposition to petty bourgeois radicals, sought to understand the historical and revolutionary significance of the growing internationalization of finance capital, the entwining of various national capitals, and the subordination of national states to the dominance of global financial interests.

In The Collapse of the Second International, Lenin wrote, referring to Kautsky: "'The growing international interweaving between the cliques of finance capital' is the only really general and indubitable tendency, not during the last few years and in two countries, but throughout the whole capitalist world. But why should this trend engender a striving towards disarmament, not armaments, as hitherto? ... To think that the fact of capital in individual states combining and intertwining on an international scale must of necessity produce an economic trend towards disarmament means, in effect, allowing well-meaning philistine expectations of an easing of class contradictions to take the place of the actual intensification of those contradictions." 

In another comment on economic processes cited by Kautsky, Lenin wrote: “There is no doubt that the trend of development is towards a single world trust absorbing all enterprises without exception and all states without exception.”

In opposition to Kautsky, Lenin insisted that this development “proceeds in such circumstances and at such a pace, through such contradictions and conflicts and upheavals—not only economic but political, national, etc.—that inevitably imperialism will burst and capitalism will be transformed into its opposite long before one world trust materializes, before the ‘ultra-imperialist,’ world-wide amalgamation of national finance capitals takes place.”

Lenin claimed that war and the global socialist revolution were driven by the same developmental trends that Kautsky had mentioned. The groundwork for the growth of a socialist economy was created by the integration of financial capital and the shift from competitive to monopoly capitalism.

“Capitalism in its imperialist stage leads directly to the most comprehensive socialization of production: it, so to speak, drags the capitalists, against their will and consciousness into some sort of new social order, a transitional one from complete free competition to complete socialization.”

Lenin held that imperialism was an objective phenomenon, independent of the will and consciousness of the capitalists themselves, rather than a financial capitalist agenda. Even though it undermined the foundation of their control, they were unable to undo it. On the other hand, for Kautsky, imperialism was a policy that might or might not be changed, not an actual trend of capitalist development. The contemporary proponents of this trend maintain that globalization is nothing more than a bourgeoisie-led political campaign that can be stopped if it threatens the national governments of the major imperialist countries.

Instead, globalization is a real economic trend that is driving towards war and socialist revolution by deepening and accelerating processes that Lenin and other Marxists originally studied at the turn of the century.

Part D

15. The historic degeneration of national trade unionism

Historically, contemporary trade unions evolved on the soil of the national economy and the expanding authority of the national state. Whether the unions arose as the result of a mass socialist party, as in Germany in the late 1800s, or as purely economic organizations with political ties to the liberal bourgeoisie, as in England, they were founded on the success of the national economy and national industry.

The unions' politics were centered on getting the government to impose tariffs and other forms of protection for the domestic industry. Due to this historical history, national opportunism and reformism developed into powerful and ultimately dominant impulses. Not only was the socialist revolution opposed by the labor union bureaucracy, but also the class struggle itself. With the rise of imperialism, the nationalist politics of the unions evolved into imperialist politics as the economic life of nation states in Europe and America progressively moved from the domestic realm to the global arena.

As a result, the tendency of union bureaucracies to embrace nationalism and integrate into the state has very strong material underpinnings. The globalization of the economy has harmed the viability of trade unions as national-based defensive organizations of the working class.

Since the turn of the century, there has been no fundamental economic change in capitalism, according to the pseudo-left. There is no objective explanation for the labor movement's series of defeats and the general reduction in wage levels, benefits, and working conditions since the turn of the century. The role of official unions has supposedly not changed qualitatively. Rather, this process is to be explained solely by the union leaders' subjective cowardice and betrayal.

In the end, the corrupt and reactionary nature of the union leaders must be seen as the subjective manifestation of more fundamental objective processes rather than being attributed solely or even predominantly to their subjective traits. The characteristic of Marxism has always been the attempt to connect political processes with more significant developments and changes in the mode of production. This scientific method derives from historical materialism's underlying assumptions and worldview. The major figures of the Marxist movement, such as Marx and Engels, Lenin, Trotsky, and Luxemburg, undoubtedly followed this approach. Marxism has always been distinguished from revisionism by its historical and materialist stance. Today, nothing less is necessary. Understanding the economic mechanisms that underpin all of the old working-class organizations' betrayals, decline, and collapse is essential.

