Chapter 15 – The new Fascism

by Peter Cohen

The principal features of Fascism as a historical phenomenon 1920-1945 were outlined in Chapter 3. Corresponding features of the new Fascism are discussed in the numbered sections below.

Since the Forum for Living History and other mainstream propagandists either distort the nature of Fascism prior to 1945 or virtually ignore it, they are incapable of recognizing the emergent new Fascism, even if they wanted to.

The words of Herbert Tingsten, the Swedish professor of Political Science quoted in Chapter 3, are worth repeating:

Fascism is a bourgeois phenomenon: it has come to power virtually without exception with the support of the bourgeoisie, the anti-socialist groups, it has basically preserved the bourgeois structure of production, private ownership of the means of production, free – at least in principle – competition, and it rejects the idea of economic equality.

Dissociating capitalism from Fascism 

The historical reality of capitalist Fascist society is potentially explosive for mainstream historians, for obvious reasons. Since “capitalism”, “democracy” and “freedom” are inextricably linked in mainstream propaganda, it would be impossible to maintain the link and simultaneously discuss the active involvement of domestic and foreign capitalists in Fascist countries such as Hitler-Germany.

A number of approaches have been developed to avoid detonating the explosive. In general they avoid examination of the socio-economic structure of Fascist society, and the condition of the working class. One approach involves equating Fascism with anti-Semitism, as the Forum for Living History does, and focusing on the Holocaust to the virtual exclusion of everything else, except for humanitarian concern with Roma, homosexuals and mental defectives.

Another approach involves highlighting Hitler’s personality, as in Allan Bullock’s Hitler: A Study in Tyranny, first published in 1952. Bullock transforms capitalists’ support of the Nazi party into an evasive formula: “Hitler was jobbed into power by backstairs intrigue”. The exact identity of the intriguers and the reasons for their machinations are not discussed in detail, although Bullock admits that Hitler praised capitalists as belonging to a “higher race”, which gave them “a right to lead”.

A recent example of the same approach is Simon Sebag Montefiore’s Stalin: The Court of the Red Tsar (2003), which will be discussed in the next chapter.

The role of capitalists in Fascist society is often cloaked by the term “conservative elites”, which has become a favorite among mainstream historians. The condition of the working class is discussed in passing, if at all, although the working class comprises the majority of the population.

A relatively recent and highly praised attempt to dissociate capitalism from Fascism is The Anatomy of Fascism by Robert O. Paxton (2004). Paxton treads very carefully. For example, in the Introduction he admits that no Fascist government “altered the social hierarchy”, which is another name for the class structure.

He refers to

…the complex relationship of complicity, accommodation and occasional opposition (sic!) that linked capitalists with Fascists in power… one cannot consider Fascism simply a more muscular form of conservatism, even if it maintained the existing regime of property and social hierarchy.

This is very close to the edge. “Conservatism” may or may not be code for “capitalism”. The key words are “complicity” and “accommodation”, which neatly allow Paxton to evade the fact of the active support offered by the Circle of Friends and other powerful capitalists, as noted in Chapter 9. Paxton does not mention the Circle or the Bank for International Settlements, a vital conduit for financing the activities of the Hitler regime. Capitalist property relations, e.g. private ownership of the means of production, distribution and exchange, are recoded as a “regime of property”. If Fascism maintained capitalism, then the Fascists must have supported it.

Paxton refers to (unidentified) Marxists who have claimed that a crisis of capitalism “gave birth to Fascism”. The Marxist analyses with which I am acquainted regard the crisis as the background to the emergence of Fascism. Paxton also claims that the “orthodox Marxist view” maintains that capitalists financed Hitler, and then attempts to prove that they did not, alleging that they “hedged their bets” by contributing to any party that wanted to keep Communists out of power. Of course they did. Corporations usually do. But that does not alter the fact that they supported Hitler.

William L. Shirer describes the Nazi’s dual strategy:

The party had to play both sides of the tracks. It had to allow Strasser, Goebbels and the crank Feder to beguile the masses with the cry that the National Socialists were truly ‘socialists’ and against the money barons. On the other hand, money to keep the party going had to be wheedled out of those who had an ample supply of it.

Paxton goes on to say that Fascists saw the “international socialist Left” as the enemy. He does not explain that this view was fervently shared by Western capitalists and their propagandists, such as Winston Churchill, who referred to the Soviet government as “a tyrannic government of Jew commissars” bent on establishing “a world-wide Communistic state under Jewish domination” (Ponting).

Paxton states that after World War 1 Fascists were moving into a “political space” that had arisen between “principles” that were promoted by “contenders” such as “Lenin’s project” and “conservatives”. At times Paxton identifies these conservatives as political figures, while at other times their occupations are rather vague. The war launched by Western capitalists against the Soviet Union which the Fascists promised to intensify  was not between contenders for a mythical political space. It was a class war aimed at enabling capitalists to continue maximizing profits.

Paxton writes (emphasis added):

Whenever fascists reached power, to be sure, capitalists mostly accommodated with them as the best available non-socialist solution… even the giant chemical combine IG Farben, whose ascent to the rank of the biggest company in Europe was based on global trade [and on close cooperation with American capitalists] found ways to adapt to rearmament-driven autarky…

To adapt! As noted in Chapter 4, the directors of IG Farben prepared the rearmament plan that was the basis for the attack on the Soviet Union. Farben built and owned Monowitz, a sort of annex to Auschwitz. Farben supplied Zyklon gas to concentration camps. The company was one of the major exploiters of slave labor supplied by the SS, which enabled huge profits. The shareholders and directors of IG Farben did not “accommodate” themselves to Fascism. They supported it eagerly and enthusiastically because it served their interests to do so. See the comment by Farben director Carl von Weinberg, who was Jewish, in Chapter 6.

After more than 200 pages of equivocation (Penguin edition) Paxton defines Fascism as:

‘A form of political behavior marked by obsessive preoccupation with community decline, humiliation or victimhood and by compensatory cults of unity, energy and purity, in which a mass-based party of committed nationalist militants, working in uneasy but effective collaboration with traditional elites, abandons democratic liberties and pursues with redemptive violence and without ethical or legal restraints goals of internal cleansing and external expansion.

The “traditional elites” are of course capitalists, with whom the Fascists were “working”.  And the collaboration was anything but uneasy (see e.g. Lamb). The elites may be clergymen. In any case, they are unidentified by Paxton, who reduces Fascism to a mental state that is expressed in “political behavior”. I must admit that I do not understand the meaning of this term.

Its use is clearly supposed to eliminate the need to discuss socio-economic structure, which defines the reality of people’s lives. Paxton comes no closer than passing references to the “social hierarchy”, which is code for the class society.

In Behemoth, Franz Neumann focuses on the socio-economic structure and lays it bare. He also makes it plain that suppression of the working class is one of the Nazis’ top priorities. Paxton’s two references to Neumann are sparse. In Chapter 5 he repeats that Fascist regimes had “some kind of pact or alliance” with “powerful conservative forces”, and then notes that Neumann “argued…that a cartel of party, industry, army and bureaucracy ruled Nazi Germany, held together by “’profit, power, prestige and especially fear’”. Neumann did not “argue” this point. It is included in a wider description of German society (see Chapter 3). Neumann uses the word “bloc”, not “cartel”, in this connection

In the final chapter “What is Fascism?”, Paxton quotes Neumann’s observation that “National Socialism’s ideology is constantly shifting”, and then states that “this book is drawn toward Neumann’s position…”

If Paxton really wanted to present Neumann’s position, he should have quoted the latter’s definition of the fundamental goal of Nazism:

The resolution by imperialistic war of the discrepancy between the potentialities of Germany’s industrial apparatus and the actuality that existed and continues to exist.

