on Monday 5 June.
The fall in share prices has been matched by volatility in commodity markets as well, especially copper.
Additionally, after a relatively long period of stability in currencv markets in the developing world, following the 2001 Argentine crisis, foreign exchange values have begun to shift more dramatically; most notably through a rapid 20 percent decline in the value of the Turkish lira.
What does the increased uncertainty of asset markets mean for global capitalism? Is it a sign of a potential economic crisis?
The immediate reason for the decline in share prices is the fear of rises in interest rates. In its May 27 issue The Economist reported that 'the era of cheap money is nearing an end.
For the first time in 15 years, the three big central banks are now all tightening monetary policy... only now are the markets realising that interest rates may rise by more than they had expected.
The lead here has been taken by the US Federal Reserve. After the collapse of the previous market boom and the September 11 attacks, Fed Chairman Alan Greenspan cut The continued growth in the American trade deficit is putting renewed pressure on the dollar. rates down to 1 per cent.
Coupled with George Bush's tax cuts, this boosted US growth over the next four years at the expense of soaring increases in household debt. This increase in borrowing was reinforced by a housing market bubble.
In the past there have been three main constraints on national central banks pursuing this kind of policy.
The first has been fear of inflation. However, as again noted by The Economist, this has been lessened in the last decade by the increase in production coming from China, India and other 'emerging' economies.
The second is the fear of low interest Lales and increased spending ULL imports pushing down currency values. The dollar fell in 2003 and 2004 but not dramatically, and it regained some of its lost value in 2005.
This was partly because interest rates in Japan were even lower than in the US as a result of the long-term stagnation of the Japanese economy. Also currency markets lost confidence in the euro when France and the Netherlands rejected the proposed European constitution.
Finally, East Asian central banks continued to buy dollars in order to keep their own currencies low and maintain their export growth.
The third is an eventual falling away of confidence leading to reduced borrowing. Up until recently, optimism was maintained on a wave of hype about globalisation and the supposed infallibility of US economic management, especially as personified by Greenspan.
All of these three pillars of debt-fuelled growth are now crumbling. Fears of inflation have risen, partly as a result of rising oil and commodity prices, which in turn arise from growth in countries like China and India which the imperialist countries have relied upon to curb price rises.
The result has been steady interest rate rises to a level of 5 per cent in the USA with the European Central Bank following - and there is no guarantee that this process is yet complete.
The continued growth in the American trade deficit is putting renewed pressure on the dollar. At the same time Japan has also begun to raise interest rates as its own economy has started to grow, again partly because of the Chinese boom.
Rising oil prices and faltering house prices have hit marker conndence and tols effect has been sharpened by Greenspan's replacement by the relatively untried Ben Bernanke.
The Guardian of June 7 quoted a BNP Paribas economist as saying that 'core inflation is beginning to pick up just as the debt-soaked housing expansion finally beginning to buckle under the weight of the twin drags of the substantial cumulative policy tightening of the past 18-24 months and record energy prices.
Orthodox observers have put forward two main views of how serious these developments are. One approach is to point to the dramatic rise in share prices across much of the developing world in the last five vears and to argue that all that is happening now
some sensible 'profittaking' and a necessary 'correction' to the market.
On the other hand some analysts point to the danger of a substantial slowdown in the US economy as falling dollar values combine with rising interest rates and a decline in house prices. Coupled with high oil prices this could lead to a recession which would then spread internationally.
The 1n The Economist tries to steer a middle course between these viewpoints, claiming that, while US consumers will have to restrain spending significanuy In une coming period, the growth generated for global capitalism by China and India will eventually outweigh the admittedly serious effects of unravelling the American boom.
The varying analyses of and laid the basis for growth in China, India and elsewhere. But. as ever under capitalism, and particularly in the light of the problems in production, this resolution of cconomic cuss was lemborary and unstable.
Three main contradictions have become increasingly apparent.
First, the tension between maintaining the value of the dollar and curbing the runaway US balance of payments deficit; second, the problem of maintaining stable growth in the USA while bringing down …The mountain American domestic debt; third, the implications of rapid growth in Asia and the rest of the developing world for global commodity and energy prices.
The combination of these developments means that the fragile equilibrium of the last tew vears is not sustainable for much longer.
It is quite possible that the optimism of The Economist will prove justified and that global capitalism could construct a way forward for itself but any such resolution of the problems it faces will again be temporary and will generate the seeds of further crises.