The inherent desire of the working class to escape the deadlock brought on by the nationalism of the trade union apparatus is something that the revolutionary Marxists aim to consciously express. They aim to demonstrate the link between the unions' failures and the inherent flaws in national reformism, as well as the necessity of the working class following the path of international organization. They support the growth of an uprising against the labor bureaucracy and see the basis for new, more militant, and revolutionary working class organizations, like rank-and-file committees and even new, global trade unions, in the growing struggle between the working class and the nationalist bureaucracy.

It is important to keep in mind that the great Marxists of the late 19th and early 20th centuries wrote about national unions, which, despite their obvious limitations, played a far more significant role in the working class's day-to-day existence than the dying trade unions of today. Particularly before World War I, the German unions acted as a hub for the workers' cultural life and offered a wide range of social services. They supported the working class's socialist ideals formally at least, and large numbers of workers followed their example and took part in their initiatives. Initially educated and schooled by the Marxist party, the leaders of the mass German unions professed to be Marxists.

The AFL-CIO in the US remained, in part, a focus of the militant struggle of workers against the encroachments of big business even in the early decades after the Second World War, as did the major unions in Europe that professed some sort of devotion to socialism. In these circumstances, it was one thing for the revolutionary party to make demands of the union leadership as a primary strategy for exposing the trade union bureaucracy to the workers. After decades in which the unions effectively degenerated, betraying the most fundamental interests of the working class and became fatally constrained by their nationalist straightjacket, the situation is radically different today.

Clearly, the modern trade unions, rooted in the nation-state, have experienced a qualitative degeneration as a result of globalization. In analyzing this degeneration it is helpful to look to the degeneration of another workers organization, the Soviet Union. In Trotsky's analysis, insofar that the Soviet regime continued to base itself on the nationalized property forms established by the October Revolution, it remained a workers’ state. Similarly, the trade unions, which base themselves on and gradually tear up the gains of previous generations, remain workers organizations, albeit degenerated. 

The Soviet Union did not immediately transition from a workers state resting on socialist property forms into a capitalist state resting on bourgeois foundations. The Soviet Union degenerated quantitatively and qualitatively over time, and this was mirrored in qualitative changes in the state form in which the socialist property forms were embedded. From a genuine workers state, the Soviet Union changed form, and degenerated into what is known to Trotskyists as a Degenerated Workers State.

In response to this change, and to preserve and advance on the gains (socialist forms of property) on which the Stalinist bureaucracy parasitically based itself, Trotsky came to propose a program not of reform, but a program of political revolution, of violent rebellion against and overthrow of the bureaucratic caste. Similarly, the revolutionary Marxists propose a rebellion by rank-and-file union members to overthrow the degenerate, nationalist trade union bureaucracies. 

The modern unions, fatally circumscribed by the nation-state, have experienced a degeneration. This degeneration affects the content of the trade union, trade unionism itself - the fight to merely attain the best rate possible for labor power - which, restricted to the national labor market in conditions of globalized production, leads to a qualitatively intensified separation of interests between the bureaucracy and the rank-and-file. However, as the upswing in unionization efforts show, history is not done with the union form so much as its nationalist restriction. For these reasons we might categorize the modern unions as degenerated workers organizations, and must necessarily fight against the pro-capitalist and nationalist trade union bureaucracy to break the workers organizations from the straightjacket of nationalism.

A transnational phenomena, the unions are degenerating. Why do unions use similar practices all around the world? Why do they support labor-management corporatism and give the employers the gains that earlier working-class generations had achieved?

If this is a global phenomena, it is obvious that there are other factors at play in addition to people's subjective motivations. The driving forces behind the rapid degeneration of unions and the preponderance of all nationalist organizations' reactionary natures are not the arbitrary motivations of their leaders, but rather the profound shifts in the global economy brought on by the globalization of production, the international mobility of capital, and the unbridled dominance of the global market over all national economies. Nationalist and pro-capitalist trade unions policies lead directly to collaboration in the corporate attack against the working class.