But that of course would require a further discussion of the relationship between German capitalists and the Nazi Party, which Paxton obviously wants to avoid.

Paxton’s comments on Yugoslavia do not enhance his credibility as a historian. He writes “It was in postcommunist Yugoslavia that Europe’s nearest postwar equivalent to Nazi extermination policies appeared”. This and other allegations are standard propaganda and will be discussed in the next chapter, The Propaganda War.

Perverting the content of Behemoth

Behemoth wasreissued in the US in 2009 by Ivan R. Dee, a Chicago publishing house, “In association with the United States Holocaust Memorial Museum”. The book is required reading for anyone who is interested in German Fascism. But I suspect that Neumann’s description of the historical background of anti-Semitism in Germany was the main reason for the re-issue.

The text is preceded by an introduction by Professor Peter Hayes, who goes to extreme lengths to discredit Neumann’s analysis of German society and the capitalist-Fascist connection. I am devoting space to Hayes’ introduction for three reasons: it is a perversion of the content of Behemoth, it will mislead potential readers, and it reflects the systematic ignorance about Fascism that masquerades as historical knowledge throughout the West and is cultivated so intensively in many of the groves of academe.

A few examples are sufficient. First of all, Hayes calls Neumann a “German Marxist”, a term which would automatically discredit him in the eyes of many if not most Americans. Hayes is wrong. Neumann was not a Marxist. Hayes also refers to “Neumann’s leftism”, a vulgar term of disapproval which is also calculated to trigger negative responses. Like others who speak of “leftism” Hayes does not define it. Left of whom? Louis XVI? Franklin D. Roosevelt? Henry Kissinger? George Bush Junior?

Hayes claims that Neumann “could not and would not believe that Nazism had cultural, rather than structural causes and impact”, and that his “conspiratorial” analysis prevented him from seeing Nazism as a manifestation of “deeper historical or cultural patterns”.

On the contrary, Neumann gives an excellent analysis of the historical and cultural background of Nazism. But he is not so foolish as to believe that Nazism had “cultural” causes. Neumann has no conspiratorial theories. He states the facts, and the facts are precisely what Hayes is trying to avoid.

Hayes complains that “Behemoth abounds with unquestioned and doctrinaire Marxist clichés”, and gives page references. I have not been able to find any such “clichés” on the pages given. Hayes’ statements would be easier to accept if he could show that Karl Marx’s 3-volume analysis of Capital was faulty, but he will find it difficult to do so. In any case I doubt whether Hayes has read Capital or anything else written by Marx. If he has, he shows no sign of understanding what he read.

Hayes also claims that research subsequent to the original publication of Neumann’s book has disproved his analysis of “the place of big business in the Nazi regime”, and refers to “specialists”. This is simply not true. The specialists are mainstream historians who like Paxton and Hayes himself are committed to dissociating capitalism and Fascism. This also requires avoiding the unpleasant subject of class struggle. I suspect that Neumann’s description of the repression of the working class is one reason why Behemoth is not popular with the specialists, since the subject of “class” is taboo.

In addition to Behemoth, William L. Shirer’s Rise and Fall of the Third Reich, and Charles Higham’s Trading With the Enemy and The Brown Book, three books are sufficient for refuting Hayes and other propagandists:

  • Schweitzer, Arthur, Big Business in the Third Reich (1964). Schweitzer was Professor of Economics at the University of Indiana. His documentation and analysis of the corporate-Nazi connection is so detailed and accurate that the book has been virtually ignored by historians who share the views of Paxton and Hayes. Paxton does not even mention it. An excerpt is given below.
  • Eichholtz, Dietrich, Geschichte der deutschen Kriegswirtschaft 1939-1945 (History of the German War Economy 1939-1945) (2003, reprint). This richly detailed, five volume, 2000-page documentation of the German capitalists’ zealous collaboration with Nazi criminals and their frenetic search for profits is unfortunately available only in German.
  • Poulantzas, Nicos, Fascism and Dictatorship: The Third International and the Problem of Fascism (1974, orig. 1970). This is difficult reading at times, but it ranks with and complements Behemoth as an analysis of Fascism and Fascist class society.

The following is a highly relevant excerpt from Schweitzer’s book in light of Paxton and Hayes evasion of historical fact:

On May 2, 1933, [about two months after Hitler took power] uniformed and well-equipped units of the Brownshirts and Blackshirts arrested the trade union leaders, seized their funds, occupied their buildings, and acquired title to all the property of the trade unions. This seizure was followed by two declarations. One outlawed all independent trade unions; the other outlawed strikes. Both actions were presented as steps leading to industrial peace and social harmony between employers and employees, whose organizations dissolved themselves a few months later. The destruction of independent trade unions, the elimination of free collective bargaining, the abandoning of mediation and arbitration, the bans on labor participation in industrial affairs, and the suspension of collective actions on the part of labor organizations established the principle that independent organized labor had no place in a state politically dominated by the Nazi party.

Who decided that the trade unions should be abolished? Wilhelm Keppler has revealed the antecedents to this decision: ‘In May 1932, after I had met with the gentlemen of the Circle of Friends several times, I asked the Führer whether he could not meet with them. The Führer received the business leaders in the small hall of the Kaiserhof on May 18, 1932. As far as I can recall, all the gentlemen who were at that time members of the Circle of Friends were present. The Führer made a short speech, and in it he disclosed, among other things, the following points in his program: abolition of trade unions and abolition of all parties other than the NSDAP. No one raised any objection. On the contrary, these points of the Führer’s program met with the fullest approval of the members of the Circle of Friends. They only expressed their apprehension that he would not be able to carry these excellent ideas’.

This shows clearly the role of the Keppler circle as an agency of policy formation. Hitler presented his ideas to the selected businessmen, and these either approved or rejected his ideas.

So much for Paxton’s “accommodation” by “conservative elites”.

According to Hayes, Neumann’s “claims” that Nazism “lacked a political or social theory seems (sic!) highly dubious”. The proof is that “Hitler had a theory of society, namely that it followed the law of the jungle”. Hayes presumably classes the belief that the earth is flat as a theory of the universe. He is confusing an opinion with a theory. Neumann wrote that “National Socialism has no theory of society as we understand it, no consistent picture of its operation, structure and development”, and referred to the “absence of a basic theory”. He was correct.

Hayes goes on to say that Hitler’s

view that all history pivots around the contest among races for space, on the basis of which they can feed and breed their way to new rounds of growth may have been an imitation of Marx’s dialectical materialism, but that did not make it any less theoretically fundamental.

Here we are in deep water indeed. Hayes obviously knows nothing whatsoever about dialectical materialism. Its main principles are given in Chapter 16. Hitler’s view is not an imitation of anything except the maunderings of German so-called intellectuals in the late 19th and early 20th century.

The highpoint of Hayes’ text is the claim that

Neumann’s [nonexistent] Marxism and his training as a political scientist blinded him, since together they urged him to see history as made not by diverse individuals or contingent events but by the rather mechanical interaction of monolithic blocs of actors – in a word, by ‘structures’.

