by Daniel Gluckstein and Pierre Cise
“Debt crisis”, “default”: this low-key language barely conceals the bankruptcy not only of this or that capitalist power, but of the entire system.
As part of its aim of binding every layer of society – first and foremost, the working class and its organisations – to its desperate attempt to save the system, the capitalist class is resorting to the technique of myth-making. Debt, they tell us, is supposedly the result of overconsumption by states, public services, social welfare systems and individuals. Therefore, it has no class character. It is somehow a curse affecting the whole of humankind, rather like the big epidemics or the plague in times gone by. This is why it would call for responses that involve the “sacred union” , consensus and governance. Consensus, governance and sacred union which the leaderships of the parties historically born out of the labour movement – as well as, to varying degrees, the leaderships of the trade union organisations – have consistently gone along with. Which, as we shall see later, constitutes the main problem facing the working class.
In this article we will show that the crisis which is destabilising the economy, the institutions, governments and all political representatives to their very foundations is not a debt crisis. We will establish that in fact it is a crisis of decay – the crisis of decay of the capitalist system based on private ownership of the means of production – coming out into the open.
This crisis is combining with the shock- wave of the proletarian revolution that broke out in Tunisia at the end of 2010. A revolutionary wave which has continued to spread and deepen in Tunisia itself and in other countries, and which today is knocking on Europe’s door. The leaders of the capitalist powers cannot hide their fear. With the Greek crisis in full flow (June 2011), spokespersons for US imperialism demanded that the European leaders take measures as soon as possible in order to “prevent the crisis spreading from the periphery of Europe to the core and from there to the rest of the world.”  However, the crisis has continued to spread. The French capitalist newspaper Les Echos described (17 and 18 June) the frame of mind of those in power in Europe in the following terms:
“European political leaders are watching with dread what is happening in Greece, Portugal, Ireland and Spain. Demonstrations of anger against the austerity measures and reforms imposed by Brussels or the IMF are resulting in every election in the incumbents being thrown out of power. (…) Everywhere, the people are punishing their leaders. As the crisis is far from over, the politicians are trembling. Because the leaders of the other countries are not safe.”
The crisis that is hitting the capitalist system places the conscious struggle to bring down the system of exploitation on the agenda for the workers and peoples the world over. Hence the need to understand the mechanism of the debt, which is not the peoples’ debt, in order to be able to draw the political conclusion that flows from this: nothing can justify the least subordination of the labour movement to servicing that debt or reducing the budget deficits that it generates.
What distinguishes the current crisis?
What distinguishes the current crisis from previous situations? The following characteristics:
The volume of public debt of the developed capitalist states has reached an unprecedented level, except for periods of war (where the state assumes debt in order to meet the needs of the war effort) and recognised bankruptcy (for example, the crash and crisis of 1929).
This inflation of the public debt applies to all states, including the most powerful.
Undoubtedly the most important element: for the most part, this debt is held by private lenders (pension funds, banks, international financial institutions) that are levying exorbitant rates of interest, thus creating a situation where paying interest on the debt becomes impossible for most of the states concerned.
It follows that nations which in principle are sovereign and independent are at the mercy of private investors who are acting like a bank manager with an over-indebted worker, demanding that all of the national inheritance be sold off to the highest bidder, up to and including dismembering the country, beginning with dismembering the working class.
Having reached this stage, the debt and the credit system that caused it quite rightly appears to the workers and peoples the world over as an instrument of death and destruction. It is an instrument for the mass destruction of the productive forces.
Now, this has not always been the case. In the past, credit has contributed to the development of the productive forces. But today it is an instrument of mass destruction for those productive forces. The debt crisis is a concentrated form of the decay of the capitalist system based on private ownership of the means of production. It underlines the extent to which that system has entered its death- throes. We will see that there is nothing accidental about this, it being the “logical” evolution of the mechanisms of the system itself – and cutting its death- throes short calls for the only possible “remedy”: revolution to expropriate the exploiters and oppressors.
Credit lies at the root of debt
Historically, the roots of debt lie in the system of credit.
Credit itself grew from the system of promissory notes between producers and traders. Then it became a system of credit between capitalists concerning the payment for commodities. But, with the accumulation of capital and the growth of the capitalist markets, credit was transformed.
“Short-term credit gave way to long- term credit for financing capitalist investment: the purchase of machinery, setting up factories or big facilities (ports, railways, ships). The banks that centralised money (individual deposits – interest-bearing or not – and short-term loans) transformed that money into loan capital. The banks gave loans on behalf their shareholders or served as correspondents, for example in the case of big international bond issues, for other capitalists”, wrote Michel Dauberny .
He added: “In credit transactions, money becomes capital, in other words a generator of surplus-value. Indeed, capital loaned in the form of money will enter into a cycle in which it is, successively, a means of production (machines, raw material) and labour, then a produced commodity, and finally, if a sale is effected, new money. The final sum consists of the value of the means of production, the value of labour-power and also surplus-value, in the form of operating profit. However, this profit will be reduced by the amount of interest paid to the original lender of the capital.
Loan capital can be expressed in the formula A–A’, where money generates money in greater quantity. But the source of that interest is the surplus-value realised in the productive phase of the capitalist process, the phase of exploitation of labour-power . What is referred to as the interest rate (offered by banks, central banks and credit bodies) is therefore nothing other than the share that loan capital deducts from surplus- value, in other words from the operating profit.”
Deducting that share of surplus-value which constitutes the rate of interest, credit nevertheless constitutes a factor of development of the productive forces – in that ascendant phase of capitalism. Marx wrote:
“The credit system appears as the main lever of over-production and over- speculation in commerce solely because the reproduction process, which is elastic by nature, is here forced to its extreme limits, and is so forced because a large part of the social capital is employed by people who do not own it and who consequently tackle things quite differently than the owner, who anxiously weighs the limitations of his private capital in so far as he handles it himself. This simply demonstrates the fact that the self-expansion of capital based on the contradictory nature of capitalist production permits an actual free development only up to a certain point, so that in fact it constitutes an immanent fetter and barrier to production, which are continually broken through by the credit system.” 
So what is the “contradictory nature of capitalist production” referred to here by Marx?
“[P]roduction is only production for capital and not vice versa (…). The limits within which the preservation and self- expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move – these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. The means – unconditional development of the productive forces of society – comes continually into conflict
with the limited purpose, the self- expansion of the existing capital. The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world-market and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production.” 
“The credit system accelerates the development of the productive forces”…
Put another way:
“Capitalist production seeks continually to overcome these immanent barriers, but overcomes them only by means which again place these barriers in its way and on a more formidable scale. The real barrier of capitalist production is capital itself.” 
The “means” referred to by Marx include credit. When the capitalist system is in its ascendant phase, Marx wrote, “the credit system accelerates the material development of the productive forces and the establishment of the world-market. It is the historical mission of the capitalist system of production to raise these material foundations of the new mode of production to a certain degree of perfection.” 
As a major lever allowing the anticipation of the creation of values not yet produced and their flow into the market in order to obtain discounted profit, credit therefore constitutes as such a factor of the material development of the productive forces and the extension of the world market. However, Marx qualified this characterisation, pointing out that “at the same time credit accelerates the violent eruptions of this contradiction – crises – and thereby the elements of disintegration of the old mode of production.” Anticipating the creation of values carries the risk of those values never being realised. But what was a mere tendency during capitalism’s ascendant phase has today become a dominant characteristic. From a capitalism that in its ascendant phase could “push back its own limits” through the (artificial) means of credit, today we have reached the stage of decayed imperialism, where the massive injection of credit and the accumulation of mountains of debt are resulting in the mass destruction of the productive forces.
… before transforming itself into a destructive force
“In the development of productive forces there comes a stage when productive forces and means of intercourse are brought into being, which, under the existing relationships, only cause mischief, and are no longer productive but destructive forces (machinery and money)”, wrote Marx and Engels. 
Subsequently, Rosa Luxemburg would complete this list by adding to machinery and money a third major lever for parasitically driving the capitalist economy: militarism (what today we call the arms economy).  This tendency for machinery and money to be transformed into destructive forces fed cyclical crises of capital in its ascendant phase. Today it has become more than a tendency: a major mark of capitalism having entered its phase of decay, the stage of imperialism. 
Before, ascendant capitalism was able up to a certain point – and certainly at a cost of terrible conditions of exploitation – to “absorb” the consequences of the class struggle and to pass them on within the growth of the productive forces and the extension of the world market. Today, masses of huge capital cannot be employed under the normal conditions of capitalist exploitation. Using the most artificial of means, the capitalist class is obliged to define new fields of profitability.