If the workers' movement is to be rebuilt on strong political and organizational grounds, it is imperative that the reasons and lessons of the crushing defeats the working class experienced during this time are understood.  The working class needs a mass, worldwide socialist party based on international working-class  organizations, whose strategy and tactics are informed by Marxist theory.

16. On the national question

As it is in regard to the class struggle in the advanced capitalist nations, nationalism is the cornerstone of the middle class left's stance toward the developing nations. And in those countries historically subject to imperialism, it lends similar potential to bourgeois nationalism and petty-bourgeois guerrillaism, just as they praise the purported capacities of national trade-unionism. These people never question why there are so few left-nationalist governments today compared to those that were common in the 1960s, 1970s, and 1980s.

In fact, the old bourgeois nationalist regimes have all abandoned economic nationalism. The IMF-managed "structural adjustment" schemes intended to entice globally mobile capital to invest in the specific backward country have long since replaced policies focused on import substitution and the development of native industry. One of the clearest illustrations of this fundamental change can be found in Mexico, where the Institutional Revolutionary Party, or PRI had been in power for the longest period of time among bourgeois nationalist movements. The Peronists in Argentina, the Congress Party in India, the Nasserites in Egypt, and the different republics established via the decolonization of Africa all followed the same fundamental path.

The second wave of national liberation movements, those that advocated "armed struggle" and leaned on the support of the Soviet Stalinist bureaucracy from the 1960s to the 1980s, had a similar but even more pronounced transformation. Every single one of them - the African National Congress, the Nicaraguan Sandinistas, the FMLN in El Salvador, and the Palestine Liberation Organization - has renounced the uncompromising anti-imperialist language that they advanced decades ago. All of them have acquiesced to imperialist-imposed agreements and adopted "free market" capitalism's principles, reneging on the most fundamental liberties of the masses they claimed to speak for.

How may this phenomenon be explained? Finding an objective foundation that is based on the production process is necessary once more. This turn's sheer universality makes it obvious that it is the result of the national movements' objective character and their interactions with global capital. Opportunist groups play a cover-up role in regards to these movements' class nature and the unavoidable disasters that result from their policies.

Inextricably linked to the growth of capitalism is the transformation of bourgeois nationalist regimes and movements. The major national movements of the 18th and 19th centuries destroyed feudal particularism and produced larger economic and social units that matched the fundamental requirements of capitalist production. They created national markets in particular, bringing people together through language and common law.

Historically, national liberation campaigns in oppressed countries have a similar economic motivation. As long as productive capital was structured primarily within the nation-state framework, there was a strong objective basis for antagonism between these countries' national bourgeoisie and imperialism. The national bourgeoisie aimed to oust imperialist dominance in order to seize control of the national market and exploit its "own" working class. It attempted to organize the populace in support of this goal; traditional instances of such conflicts are found in India and China. It was forced to advance democratic objectives and even take on a socialist persona while trying to stop the conflict from undermining capitalist private property.

Due to the unparalleled global integration of capitalist production, these national markets are now significantly less important than the global market, where production is increasingly being directed. Instead of attempting to drive out imperialist capital and create domestic industries, the old bourgeois nationalist governments are implementing austerity and privatization plans designed to entice internationally movable capital with low labor costs and unlimited exploitation. Meanwhile, the national bourgeoisie has established a direct connection between their wealth and international markets by sending increasing sums of their own money to major financial hubs like Wall Street.

The new global economic linkages have also created an objective motivation for a new sort of nationalist movement demanding the fragmentation of existing states. Smaller countries can now connect directly to the global market thanks to globally mobile finance. Hong Kong, Singapore, and Taiwan have emerged as the new development paradigms. A small coastal enclave with good transportation links, infrastructure, and a supply of inexpensive labor may be a more appealing location for multinational capital than a larger country with a less productive hinterland.

Simultaneously, IMF austerity plans mandating the deconstruction of national development schemes and the abolition of limited social welfare programs have converted oppressed countries' central governments into bill collectors for foreign banks. Rival ruling cliques in regions with natural resources or industries that are being drained off to pay foreign debt see independence as an opportunity to cut out the middleman and strike a more profitable deal by dealing directly with international finance.