Students of political science, you have been warned. You are in danger of being blinded. Hayes should stop reading Karl Popper. History is not made by individuals or events that are contingent, i.e. accidental and presumably non-repetitive. It is made by the actions of men and women seeking to satisfy what they perceive as their needs and interests, and acting together in order to do so, as Aristotle pointed out long ago. They act together because they know – as Hayes evidently does not – that if they act as individuals they will fail.

As human society evolved, it developed into classes, which can generally be described as comprising the people who own most if not all of the means of production, and the people who own little or none. The latter class does the work that is required for society to survive. The events of the past 100 years or so which are the subject of this book demonstrate that history is driven by class conflict, not by individuals or accidents.

Does Hayes actually believe that World War 1 was a “contingent event”, i.e. an accident? That the Russian Revolution was accidental, or the work of a single individual? Or that the Western attack on the Soviet Union in 1918 was the work of one or more “individuals”? If so he has a lot to learn. The reason for the far from “contingent” attack was publicly stated on many occasions by the Western leaders, including Winston Churchill. Its purpose was to protect capitalist interests by destroying “Bolshevism”.

Hayes’ claim that Neumann sees history as “the rather mechanical interaction of monolithic blocs of actors” is simply slander. Neumann’s analysis is anything but mechanical – it is dynamic.

Ivan R. Dee should be commended for re-printing Behemoth, and I hope that it will be widely read, but commissioning Hayes to write an introduction was a serious mistake. It is unfortunately probable that many readers will limit themselves to Hayes’ text and the chapter on “The Racial People”.

Fascism then and now

Control of the State has been a major issue in the conflict between capital and labor within modern industrial societies. The struggle for control has often centered on proposed legislation and/or directives such as those for restricting or prohibiting monopolies and for regulating or deregulating banks, other financial institutions, stock markets, the manufacturing industry, including pharmaceuticals, and the transportation sector. The struggle has been particularly intense in connection with laws governing working hours, working conditions and the formation and activities of labor unions.

In some cases, representatives of the labor movement have been allied with farmers’ associations and sections of the middle class, e.g. tradesmen, the self-employed and owners of small enterprises. For example, public pressure from all these forced the US Congress to enact the Sherman Anti-trust Act in 1890. The middle class as a whole, i.e. those who are not obliged to wear blue collars but have no significant influence on large corporations and financial institutions, has often wavered between the two major antagonists, supporting the demands of now one and now the other, as in the Weimar Republic in the 1920s. But basically the allegiance of the middle class is to the capitalist system.

One of capital’s major triumphs in the US was the creation of the privately owned Federal Reserve Bank in 1913, when the US Congress surrendered its constitutional right to issue money and control the currency. “Permit me to issue and control the money of the nation and I care not who makes its laws” – attributed to Mayer Amsched Rothschild (1744–1812), a “founding father of international finance” according to Forbes magazine.

The struggle for control of the State developed within the framework of bourgeois representative democracy in both Western Europe and the US, including Germany and Italy, until the advent of Fascism. The struggle naturally involved demands for universal suffrage, which were fiercely resisted by the representatives of capital, including Winston Churchill. The power of the ballot in a capitalist society should not be overestimated, but there is no question that the right to vote gave labor a weapon that was often effective.

A discussion of Fascist society must therefore focus on the key relations: capital-State-labor, and not on “obsessive preoccupation with community decline, humiliation or victimhood and… compensatory cults of unity, energy and purity” (Paxton).

Like the bourgeois democracies, the Fascist societies of the 1920s and 1930s were capitalist societies. The relation within them between capital and the state cannot be reduced to the question of whether one did – or does – the bidding of the other. The question is whether the programs, functions and actions of the State favored and promoted the interests of capitalists. It is axiomatic that the interests of the capitalist class can only be promoted at the cost of the working class.

That is why the testimony of Neumann, Schweitzer, Eichholtz, Poulantzas, Shirer and Higham is decisive. It shows incontrovertibly that the Fascist State served the interests of capitalists.

The new Fascism that has been emerging over the past four decades exhibits the same primary features as the previous manifestations, although specific forms and methods are naturally not always identical. One important difference is that the new Fascism is global, and not restricted to Europe.

It is the substance, the relations between capital, the State and the working class, that is vitally important. The main features of the emerging Fascism are discussed below:

1. Annulment of bourgeois democracy. Under Mussolini, Hitler and Franco the people no longer had even a nominal right to influence the State. And they had no insight into the decision-making process within the government.

The European Union – democracy is obsolete

The EU was not generated by popular agitation for a united Europe. Historically, the initiative for its creation is traceable to a higher level of society – the ruling class, i.e. the capitalist class.

For example, on 3 October 1940, representatives of the German Industrial Employers’ Confederation met in Berlin with Dr. Gustav Schlotterer, a senior director in the Hitler government’s Ministry of Finance. The subject of the meeting was the Europäische Gemeinschaft, the European Community that was to be formed after Germany had won the war. Dr. Schlotterer’s remarks included the following (translated from the text in Eichholtz, emphasis added):

The countries of Northern and Western Europe, most of which are occupied by us, comprise an economic system that is closely related to our own… with largely similar social and economic structures. They are also closely related to us in terms of culture, civilization and race (sic!), which means that between Germany and these northern and western European countries there exists a common ground for a single market, for uniform levels of prices, incomes and wages. Thus a customs and currency union between these countries and Germany is not only possible but is also desirable from an economic perspective.

Asked “Why do we need a European Community?”, Dr. Schlotterer answered

Namely because we want to create a rational division of labor in agriculture and industry, because we want to achieve the lowest possible production costs within Greater Europe, which means that we must discontinue production that is not viable…

Economic integration within the New Europe was to be implemented by

business… in our view the economy of Greater Europe will be generated by the initiatives of the business community. Obviously as a State we can enter into economic agreements… but they will remain abstractions if they are not implemented by business…

After 1945, one of the first important steps toward realizing Dr. Schlotterer’s vision of a united Europe was the Treaty of Paris, signed in 1951 by France, Italy, Belgium, The Netherlands, Luxembourg and West Germany. It was the basis for the establishment of the European Coal and Steel Community one year later. EU enthusiasts often claim that the aim of the community was to eliminate the possibility of future wars between the signatories. The real aim was to “rationalize” the Western European coal and steel industries, which were suffering from over-capacity and excessive competition that involved downward pressure on prices and profits.

In the words of Dr. Schlotterer, shareholders in these industries wanted “to achieve the lowest possible production costs… which means that we must discontinue production that is not viable…” The resulting increase in unemployment did not worry the shareholders, since such an increase normally helps to depress wage levels.

The uniform level of pan-European wages referred by Dr. Schlotterer remained a primary goal for the directors of the European Community (EC) that developed in the decades after 1945. But a number of factors made it difficult to achieve their goal. These included the strength of trade unions and Communist parties in Western Europe, and the existence of the Soviet Union and other socialist economies in the East, where working conditions, pensions and social benefits served as a benchmark.

In the early 1980s some of the leading European capitalists began to realize that the need for a Europe that was united on their terms was more urgent than ever. For a number of reasons, GDP annual growth rates in the OECD countries dropped from 5-6% in the 1950s and 1960s to 2-3% in the early 1970s, a massive decline of about 50%. Annual GDP growth has been low, or nonexistent, ever since. This is a trend, of course. Figures for specific years may vary. In other words, the capitalist system has been in stagnation for about 40 years. By the early 1980s the more prescient European capitalists began to understand that they were not facing a “normal” fluctuation in the business cycle, but a disturbing trend to stagnation that could conceivably be long-term.