“The credit industry” (and therefore the exponential growth of the resulting debt) has today become one of the main means. Its deployment on such a large scale is dislocating the world economy. For it is necessary to “invent” new fields for investing capital that is short of profitability, it is necessary to create a demand for credit that goes beyond its own limitations… This resulted in both the subprime crisis and, on another level, sovereign debt beyond sustainable limits. But this extension in all forms of the credit economy and debt has immediate consequences on the very conditions of exploitation of labour-power. For interest payments on debt are nothing more than levies on the surplus-value extracted from the working class. Guaranteeing a return on investment at whatever cost involves the worsening to a considerable degree of the conditions for extracting surplus- value, and the merciless elimination of any productive activity that is insufficiently profitable for offering such a guarantee. This is how – through the deskilling-degrading of labour-power (putting its value into question and deregulating wages, collective agreements and recognised job-grades by offshoring) but also through deindustrialisation – the growth of the debt economy has resulted in the current situation. The credit system, which Marx described as accelerating the material development of the productive forces and the creation of the world market, has been transformed into a system which today is accelerating the material destruction of the productive forces and the dislocation of the world market. And in the front line of the mass destruction of the productive forces, we find the main productive force: the proletariat’s labour-power. 
The constitution of public debt as a weapon of mass destruction for the working classes, the peoples and nations has occurred in two periods. It first hit the dominated countries and – a more recent phenomenon – today it is hitting the capitalist powers themselves. In both cases, its origins lie in the turning-point of the 1970s.
Forty years ago: the turning-point of August 1971
The decision taken on 15 August 1971 by United States President Nixon to break all links between the dollar and the price of gold was to bring about a series of widespread deregulation measures, first of all at the monetary level, then the financial, economic, political and social levels, leading to the current situation. It represented a fundamental shift.
We know that currency occupies a specific position in economic relations. Originally, it was created as a simple “general equivalent”, a commodity distinguishing itself from other commodities by the fact that it reflected the value common to all of them, and expressing the quantity of social labour incorporated in all of them.
Over centuries, the “commodity” currency has known many discrepancies between its real value as a commodity and its nominal value as currency. Discrepancies between actual weight and official weight , the emergence of credentials, paper currency, banknotes, etc.
However, whatever the discrepancies and acts of speculation, currency always remained a reflection – however distorted – of produced value in circulation. The level of a national currency was always in relation – however distorted – with the level of productivity and the mass of wealth in circulation in the country. This relation was expressed in the fact that all national currencies were convertible into gold. They all therefore boiled down to the value of a “general equivalent commodity”, determined – as is the case for all commodities – by the labour-time socially necessary for its production.
The break with this line occurred in two points in time.
In 1944, the negotiations held in Bretton Woods between nation-states on the reconstruction of the international monetary system established the US dollar as the international means of payment and reserve.  The gold standard was replaced with the dollar standard. At the same time, the United States sought to exempt itself from any external constraint on the quantity of currency created.
However, the link with the “real economy” persisted through the dollar- gold parity rate. This link in turn was to be broken on 15 August 1971, when the US President broke the last link between the world monetary system and the gold- equivalent, in other words the commodity-equivalent. By acting in this way, Nixon was trying to attend to the most urgent things first: controlling the enormous gap between the US gold stock and the quantity of dollars created (the financing of the reconstruction, of gaining control over parts of the world economy, and the Vietnam War having been secured through quantitive easing, in other words printing money).
In a statement dated 20 August 1971, the Political Bureau of the Internationalist Communist Organisation (OCI) – today the Internationalist Communist Current (CCI) of the Independent Workers Party (POI); the CCI is the French section of the Fourth International – said:
“The capitalist system does not produce commodities in order to satisfy the needs of humankind. It produces commodities that must be sold in the market for the purpose of realising profit in the form of money, the source of which is the surplus- value extorted by capital from waged labour, and which, in the form of invested (accumulated) capital, guarantees the functioning of the system of capitalist production.
From time immemorial, the producers have not been able to buy up the product of their labour. At periodic intervals, the capitalist mode of production has had too many commodities, too many workers, too much capital.
No longer able to realise surplus-value, the capitalist system ended up in economic crisis, which then proceeded to a sudden and massive destruction of the productive forces, reducing millions to the unemployment line, until the capitalist mode of production, sufficiently stabilised by, on the one hand, the result of its destructive actions, and on the other through winning new markets, could resume its march forward.
With imperialism, the highest form of capitalism, the whole planet is subject to the capitalist market; the carving-up of the world has been completed. The expansion of each imperialism is no longer possible in the long run except at the expense of the others, through imperialist wars.
The militarisation of the economy and the arms economy become – for a more or less lengthy period and as a preface to the war economy and war – the preferred means of realising surplus-value. In other words, militarism becomes a means – the main one – of accumulating capital. (…)
The consumption of commodities by and for the army (…) opens up a new market to which everything else is subordinated: machinery, the labour of millions of producers, scientific and technological research, and the industrial applications of research.
The arms economy consequently guarantees the functioning of the overall system and all of the branches of capitalist production. (…) But stabilising the capitalist economy is not enough. Sooner or later, if war does not become its logical conclusion, the limits of the market structured on private ownership of the means of production in the epoch of imperialism restrict the arms economy sector, just like all other sectors of the capitalist economy.
Nixon has just stated those limits in the measures he has just taken.
The US balance of payments deficit expresses the fact that US capitalism has “produced too many commodities of all kinds, including military ones”. (…)
The succession of monetary and financial crises over years have just erupted into a major crisis.
Those crises have just one cause: the world market cannot absorb the commodities produced; despite the arms economy, there is a world surplus of capital in the form of commodities and means of production.
The crisis of overproduction looms.
This threat is made considerably worse by the fact that the arms economy sector is fed by the bourgeois states which are financing it through credit and money inflation, through all sorts of financial manipulation – the famous anti-cyclical measures – that result in the creation of a growing mass of fictitious capital,  an increasingly smaller fraction of which is actually invested in production.
It is here, and only here, that the cause of the crisis of the international monetary system is to be found. All of the bourgeois states have, through their parasitic spending of all kinds and especially on arms, opened up artificial outlets for production, which have allowed the overall economy to function. Every capitalist government, and first and foremost the US government, has financed the arms sector through kite bills , loans, inflation and the thousand and one means at the disposal of financial technology.
The gaps in the balance of trade and payments, and especially the US trade and payment gaps, which lie at the heart of the formation of huge volumes of fictitious capital, express the dead-end reached by an economy based on private ownership of the means of production.” 
“What do we do next?”
Following the decision of 15 August 1971, those huge volumes of fictitious capital had to find new fields of valorisation, whatever the cost. 15 August 1971 marked the end of an era, a break in US imperialism’s way of conducting its policy at both the national and world levels.
“US imperialism broke suddenly with the mode of financing US and international growth that had applied since the Second World War: printing money. The break with what is referred to as the Keynesian model was clean: the profitability of capital was no longer mainly expected to flow from good use of production capacity. It became in itself the one and only criterion for all economic investment.
In 1971, inflation had in fact reached all-time highs. The conditions for protecting invested capital were no longer being met. The whole of the economic policy applied up to that point was based on the fly-wheel that was the arms economy, culminating in the financing of the Vietnam War. This policy finally produced an adverse result, and became a veritable accelerator of the march towards the explosion consisting of the decision to break all links between the value of the dollar and the value of gold.
It was the end of an era. Henceforth, the declared wish was to have done with inflation, the mode of financing economies which, up to that point, had on average guaranteed the conditions for the profitability of capital. Inflation had also permitted the guaranteeing of a certain type of “regulation” of the class struggle. In effect, it allowed imperialism to claw back, nibble away, to reduce all of the gains that the proletariat had won through its struggle. The expression “give with one hand, take away with the other” is a good illustration of these mechanisms. Of course, imperialism “gave” nothing; it was forced to give in to demands in the thick of the battle with the proletariat, and then used inflation to gradually cancel out those concessions. Not only in the United States, but also in all of the imperialist countries, inflation had allowed the opportunity to exploit capital to be regained. But from the late 1960s into the early 1970s, the very high levels reached by inflation, especially in the United States, put into question the conditions for protecting invested capital (…).
After August 1971, a new plan of attack was put in place by imperialism. As often happens, the elements of this new orientation were fixed in a pragmatic way, not flowing from a pre-established decision. History has recorded one such element in the following anecdote. Just before taking his decision, Nixon consulted with his advisors. One of them is supposed to have said: “OK. But what do we do next?”.” 
