It is generally accepted that the capitalist class agreed of the end of World War II to adopt a concessionary strategy of growth and full employment in the developed countries. It is usually known as the Bretton Woods agreements. This was combined with a welfare state, whose dimensions differed according to the particular country This was a deliberate concession predicated in the first instance on the defeat of fascism. which was itself an inchoate and irrational response to a capitalism under threat of disintegration or overthrow. Capitalist instability can also be contained for a time, through repression and the period during the two world wars saw wave after wave of repression in the developed countries most particularly in central and eastern Europe While the post-war period may be regarded as a period when the capitalist class had to concede, in reality it was also a period when such concessions could be made without any danger to capitalism itself unlike the period after the Russian Revolution. The Nazis had destroyed the most powerful working class in the world and Stalinism had destroyed the impetus of the Russian Revolution. Furthermore Stalinism prevented the working class from taking revolutionary action, most particularly in Europe. The immediate danger from the world working class was contained, but the underlying threat of the Russian Revolution remained. It had become built into the epoch itself, in spite of Stalinism. The resulting concessions made in the post-war period were spectacularly successful and provided a period of social democratic calm in western Europe. The standard of living of the workers in western Europe and the United States rose very considerably until the late 60s and early 70s. By 1968 the conditions which made the concessions viable had begun to evaporate. The working class was no longer disciplined by the history of the great depression, fascism and the world war. Stalinism was declining fast in its ability to control the working class and social democracy could no longer deliver what was required. Above all a capitalism without a reserve army of labour cannot control the class. Still less can it do so when much of the economy is nationalised and politicised so breaking commodity fetishism. Workers were demanding control and greater democracy in the workplace, as well as higher wages.

It became clear that the capitalist class could only revert to its former form to maintain control. It returned to finance capital. Some argue that there was a downturn in the rate of profit through wage rises and others argue that arise in the organic composition of capital was responsible. The capitalist class clearly needed to change the terms of its relations with the working class, whatever the immediate reason. Throughout, the major condition for the growth strategy was the cold war and the series of secondary hot wars that erupted - Korea and Vietnam were the two biggest. Wars permitted the west to invest heavily, in the military sector and so create demand, particularly for the producer goods sector. It raised the rate of profit, in large part through the exaggerated prices charged to the state, and it increased overall demand for goods including consumer goods. Taxation and the issue of government debt provided the funding, and it was generally supported by the public who took the view that the USSR was a menace to the 'free world'. Stalinism therefore, stabilised capitalism in three ways: firstly by providing the cold war with which capitalism could accumulate beyond its previous limits; secondly by controlling the working class through its communist parties; and thirdly through its responsibility for the creation of the anticommunist ideology, given the monstrosity of its operation. FINANCE CAPITAL AND ITS LIMITS The re-introduction of finance capital, in the 70s, was planned in its outlines though not in detail and it evolved over time, with privatisation, elevation of market-type controls over the public sector, outsourcing government activities, a massive extension of credit, both personal and corporate, and the imposition of IMF/World Bank market conditions on all loans to the third world. The short-termist nature of finance capital led to the elevation of ever-higher returns on capital as a crucial criterion of success. This led to ever higher share prices, based on ostensibly rising profits. In this period, the rich got richer and the poor poorer, some relatively and others absolutely. Income differentials have grown to levels not seen since the pre-war period. Asset prices rose spectacularly, given the wall of outstanding money looking for investment opportunities. In reality, profits were often specially driven up, using creative accounting through a number of well known and well tried methods. This helped the shift of income away from the working class and the growth of real returns to the capitalist class. In this period, the upper managers in large corporations came into their own, receiving salaries so enormous, running into millions and in a few cases hundreds of millions, that it is clear they had been enfranchised by the capitalist class itself as an entity worthy of equal rewards. The division between ownership and control appears, at one level, to have been resolved, in that the managers are also part of the capitalist class in their own right. The levels of unemployment rose equally spectacularly. In the third world. the numbers are so great that there can be more unemployed than employed. In the first world, the figures are obscured by the terms used. In the UK, there is a proclaimed difference between the employed and the economically inactive. It is clear that the latter figure is the one comparable with those down to 1970 and we can talk of 15% to 20% de facto unemployment. As the trade union leaders can no longer get economic concessions, they are bereft of a function and have lost members on a considerable scale. Trade unions have to return to their origins, when they were political, in order to achieve real gains. Today they arrange bargains with the Labour Party of a limited kind, expressing the real need to act politically, but their demands are so limited, they must be regarded as impotent.