During the sharp world-wide recession of the early 1980s the European Round Table (ERT) was established on the initiative of the Swede Pehr Gyllenhammar, then president of Volvo. It comprised about 15 of the leading West European industrialists. Within a short time the ERT submitted a plan to Jacques Delors, head of the EC’s European Commission. The plan was a blueprint for the subsequent Maastricht Treaty that created the European Union.

Among other things, it called for a single currency, a single market and a central bank that would be independent of the member countries, as well as a “more flexible” labor market. Job security was an obsolete concept. Job insecurity was disguised as “Learning for life”, i.e. white- as well as blue-collar workers would have to adjust to a new deregulated labor market with no job security. The report also explained that there was no time to waste. It was imperative that the union be established no later than 1992, which turned out to be the year when the Maastricht Treaty was signed. The Treaty was the beginning of the last act in the long tragicomedy known as European bourgeois democracy.

In an echo of Dr. Schlotterer’s views, the ERT currently describes itself as comprising (emphasis added):

…around 45 chief executives and chairmen of major multinational companies of European parentage covering a wide range of industrial and technological sectors… European industry cannot flourish unless it can compete in a global economy. This capacity to compete cannot be determined solely by the efforts of individual companies. The prevailing economic and social policy framework is crucially important and must be flexible enough to adapt swiftly to changes in global conditions. ERT Member Companies’ actions help to strengthen and support some of the key enabling conditions which trigger innovation and entrepreneurship elsewhere in the economy. Enabling conditions are part of the external business environment within which economic activity takes place, and are the result of actions undertaken by governments, public institutions and those in private sector (sic!).

The ERT notes that the required solution cannot be achieved by the actions of individuals, or even of “individual companies” (Professor Hayes please note).

ERT therefore advocates policies, at both national and European levels, which help create conditions necessary to improve European growth and jobs.

In other words, the ERT writes the agenda for the EU. The project for transforming the EC into a European Union did not arouse much enthusiasm among the working class in Western Europe, largely because the EC had never offered any opportunities for democratic participation in decision-making.

The EU offers less than nothing. It is a supranational organization designed to eliminate state sovereignty and the remnants of representative bourgeois democracy in Europe. It comprises a Parliament, a Council of Ministers, and a European Commission. The Parliament is one in name only, having none of the traditional parliamentary powers such as control of the budget or the right to propose legislation. It is a virtual rubber stamp for the Commission’s decisions, which are often based on input from the Council that is not available to the public.

The European Union is run by and for large privately owned companies. It serves as an arena within which the major industrial and banking corporations of Europe can resolve any differences that may arise between them, and at the same time ensure that Europe as a whole offers what is euphemistically known as “a favorable investment climate”, i.e. a region in which profits can be maximized.

The citizens of the EU member countries have no insight into the deliberations or the decision-making processes of the Council and the Commission. Their own ministers are not permitted to make such information public. On repeated occasions journalists have tried to gain access to documentation, without success. “Democracy deficit” is the EU’s term for the denial of citizen insight into the organization that governs them.

The European Central Bank (ECB) is tasked with implementing a financial policy that has one and only one aim – “price stability”. The rest is silence. As if that weren’t enough, the agreement specifies that it is absolutely forbidden for anyone in the government of a member state to attempt to influence the bank’s policies or even contact the bank (Maastricht Treaty, Protocol on the ECB, Chapter III, Article 7). That privilege is implicitly reserved for the privately owned banks of Europe.

The Treaty has no provisions for dealing with the difficult problem of persistent and increasing unemployment. In the winter of 1993-1994 the EU released a White Paper on unemployment which stated that it had doubled within Western Europe over the preceding 20 years, and admitted that no solution had been proposed or was under development. The trend for unemployment has continued upward since then, for reasons which are discussed later in this chapter. The EU has never proposed a solution to the problem.

The anti-democratic nature of the EU is clearly demonstrated by the procedures for ratifying a proposed constitution and the subsequent Lisbon agreement. In 2005 the leaders of the Union wanted a new constitution to be adopted. Many people understood that it was an instrument for further centralization of power and erosion of national sovereignty. Among other things, the EU would have common foreign and security [war] policies, which would make it impossible for the member nations to decide on their own such policies.

According to the Maastricht Treaty, the constitution had to be ratified by all the member nations in order to become valid. National referendums were to be held in several countries. Sweden was not among them. In line with its devotion to democracy, the government of Sweden announced that there would be no referendum, for three reasons according to the Swedish Foreign Minister. She was obviously inspired by an old Brooklyn joke about a man named Cohen whose daughter would soon celebrate her Sweet Sixteen birthday.

Cohen had very little money, so he asked his wealthy friend Bernstein if he could borrow a few things to decorate his apartment for a party on his daughter’s birthday. Bernstein agreed. The borrowed decorations included a Ming vase. After the party Cohen returned everything. Bernstein phoned the next day to complain that the vase was cracked. Cohen was mystified. One word led to another, and the two men wound up in court.

Cohen’s lawyer announced that the defense of his client would be based on three simple facts: 1) Mr. Cohen had never borrowed the vase, 2) when he borrowed the vase it was already cracked, 3) when he returned the vase it was in perfect condition.

In justification of the decision not to allow a popular referendum on the constitution, the Swedish Foreign Minister explained that 1) The Swedes had already ratified the constitution when they voted to join the EU ten years earlier, in 1994, 2) the changes relative to the Maastricht Treaty were so minor that they were not worth debating, 3) the issues involved were so complex that ordinary people would not be able to understand them.

Referendums were held in France and The Netherlands, where large majorities voted No. The constitution was dead.

But there was no need for the rulers of Europe to worry. After a decent 2-year interval, they proposed the Treaty of Lisbon, a warmed-over and cosmeticized version of the dead constitution. The heads of the member states were instructed not to take chances with popular referendums. The treaty was to be ratified by domestic parliaments, where party whips could ensure compliance, because the rulers of the EU understood that allowing popular referendums would kill the Lisbon Treaty.

The only exception was Ireland, whose own constitution requires popular approval of such a treaty. The Irish voted No. The Lisbon Treaty was dead. Margot Wallström, a Swedish politician (social democrat) who at the time was a member of the European Commission (2004 – 2010), blurted out that the Irish refusal “doesn’t make any difference”, which it nevertheless did, according to the EU’s own rules. Other, less volatile members of the EU’s higher bureaucracy exhibited discreet disappointment.

The rulers of Europe then decided to apply the rain-dance principle. When water is in short supply, the members of the tribe do a dance that will induce rain to fall. If no rain is forthcoming within a few days, the chief tells them “You didn’t do the dance right”. They keep repeating the dance, until the rain comes. Then he tells them “This time you did it right”.

It was decided that the Irish would have to vote on the treaty a second time, because they had not received the proper information and were therefore confused. After copious applications of bullying, bribes, misinformation and false promises the Irish finally did it right and voted Yes. The Lisbon Treaty is now in force. The European Union is free to continue its march toward Dr. Schlotterer’s vision of a pan-European state that is centrally managed in the interests of big business, with “uniform levels of prices, incomes and wages” that will help maximize profits for those who are entitled to them.

Democracy in the US

As the flagship of capitalism, in the mainstream version of history the United States of America is automatically assumed to have always been a democracy. US governmental spokesmen, historians and media people have shared this assumption for many years.

Democracy is not an abstract concept or a ready-made structure. There is no user’s manual. A definition of democracy reflects a class viewpoint. For example, the question of whether a country without universal suffrage can be classified as a democracy has not received a great deal of space in the mainstream version.