Forty years have now passed. To the question: “What do we do next?”, the current dislocation of the world economy, the march towards chaos and the bankruptcy of the main capitalist economies provide a reply that will not surprise those who, armed with the Marxist method, had predicted as early as August 1971 that this headlong flight by the system based on private ownership of the means of production could only result in new acts of mass destruction.
The debt of the dominated countries: genesis of an instrument of pillage
In the years that followed the 15 August 1971 speech, imperialism was pragmatic about having to use two main tools in order to try to keep its head above water: manipulation of interest rates by the central banks and deregulation of economic activity (first and foremost, of financial activity). Concurrently, it was from the 1970s onwards that public debt emerged as a major weapon of imperialist pillage, used first of all against the dominated countries of Africa, Asia and Latin America. Straightaway, the Fourth International began a campaign on a united front line for the cancellation of the debt. In 1987, its French section, the MIR-MAS of Venezuela and the PT of Peru jointly organised an international conference for the cancellation of the debt in Caracas (Venezuela). Two years later, an “International Tribunal to judge the crimes of the IMF, World Bank and the EEC  against the peoples” met in Lima (Peru), convened by the same initiators.
Let us note that, even then, we had established that the origins of the debt had nothing to do with chance or fate, and least of all with recklessly excessive spending by the “peoples”.
The documents submitted to the Lima Tribunal in 1989 included the following:
“Third World debt has always existed, without reaching the levels it has currently. (…) The late 1960s saw the development of an overabundance of dollars in the financial networks. The post-war reconstruction of the European economies stimulated by the Marshall Plan had injected massive quantities of dollars that remained unused, since that period of reconstruction had ended (…). Thus a eurodollar market was created, enhanced by the arrival of “petrodollars” resulting from the 1973 “oil shock” (which US imperialism has been proved to have largely instigated).
Furthermore, the end of the reconstruction period stimulated fierce competition between imperialisms in search of new markets in order to provide an outlet for economies that were threatened by glut.
These combined effects were a powerful stimulant in the development of the debt. Massive eurodollar loans were easily accessible, with no conditions for obtaining them. They allowed the purchase of anything at all, or even nothing at all when they were intended to fill the pockets of the local bourgeoisies. Third World debt increased fivefold between 1971 and 1980. It worsened during the 1980s with a widespread rise in interest rates, and the first serious warning shot rang out in 1982, when the Mexican government decreed a moratorium because its foreign exchange reserves – which allowed it to service its debt – were completely exhausted.
Imperialism’s first reaction was to develop a policy for the systematic rescheduling of the debt, which resulted in:
– increasing the amount of debt, as new loans were made in order to pay the interest on the previous one;
– postponing the question of repaying the debt later;
– “cleaning up” the economies of the indebted countries by implementing “structural readjustment” policies advocated by the IMF and World Bank.” 
Those of our readers who were not part of the democratic labour struggle a quarter of a century ago will no doubt be surprised to note the extent to which the mechanisms for creating the debt of the dominated countries in the 1970s and ‘80s are similar to those that we see in play today. Whether it is a question of the policy of credit at whatever price, inflating the speculative subprime bubble (bringing in its wake the failure of big banks, their bailout by the imperialist governments and the current debt crisis) and making the states’ public debt rocket, or a question of the adjustment mechanisms that flow from that.
The Lima International Tribunal reached the following conclusion in its final sentence:
“Considering the extensive and detailed information on the conditions for the formation of the foreign debt, the tribunal is in a position to state:
Contrary to what the IMF says, the debt did not originate in “overconsumption” by the peoples of the so-called third world. The debt originated in the constant search by finance capital for realising profit (…).
The capital the repayment of which is being demanded today has never benefited the peoples (…).
Therefore, this debt cannot in any way be considered as being that of the peoples, who did not solicit it, sign up for it, nor benefit from it (…).
Considering that as a consequence of the imposition of repaying the debt, the peoples of the world are being sacrificed through an increase in the rates of malnutrition, unemployment, illiteracy and disease due to the drastic reduction in spending on health, food, education, productive investment, housing (…).
On these grounds, the international tribunal notes that the foreign debt of the developing countries has already been repaid over and above the capital borrowed and the resulting interest, and declares that consequently it must be considered as being extinguished (…); judges that the foreign debt constitutes an instrument of exploitation and oppression of the peoples by international finance capital acting through agents of imperialism: the IMF, the World Bank and the European Economic Community (…); therefore pronounces the total, immediate and unconditional cancelation of the foreign debt of the countries of Asia, Africa, Latin America, the Caribbean, Eastern Europe (Poland, Yugoslavia) and considers the fight of their people against the payment of the foreign debt and against the IMF plans to be legitimate.” 
The charge brought in Lima in 1989 against the IMF and the governments responsible for the pillage in the name of the debt and its repayment in the first place concerned the countries dominated by imperialism, in Latin America, Asia and Africa, but also, within the framework of the decay of the Stalinist apparatus, in certain countries in Eastern Europe. The impact of the very broad regroupment achieved in the Caracas Conference and then the Lima Tribunal was considerable, bringing together a broad spectrum of organisations of the Fourth International and current, groups and organisations seeking the path of independence and a break with imperialism. Furthermore, these two initiatives in the fight for the cancellation of the debt – Caracas 1987 and Lima 1989 – in connection with the global upheavals in the turning-point of the years 1980-90 (collapse of Stalinism, break-up of the USSR, first Iraq War) led directly to the Open World Conference of January 1991, in Barcelona, which set up the International Liaison Committee of Workers and Peoples (ILC).
When, two years later (1993), the Reproclamation Conference of the Fourth International was called in keeping with the line of transition expressed by the setting-up of the ILC, this question of the debt occupied an important position in the preparatory documents, as the expression of the decay of the capitalist system:
“Previously, by exporting capital to the colonial countries, the dominated countries, the imperialist powers were aiming for local production of surplus- value, most of which was then appropriated by the owners of the capital thus invested: it was colonisation.
Today, the measures imposed by the International Monetary Fund and the other agencies of imperialism aim to deduct an increasing proportion of the national income of the dominated countries, on which a growing pressure is being exerted through control of their policy and even, increasingly, direct interference in the areas of the economy, finance, foreign trade, the armed forces, police, etc. Under the aegis of not only the IMF and the World Bank, but also the United Nations, which are organising the placing of whole countries under supervision, a quasi-direct domination [is being imposed] in order to force them to carry out restructuring according to the demands of international finance capital (…) which is resulting in an increase in armed interventions (…).
In fact, we are witnessing a direct tax on the surplus-value produced in the dominated countries through the debt economy. In this way, imperialism is stripping to a bare minimum the budgets for public healthcare, education, social welfare and housing, but is also forcing production for export, thus destroying the foundations of the national economy, food production, small businesses, public services, etc. – everything that is not needed for valorising capital (…). The structural adjustment policies being implemented by the IMF , focusing especially on reducing public spending, and privatising and restructuring public enterprises, are resulting in the dominated countries being forced to sell off part of their national inheritance to the capitalist powers.” 
Growth and so-called reduction of the dominated countries’ debt
In total, between 1968 and 1980, the debt of the dominated countries increased twelvefold.
In the 30 years since 1980, on account of their foreign debt the dominated countries have made capital and interest payments amounting to thirteen times the aggregate amount of their debt in 1980. During that same period, their foreign debt increased sixfold.
In the 1990s, “debt servicing” changed for the dominated countries. Policies of reducing and partially writing off the debt were introduced, in relation to both the creditor banks and the financial institutions (IMF and World Bank).
From 1996 onwards, these two institutions even launched a plan for reducing the debt of the 42 poorest countries (the “HIPC Initiative”, aimed at officially-designated “Heavily Indebted Poor Countries”). The objective was not to cancel the debt, but to reduce it to a “sustainable” level by writing off a proportion of the debt which, in any case, could not be repaid (one will see that the July 2011 bailout plan for Greece has exactly the same content).
Of course, the “benefit” of this programme can only be accessed on condition that the “candidate country” must “establish a further track record of good performance under programs supported by loans from the IMF and the World Bank”. 
Officially, financial and budget surpluses freed up by the non-payment of debt cancelled in this way – recognition, meanwhile, that these can exist – must be directed towards the “fight against poverty”. But as the so-called “fight against poverty” cannot be allowed to act against the needs of the multinationals that are pillaging those countries and to prevent the IMF’s “structural adjustment policies” from imposing the breaking up of states, privatisation and the cutting of public budgets, the “fight against poverty” is changing into a sad farce (for example, we have seen the completion of programmes for building new schools, while under the terms of the structural adjustment plans, there is absolutely no budget provision for paying teachers!).