The national movement in India and China posed the revolutionary task of uniting divergent peoples in a single struggle against imperialism - a task that proved unattainable under the leadership of the national bourgeoisie. This new brand of nationalism encourages separatism along ethnic, linguistic, and religious lines in order to divide existing states for the advantage of local exploiters. Such movements have nothing to do with the fight against imperialism, nor do they represent the progressive aspirations of the oppressed masses. They divide the working class and redirect class conflict into ethno-communal violence. There is nothing progressive in this type of bourgeois separatism. 

The right to national self-determination had only one meaning for Lenin: the right to build a separate, independent state. He stressed frequently that this right had a "negative" connotation for the Bolshevik Party. In other words, the Bolsheviks did not necessarily advocate national separation as a desirable path of action. Rather, the right was included into the program to make it plain that the party was opposed to the Tsarist regime's use of military action to compel oppressed nationalities to remain within the bounds of the existing state structure.

In order to gain the trust of the oppressed nationalities in the leadership of the working class, Lenin emphasized that the right to self-determination must be recognized. He also fought against the reactionary impact that national separatists might have had on the working class by promoting the political independence and unification of workers across the Russian Empire under the guidance of a single all-Russian party.

Lenin's 1916 essay on the subject, in which he divided between three different sorts of countries, outlined the historically concrete manner in which he invoked the right to self-determination.

“First,” he wrote, were: “the advanced capitalist countries of Western Europe and the United States. In these countries progressive bourgeois national movements came to an end long ago.”

Lenin used the phrase "long ago" to refer to the time period less than 50 years after Germany's unification and the Union's victory in the American Civil War, which put an end to the bourgeois revolution.

The difference in time between our era and that of Lenin is about twice as great, and the national question has seen changes that are considerably more profound and global in scale. Lenin claimed that the slogan of self-determination was especially relevant in 1916 for the second and third categories of countries.

The second category, Lenin wrote, consisted of “Eastern Europe: Austria, the Balkans and particularly Russia. Here it was the twentieth century that particularly developed the bourgeois-democratic national movements and intensified the national struggle. The task of the proletariat in these countries, both in completing their bourgeois-democratic reforms, and rendering assistance to the socialist revolution in other countries, cannot be carried out without championing the right of nations to self-determination.”

Lenin added a third classification, "the semi-colonial countries, such as China, Persia, and Turkey, and all the colonies, which have a combined population of 1,000 million." He said in these regions, “the bourgeois-democratic movements either have hardly begun, or have still a long way to go.” He underlined the importance of socialists demanding “the unconditional and immediate liberation of the colonies without compensation”, a demand which he said, “signifies nothing else than the right to self-determination.”

The post-World War II period saw significant changes, particularly in the third category. With the exception of a few regions, Africa, Asia, and the Middle East, which were  under colonialism during Lenin's time, have long since attained independence. Many of these countries have been dominated by nationalist movements for up to a half-century. Indeed, the dissolution of the initial nationalist aspirations has given rise to new separatist organizations trying to divide existing nations in former colonial countries.

In the history of the Marxist movement, phrases and slogans with progressive and revolutionary content in one epoch often take on a completely different meaning in another. National self-determination is one example of this. The right to self-determination has evolved to imply something substantially different than it did more than eighty years ago, according to Lenin. The right to self-determination has been promoted not only by Marxists, but also by the national bourgeoisie in backward countries and by imperialists. Since the end of World War I, one or more imperialist powers have used this "right" to legitimize schemes aimed at partitioning existing territory.

Today, everyone agrees that claiming the "right to self-determination" entails supporting the formation of a new state and national secession. The extensive use of this slogan by imperialism, the bourgeois nationalists, and their supporters within the middle class left has obscured the "negative" meaning assigned to this right by Lenin and the Bolsheviks, who fought bourgeois separatism. 

How does the revolutionary working class party react to the dissolution of the previous bourgeois nationalist movements is the key question at hand. Are the masses in these nations to promote their interests through fresh separatist movements based on pieces of the decolonized states and rooted in national particularism? Such an outlook must be disregarded. 

