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Statement of the League for the Revolutionary Party

November 2008

Revolutionary View of the Election and Economic Crisis

Bankrupt Capitalism Threatens Depression

Across the United States and the world, the election of Barack Obama has been celebrated as a momentous event that promises welcome change in the conduct of American government. In one sense it certainly is momentous – in this nation built on slavery, in which racism continues to oppress Blacks, Latinos and immigrants, the election of a Black man as President is truly an historic event. It is surely evidence of improved racial attitudes among white people. However, Obama’s victory had far more to do with the widespread sense of crisis in America and the Democratic candidate’s promise of “change.”

The outbreak of economic crisis on Wall Street in October added an exclamation point to the end of the eight disastrous years of George W. Bush’s presidency. The U.S. occupation of Iraq proved a bloody quagmire, signaling a sharp decline in the U.S.’s global power and reputation. Meanwhile at home, the government’s failure to respond to Hurricane Katrina revealed a shocking level of racism, disregard for human suffering and incompetence.

The celebrations in the streets over Obama’s victory expressed joy in striking a blow against racism and in getting rid of Bush. The euphoria also demonstrates the broad expectation that the Democratic Party, with Obama at the helm, will change America into a more just society, make major strides against racism and poverty and bring an end to years of warmongering.

But the truth is that Obama and the Democrats will sorely disappoint their supporters, especially among the working class and poor. At home, the massive problems of unemployment, falling wages, evictions and woeful social services are not going to go away. The capitalists are caught in a crisis that they can escape only by drastically intensifying their exploitation of the working class. Obama & Co. are dedicated servants of America’s ruling capitalist class, no less than their Republican rivals are. They will oversee escalating attacks by the capitalists on working-class standards of living, which will inevitably hit Blacks, Latinos and immigrants hardest.

Obama’s Mission

Indeed, everything from big campaign donations to newspaper endorsements showed that the ruling class overwhelmingly favored Obama’s election. The capitalists knew that after the last eight years their government desperately needed a liberal facelift. With the economy on the edge of collapse, the capitalists hope Obama can contain working-class anger at the inevitable attacks on jobs, wages and social services. And they hope Obama’s presidency will calm the oppressed masses of the Middle East, Latin America, Africa and Asia, who have suffered so much in a U.S.-dominated world and whose hatred of U.S. imperialism threatens to explode in massive struggles. Thus Obama’s mission is not to “change” the system, but to save it.

In fact, even before he has taken office, Obama’s actions confirm that he will play such a role. While he spoke against the invasion of Iraq as a “dumb” idea, since his election to the Senate Obama has repeatedly voted to maintain funding of the occupation. Indeed, while he talks about withdrawing U.S. troops from Iraq he at the same time plans on maintaining a large military force in the region to defend American interests. Further, he has made clear that he supports what he considers to be “smart” wars like the first Gulf War, and the occupation of Afghanistan, where he promises to send more troops. Obama slipped calls for “shared sacrifice” into his campaign speeches, but he won’t tell us how much sacrifice (read: misery) he thinks we will be expected to endure. However his top economic advisors, like former Federal Reserve Chair Paul Volcker and former Treasury Secretary Robert Rubin, are already doing the calculations – after all, they designed historic economic attacks on the working class when they previously served in the White House.

Obama and the Wall Street Bailout

The clearest proof so far of Obama’s loyalty to capitalist interests, however, is his role in rallying support for the Wall Street bailout.

For decades the Republican and Democratic parties alike have told us that there was no money to improve health care or education. Instead, they slashed social services and approved wave after wave of attacks on our jobs and wages. As working-class incomes fell further behind the rising cost of living, no help came from the government. But as soon as the vampires on Wall Street faced bankruptcy, the Republicans and Democrats rallied together to give them hundreds of billions. As long as profits lined the bosses’ pockets, free-market ideology ruled. But as soon as they made big losses, the government intervened – at the public’s expense. Meanwhile, as workers lose their houses, jobs and pensions, only the most meager and temporary assistance is proposed for us.

While Obama campaigned as the anti-Bush, it is a fact that the recent bailout that Obama supported, a gift of nearly $1.5 trillion given to Wall Street on our backs, was the Bush Administration’s plan. Its aim: to buy the ruling class time – by calming the herd of panicky investors and getting the capitalists to loan each other money – to launch the sorts of economic attacks on the working class that could help Wall Street regain its profitability. Obama and most Democrats in Congress did support adding to the bailout package a little temporary help to homeowners facing eviction and to workers facing unemployment. But those additions were just that: temporary and limited afterthoughts aimed at blunting opposition to passage of the bailout legislation.