As for the countries which do not fulfil the HIPC criteria and which the IMF, World Bank and official line (economic or not) present as “emerging countries” (in which, we should remember, most of the planet’s poor people live) , the IMF and World Bank are forcing them to repay the debt to the last dollar and to totally subject themselves to the financial markets for their loans. 
Who would dare to claim that this debt, which finance capital is desperately trying by every means possible to have repaid, is that of the peoples? It is estimated that almost half of that debt, misappropriated by the local bourgeoisies and mafias, has once again been sent abroad (capital flight). The rest has not fundamentally benefited the population, whose living standards, according to several indicators apart from the official propaganda, are continuing to worsen. All the reports of the UN’s official agencies, for example, explain that a few tens of billions of dollars would be enough to guarantee food security and provide all of those countries’ inhabitants with access to drinking water and correct sanitary installations, etc. Even if one questions the reliability of these numbers, one question remains: where did the US$3,545 billion (including US$1,400 billion in public debt) of the dominated countries’ debt go – what was it used for?
1960: US$ 7,6 billion. 1970: US$ 66 billion (14 % of GDP).
Debt of the dominated countries Year External Debt (US$ billion) % GDP Long term public debt (US$ billion) Long term private debt (US$ billion)
1980 534 20 500 10
1990 1 253 192 967 65
2000 2 122 128 1 281 496
2005 2 489 75 1 278 686
2006 2 463 65 1 207 861
2007 3 180 65 1 304 1 118
2008 3 425 58 1 342 1 330
2009 3 545 75 1 396 1 363
Sources: World Bnak.
Debt in the United States
Year Public Debt (US$ billion) % GDP
1940 43,00 52,40
1950 257,40 94,10
1960 290,20 56,10
1970 389,20 37,60
1980 930,20 33,3
1990 3 233,00 55,9
2000 5 674,10 58,10
2007 9 007,60 65,50
2008 10 024,70 70,60
2009 11 909,80 83,60
2010 13 561,60 92,50
2011 14 344,00 95,51
The United States’ total indebtedness is U$ 49,000 billion, or 3.5 times the country’s GDP. This figure includes external (foreign) debt – in other words, what the private sector, public sector, and the federal state owe to non-Americans – and the internal (domestic) debt, which includes US$ 10,000 billion public debt owed to Americans plus household debt.
Today, the public debt amounts to US$14,344 billion, of which around one-third is owed to non-Americans (foreign states or private entities). Out of this one-third, China holds almost 50 percent, in other words, between 15 and 20 percent of the United States’ public debt.
Debt in the euro zone
Year Public Debt (€ billion) % GDP Public deficit (€ billion) % GDP
2000 4 492,30 69,6 0,20
2008 6 424,60 69,40 181,20 2,00
2009 7 062,60 78,70 565,10 6,30
2010 7 837,20 85,10 550,50 6,00
2011 94,80 4,20
Debt and deficit
— External debt: debt owed by a country’s state and enterprises to foreign creditors. It is the basis of all flows of money and capital that leave the country.
— Public or “sovereign” debt: debt of the central state, (local) public collectivities, state enterprises and agencies and social welfare systems.
— What is debt for? According to official propaganda, it is “excessive” state spending that leads to debt and especially deficit. Fact: debt increases even when there is massive privatisation, cuts in public services and the number of public employees, and a fall in public investment.
— Let us take the case of France in 2009. The state’s fiscal loss of earnings was estimated at a minimum of €100 billion, due to tax exemptions granted to the capitalists. Continuously-rising interest payments on the public debt had reached €46 billion. Adding the state’s lost earnings (tax exemptions) to interest paid gives €146.5 billion, a little more than the amount of the budget deficit (€145 billion). The debt is therefore being used to reduce the tax burden of the capitalists (the amounts saved in tax exemptions are diverted almost totally into speculation rather than investment and employment) and to pay interest to the speculators.
Sources: IMF; Bank for International Settlements; McKinsey Global Institute; The Economist magazine. For France: Court of Audit annual report of February 2010; Board of Compulsory Levies report of March 2009; reports of the National Assembly’s Finance Committee; INSEE statistics institute.
— A public deficit appears when spending by the state, local collectivities and social welfare bodies exceeds their income. The budget deficit is part of the public deficit, which concerns only the state.
— The state deficit is fed by two main causes. The first is a fall in revenues. The other cause of the deficit is servicing the debt. ((Let us point out, for example, that in France in 2009, the banks were able to draw capital from the European Central Bank (ECB) at an interest rate of around 1 percent, but charged the state around 3.5 percent for ten-year loans, a margin of 2.5 percent. In 2008, half of the debt issued by the French state was intended for repaying old debts.)
Sources: INSEE; Court of Audit; Board of Compulsory Levies; documents on various finance laws; Alternatives économiques magazine; Report on the situation of public finances by Paul Champsaur (head of the Public Statistics Authority) and Jean-Philippe Cotis (director general of the French statistics institute INSEE); Social Security Central Agency (ACOSS).
The rocketing public debt of the capitalist countries: why and how?
The most spectacular growth in recent years has been in the public debt of the imperialist countries. This indebtedness has followed an infinitely faster rhythm than that of the dominated countries.
From 1980 to the present, the volume of public debt of the dominated countries increased by a coefficient of 2.8, rising from US$500 billion to US$1,396 billion. During the same period, the volume of the United States’ public debt increased by a coefficient of 15.4, rising from US$930 billion to US$14,345 billion. France’s debt rose by a coefficient of 18. Today, the public debt in most of the imperialist countries, constantly inflated by the states’ obligation to seek funding in the speculative markets, is close to and sometimes exceeds the annual gross domestic product (GDP).
A graph published in July 2011 by the Wall Street Journal shows the extent of the situation.
This curve represents the public debt limit authorised by the United States Congress. Publishing this table, The Wall Street Journal strongly emphasised (31 May 2011) that “a vote for increasing the debt limit is often a routine matter in Congress, because in essence it amounts to paying the nation’s bills for expenses already incurred.” We shall return later to the reasons why, in 2011, the negotiations in Congress on increasing this new limit is provoking an unprecedented crisis, refracting all the elements of the world crisis.
At this stage, we draw the attention of our readers to the suddenness of the curve progression from the mid-1980s onwards, becoming more pronounced in recent years. That progression is the sky- rocketing of the public debt.
It registered an increase between 1940 and 1950 (in connection with the US’s indebtedness in the course of the Second World War), then remained relatively stable in global volume up to 1974. from 1974 onwards, it shot up progressively. There is nothing accidental in this – the public deficits curve is parallel to that of the public debt.
Public debt saw a very strong progression from the 1980s onwards in all of the imperialist countries, reflecting the extended impact of the collapse of the Bretton Woods international monetary system. Following the example of what was happening to the dominated countries, Nixon’s decision to delink the dollar from gold was to play a decisive role. But the process for the developed capitalist countries would be longer and would pass through several stages.
Up to the early 1970s, except for the two world wars, most of the capitalist states’ resources derived from taxation (direct or indirect). When tax revenues were insufficient, they turned to the central bank coffers for help (borrowing from the markets playing a non- determining role). In the early 1970s, budget financing by the central bank started to be limited, disappearing over the following decades as the central banks were made “independent” – at least formally.
In this context, the delinking of the dollar from gold, the monetary chaos that resulted and the boost this gave to the financial markets, combined with a restructuring of the conditions for realising profit (including an offensive against the value of labour-power), led the governments to force the state to seek funding in the financial markets dominated by US finance capital. This was the origin of the explosion of public debt in the imperialist countries.
The second reason for that explosion, within the framework of the all-out offensive against the value of labour- power and the public services, was the decline in budget revenues: a fall in tax receipts due to tax exemptions which largely benefited the capitalists.
In these conditions, following a policy of reducing spending (cutting public sector jobs, dismantling and privatising public services, etc.) and coming up against the class struggle, the governments moved to take on new debt to compensate for the difference between diminished budget revenues and the essential requirement to honour existing debt owed to the markets. This new debt was solely intended to ensure that finance capital was reimbursed normally, so that the debt would thus be well-regarded by the credit ratings agencies, allowing the state to borrow further at a price (interest rate) that would not soar too high.