Under conditions of globalized production, the slogan of "self-determination" raised by bourgeois nationalist forces no longer has any progressive or anti-imperialist impulse. This does not signify that the Marxists must abandon the demand for self-determination. Rather, only the movement of the working class can impart to this demand any progressive content.

17. Permanent revolution more relevant than ever

The globalization of production emphasizes, more than ever, the Trotskyist strategy of permanent revolution. Trotsky formulated this theory based on a thorough examination of the evolution of capitalism in Russia, particularly its relationship with the global economy and class struggle.

The theory of permanent revolution contained a dialectical understanding of capitalism's combined and uneven development. Russia, the most backward of the capitalist countries, had brought into itself the most advanced forms of production as well as all of modern capitalism's social contradictions due to its relationship with the world market and foreign capital penetration.

The aims of the bourgeois revolution, such as achieving national independence, self-determination, agricultural reform, etc., could only be accomplished by the working class, guiding the vast majority of peasants. After winning, the working class would have to install its own dictatorship and implement socialist policies that would undermine the fundamental basis of bourgeois property.

To those who argued that such a socialist revolution was unthinkable within the framework of Russia's backwardness, Trotsky retorted that using isolated Russia as the framework was a fundamental error. The Russian revolution's shape and fate would be dictated above all by global conditions and the international class struggle.

He believed that a successful revolution in Russia would spark uprisings among the working class in developed capitalist nations. The objective circumstances for the abolition of capitalism as a worldwide system had become apparent on a global scale, notwithstanding the fact that Russia's backwardness prevented the formation of socialism inside the constraints of its isolated national economy.

The Russian revolution's survival would be contingent on victorious proletarian revolutions beyond its boundaries. Only a socialist revolution in the West could save Russia from the threat of capitalist restoration and offer the means for socialism to be realized.

Trotsky's worldview was powerful precisely because of this. It didn't begin with Russian peculiarities. Instead, it understood the impending Russian revolution as a unique fusion of the traits and conditions of capitalism as a global economic system.

The Russian bourgeoisie's organic inability to carry out its own revolution, to secure democracy, agrarian reform, and economic development within Russia, was a specific manifestation of a larger phenomenon that remains the fundamental contradiction underlying today's global capitalist crisis. Even before the turn of the century, capitalism's productive forces had surpassed the nation state's boundaries. The national-state form was already an insurmountable hindrance to economic development. Under these conditions, it was impossible to resolve Russia's historic problems, or those of any other country, on a national level.

18. The crisis of the nation-state and collapse of the USSR

The collapse of the Soviet Union was merely the first big political upheaval caused by the transformation of production processes. The qualitative advancements in global economic integration dealt the fatal blow to the Stalinists's autarchic state policies. In other words, the Soviet state was the first victim of global economic forces that had exacerbated the contradiction between the world economy and the nation-state system. These same processes, however, are preparing massive crises and revolutionary eruptions within capitalist countries. 

The working class was unable to overthrow the bureaucracy before the Stalinist regime successfully restored capitalist relations and started to incorporate itself into the framework of the global capitalist economy as a type of comprador bourgeoisie, organizing the looting of the resources of the former Soviet economy.

What were the underlying reasons behind the Soviet Union's demise? The Soviet Union's crisis was linked to global economic trends. This does not reflect a more recent theoretical development in Trotskyism.  Trotsky outlined the stark incompatibility between the limited national character of socialist construction in the USSR and the worldwide character of the productive forces developed under capitalism more than 70 years ago. This comprehension served as the foundation for his criticism of the Stalinist idea of "socialism in one country."

The degradation and abolition of the October Revolution, according to Lenin and Trotsky, were not only "objectively determined," but also unavoidable as long as the USSR was isolated and surrounded by an antagonistic capitalist world. In contrast to the anti-Marxist idea of "socialism in one country," they insisted that only by extending the socialist revolution globally could the Soviet Union amass the resources required to get past the Tsarism-inherited backwardness and build a socialist society.

The contradiction between the global economy and the nationally isolated workers' state could only be resolved in one of two ways: on a socialist basis, by the working class seizing power in the remaining capitalist countries and establishing a world socialist republic; or by the bureaucracy restoring private property and reintegrating the USSR into the global capitalist system. The political revolution within the USSR was conceived within this international context.