The word “democracy” derives from two Greek words, demos meaning the people and kratia, meaning power and/or controlThe first democratic constitution in the West was written in Athens early in the 6th century BC by Solon, a member of an emerging class of rich traders.

Solon’s constitution was essentially an attempt to resolve a bitter class conflict which threatened to rip Athenian society apart. The constitution was a tightrope act that gave the people voting rights and representation in a general assembly. But there was another, higher council in which membership was reserved for the rich.

Solon made this quite clear in The Lawgiver’s Boast, a poem he wrote after the constitution had been adopted and a violent class conflict had been averted. Text in The Oxford Book of Greek Verse in Translation (OUP, 1958):

I gave the commons their sufficient meed
of strength, nor let them lack, nor yet exceed.
Those who were mighty and magnificent,
I bade them have their due and be content.
My strong shield [the constitution] guarded both sides equally
and gave to neither unjust victory.

The right to vote was based on property qualifications. Women, slaves and men with no or insufficient property did not have voting rights. The same rules applied when the first US election was held in 1789. About 15% of the white male population had the right to participate in the balloting that put George Washington in office as the first president.

Property qualifications for white men in the US were not removed completely until 1850. Non-white men were given voting rights in 1870 by the Fifteenth Amendment to the Constitution. Women could not vote until 1920 (Nineteenth Amendment). Native Americans could not vote until 1924.

There is a difference between having the right to vote and being able to vote. Despite the passage of the Fifteenth Amendment in 1870, most blacks living in southern states were denied voting rights through intimidation or the so-called poll tax, which many could not afford. Imposition of a poll tax in Federal elections was not prohibited until 1964 (Twenty-fourth Amendment). In 1965 the Voting Rights Act made it illegal to deny the vote to any racial minorities. The passage of the Act is proof that the right to vote was being denied.

If universal suffrage is a criterion, the US did not become a democracy until 1965. But by that time, industrial and financial capital had gained a virtually unshakeable hold on government. Since then, this hold has been reinforced through corporate control of the media.

No one outside America any longer believes the US media or the US government… You can’t believe a word the American media says. If they say anything correct, it’s just an accident (Paul Craig Roberts).

Ever since the development of industrial capitalism began to accelerate after the Civil War, corporations have had disproportionate power in the US. The growth of their power in the 19th century is described in Matthew Josephson’s The Robber Barons (1962). For example, in 1876 the railroad magnate Hollis P. Huntington wrote in a letter that

I am fearful this damnation Congress will kill me’. It costs so much money ‘to fix things’ [buy congressmen]. $100,000 to $500,000 each session, and there is no end!

However, while the Maastricht Treaty makes the EU inherently undemocratic, the US Constitution was preserved as a framework for bourgeois democracy. In the depression years of what is known as the Roosevelt Era, the Constitution enabled legislation and political action that promoted the interests of working- and middle-class Americans and restricted various types of financial operations, although the influence of corporations and bankers by no means disappeared.

Representatives of big industry and Wall Street have always been close to US presidents. After 1945 they occupied the upper echelons in most areas of government, from farm policy to foreign policy. A good account of the corporate-government connection is in C. Wright Mills’ The Power Elite, first published in 1956. Representatives of labor have not been close to the government, except for a limited number who were been certified as sufficiently subservient to corporate interests.

In July 1947, Roosevelt’s successor Harry Truman signed a directive establishing the CIA and the National Security Council. The War Department was ominously renamed the Defense Department. Truman then launched a massive campaign of repression against a wide range of dissidents, from Communists to progressive politicians such as Henry Wallace, who had been Roosevelt’s Secretary of Agriculture. The repression has been part of American life ever since, and is sometimes referred to as “McCarthyism” in order to disguise the fact that it was – and is – the official policy of the US government.

Since the end of World War 2 the process of eroding democracy in the US has been continuous, and the erosion has intensified since the early 1990s.

Symptoms of this process include the de facto exclusion from national elections of candidates who cannot raise hundreds of millions of dollars. This has naturally served to increase the power of corporations. It has also become obvious that the Congress is still for sale, although the transactions are described as “lobbying”. With a few exceptions, the members of Congress are more or less oblivious to the needs and demands of the working class, and of a large section of the middle class as well.

This was dramatically demonstrated in 2006, when the general protest against the war in Iraq and the deteriorating economy resulted in the Democrats receiving a majority in the House of Representatives. Again with few exceptions, the people’s representatives supported the policies of the Bush regime, which engaged in the most blatant intimidation and election fraud since the McKinley campaign of 1896.

The Constitution of the United States of America was effectively shredded by the Bush regime, and Barack Obama has shown no sign that he intends to restore it. On the contrary, he is openly committed to serving corporate interests and effectively disenfranchising the American public at large.

Someone has correctly pointed out that the Democratic and Republican parties are “two wings on the same eagle”, and most Americans know it. In a poll late in 2009, 85% of the respondents said that the US government serves the interests of big business. They have understood that the US is a de factodictatorship of industrial and financial capital.

It is not an accident that the Obama regime continuously attempts to distract Americans from the real issues of class conflict and disappeared democracy by advocating a continuous state of war, as in Obama’s Nobel Peace Prize speech. The monotonous invocations of the specter of the evil forces that lurk everywhere and are bent on destroying the US and Western civilization show that Obama has absorbed the lesson given by Herman Göring at Nuremberg:

…the people can always be brought to do the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.

Jim Garrison was the New Orleans prosecutor who tried to expose the plot that led to the assassination of John F. Kennedy. His background included service as a pilot with the US National Guard in World War 2. He later graduated from law school and spent two years with the FBI. In 1967 an interview with him was published in Playboy Magazine. It included the following remarkable prediction (emphasis added):

In a very real and terrifying sense, our Government is the CIA and the Pentagon, with Congress reduced to a debating society. Of course, you can’t spot this trend to Fascism by casually looking around. You can’t look for such familiar signs as the swastika, because they won’t be there. We won’t build Dachaus and Auschwitzes; the clever manipulation of the mass media is creating a concentration camp of the mind that promises to be far more effective in keeping the populace in line

I’ve learned enough about the machinations of the CIA in the past year to know that this is no longer the dreamworld America I once believed in… I’ve always had a kind of knee-jerk trust in my Government’s basic integrity, whatever political blunders it may make. But I’ve come to realize that in Washington, deceiving and manipulating the public are viewed by some as the natural prerogatives of office. Huey Long [1893-1935, governor of Louisiana and US senator; assassinated] once said, “Fascism will come to America in the name of anti-Fascism.” I’m afraid, based on my own experience, that Fascism will come to America in the name of national security.

2. Pre-war Fascism involved intensified and widespread integration of the State with big industry and finance capital, often in the form of joint committees that made vital decisions and formulated strategy.

A grotesque parallel is provided by the “reform program” for dismantling the German social insurance system that was launched in 2004. The German chancellor commissioned it from Peter Hartz, personnel director of the Volkswagen corporation. (In 2007 Hartz was convicted for embezzlement of large amounts of corporate money.) In 1935-36, the rearmament program for the Third Reich was written by the directors of IG Farben.

In Nazi Germany, the State encouraged the continued existence of monopolies and cartels that had been previously established by big business. But the State also made cartels compulsory and prohibited formation of new businesses that might operate independently. Similar laws were passed in Italy and Japan. Official economic policy actively favored the interests of the big corporations at the expense of small and medium-size enterprises (see the letter from a group of German businessmen below) and of course the working class.