Debt inflates debt
But it was not simply a question of paying down the debt. When the financial markets lend to a state, what interests them above all is that the capital comes back to them increased by interest. The opportunity to receive that interest (assuming the debtor state is able to honour its commitments) is monetised in the markets, where the security (bond, Treasury bill) can be traded millions of times before its maturity date. Interest rates and speculation on interest rates and debt play an essential role in the debt explosion. To date, global debt is estimated at US$90,000 billion (US$40,000 billion in public debt and US$50,000 billion in private debt). The market in that debt represents around half the total amount of the global capital market. Above all, the debt market is the basis for another market, that of interest rates. Speculation on interest rates takes the form of derivative products, which in June 2010 were estimated to total around US$452,000 billion, or five times the total amount of the debt itself. The interest rate market alone represents some 80 percent of the global market in derivatives.
One can understand that in these conditions, henceforth debt and interest rates constitutes a crucial issue for the world economy, due to both their volume and the volume of more or less fictitious capital whose speculative movements are linked to them.
Now, what is the interest rate of the public debt? It is a levy on the state’s future income. If state revenues diminish for the reasons referred to earlier, and if they diminish even further due to anaemic economic growth, despite the injection of parasitic drugs, the state must borrow more in order to pay the interest on its debt. These new loans are added to the old debt, inflating the total debt through a “snowball” effect. To which one can add the impact of the interest rate increases to push down the conditions for realising profit, which we have seen over the last 30 years. Finally, we can add – since late 2007 – the massive bailouts given to the banks which, combined with tax income losses due to the recession, have increased the “snowball” effect. For the European Union, public debt grew from €7,300 billion to €8,700 billion between 2007 and 2009.
Paying interest on the debt is the main driving-force for inflating the debt. Here we find a second similarity with the debt of the dominated countries.
Theoretically, this debt growth has a limit: bankruptcy due to indebtedness far exceeding the possibility of repayment.
All the more so since the accumulation of debt worries the financial markets, which then demand a higher interest rate, making states go down on their knees, and states in turn introduce new cuts in order to repay the new debt (and the interest) which was taken out in order to repay the old debt.
Debt then becomes a lever for new attacks on the value of labour-power, a veritable weapon of mass destruction of the productive forces, and beyond that, of the whole of human civilisation. At the risk of repeating ourselves, let us insist on the fact that the debt we are referring to here is not the result of any kind of drift or bad management of a capitalist system. No. We are talking about public debt as the extraordinary parasitic excrescence of a capitalist system that no longer has at its disposal resources suitable for its survival and growth, and which owes its “salvation” to resorting to parasitic and destructive means that every day are pushing humankind faster towards a deadly outcome.
Only the working class is capable of freeing humankind from this. And it is even more necessary that it should not be hindered in its emancipatory task by the apparatuses which, far from fighting that machine of destruction, are accompanying it and embracing its every move.
From the introduction of the “dictatorship of the markets”…
It is considered good manners these days (including in certain “left-wing” circles which on the other hand declare their support for servicing the debt and reducing public deficits) to worry about the dictatorship of the markets. Let us point out that this phenomenon is nothing new. Twelve years ago we were already writing:
“US imperialism, expressing the interests of capital in general, would begin this offensive by forcing all states to implement destructive, so-called “anti- inflationary”, policies, to abandon protectionist policies (reducing customs rights) and launch “reforms” favouring the free circulation of capital. At the same time, this deregulation would facilitate the subjugation of the states to the financial markets. Forced by finance capital – through the international financial organisations (International Monetary Fund, World Bank, European Union) – to privatise and reduce their tax revenues, states would have to obtain refinancing in the financial markets. An impressive mass of securities (Treasury bills, etc.) had thus been issued. Carrying out its destructive policy, finance capital had the states under its thumb, forcing them to deregulate even further, to privatise, to reduce the number of public employees (…).
This process, which is the basis for what is referred to as the “dictatorship of the markets”, constitutes a clear swing towards an economy which retains commercial production as its foundation, in the process of which surplus-value is extracted, but where the very conditions for valorising capital in production are increasingly determined by speculation, which destroys the productive forces.
This explains why financial deregulation has often preceded other forms of deregulation (except for monetary deregulation, without which financial deregulation would not have been possible). This also explains why it began in the United States.
Financial deregulation consisted above all in eliminating the national and international regulations that could have acted as a brake on moving capital, in other words on speculation.
These measures were of a fiscal nature. Thus, in the United States in 1984, the deduction of tax at source on securities sold to non-residents was abolished. This measure favoured the purchase of US securities by foreigners, at a time when the US deficit was growing significantly. The whole phenomenon of the growth in tax havens originated in this tax deregulation, which was propagated to varying degrees in several countries (…).
Similarly, restrictions designed to control or even reduce the mass of debt were gradually lifted. Thus in 1986, the debt control system was completely abandoned in France, in order to allow banks and businesses to have the freest possible access to capital markets for their speculative operations.
In the same area, those countries which had introduced exchange controls lifted them. Access to the global capital market was facilitated (…). The EEC (which has since become the European Union) placed financial deregulation at the centre of its process by issuing directives aimed at the free movement of capital in the countries of Europe. These measures especially concerned removing all limitations on investment and lifting all existing constraints on sectors that were regulated or enjoyed a monopoly (see below for banking deregulation). This applied equally to high-street savings banks and even to financing for access to housing.
Another example of deregulation is the lifting of all constraints imposed on the banks, insurance companies and pension funds for their speculative investments.” 
… to the sovereignty of all nations being challenged
Those lines were written twelve years ago. Is it an exaggeration to say that they described the developments that were to follow? Is it not clear, for example, how the subprime loans mechanism – which was “necessary” for manufacturing creditworthiness for millions of ordinary American families and then for putting them into debt – was contained in the measures we have described here?
Is it not clear that the mechanics set in motion in 1971 has resulted in the current situation, where astronomical levels of debt are subjecting states and their economies to the “dictatorship of the markets”, through the perfectly artificial, deliberate and induced inflation of a debt whose sole function is to impose an ever- heavier tax on the wealth of nations, and to impose the deadliest of blows against the working classes and peoples?
However, a threshold was crossed between the writing of those lines in 1999 and today. Quantity has been transformed into quality.
From now on (following a plan that finally displays many points in common with what happened with the dominated countries during the 1970s and ‘80s), the sovereignty of all nations, including the oldest imperialist nations, will be challenged.
Thus, Jean-Claude Juncker, leader of the euro zone Finance Ministers, pleaded for the creation of “a privatisation agency independent of the [Greek] government, that will include foreign experts”.  Even the “socialist” Greek government, which had agreed to everything else proposed to it, were worried about this.
“The European Union cannot lead this privatisation programme”, said Haris Pamboukis, Greece’s minister for investment, who saw it as “a disaster for the image of the EU in Greece. It would be called a European protectorate and the Greeks would rightly find it hard to come to terms with it”.
The IMF on the front line
But it is the new role of the IMF, particularly in the Old World, that provides a concentrated expression of the tendency for all nations – including the developed capitalist countries – to be placed under close supervision.
Up until recently – and unlike what happened with the dominated countries – the policies of budget cuts, dismantling public services and submitting to the demands of the financial markets were carried out in the imperialist or “advanced” countries following routes and using tools that did not involve the direct intervention of the IMF and its structural adjustment policies (despite the similarity of the policies being implemented). In Europe, for example, the European Union, the Maastricht Treaty, the Stability Pact and its convergence criteria (and for some countries the euro) were the tools used to introduce permanent structural adjustment policies hiding behind another name. From 2009-10, the European Union’s process showed itself to be insufficient for the task of imposing plans for destruction of an unprecedented scope and depth. It needed the IMF to enter the stage. Of course, for decades now the IMF had been publishing reports on the different European imperialist countries, recommending to tighten the vice by one turn here, two or three turns there. But each time it left it to the institutions of the European Union to do its dirty work. 2010 marked the turning-point. The IMF entered the stage directly. “The barbarians are at the gate”, one Irish trade unionist exclaimed in 2010, when the IMF Mission came to his country to impose its austerity plan directly. That was the start of a long series of visits. The very creation of a “troika” (European Union, ECB and IMF) led by the IMF demonstrates the powerlessness of the “European construction” put in place under the aegis of US imperialism to resolve the issues on its own.
In Portugal, the “troika” came before the June 2011 legislative elections to impose a deadly plan of privatisation, deregulation and pillage, demanding (and obtaining) the signature of the leaders of all the institutional parties before the elections as a condition for being able to borrow money after the elections. Within hours of being elected head of the IMF, new Director General Christine Lagarde called on the Greek (right-wing) opposition to support the austerity plan submitted to Parliament by “socialist” Prime Minister Papandreou.