The liquidation of the USSR had its roots in a change in production processes that rendered the Stalinist bureaucracy's nationalist methods unviable. Trotsky had explained that armed intervention by imperialist powers represented an immediate threat to the Soviet Union in the short term. But, in the long run, the greatest risk was that worker productivity in advanced capitalist countries remained, and would continue to be, significantly higher than in the Soviet Union. As Trotsky put it, an even greater danger than military intervention was the cheap goods in the baggage trains.

Without firing a single shot, the former Soviet Union's economy has been subjected to the power of global finance capital. What neither imperialist troops nor Nazis could achieve - the pillage of Russia's and other former Soviet republics' resources - is now carried out through the processes of the capitalist financial system.

Similarly, the history of Vietnam indicates that defeating imperialist troops is significantly easier than breaking the grip of the international banking system. In a 10,000-day struggle, Vietnamese workers and peasants were able to militarily defeat French and subsequently American imperialism. However, Vietnam is now even more firmly in the clutches of international finance capital than it was when it was overrun by US Marines.

19. Conclusion

Trotsky attempted to provide a historical assessment of the imperialist war and the struggle to resolve the proletarian leadership crisis in some of his final writings:

"The second imperialist war poses the unsolved task on a higher historical stage. It tests anew not only the stability of existing regimes but also the ability of the proletariat to replace them. The results of this test will undoubtedly have a decisive significance for our appraisal of the modern epoch as the epoch of proletarian revolution. If contrary to all probabilities the October Revolution fails during the course of the present war, or immediately thereafter, to find its continuation in any of the advanced countries; and if, on the contrary, the proletariat is thrown back everywhere and on all fronts—then we should doubtless have to pose the question of revising our conception of the present epoch and its driving forces."

Trotsky's prediction didn't fully capture the complexity of the actual course of events. The working class and oppressed masses advanced in a series of revolutionary struggles, but the fall of capitalism in the developed nations of Western Europe was thwarted by the treachery of the Stalinist leaderships, whose political power had been increased by the Soviet armies' victory over the fascist armies. The proletariat was not thrown back, but it also did not achieve new October revolutions. The Stalinist bureaucracy not only maintained control in this challenging situation, but also solidified and expanded its dominance across Eastern Europe.

While the socialist revolution had not advanced, neither had the working class experienced a significant setback. The bourgeoisie was also successful in putting in place a number of political and economic arrangements that ushered in a new era of capitalist expansion, defying all predictions, including its own.

The Fourth International was under a lot of pressure as a result of this difficult and contradictory situation. The theories of Pablo and later Mandel, which imparted to the Stalinist bureaucracies the ability to be revolutionary, were the outcome of these pressures finding their political expression. More than that, Pabloism aimed to replace the Lenin-Trotsky theory of the party, which insisted on the crucial role of conscious revolutionary leadership in the socialist transformation, with an outlook in which the overthrow of capitalism would be achieved by the operation of objective processes working behind the backs of conscious leadership through whatever forces happened to dominate the working class.

The Open Letter of 1953 drew the clearest division between revisionism and the program of the Fourth International and insisted that “the lines of cleavage are so deep that no compromise is possible either politically or organizationally.”

The peculiar set of social and economic relationships that constituted the post-war equilibrium of global capitalism served as the material basis for the opportunistic theories. But as a result of capitalism's unrelenting expansionist ambition, the foundations of that equilibrium and the political relationships that built on it have literally been destroyed. This is the revolutionary implication of the development of globalized production. 

Pseudo-left tendencies that flourished during the post-war period are now seeing the earth crumble beneath their feet. All of their notions about Stalinism's "progressive" role, the revolutionary capacities of Maoism and petty-bourgeois guerrillaism, and the possibilities of "class struggle unionism" on a solely national basis are in shreds. As the world they knew is shattered - a world in which the class struggle was suppressed by the domination of the nationalist labor bureaucracies - the middle class left lashes out furiously at "globalization," desperately trying to reassure themselves that, despite everything, the old order remains. In vain. Their desperation is only the most telling symptom of the upcoming social and political upheavals. 

And what is the only way forward? New, international organizations - a world socialist party basing itself on international organizations of class struggle.