Fascist society thus tended toward a symbiosis of the State and monopoly capital. Naturally, conflicts between representatives of the two sectors arose as a result of greed, divergent opinions on specific policies, personal differences and rivalries for powerful positions. Anyone who has ever worked in a large organization can testify that such conflicts are more or less continuous. But there was general agreement that the State was to play an active role in ensuring the sanctity of profit maximization and the subservience of the working class.

There was also general agreement that war was an unavoidable and profitable necessity.

Previous to the advent of Fascism, capitalists had already organized groups that would promote the interest of specific sectors and of the capitalist class as a whole, such as the Confederation of British Industry in the UK, the National Association of Manufacturers in the US and the Svenska Arbetsgivareföreningen (Swedish Employers’ Association)in Sweden. These groups were formed because capitalists were well aware that they had a much better chance of achieving their goals through joint action rather than individual efforts, despite the misguided beliefs of Peter Hayes.

The first step toward international postwar cooperation among capitalists was taken while the war was still on, when the Bretton Woods agreement of 1944 established the gold-backed US dollar as the world’s reserve currency. The “world” then consisted of everything outside the Soviet Union. The agreement also set up a framework and guidelines for regulating the international monetary system as well as the monetary and financial policies of the capitalist countries. It was hoped that the terrible depression of the 1930s would never be repeated.

Since 1945 the degree of international integration between capitalists and national governments has been increasing steadily. One aspect of this integration comprises non-governmental organizations formed by major corporations. Their task is to maintain close relationships with national governments in order to influence and/or determine their policies. Such a task is beyond the reach of most citizens. These organizations often consist of representatives of both business and government. In addition to the European Round Table mentioned above, they include the Trilateral Commission, the Bilderberg Group and the Transatlantic Business Dialogue.

Another aspect of capital-government integration comprises official inter-governmental organizations and agreements, such as the OECD, the World Bank, the International Monetary Fund (IMF), the North Atlantic Free Trade Agreement (NAFTA) and the World Trade Organization (WTO; until 1995 GATT, the General Agreement on Tariffs and Trade).

In general, these groups and organizations aim at influencing and controlling national governments and driving “globalization”, which means enabling capitalists to penetrate and dominate markets world-wide.

For example, the Trilateral Commission (TC) was established in 1973 “by private citizens of Japan, Europe (European Union countries), and North America (United States and Canada) to foster closer cooperation among these core democratic industrialized areas of the world with shared leadership responsibilities in the wider international system”. David Rockefeller is listed as a founder and previous chairman.

The TC’s website does not specify who delegated the “leadership responsibilities” or the exact nature of the “wider international system”, but it does inform us that thinking and leadership are shared with “principal international organizations” (unidentified).

The TC has 390 members, from Europe, North America and Asia/Pacific, who are “distinguished leaders in business, media, academia, public service (excluding current national government leaders), labor unions, and other non-governmental organizations”.

The executive committee includes representatives of financial institutions and industrial corporations, academics devoted to extolling the virtues of capitalism, former heads of finance and defense ministries, and others with leadership responsibilities, such as an international adviser to Goldman Sachs, a former editor of the Wall Street Journal, the head editor of the right-wing Danish newspaper Politiken, and a former chairman of the, Federation of German Industries. The committee does not include any representatives from Cuba or Venezuela.

The TC’s approach to “common challenges and leadership responsibilities” is reflected in the agenda of its 2009 Annual Meeting in Tokyo. The topics discussed included The Threat of Protectionism to Global Recovery. “Protectionism” is code for efforts by sovereign nations to guard their economies against penetration and domination by international capital. It is therefore not surprising that the panel which discussed the issue included Susan Schwab, “a former US Trade Representative, as well as Peter Sutherland, former Director General, General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO), Chairman, BP (British Petroleum)”. The functions of GATT and the WTO are discussed below.

The meeting also included a discussion of The Intellectual Underpinnings of The Trilateral Partnership in the 21st Century, at which the main speaker was none other than the unindicted war criminal Henry Kissinger, listed as “Chairman, Kissinger Associates, Inc., New York, NY; former U.S. Secretary of State; former U.S. Assistant to the President for National Security Affairs”.

The obvious function of the Trilateral Committee is to serve as a link between major corporations and governments as well as a clearing house for identifying and marketing policies that are of benefit to the owners of the corporations.

The TransAtlantic Business Dialogue (TABD) calls itself “the leading voice promoting a barrier-free transatlantic market for growth, innovation and sustainability in the global economy”, which sounds quite benevolent. Its goal is to “help establish a Barrier-Free Transatlantic Market which will serve as a catalyst for global trade liberalization and prosperity. Unified markets are needed to create a business environment which will stimulate innovation and economic growth, increase investment and create new jobs”.

The bit about creating new jobs can be ignored, since private companies are not in business to do so. Their job is to maximize profits. The rest can be easily decoded: remove all regulations and/or laws that might inhibit profit maximization. “Key issues” include “maintaining an open investment climate” and “moving toward a transatlantic financial market”. The membership of the TABD naturally includes executives from major US and European corporations such as Coca-Cola, General Electric, Intel, JPMorgan Chase, KPMG International, Merck and Co, Inc., Microsoft, Pfizer, PricewaterhouseCoopers, Airbus, AstraZeneca, BASF (successor to IG Farben),
British AirwaysBritish American TobaccoBTDeutsche Bank, MAN AG, Siemens, ThyssenKrupp, Unilever and others with a burning interest in the welfare of the working class. However, none of them has shown much interest in creating new jobs.

The roles of the World Bank and the International Monetary Fund (IMF) as spearheads for and enablers of profit maximization for US, European and Japanese capitalists are well known. We may briefly note that these two organizations provide loans and financial assistance to less-developed countries that almost without exception have disastrous results for the industrial and agricultural working classes of the country concerned.

The World Trade Organization (WTO) is probably the best example of how postwar cooperation between capital and government represents an international development of the principle underlying the economic structure of Nazi Germany, i.e. integration of the State with big industry and finance capital.

The WTO is an extension of the inter-governmental General Agreement on Tariffs and Trade (GATT), which was established in 1947 for the purpose of promoting free trade. In practice it has been dominated by the representatives of the imperialist countries, whose aim is to promote the interests of capitalists. GATT was integrated into the WTO, which was established in 1995 to define and regulate “the rules of trade between nations at a global or near-global level”, which are derived from the rules set up by GATT.

It should be emphasized that every major capitalist country developed behind tariff walls which obstructed the import of goods that could compete with those produced by domestic capitalists. Free trade was not desirable until a sufficiently large volume of investment capital had been accumulated. When industrial capitalism within a country developed to the point where capitalists had to seek external markets for investment, the cry of “free trade” began to be heard.

However, the ruling class in the imperialist nations is not interested in allowing less-developed nations the option of protecting their domestic industries. GATT and the WTO are instruments for enabling Western capitalists to penetrate and dominate the economies of such nations.

The WTO has 153 member countries. In almost every case, the decision to join was made at government level without any public debate or discussion. In Sweden, the people’s elected representatives in the parliament (Riksdag) had nothing at all to say.

The WTO aims at “deregulating trade”, which means eliminating all and any legislation that restricts the right of capitalists to maximize profits, irrespective of hazardous effects on public health, the environment, working conditions, work safety, or anything else. In effect, governments of member countries are no longer free to make their own decisions on trade. This in turn means that the citizens of these countries are powerless to influence their economies, as in the prewar Fascist countries.