The IMF reoffended a few weeks later, this time in relation to France, recommending very strongly to all candidates for the 2012 presidential election that they introduce a constitutional constraint aimed at turning the reduction of the public deficits into an obligation inscribed in the Constitution. European Central Bank President Jean- Claude Trichet said in a speech on 2 June 2011 (ironically, on the occasion of receiving the Charlemagne Prize 2011 in Aix-la-Chapelle) :
“In all domains this calls for continuing to strengthen Europe’s institutional framework. (…) Arrangements are currently in place, involving financial assistance under strict conditions, fully in line with the IMF policy. (…) It is of paramount importance that adjustment occurs; that countries – governments and opposition – unite behind the effort; and that contributing countries survey with great care the implementation of the programme. But if a country is still not delivering, I think all would agree that the second stage has to be different. Would it go too far if we envisaged, at this second stage, giving euro area authorities a much deeper and authoritative say in the formation of the country’ s economic policies if these go harmfully astray? (…) In the new concept, it would be not only possible, but in some cases compulsory, in a second stage for the European authorities – namely the Council on the basis of a proposal by the Commission, in liaison with the ECB – to take themselves decisions applicable in the economy concerned.
One way this could be imagined is for European authorities to have the right to veto some national economic policy decisions. The remit could include, in particular, major fiscal spending items and elements essential for the country’s competitiveness.”
This speech by Trichet admirably and openly summarises the salient aspects of the current situation. In it, he defines the European Union as having to implement a policy “fully in line with the IMF policy”. Knowing that the IMF is itself dominated by the US administration, it is a clear demand to be Washington’s subsidiary instrument. Moreover, a majority- opposition consensus is put forward here not as an economic element, but as an institutional necessity. This has a name: it is the quest for the introduction of a supranational corporatism, to which we will return later. Finally, the right of “contributing countries” to examine the conditions for implementing the plans, including the proposal that the euro zone authorities (in liaison with the ECB, Trichet clarifies) would be able to use their veto, particularly on the drafting of the budget, concentrates the whole situation. Because, what is the approval of a budget by a parliament, if not – in principle – the expression of a nation’s sovereignty? If it succeeds, placing under supervision the drafting and approval of budgets would erase any trace of the semblance of national sovereignty.
The euro, weapon of destruction
One should not be surprised that of the imperialist countries, those in the euro zone have been most directly affected in 2011. For its part – and against the current of all the left-wing and far-left elements that are speaking in favour of a “correct” use of the euro – the Fourth International has from the outset denounced the introduction of the single European currency as an instrument aiming to compensate for the weaknesses, hesitations and wavering of the national bourgeoisies of the different countries of Europe in order to force them at whatever cost to align their policy with the clearly- understood needs and demands of the United States Federal Reserve. Things were announced in advance.
On 13 October 1997, Hans Tietmeyer, one of the first and leading officials of the European Central Bank, said: “The Maastricht Treaty commits national budget policy to also avoid in the future, in the common interest, excessive deficits. This requirement made on budget policy is justified (…). Nevertheless, it is clear that it profoundly encroaches on the primary competences of the national parliaments, especially their right to decide to fund the budget through borrowing.” 
Wim Duisenberg, the ECB’s first President, was obliged to acknowledge clearly in an interview in Le Monde (31 December 1998): “For the first time in history, eleven sovereign states are deciding to abandon their national currency and their sovereignty.”
Tietmeyer was at that time the conspicuous author of the following statement: “We can no longer play with the exchange rates. (…) The burden of adjustment (…) will henceforth rest exclusively on national labour costs. Wages and all the levers linked to wages will have to be used to deal with any differences in productivity.”
But this is where the huge labyrinthine system set up by imperialism to suppress any class struggle came up precisely against the reality of the class struggle. What happened? As Tietmeyer had advocated, the various European Union governments of all political colours (at least, all those that were in the euro zone) had played the game of shifting “the burden” of adjustment onto the cost of labour. Over the course of the last decade, they have all, without exception, governments of the “left” and of the right alike, hammered on the value of labour- power as the only adjustment variable. Only, there you have it: the demand for reducing the cost of labour was such that it in order to be able to impose it, it implied inflicting major defeats on the working classes concerned. But they fought back. They resisted. One lost count of the strikes, general strikes and million- strong demonstrations that took place over the last decade in France, Great Britain, Greece, Italy, Portugal and many more countries. Those movements of worker resistance, in a situation where each of the national bourgeoisies had been too weakened to impose a fascist-style or corporatist dictatorial regime, prevented the supranational corporatism that the European Union had to impose from coming to fruition. To be sure, the working classes suffered major blows. Considerable breaches have been opened in the independence of the labour organisations. Of course, at the highest levels of the organisations, the leaders agreed to go very far down the path of betraying the class movements. But the resistance of the working class, combined with the depth of the crisis of decay of capitalism itself, meant that what was gained by the capitalist class with the help of the apparatuses constituted deadly blows against the working class and youth, but at the same time a limited “gain” that was very insufficient in terms of what was needed to respond to the valorisation requirements of the whole of finance capital. From this point on, the existing mechanism was no longer sufficient. The inability of each of the governments to “claw back” from the working class’s labour-power what it was squandering on paying interest on the debt, together with the bank bailouts, created a novel situation, one in which the IMF had to come directly to the rescue – a situation in which they had to bring in the “troika” in an attempt to place wide consensus-building and a Europe-wide governance on the agenda, so that everybody would be bound to the task of plugging the leaks in a capitalist system that was taking on water everywhere one looked.
The “troika” enters the stage
Debt is just one weapon in the hands of the big banks, pension funds and hedge funds, used to force governments not only to bail them out after the significant losses sustained through the subprime crisis, but also to guarantee that the loans extended to states will be honoured in full. It is a weapon that the institutions responsible for speaking in the name of capital’s general interests (rather than the particular interests of this or that national bourgeoisie) take turns to wave in order to push the plans for destruction. It is no accident that the political and institutional concept of the “troika” appeared recently in the Old World. The IMF is leading a team made up of the European Union, the European Central bank and the IMF itself. A team whose role, from Portugal to Greece, from Ireland to Spain, and now in France and other countries, is to dictate the drastic conditions for the destructive austerity plans that aim to “reduce the deficits” and guarantee in full the payment of interest on the debt, in line with the demands of the bankers, speculators and international financial institutions. Through the orders issued by the IMF, it is indeed United States imperialism that is talking. The way it is doing so can only sharpen the contradictions at every level. Contradictions in each country, where the troika’s plans implies a confrontation with the working class. The “troika” is there to urge the Greek “socialist” Papandreou, the Spanish “socialist” Zapatero, the Italian right-wing Prime Minister Berlusconi and all the others to take the harshest measures against the working class, national sovereignty, democracy and labour gains; it is there to make sure they do not waver in the face of worker resistance. To be sure, up to now the leaderships of all the labour organisations – both political and trade union – have given in to this extraordinary corporatist pressure. This allowed the governments to contain the seven or eight general strikes in Greece, the mass mobilisations in Spain, in Portugal, Great Britain and elsewhere. In France itself, this allowed the government to block the movement of millions of workers against the pensions reform in the autumn of 2010. But until when? This very fragile balance will not last forever. The conditions surrounding the holding of the European Summit of 21 July and the statement by the euro zone heads of state and government were most revealing. Two days before the Summit, due to the difference of interests between French imperialism and German imperialism, Merkel said that there would be no agreement. Direct orders from the IMF and Obama issued in the 48 hours leading up to the Summit resulted in the famous 21 July statement, through which all of the euro zone states “mutualised” the guarantee given to the speculators and bankers around the world, that the Greek debt would be honoured. They are making that guarantee by committing to impose austerity plans of unprecedented brutality in each one of their countries. In a sense, therefore, it is a commitment to deliver the most brutal of blows against the working class in a co-ordinated way, but on a scale that is totally unfeasible. And they know it. Even while delivering that 21 July statement, the Sarkozys, Merkels, Berlusconis and the rest knew perfectly well that they could not impose the plans they were committing to. Despite this, they made the commitment. When they stated on 21 July that the measures taken were exceptional, only related to Greece and would not be applied to any other European state, they knew that the same processes would be repeated elsewhere in the next few weeks. They knew this, and yet issued their statement. It is a veritable headlong flight, a frantic race being run by the leaders of the imperialist powers who know that the conditions are not there for them to inflict on the working class the resounding defeat implied by the austerity plans announced so far, but who nevertheless cannot commit to anything else for fear of provoking the anger of the “markets”.