The bailout has been greeted with widespread outrage. Most workers correctly sense that they will be footing the bill. But they do not yet see an alternative and are far less conscious of their potential power than the bosses are. The capitalists and their politicians know of past working-class rebellions here and around the globe. It is an iron law of capitalist rule that the working class and oppressed eventually fight back against what the system does to us. So the rulers fear the future probability of mass strikes, protests and riots. They especially fear mass action growing into a political movement that would threaten their grip on power right here in the U.S. Obama’s ability to channel popular discontent into the voting booth with vague talk of reform makes him a valuable asset for the ruling class.

Why Capitalism is in Crisis

The current crisis has been centered on financial institutions, and has featured sorry tales of greed and corruption. But the reasons for the crisis go far deeper than that. It is the predictable and inevitable result of the normal operation of a capitalist system that has long outlived its time and can only survive by plunging humanity into ever worse economic disasters and wars.

Capitalist ideologues encourage the idea that the whims of the market are like “acts of God” – beyond the understanding or argument of mere mortals. On the contrary, the workings of capitalism can be scientifically understood and the system’s crisis predicted. The theorist who first explained this was the founder of modern revolutionary socialism, Karl Marx. Marx explained that different forms of society rise as they further the development of productive economic power of society and fall after they have become barriers to further development. Like preceding societies, capitalism would inevitably reach a point where it was no longer a progressive way of organizing economic production. Marx’s prediction of the inevitable economic decay of capitalism is a fundamental guide for revolutionaries today.

Capitalism was always a cruel, unjust, exploitative system. But in the 19th century it succeeded like no previous form of society in developing the productive forces of the economy, from modern industry to the working class itself. Innovation in the productive process was the key to this development; those capitalists that introduced more efficient organization and techniques of production were rewarded by greater profits and power. By the turn of the 20th century, capitalism in the most advanced countries had created an industrial economy and world market. This meant that for the first time there was the possibility of overcoming the scarcity of human necessities that had previously made the division of society into classes of exploiters and exploited unavoidable. Now, an abundance of food, shelter and every other requirement of life could be produced. Capitalism had now also created the class capable of overthrowing it: drawn from across the globe into cooperative labor, the modern working class was turning its collective organization at work and its need to resist its own exploitation into the basis for powerful struggles that, under the right conditions, could grow into a revolutionary uprising. Its position and role in the productive process made the working class not only the gravedigger of capitalism, but the force for organizing production on a collective and non-exploitive basis in the future.

But at the same time, the system of private profit and national competition was turning into a fundamental barrier to the further advance of the productive forces. On the one hand, while the capitalists depended on nation states to protect their interests, their production expanded beyond national boundaries. On the other, the ownership of production in private hands clashed with the collective nature of production it had introduced. The system’s drive to introduce new productive methods and technology became suppressed: giant monopoly firms had come into being and began using their sheer size and domination of the market, rather than efficient production, to maintain their positions. They discouraged, though not entirely abandoned, productive innovation, as it would cheapen their large existing investments.

Capitalism’s Epoch of Decay

The growth of monopolies had a profound impact on the cycles of boom and bust that characterized capitalism. The slump, or depression, is the system’s bitter medicine required for periodic recovery and revival. In earlier times, this role was carried out more efficiently; weaker firms fell by the wayside and the surviving, more productive capitalists were able to pick up the losers’ assets at bargain basement prices. Depressions also served to intensify profit-making exploitation, with rising unemployment intensifying competition among workers for available jobs, allowing the bosses to cut wages. The basis for a new round of capitalist expansion was thus set. But with the development and dominance of monopolies, and the connivance of capitalist states eager to prop up the vast outlays in labor and capital, the conditions of the slump may be tamped down for a period. However when they did occur, depressions became more catastrophic, wiping out greater sections of the economy and taking much longer to recover from. And the surviving capitalist enterprises were less likely to be the most productive, but simply the biggest. The overall profit rate started to go into decline.

Capitalism thus entered into its epoch of decay. It had reached the point where it could only expand the productive forces in some sectors or regions by destroying them in others, at best. This epoch we live in is one of war, revolution and counter-revolution, in which a handful of imperialist powers dominate, loot and super-exploit the rest of the world. Imperialism also buys off a key section of the working class, the labor aristocracy, by giving it higher wages and other privileges, and thus a partial stake in the system. Racism and national chauvinism are key tools perpetuated by the system to fool better-off workers and then use them to keep the rest of the working class down.

