George Bush’s apocalyptic televised address in the US last week will have signalled the seriousness of this economic crisis – even to those not already aware of it.
Bringing the same analytical skills to the study of economic matters as he has done to foreign affairs, the president said in the private meeting convened to agree the bail out, “Unless we find some money, this sucker is going down.”
Job losses, house repossessions, inflation, falling wages and welfare cutbacks are now staring millions of working people in the face.
For many, the need to resist is obvious. But economic crises do not always produce resistance. Sometimes fear triumphs over anger and passivity over activity.
So what is the relationship between the economic crisis and the class struggle? This is the question that is now being asked throughout the labour movement.
Some guidance on this question is to be found in writings by the Russian revolutionary Leon Trotsky. In the 1920s and 1930s Trotsky made some valuable observations about the relationship between recession and resistance.
Trotsky started by rejecting the crude association of recession with rising class struggle.
Of course it may be the case that an economic downturn fuels resistance. But it is not always the case that if workers are hit with the big stick of recession they react by fighting back. Sometimes they are simply knocked politically unconscious. “There is,” wrote Trotsky, “no automatic dependence of the proletarian revolutionary movement upon a crisis.”
Under certain conditions an economic upswing could even generate more struggle than a downturn. If workers get jobs and feel more confident of their bargaining position with employers, they may then struggle to recoup what they lost in a downturn.
So what factors should we look at in order to judge the likely effects of an economic crisis on the class struggle?
Trotsky outlined two broad considerations that are vital in any analysis of this relationship.
First, he argued that we have to look at the boom and bust cycle against the longer term background of capitalist development.
Second, Trotsky argued that we have to look at the economic crisis in a wider political framework.
We have to look at the way in which imperialism, the crisis in the governmental system, party politics and, crucially, the consciousness and combativity of the working class all interact with economic downturns.
We can think of the recession as a beam of light and the political conditions with which it interacts as a prism. The same beam of light can be refracted in very different ways depending on the kind of prism it hits.
So let’s first look at the relationship between the broader phase of capitalist development and individual recessions.
Trotsky compared the economic upswing that he was analysing in the early 1920s with the upswing analysed by Karl Marx and Frederick Engels in the aftermath of the 1848 revolutions across Europe.
In the 1850s the upswing marked the beginning of a prolonged period of capitalist expansion – “an entire epoch of capitalist prosperity which lasted till 1873”, as Trotsky described it.
But, he added, the period after the Russian Revolution and the First World War was a period of capitalist decline in which “upswings can only be of a superficial… character, while crises become more and more prolonged and deeper going”.
Trotsky’s general point was this: “The movement of economic development is characterised by two curves of a different order.
The first and basic curve denotes the general growth of the productive forces… On the whole, this curve moves upward through the entire development of capitalism.
“This basic curve, however, rises upward unevenly. There are decades when it rises only by a hair’s breadth, then follow other decades when it swings steeply upward… In other words, history knows of epochs of swift as well as more gradual growth of the productive forces.”
Trotsky argued that a second curve showing the boom and bust cycle must be “superimposed” on this first curve if we are to correctly understand the likely impact of an economic crisis.
In this light, how should we view our own era?
Since the Second World War there have been two long phases of capitalist development.
From the end of the war to the early 1970s capitalism underwent its longest ever period of sustained economic expansion. Recessions were shallow and short lived, while economic growth was substantial and sustained.
Profit rates could be sustained at the same time as a rising standard of living for workers.
But since the 1970s growth rates have undergone serious decline and recessions have become sharper. Profit rates could only be sustained by attacks on workers’ living standards.
There have been recessions of varying severity in 1973, the early 1980s, the early 1990s, the late 1990s, in 2001 and now in 2008.
So the current recession comes after a prolonged period of slow economic growth. Indeed during the boom that immediately preceded this recession real wages in the US declined for four straight years in a row.
In Britain inflation has meant that real wages have been declining even before the recession took hold.
For many workers any sense of prosperity even in the boom years has been based on rising house prices and expanded credit. Now this is collapsing – and the full scale of the economic weakness of the system is being exposed.
Moreover, since the end of the Cold War in 1989 this weakened economic system has had as its counterpart a
global state system that has become more unstable and prone to war.
The recession is likely, over time, to worsen these conflicts since much of the instability is caused by the US using its overwhelming military power to offset its declining economic weight.
Now let’s look at the second element in Trotsky’s framework – the political conditions that recessions interact with.
The end of the post-war boom in 1973 brought about a wholesale alteration in politics.
The “you’ve never had it so good” era of rising living standards and the expansion of the welfare state was brought to a close by the Tory government of Edward Heath in the early 1970s and the Labour government of the late 1970s under Harold Wilson and James Callaghan.
But the counter-offensive really got under way with the election of Margaret Thatcher in this country in 1979 and Ronald Reagan in the US in 1980. Neoliberalism replaced Keynesianism as the economic orthodoxy and attacks on the welfare state and the trade unions became more fierce.
So we enter this recession with 25 years or more of experience of privatisation, deregulation and anti-union policies – and their effects in the minds of workers.
The latest crisis may be the most dramatic proof that the system doesn’t work, but it is not the first or only such proof.
The effects of the crisis will build on a deep scepticism about politicians and the political system in general, including scepticism about a Labour Party that has adopted Thatcherite economics virtually without amendment.
This sentiment has grown massively since the birth of the anti-capitalist movement in 1999. The scale of the anti-war movement after 2001 then radically enhanced it.
The same feeling has seeped into the trade union movement. Its first fruit in this area was the election of a raft of left wing general secretaries in 2002 and 2003. There has also been a political breach between the Labour leadership and many in the unions.
More recent and more important, though still limited, is the revival of industrial struggle that has been towed forward by this general radical mood.
Not all political developments have been to the left, of course. The rise in votes for the fascist British National Party and the resurgence of the Tories remind us that working class opinion polarises in a crisis – some blame the system, some blame the nearest scapegoat they can find.
Every crisis involves a race between the right and the left as to who can most convincingly express people’s anger at the system and suggest the most effective ways of fighting back.
As this recession strikes there is a pre-prepared disillusionment with the economic and political system among wide layers of the working class.
A mass anti-war movement has already mobilised millions and deepened scepticism about reformism.
Industrial resistance has been weak, though it has grown stronger in the last couple of years.
The push for coordinated public sector strikes remains a vital part of the response to the crisis. And the recent action on the London buses may well portend further strikes.
We must bend our every effort to ensure that the weaknesses of the movement are diminished and the possibilities of resistance are magnified.
That means a clear political argument about the nature of the capitalist system and an equally clear political commitment to working with others to defend workers from the effects of the recession wherever we can.
There is great danger here – but also a great opportunity for socialists.
A selection of Leon Trotsky’s writings on booms on slumps are available in the theory section of the Socialist Workers Party website. Go to » www.swp.org.uk/swp_archive_list.php?issue_id=398