This situation is the source of the major crisis that is hitting all the institutions of the European Union and the various governments. This poses the problem of the solution which, from the point of view of the masses, can only be resolved satisfactorily in the field of putting a stop to all the plans, therefore in the capacity of the working class to block capital’s destructive offensive (which brings us back to the policy of the apparatuses).
Crisis in the United States
There are also contradictions at the highest levels of the world’s most powerful imperialism. The threat that is weighing on the assets of all the banks and international institutions, exposed as they are to the risk of the astronomical debt of Greece, Ireland, etc., is affecting the positions of US finance capital itself. However, when it comes to the US economy, debt plays a slightly different role. Due to the dominant position of US capitalism at the world level, the dollar is the obligatory reserve currency for all of the world’s economies. The whole world is financing the US economy, using tens of trillions of dollars held as exchange reserves by the central banks. In a way, in relation to the world economy the US economy knows that it will always get a seat for the show – it is sure that the reliability of its commitments could not be questioned for fear of destabilising the world order. Now, in the summer of 2011, the debt crisis is also the US debt crisis.
In mid-May, the federal state’s gross debt of around US$14,300 billion reached the ceiling authorised by Congress.
Everybody understood that a payment default by the United States would unbalance the whole world economy. First and foremost, this was about a trial of political strength. As our comrades in Socialist Organizer point out elsewhere in this issue of La Vérité-The Truth, this was an expression at the highest level of the most powerful imperialism’s crisis of political domination. In itself, raising the federal debt ceiling in the United States is commonplace, something Congress has voted through dozens of times over recent years. The trial of strength around the federal debt limit was a concentrated expression of the dislocating crisis that is hitting the highest levels of US imperialism. Of course, both Democrats and Republicans are agreed that the consequences of the crisis should be passed on to the working class and its gains. But up to what point? During his “negotiations” with the Republican majority in Congress, Obama put on the table his determination to deliver major blows to Medicare, Medicaid and the social security system, adding to the significant attacks that are pushing whole sectors of the American working class onto the path to unprecedented levels of impoverishment, poverty, destitution and job insecurity. But even this was not enough to satisfy the demands of the most reactionary wing of the capitalist class (the Tea Party), which has influence with the Republican majority. They always wanted more. Since the eruption of the subprime crisis, the American working class has been the target of the most violent of attacks by US capitalism. Since his arrival in power, President Obama, despite carrying the hopes of the Blacks, the youth, the oppressed and the exploited, has turned his back on the limited commitments he had made, most notably on Social Security, encouraging the partnership through which the trade union organisations have been forced to give up labour gains, supposedly in order to save jobs. But all that was not enough to put “America” back on the road of growth in profits. The capitalist class was overwhelmed by anxiety over its own powerlessness to halt the crisis. Whole sectors became radicalised at a rate that was previously unheard of, demanding a move in force against the working class and brutal demolition measures, following the example of what the Governor of Wisconsin had done in recent months, encouraged by the federal administration. A whole sector of US finance capital which had never regarded Obama – despite all his commitments – as a reliable representative of its interests, grasped every opportunity to exercise maximum pressure to obtain more and more in terms of dismantling labour rights. This sector pushed for a brutal confrontation with the working class. But it is precisely the events in Wisconsin which showed that, even when the AFL-CIO leadership were making offers of service and putting on the table hundreds of millions of dollars in concessions, this neither defused the massive mobilisation of workers and youth, carrying along with them whole sectors of their organisations, nor did it lead to the Governor agreeing to negotiate anything. It all comes down to the class struggle. Therefore, the crucial question, in the United States and everywhere else in the world is: the independence of the labour movement.
Let us recall what we wrote more than twelve years ago:
“At the end of the 20th century, it is indisputable that at both the international level and in every country, under different forms and in different relations, the foundation stone of the policies being implemented is a new type of corporatism. Corporatism in the sense that at the heart of all the policies being implemented lies the transformation of the trade union organisations into component parts of so- called “civil society”. In the name of a supposed “general interest”, the labour organisations are being commanded – increasingly through restrictive legislative frameworks – to become part of the policies and pacts labelled as “social” or “for jobs”. The content of those pacts is unequivocal: the questioning of the collective guarantees that constitute the working class as a class, in order to impose the dispersal and individualisation of wage-earners and, above all, the transformation of the trade unions into subsidiary cogs in the machine. (…) Under ascendant capitalism, the variable that thwarted the tendency of the rate of profit to fall was the expansion of the world market. Under decayed imperialism, the only adjustment variable increasingly boils down to lowering the cost of labour. (…) These policies are being expressed not only in the orientation of every government, but also in the change in the role of the international institutions. On this level, the European Union constitutes an unprecedented testing-ground (…). We are moving into a new situation of supranational neo-corporatism that is linked directly to the orders issued by the United States Federal Reserve. Carrying out this policy of breaking up labour- power requires the apparatuses of the so- called Socialist International and those resulting from the international apparatus of Stalinism to move into the front line.” 
Is this not what we are seeing today? In this phase of unprecedented decay of the system of private ownership of the means of production, valorising the gigantic mass of available capital requires the mass destruction of the productive forces. The main obstacle facing the working class in its move to resist this policy aimed at breaking it up as a class, is the consensus to which the leaders of the parties historically located within the labour movement and the leaders of the labour organisations are lending themselves. This consensus is expressed in the positions adopted by the Papandreous, Zapateros, Socrates and others in the implementation of the plans for destruction. This consensus is expressed in the way in which the International Trade Union Confederation (ITUC), the European Trade Union Confederation (ETUC) and the leaderships of trade union organisations in various countries are agreeing to support the reduction of the public deficits. (Let us recall, for example, that in the middle of the Greek debt crisis, the ETUC Congress meeting in Athens in May 2011 passed a resolution in which all of the national trade unions present voted unanimously in favour of a gradual reduction of the public deficits). Without exception, all of the leaders of the Socialist Parties and Communist Parties throughout the world are putting forward proposals for “reducing the public deficit”, and all of them recognise the legitimacy of the debt. Without exception, including the United Secretariat. 
These problems in the labour movement are occurring everywhere. In France, the Socialist Party is trying to outdo Sarkozy, declaring that it is in favour of reducing the public deficit to under 3 percent of GDP by 2013. Germany decided to put a brake on indebtedness by changing basic law, voted through jointly by the SPD and CDU-CSU in 2009. In Italy, the “left” parliamentary group did not vote for the austerity plan, but the leaders of the parties of the left agreed to a “pact” on 9 July which according to daily newspaper La Repubblica “advocates reforms that are even more unpopular than those proposed by the government for balancing the budget in 2014, requiring more blood, sweat and tears”. And everywhere, the trade union organisations are being summoned to become part of the governance within the framework of consensus!
A line of demarcation within the labour movement
This brings us to the political struggle of the militant activists of the Fourth International. “Cancel the debt! Out with the IMF-EU-ECB “troika” and its diktats! No consensus to reduce public deficits!”. These three slogans draw a line of demarcation within the labour movement. In Greece, Spain, Italy, Portugal, in France with the pensions movement, in Great Britain, in the United States with Wisconsin – everywhere, the workers are engaging in the most determined of class mobilisations against the deadly plans that are hitting them. Everywhere, they are coming up against hesitation and prevarication – when it is not out-and-out treachery – on the part of leaderships that, contrary to the movement by the working class, are seeking to impede the resistance movement. Under the most diverse of forms, the militant activists of the Fourth International, while respecting the labour organisations’ prerogatives, consider it their responsibility to help to regroup all those who are refusing to subject the working class organisations to the supposedly inevitable requirement to reduce public deficits and service the debt. Within the class struggle, within the political initiatives taken as part of that struggle, they are led to help the working class to advance down that path, in particular within the framework of the International Liaison Committee of Workers and Peoples and the decisions taken at the Algiers Conference in November 2010, and the united front initiatives in different countries.
Everybody understands that the destructive offensive being waged in the name of the debt and reducing public deficits is sharpening all the class contradictions. It is paving the way – under forms and rhythms that cannot be known in advance – to an inevitable clash, not only between the working class and the capitalist class, but also between, on the one hand, the working class, militant activists and whole sectors of the labour organisations that are seeking to resist, and on the other hand, those at the highest levels of the same organisations who would like to impose, at whatever cost, a policy of escorting the plans, clearing the path to supranational corporatism. This is why, under forms that vary from country to country and from continent to continent, the starting-point for the policy of the militant activists of the Fourth International is the three slogans mentioned above, linked to the affirmation of the legitimate character of all labour demands in response to and against those plans. Working through these slogans calls for the demand for the expropriation of the big banks and all of the institutions of international finance capital, which is an indispensible measure to be taken by any workers’ and peasants’ government wishing genuinely to defend the interests of the vast majority of the population. Socialism or barbarism: this choice, which is more than ever on the agenda, cannot be resolved without clarifying at the outset the positioning on the essential questions of the debt and the public deficit.