Unable to qualitatively expand the international economy, the competing great capitalist powers inevitably went to war to re-divide control of the world’s wealth. The carnage of the First World War signaled the historical dead-end capitalism had reached. In response, the workers’ revolution in Russia in 1917 showed the exploited and oppressed of the world the way out. Led by the Bolshevik (Communist) party, the Russian workers’ state made huge efforts toward building a just and prosperous society. Tragically, revolutionary upheavals in the rest of Europe were betrayed and by the late 30’s counterrevolution destroyed the Russian workers’ state (see our book The Life and Death of Stalinism for the subsequent history and overturn in the late 1930’s of the first workers’ state.)

In the West in the 1930’s, the Great Depression was long and deep, but by itself was not enough to put the system back on its feet. It also took the crushing of revolutionary working-class struggles by Stalinism and fascism and then the massive destruction of World War Two, to establish the basis for important sections of the international capitalist economy, dominated by the U.S., to start expanding again.

The Crisis This Time

This boom that followed World War Two was real and serious, but it could not reverse the underlying decay of the system; it could not last. In the U.S., it ended in the early 1970s. Facing declining profit rates, the capitalists were driven to start taking back many of the gains the working class had previously won – an offensive that continues and promises to worsen. They also stepped up investments in speculative financial assets that promised quick profits rather than in long-term investments in the production of real values. This meant a build-up of what Marx had called “fictitious capital” – paper entitlements to expected profits in the future that would never materialize. This led to financial bubbles in previous years and, with the bursting of those bubbles, the shifting of financial capital into the housing and consumer credit market.

This is the set-up for the current raging crisis. The rapid rise in housing prices of recent years was coupled to devices of subprime mortgages and unsecured credit for people without adequate or reliable incomes. Millions of working-class and even middle-class owners could not afford their rising credit bills, particularly with stagnating or declining wages, resulting in a rapid rise in defaults on mortgages. This spiraled into the financial mess at present that has yet to run its course.

After the collapse of the fake-socialist Stalinist economies of Russia and Eastern Europe almost twenty years ago, capitalist commentators hailed the free market’s supposed triumph over “communism.” The working-class revolutionaries of the League for the Revolutionary Party disagreed. We argued that the so-called communist states of the Stalinist East were in fact state-run capitalist economies and that their collapse confirmed the economic theories of Karl Marx.

The Stalinist economies had built up mountains of fictitious capital in the form of obsolete industry that could not compete on the world market. Those mountains inevitably collapsed. Today, world capitalism has inflated enormous bubbles of fictitious capital through property and stock market speculation and growing debts that overwhelm genuine production and services. Everyone can see that these bubbles have begun to implode and we have by no means seen the end of it.

The Revolutionary Socialist Answer

As Marx pointed out long ago, the answer to capitalist crisis is socialist revolution. Working-class socialist revolution would replace the capitalist state with a workers’ state, the capitalist government with a workers’ government. The goal would be to get rid of capitalism and over time, with the aid of similar revolutions in other countries, to create a socialist society of abundance and freedom.

We know that most workers and working-class youth are not now convinced that such a dramatic and profound change is either possible or necessary. We can’t convince everybody at once. The first step is to organize a vanguard group composed of revolutionary-minded workers and youth who do see the need to build a revolutionary party right now. Such a revolutionary group can prepare its supporters to be the political leaders of future mass struggles when more and more people can be convinced of the revolutionary perspective. Of course, the bigger the group, the more effectively we can do all kinds of revolutionary work, including fighting in various arenas for the kinds of struggles and actions that would really help advance our class’s interests. A very central part of our work today is also producing literature, like this statement, which argues against illusions in any pro-capitalist party or politicians and for revolution, in a straightforward manner. Of course it is also necessary for revolutionaries to demonstrate that we have practical answers to the burning questions of the day. In fact, only revolutionaries have the answers.

For example, workers rightly fear that the mounting crisis will wipe out their already precarious livelihoods. In recent years increasing numbers of workers have supplemented their falling wages with credit card spending to maintain their living standards. Families have turned to risky “subprime” mortgages to buy their first homes or to use homes they’ve already paid for to raise funds for education or healthcare expenses. Now, several million families in the U.S. – including about one-third of all Black and Latino homeowners – are losing their homes through foreclosures, and hundreds of thousands more are being laid off. Across the world, hundreds of millions of people face outright famine because of escalating food and fuel prices.

So consider for a moment how a society controlled by the working class would handle the economic problems that overwhelm life under capitalism.