Although the WTO is marketed as an organization that focuses on trade in goods, it also imposes strict rules for service sectors, which can include anything from health care and education to banking and energy supply. The WTO demands – and in all too many cases has achieved – virtually complete deregulation of financial markets.

The WTO’s Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) is a powerful instrument for “harmonizing” rights and legal protection for ideas, artistic creations and technological innovation. The US biotechnology industry exerted a good deal of pressure in order to establish this agreement. TRIPS also protects patents on various forms of life, such as plants and animals, including human beings.

TRIPS makes it impossible for an individual country to apply its own patent rules. It enables TNCs to obtain patents on foods and medicines that are considered to be in the public domain, which makes the neo-colonies even more subservient to the imperial centers. The patents can extend to medicinal plants as well as the active substances they contain. Patents on various types of crops can be used to promote mono-culture agriculture, which limits or eradicates the bio-diversity that is one of the few supports of economic independence for small farmers in the neo-colonies. It is also a pre-condition for the continued existence of the human species. Patents on various types of traditional medicines and medicinal processes drive retail prices up, along with profits, and also severely limit marketing of cheaper generic medicines.

The TRIPS definition of “technological innovation” is fuzzy enough to allow corporations armed with battalions of lawyers to secure global patents on methods and processes that were developed independently within the framework of national cultures. This also applies to various types of IT code that have been available as open-source.

If a government violates the rules imposed by the WTO, foreign investors and/or corporations can sue it and complain to the WTO, which sets up a panel to hear the case. As in Nazi Germany, decisions within the WTO are made behind closed doors. They are beyond the reach of the majority of the populations in both the advanced and the less developed countries.

The WTO provides a legal framework that legitimizes and strengthens the efforts of capitalists in the imperial countries to re-establish the unfettered capitalism of 1850.

The North American Free Trade Agreement (NAFTA) is a mini-version of the WTO. It has had similar disastrous effects on the North American working class as well as the environment.

“Less government in business, more business in government” was the motto of Warren G. Harding, one of a long series of corrupt nonentities who have served as president of the US. Advocates of free trade usually call for less government in business, but the WTO, NAFTA and the rest of the legal apparatus enabling imperialism actually represents more, not less, government in business.

The relationship has been intensified during the bank bailouts which began in 2008. In a capitalist society, a provider of crucial financial aid normally demands at least majority ownership or control in the company being rescued. But in virtually all cases where State funds have been or are being injected into privately owned institutions, the government has abstained from assuming the role of owner or has promised to withdraw once the patient has been restored to health. Private property is indeed sacred, as Hitler said. The State and monopoly finance capital are now entwined like two snakes in the act of copulation – in full view of the public.

3. Degradation and intensified exploitation of the working class, including legal and physical attacks on trade unions. Pre-1945 Fascist regimes moved quickly to strip workers of rights and benefits that they had won through decades of class struggle.

In a modern society, the means of production that are used to generate goods and services include land, buildings, equipment, machinery and raw materials. In capitalist societies, with the exception of small business and small farmers, the means of production are owned by a tiny minority of the population, who comprise the capitalist class. In such societies the working class consists of people who do not own the means of production and are obliged to sell their labor power in order to obtain money that will enable them to survive. In the text below “working class” includes industrial, commercial and agricultural workers, as well as those workers who want to sell their labor power but cannot find buyers, i.e. those who are involuntarily unemployed, or under-employed.

Exploitation of the working class in the neo-colonies
We have already noted that over the past 40 years the neo-colonies have been generating an increasing share of the products consumed by the 15-20% of the world’s population who live in the developed countries.

According to the World Bank Development Report 2008, these people account for 76.6% of total expenditures on private consumption. The poorest 20% account for 1.5%.
The rest – 21.9% – is accounted for by 60% of the world’s population.

This situation is not the result of a world-wide referendum in which the citizens of the neo-colonies decided that the major share of the planetary product should be consumed by the inhabitants of the OECD countries. It has resulted from the expansion of imperialist power (“globalization”) and has included large-scale relocation of production to countries that are euphemistically designated “low-wage” or in Sweden “low-cost”, where workers are paid a tiny fraction of the wage they would receive in the OECD. If they receive a wage. The ILO estimates that the global workforce includes almost 250 million child laborers between the ages of 5 and 14, and it can be safely assumed that their wages are close to zero. Some capitalists have been able to benefit from home-grown child labor, as in the US, where an estimated 1 million children work for less than subsistence wages.

The new role of the neo-colonies as suppliers of consumer products to the imperial countries is a complement to their traditional function as suppliers of raw materials ranging from cotton and pineapples to bauxite, copper and wolfram.

The neo-colonies now include the People’s Republic of China, which from 1949 until the late 1970s was outside the orbit of the global capitalist system. The market-economy policies of the Chinese “Communist” government have led to a revival of capitalist production relations that has included comprehensive privatization of publicly owned property as well as establishment of production facilities owned by MNCs who are allowed to repatriate profits. China is currently a huge export platform that delivers cheap products to the West, particularly to the US.

Like the working class in other neo-colonies, Chinese workers are subject to extreme and often brutal exploitation. If they were not being exploited, the MNCs and domestic capitalist firms that profit from purchasing their labor power would not be there. The degree of exploitation can be measured by the degree of revolt. A total of 87,000 protests, riots and other “mass incidents” by farmers whose land had been expropriated was reported in 2005 by the government newspaper People’s Daily.

“Angered by steadily deteriorating living and working conditions (including the market reform-driven dismantling of national health, housing, and retirement protections), growing numbers of people (in both urban and rural areas) have demonstrated a willingness to confront their employers and governing officials in defense of their rights. The number of large-scale “public order disturbances” has increased from 58,000 in 2003 to 74,000 in 2004, 94,000 in 2006, 120,000 in 2008, and to 58,000 in the first quarter of 2009 (on pace for a record of 230,000 by the end of 2009). Particularly worrisome to the Communist Party leadership is the changing nature of labor actions: workers are increasingly taking direct action, engaging in regional and industry-wide protests, and broadening their demands. (Martin Hart-Landsberg, “The U.S. Economy and China: Capitalism, Class, and Crisis”, Monthly Review, February 2010.)

The sustainability of the new forms of capitalist exploitation in China is a subject that is too large for further discussion in this book. However, I believe that the struggle between the working class and the capitalists will rip Chinese society apart within a foreseeable future.

A large-scale revolt against imperial dominance has been in progress in Latin America for some time. This revolt has taken a variety of forms, but the establishment of new American military bases in Colombia shows that it is perceived as a serious threat by imperialists, especially in the US. In general, the capitalist-working class conflict is being intensified world-wide as a result of the deepening crisis of capitalism, not least in the former socialist countries of Eastern Europe.

There is no point in moving production to low-wage countries and keeping it there unless low wages can be maintained. The results of intensified exploitation of the working class in the neo-colonies are reflected in the UN Development Report 1999, and the World Bank Report cited above confirms that there has been little or no change over the past 11 years:

Gaps between the poorest and the richest people and countries have continued to widen… This continues the trend of two centuries. Some have predicted convergence, but the past decade has shown increasing concentration of income among people, corporations, and countries.

Exploitation is not restricted to low wages, however. In general, working conditions throughout the neo-colonies are horrendous in terms of working hours, work safety and non-existent or inadequate health and unemployment insurance.