The line of demarcation within the labour movement on these questions has the same significance as the line drawn in 1914, which saw the separation between those who agreed to subordinate themselves to the imperialist governments engaged in the murderous war and those who proudly stood by the flag of proletarian internationalism and the class independence of the labour organisations against the war. The debt of 2011 is the imperialist war of 1914 against the peoples. The demand to cancel the debt and refuse to be subordinated to the public deficit is the flag of class independence and proletarian internationalism. It is the lever without which it is impossible to fight to save human civilisation.
It is the lever with which the militant activists of the Fourth International are fighting together with the workers and activists of all tendencies to help the class struggle rise up and sweep away the rot and decay of a capitalist system in its advanced death-throes. It is the lever with which it is possible to help the working class to constitute its own movement for saving human civilisation from the decline that is threatening it. It is the lever with which, as far as we are concerned and under the transitional forms of building the party in which we are engaged, it falls to us to help to build the revolutionary party, to strengthen the ranks of the Fourth International in the overall fight for the Workers’ International and the emancipation of humankind.
 The “union sacrée”, or “sacred union”, was the expression in France of the Second International’s capitulation to imperialism during World War One. An important part of the Socialist movement entered a truce with their bourgeoisie, agreeing not to oppose the government or start any strike.
 John Lipsky, Acting Managing Director of the International Monetary Fund (IMF), IMF Press Conference at the Conclusion of the Euro Area Article IV Mission 2011, 20 June 2011.
 Michel Dauberny, “Monetary crisis and financial crisis, particular forms of the decay of senile imperialism”, La Vérité- The Truth, Issue No.14, May 1995.
 Karl Marx, Capital, Vol.III, Part V, Chapter 27, “The Role of Credit in Capitalist Production”.
 Karl Marx, Capital, Vol.III, Part III, Chapter 15, “Exposition of the Internal Contradictions of the Law”.
 Marx, Capital, Vol.III, Part V, Chapter 27.
 Karl Marx and Friedrich Engels, The German Ideology, Vol.I, Part 1D. “Proletarians and Communism”.
 Rosa Luxemburg wrote in 1913, in The Accumulation of Capital: “From the purely economic point of view, [militarism] is a pre-eminent means for the realisation of surplus value; it is in itself a province of accumulation. (…) In this way capital turns historical necessity into a virtue: the ever fiercer ‘competition’ in the capitalist world itself provides a field for accumulation of the first magnitude. Capital increasingly employs militarism for implementing a foreign and colonial policy to get hold of the means of production and labour power of non-capitalist countries and societies. This same militarism works in a like manner in the capitalist countries to divert purchasing power away from the non-capitalist strata. The representatives of simple commodity production and the working class are affected alike in this way. At their expense, the accumulation of capital is raised to the highest power, by robbing the one of their productive forces and by depressing the other’s standard of living. Needless to say, after a certain stage the conditions for the accumulation of capital both at home and abroad turn into their very opposite – they become conditions for the decline of capitalism.” In turn, Gerard Bloch developed this point as follows: “It is only through the development of a branch of the economy – that of weapons – of which the product is completely excluded from the economy, which does not enter the cycle as either a means of consumption or a means of production and exists parasitically, consuming means of subsistence and means of production without giving anything in return, that the bourgeoisie can rid itself of the burden of a surplus of means of consumption and production. It is only through the mass destruction of productive capital, of productive forces – which the stockpiling of means of destruction precisely prepares for – that it can “stabilise the economy” and recover a satisfactory rate of profit. The super- exploitation that generally comes with the war economy would in no way be in itself sufficient for this.” (Gerard Bloch, “Marx’s historic prediction – The question of the productive forces”, La Vérité-The Truth, Issue No.556, April 1972)
 See V. I. Lenin, Imperialism, the Highest Stage of Capitalism.
 Let us point out that what is true for money (which is the subject of this contribution) is just as true today for machinery. We would need a whole article in La Vérité-The Truth to examine the role of the internet and new information and communication technology in speeding up the process of the destruction of the productive forces, notably by deskilling labour-power and atomising it on a global scale.
 This refers to the amount of precious metals contained in early coinage.
 The same international conference at Bretton Woods (United States) saw the setting-up of the IMF and the World Bank.
 Marx’s formulation of “fictitious capital” is value (in the form of credit, shares, debt, speculation and various forms of paper money) above and beyond what can be realised in the form of commodities.
 “A kite is a domestic bill of exchange, and kite-flying is a method of obtaining accommodations from the banks under the form of negotiating bills of exchange. For example, a merchant wants money, but he does not care to make an application for an accommodation, he prefers to deal in what is called business paper. He therefore sits down and draws an inland bill of exchange upon his associate in New Orleans, payable in a certain number of days, presents it to the bank, and obtains the money, deducting the discount and the price of exchange. In other words he sends up a kite. When this bill falls due his correspondent at New Orleans sends up another kite; he draws a second bill of exchange upon the New York merchant, sells it to a bank at New Orleans, and pays the first. The merchant at New York in the fullness of time sends up a third kite – or draws a third bill of exchange and pays the second. Thus the game goes on; kite is sent up after kite; the original debt to the bank is kept like a shuttlecock constantly in the air; and the trader has the appearance of doing great business, when in fact he is only borrowing money.” (“‘Kiting’ in Wall Street”, editorial in New York’s Evening Post, 19 August 1841, reproduced in Power for Sanity: Selected Editorials of William Cullen Bryant, 1829-1861, Fordham University Press, 1994.)
 August 1971 statement by the OCI, reproduced as an annexe to Class Struggle and Globalisation and in La Vérité-The Truth special issue no.60-61, dedicated to Pierre Lambert.
 Daniel Gluckstein, Class Struggle and Globalisation, Chapter 10, “The new role of monetary policy, or the dictatorship of the interest rate”. (APIO, 2000)
 The EEC (European Economic Community) has since become the European Union.
 Excerpt from the collective work The International Monetary Fund (IMF): an enterprise for pillaging the peoples, which compiled the preparatory documents for the Lima Tribunal (published by SELIO, Paris).
 Published in Informations Ouvrières, issue no.1437, 27 September 1989.
 La Vérité-The Truth, issue no.5 (new series), February 1993: “Has the programme of the Fourth International been verified by the events?” (report presented on behalf of the International Secretariat in preparation of the World Conference to Reproclaim the Fourth International).
 IMF Factsheet, “Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative”.
 The HIPC represent a little over 700 million inhabitants, while the number of people in the world surviving on less than US$2 per day is around 3.5 billion.
 We should bear in mind that the term “emerging countries” has been used since the early 1980s (it was only picked up by the media much later) to describe countries where stock exchanges were being set up and an intensive policy of privatisation was being pursued, consequently offering juicy opportunities for “investors”.
 Class Struggle and Globalisation, complementary study entitled: “Taking stock of fifty years of world history: myths and realities of the ‘30 glorious years’ and the twenty years that followed”.
 Interview with German weekly Der Spiegel, May 2011.
 The Charlemagne Prize has been awarded once a year since 1950 by the German city of Aachen “for the most valuable contribution in the services of European understanding and work for the community, and in the services of humanity and world peace”.
 This and the following two quotes are from Class Struggle and Globalisation.
 Class Struggle and Globalisation, chapter entitled “The institutions of democracy built in the epoch of ascendant capitalism”.
 Inprecor, the United Secretariat’s organ, welcomed the fact that in Greece, the “Left Tribune” group, which for an initial period had “limited” itself to “agitating only for the cancellation of the public debt and for Greece to leave the euro zone”, had changed policy, “opting clearly in favour of the setting-up of a commission to audit the debt as the axis of its political work”. Inprecor commented: “Obviously this was the right choice.” So it would be a mistake to demand the cancellation of the debt? In France, in July 2011 the NPA [New Anti-capitalist Party] jointly signed a public statement with the Communist Party, the Party of the Left and other organisations which set aside the slogan of cancelling the debt and put in its place the demand for a moratorium (in other words a temporary suspension) and an audit – in other words, what the European Central Bank is doing, sorting the “good” repayable debt from the “bad” debt to be rescheduled.