It is also possible, however, that the difficulties capital faces will prove mOre intractable than this and that this will open up a period of much greater international economic volatility than we have seen recentlv
At all events the likelihood is that in the next year or so there will be many opportunities for socialists to show that the system we live under is not one capable either of producing economic stability or of meeting human needs.
page 11 of the scan
resistance faint page a continent in revolt Learn lessons of struggles which have pulled up half-way From resistance Phil Hearse looks at the rise of the Left in Latin America
On no continent is neoliberalism so widely rejected as
Latin and Amelica, nowhere has the resurgence of the Left been so powerful. The election of Evo Morales in Bolivia and the evolution of the Hugo Chávez government in Venezuela are hugely ideologically important.
Whatever the direction and eventua outcome or mese
they have already done an enormously important thing - given an arithmetic content to me algebraic tormula that 'another world is possible'; the only possible one, socialism. Even Tne election ol moderate centre-lett governments, like those of Lula in Brazil, Bachelet in Chile and Tabaré Vázquez in Uruguay are the product of a long period of struggle against neoliberalism and the right.
The huge Latin American panorama of struggle nas
debates given lise lo new about revolutionary strategy -debates which the left has not been used to having for some
How can this mously generation of strug gle, the rejection neoliberalism and the rise of the Left be consolidated into permanent socialist gains, the power of the popular masses and the defeat of capitalism?
Continent wide tactics are to revolution useless, and Latin American societies are enormously diverse. I here 1s no one strategv fits all solution However there are common elements in the development of these societies and certain common elements in revolutionary strategy as well.
There are a number of cruclal questions, tne answers to which will act as
crucial guidelines for a revolutionary alternative. They include:
• What is the nature of these societies and their relanonsnip with imperialism.
• What is the nature of the ruling class?
What is the character of the 'revolutionary subject'? What is Lne (potential) alliance of popular forces which might be mobilised into an alliance to make a revolutionary breakthrough?
• What are the key steps needed to make an anti-capitalist transition and a break with the capitalist state and imperialism?
Each of the countries of Latin America is oppressed by imperialism.
Semi-industrialisation in Brazil and Argentina means that the countries _Can no longer be considered having all the classic characteristics of semi-colonies, ie being providers solely of raw materials and consumers of manufactures from the imperialist centres.
Nonetheless, none of them, not even a giant economy like Brazil, is autonomous centre for the accumulation of tinance capital at the same level as the imperialist countries or a centre for multinational corporations which bestride and the
The proof of the pudding was ine aebt crisis, in lne worst vears of the crisis in the 1980s and 1990s, a huge tribute of capital flowed out of the exploited countries towards
The idea that there can be any kind of "antiimperialist alliance" with any sector of the bourgeoisie whatever is tremendously far-fetched. the imperialist centres. Brazil and Argentina were of course in lne lormer calegory, will a decade of economic progress destroyed in the 1980s by the debt crisis.
While all the countries of Latin America are dominated by imperialism, then they all also have a super-rich ruling class which is hand-in-hand with the imperialist bourgeoisie. This has created some of the most unequal societies
earth; in Mexico and Brazil the rich are rich by international standards and the poor are poor by the same standards.
The idea that there can be any kind of "anti-imperialist alliance" with any sector of the bourgeoisie whatever is tremendously far-fetched. At best there can be alliances around democratic objectives and only conjunctural national interests.
In his theory of permanent revolution Trotsky proposed that the working class had to lead the struggle for the national and democratic tasks ol ine revolunon, unal ls to say unfulfilled tasks of the bourgeois revolution.
Trotsky differed with the Stalinists 1n seeing the national democratic revolu tion as phase of an uninterrupted ('permanent') revolutionary process, which would be carried out by an alliance of the working class and the peasantry, under the
Continued overleaf
page 12 of the scan
From resistance to revolution ... political leadership of the working class itself.
There would be no Chinese wall between the national and democratic tasks and the socialist tasks, and the whole process would require the dictatorship of the working class (and the peasantry). Insofar as we need to modify Trotsky's theory, which after all was elaborated mainly between 1905 and 1928, it can only be in the direction of stressing the interaction and interrelatedness of the national democratic tasks and the continued from front page Frente Amplio in Uruguay and the PRD of Manuel Lopez Obrador in Mexico -do not of course agree with this way of posing the question. For them it is about getting more justice within the svstem. and we have seen what this means in Uruguay and Brazil - abject capitulation to neoliberalism.
This poses a first question and problem - that of class independence, creating political parties of the popular masses, led politically by the working class, independent of A first question and problem is that of class
Sooner or later there will be a gigantic confrontation and the Bolivarian movement and the Chávez leadership will have to make a choice. Three of a kind? Chavez, Castro and Morales