These are some of the measures that a workers’ state could take to bring about decent living standards and justice and lead the way to toward a socialist society of abundance and freedom.

What is to be Done?

Faced with ominous economic conditions like the present, an understandable working-class reaction is often to become cautious and conservative and, to avoid the risk of fighting back against the bosses’ and politicians’ attacks for fear of the consequences. But meanwhile, the capitalists’ economic attacks will advance their political attacks as well. In particular, rising unemployment, falling wages and deteriorating social services will all spur increased competition among working-class and poor people. These are the ideal conditions for pro-capitalist demagogues to encourage racism and the vilification of immigrant workers.

The capitalists’ divide-and conquer tactics do not only set working-class people against each other in the U.S. National chauvinism, the idea that America and Americans are better than others, is being revved up in order to divide American workers, including Black and Latino workers and youth, against workers and oppressed across the globe. It is no accident that neither McCain nor Obama spoke out in favor of the plight of immigrant workers in the United States and that both pointed the finger at dangerous foreign enemies over and over again during their campaigns. The fact is that the bloodiest world terrorist and mass murderer is still the United States government. The election of Obama hardly erases the deep institutionalized racism of American society, practiced at home and around the world. American-born workers need to link up in struggle with immigrant workers here in the United States, and our fellow workers and oppressed around the world. Such internationalist unity is essential if our struggles against our own ruling class are to succeed.

Revolutionary workers know that the only real alternative is socialist revolution. Even though the majority of workers see no such solution yet, and mass resistance here may not get going for some time, there will inevitably be upheavals against the looming austerity programs.

In spreading our revolutionary socialist analysis and policies and in building the revolutionary vanguard party, we must always point to the power of the working class, in alliance with all oppressed people, to halt profit-making and compel real change. One recent example was the 2005 strike of Local 100 subway and bus workers in New York City, which brought the capital of world finance to a crawl. It won the warm solidarity of most city workers, as well as workers elsewhere. Another big example was the enormous May Day rallies of immigrant workers in Los Angeles, Chicago and other cities a few years back, that raised the possibility of general strikes that would unite the entire working class in struggle.

These struggles, which had an electrifying effect on broad numbers of workers, were quickly betrayed by pro-capitalist union and political leaders who diverted the energy into electoralism, squandering the workers’ potential power into the futile hope that pro-capitalist Democratic Party politicians would favor unions, immigrant rights, and the like.

To build a defense, the working class must organize itself independently of pro-capitalist leaders, politicians and parties. Mass actions such as general strikes will prove key to beating back the attacks. When the working class recognizes its own independent power and recognizes who its true friends and enemies are at home and abroad, it will be on the road to solving capitalism’s crises once and for all.

One of the most famous socialist writers and fighters was the German revolutionary Rosa Luxemburg. In 1915 she went to prison for opposing the first inter-imperialist world war. Luxemburg argued then that the choice facing humanity was one of either “socialism or barbarism.”

These words ring even more true today. While the timing cannot be predicted exactly, it is clear that another Great Depression is inevitable. Without socialist revolution, young ­people today, and the next generation to come, will truly find themselves living in a barbaric, catastrophic and brutal world, with the inevitability of a new resurgence of fascism and nuclear war. In the great tradition of Marx, Engels, Lenin, Luxemburg, Trotsky and all the historic struggles of the peoples of the world before us, we fight for socialist revolution as the only solution.

No Foreclosures or Evictions!
Cancel Mortgage and Credit Card Debts!
No Cutbacks in Public Services!
Nationalize Without Compensation the Banks
and Failing Corporations!
For a Massive Program of Public Works! Jobs for All!

Stop the Capitalist Attacks!
Workers Need a General Strike!
U.S. Out of Iraq and Afghanistan!
Workers and Oppressed Peoples of the World -- Unite!

Workers’ Socialist Revolution Is the Only Solution!
Build the Revolutionary Party of the Working Class!
Re-Create the Fourth International --
World Party of Socialist Revolution!

Further Reading

The League for the Revolutionary Party’s understanding of Marxist economic theory and the development of capitalism’s crisis is explained at length in our book The Life and Death of Stalinism: A Resurrection of Marxist Theory, by Walter Daum. ($15)

Our pamphlet “The Specter of Economic Collapse” collects articles by the LRP on Marxist theory and the development of the international economic crisis in the 1990s. ($2)

To order, send payment to “S.V. Publishing” at

P.O. Box 1936, Murray Hill Station
New York, NY 10156