In the present historical period from the late 1970s to the present, finance capital has reached the limit of its historical development, in that it has become cannibalistic. It has turned in on itself and begun to devour its own. Hedge funds and private equity represent sections of big capital that cannot invest in industry, because there is no opportunity to do so and get an acceptable rate of return in a short time. The return to finance capital in the 70s led once again to a lower industrial rate of growth in return for an export of capital, most particularly to China. Attempts to export capital to other parts of the world were not always successful and did lead to very large finance capitalist losses, as in the banking crisis over South America in the early eighties, or for that matter in relation to Argentina. Similarly, there was a financial crisis in East Asia in 1997. This led to an attempt to return capital to productive industry most particularly with the dot-com boom and indeed the whole period after the crisis of 1989-93. However, finance capital determined the firm and result of the boom. Short-termism was all. As a result, firms attempted to artificially raise their share prices by distorting their profits by various forms of 'creative accounting'. Workers were paid in shares and the resulting income not counted in costs; money was taken out of the pension funds on a very large scale in order to boost the share price of the firm's shares already held in the pension fund, creating an apparently rising surplus in the pension fund; losses were put into secret offshore accounts firms bought up competitors' output on a mutual basis, so creating an illusion of increasing output. As a result, the boom of the 1990s was in large part an artificial upturn, which could only have a spectacular end as it did first with the Long Term Capital Management Fund going under and then the downturn starting in March 2000 with the dotcom crash. US IN DECLINE BUT STILL DOMINATES Finance capital only turned to China in a very big way during and after this period. For some time, the actual profits so obtained were meagre. However, the reserve army in the developed countries increased and wages were held down, at the same time as goods imported from China were very cheap. That meant that the standard of living could remain static with declining money wages or even go up. The flows of profits from China are dwarfed by the enormous investments in US government bonds by the Chinese state. Just as the Japanese earlier invested in US bonds and property and lost a considerable amount of the value of those investments as the dollar declined in relation to the yen, so the Chinese are today losing out. In effect, taxation in the United States is reduced as a result, so allowing corporations and the rich to benefit, given the relatively regressive nature of modem taxation. There are those who talk of a shift in power away from the west to the east, from the United States to China and India. There is no evidence of this seismic shift. If there were one, it would be a shift from the US capitalist class to the Chinese Communist Party or to the capitalist class of China and that of India. In fact, the Chinese economy is highly dependent on its ability to export its goods to the US and Europe, and this in turn is dependent on the absence of barriers for that export. Furthermore it should be noted that the Chinese Communist Party is not that stable in that there were some 80,000 protests, marches etc... in 2007 against various government-controlled policies. Given the strategic role of the US in the area, both in regard to Taiwan and to other states, one might surmise that the US could destabilise China if it so wanted. It could do so by supporting various minority groups, whether of an ethnic or an ideological kind, as it appears to be doing in Iran. It could mount an international campaign for free speech and support various indigenous movements, as it has done in the past in eastern Europe. In fact, although there are clear elements of these aspects to be seen, they are limited - more of a warning than a threat. In other words, China today is heavily dependent on the west both economically and strategically.

The production of goods in China should be looked on as yet another example of exploitation by the capitalist class of the west. Goods are made in China under strict supervision, with workers being super-exploited, working up to 13 hours per day, for a pittance in pay. The goods are exported to the west for low prices, allowing the resulting lower wages of western workers to raise profits. As indicated, taxation is lower because of the investment of Chinese foreign currency in US government bonds. The success of Japan, South Korea, Taiwan, Singapore and Malaysia had more to do with the cold war than with some superior ability to absorb capitalism. It should be noted that these countries had occupying troops for crucial periods, who ensured that the working class was controlled and so could be super-exploited to make high profits. At the same time, the United States allowed these countries to have access to its market, although the same countries maintained tariffs against US industry. China does not have the same conditions. Although the Communist Party controls the country with a military/secret police presence, it remains vulnerable to internal discontent and has to make concessions from time to time. As a Stalinist-ruled country, it still has its legacy of low productivity in the state sector and a more general tendency to lower productivity where the state plays a role in industry. Furthermore, it has joined the World Trade Organisation, under which it is bound to a series of rules of international trade, so making it more difficult to protect its industry. There is, therefore, a limit to the success of Chinese capitalism, a limit that is likely to show itself under the current downturn. HISTORIC TURNING POINT In short, capitalism was stabilised by Stalinism, social democracy and the cold war. All three have gone. Finance capital has taken over the strain, but is itself short-termist and has reached its natural terminus, with a huge agglomeration of capital unable to find an outlet. The result was a downturn in March 2000, which was only lifted with the war in Iraq, leading to war spending practically doubling. The boom which then erupted took on wholly unexpected forms, in that the US balance of payments grew to unsustainable levels, resulting in the decline in the value of the dollar and in trust in the dollar. US capitalism, which was already in decline as the hegemonic capitalist power, reached a turning point. Asset prices went through the roof, among them houses; derivatives reached the gigantic figure of $596 trillion; and commodity prices took off. The wealthy could not invest in industry, so they put their money into any available asset that looked like increasing in price over time, including various forms of gambling on price changes. At some point, the asset price inflation had to come to an end. Eventually commodity prices will also fall. At the same time, there is a limit to war, when people do not want to fight and the war is regarded as illegitimate. Industry then finds itself in trouble, both with the absence of war funding and with the decline in asset values. Demand for goods retreats, as workers' wages are static or decline and more are unemployed. We are now living in an historic turning point. The present downturn is a result of the end of the period of post-war stability. It is already comparable to the 1929 depression in its potential magnitude, had the government not intervened. It still has a long way to go. Marxists have long talked of the contradictions of capitalism showing themselves. In the past, they refused to look at the reality of the forces stabilising capitalism. Today they must not be so traumatised by their past failures that they cannot see what is staring them in the face.

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