About USD 41 billion annually would be sufficient to provide basic education, clean water, basic sewage systems, natal and pre-natal care and health/medical services to everyone in the world who does not have them. Annual expenditures for cosmetics in the US, ice cream in Europe, perfume in the US and Europe, and pet food in the US and Europe amount to about USD 48 billion.

A photograph on page 29 of the Holocaust Book published by the Swedish government has the following caption: “A dying child on a sidewalk in the Warsaw Ghetto, 19 September 1941. The photographer noted: ‘People simply walked by, there were all too many such children'”.

The photograph is an appropriate symbol of the world we live in today. But the authors of the Holocaust Book neglect to draw the parallel.

Another appropriate symbol of the condition of the working class in the neo-colonies would be a photograph of a family of four climbing on a rubbish dump in search of food and items that might be sold for cash.

Degradation of the working class in the EU and the US
Relocation of production and the development of a global system of slave and semi-slave labor have been paralleled by degradation of the condition of the working class in Europe and the US since the 1970s.

In addition to a decline of about 25% in real wages, the workers’ share of national and global income has been falling continuously since the early 1970s. The trend to degradation also includes continuously increasing stress levels at the workplace, as employers shed jobs and require remaining workers to maintain or increase levels of output. Regulations governing work safety are under continuous attack, or are not adequately enforced.

Persistently high and rising unemployment has encouraged employers to threaten workers with dismissal unless they agree to work overtime without compensation. Job insecurity in the form of temporary employment contracts has become endemic in a wide range of sectors from software (Microsoft) and retailing to the automotive industry, as in the giant Peugeot plant near Paris.

Job insecurity also results from so-called reforms which are aimed at creating a more “flexible” labor market that enables unemployed workers to migrate across national borders and sell their labor power at low rates.

Degradation is also evident in living conditions for the American and European working class, as many of them cannot afford to live anywhere but in slums or neighborhoods that are rapidly approaching slum status. They are also exposed to high levels of pollution in the belts of housing that encircle many large cities and are bisected by or built alongside motorways with 24-hour streams of traffic.

In the US and the UK, large numbers of citi­zens are already living in conditions that resemble those in the neo-colonies. For example, the official child mortality rate among African-Americans in Chicago and Brooklyn is higher than in Jamaica.

The attack on labor unions
The labor union has historically been the basic form of working-class resistance to capitalist domination, as workers in countries where industrial capitalism developed learned quickly that as individuals they are powerless.

Capitalist combat with unions has traditionally been violent, particularly in the US. The relative success of unions in the imperial countries in improving the condition of the working class has clearly been an important consideration in decisions to relocate production to the neo-colonies, where efforts to combat unions and prevent their formation have generally been more violent, more brutal and more successful than within the OECD.

Article 23, Section 4 of the United Nations Universal Declaration of Human Rights is worth quoting in this connection: “Everyone has the right to form and to join trade unions for the protection of his interests.”

This right has been under consistent attack within the EU, the US, and the neo-colonies, as it was in Fascist Italy and Germany. The attack modes vary depending on the balance of forces in the class struggle. For example, membership in labor unions has historically been higher in Europe than in the US, but European labor unions have been losing ground steadily since the early 1990s at least. Concessions such as acceptance of pay cuts in return for non-binding guarantees that a plant will continue to operate have become regular occurrences.

The US has a long history of bloody violence against unions, workers and union organizers. In the 1930s workers were shot down in the streets by the National Guard or hired thugs, especially in connection with the establishment of unions in the steel, automotive and electrical equipment industries, in which the Communist Party of the USA played a leading role. Attempts to organize agricultural unions in the US comprise a particularly blood-stained story.

During World War 2 unions in the US agreed to refrain from so-called industrial action, and in most cases they did so. After the war there was considerable pent-up demand for wage increases and better working conditions. The attitude of the government and the ruling class was demonstrated unambiguously during a series of major strikes in 1946-1947. The miners and the railroad workers went on strike in 1946 and refused to accept an arbitration settlement, which they considered insufficient.

President Truman announced that

This is no longer a dispute between labor and management. It has now become a strike against the government of the United States itself.

He then took over the mines and railroads in the name of national security. But the strikes continued. Truman decided to request legislation that would enable him to draft the strikers. He said that the government should “hang a few traitors and make our country safe for democracy.” The traitors were of course the American railroad workers who were exercising their legal right to strike,

Truman asked Congress to give him authority “to draft into the Armed Forces of the United States all workers who are on strike against their government.” His statements received a standing ovation. The House of Representatives passed the requested bill by a huge majority, but it was killed in the Senate. After workers at oil refineries in 20 states went on strike later that year, the US Navy seized the plants.

In 1947 Congress passed the Taft-Hartley Act, which severely restricted the rights of labor unions. In 1949, a purge of eleven unions whose leaders included Communists leaders was successfully initiated. In the following years the ability of labor unions to promote and defend the interest of workers was steadily eroded by legal and illegal means, partly with the help of paid-for union leaders who were approved by both capitalists and the US government. Union membership in the US is now 10-15% (11,3%, January 2013 according to the Bureau of Labor Statistics of the US Department of Labor).

In general, labor unions in post-1945 Western Europe were more successful than their counterparts in the US, except of course in Franco Spain. In cooperation with domestic Communist and Social Democrat parties, unions were able to obtain a great many improvements in terms of wages, working conditions, job security, unemployment and sickness compensation, pensions and work safety. The existence of the Soviet Union was a major factor in the class struggle in Western Europe, as the benefits enjoyed by workers in the USSR served as a benchmark. Social Democrats were repeatedly forced to accept union demands, although they often tried to water them down, as they attempted to offset or reduce the influence of Communists in the labor movement.

Nevertheless, from the 1970s onward there was a marked trend to greater collaboration by union leaders with employers, and this trend accelerated after the dismemberment of the Soviet Union in 1991.

The general strategy of the European capitalist class has been to co-opt union leaders in the cause of imperialism and steadily attack union solidarity. Exceptions include the government of Margaret Thatcher, which launched an all-out legal and physical war on unions and inflicted a number of serious defeats on the British working class.

This strategy has been successful in many countries. Leaders of Social Democrat-led unions seldom or never comment on the imperial world order, although they naturally mourn the jobs that are lost through relocation of production to low-wage countries.

The ratification of the Maastricht Treaty and the creation of the European Union have provided the European ruling class with powerful new ammunition in the class war. The enlargement of the Union to the East, where public-sector industries have been sold or shut down, has provided a large pool of unemployed workers who are forced to work at very low wages in the West.

One of the most powerful weapons now available to European capitalists is the EU Counter-terrorism Act. Like the Patriot Act in the US, this catch-all law enables virtually any action to be labeled as terrorism, including strikes arranged by labor unions. The EU cooperates with the US National Security Commission in operating the ECHELON surveillance system. All wire line and mobile telephone traffic, faxes, telexes and Internet communications are routinely monitored within the entire EU and sent to Langley VA for analysis. The framework of the EU Counter-terrorism Act was adopted by the SwedishRiksdag in the spring of 2002 virtually without debate.

According to the 1998 report An appraisal of the technologies of political control by the Omega Foundation in the UK, ECHELON is used for surveillance of ”dissidents, activists, journalists, minorities, trade-union leaders and political opponents”.

Unions in the EU consistently give in to demands from employers such as Siemens, VW, Electrolux, and get what they want with a minimum of fuss – e.g. extension of the working day without additional pay. The EU has now extended the working week to 48 hours. Interested historians should consult the chapter inCapital Vol. 1 on the history of the struggle for shorter hours.

An illustrative case in France was documented in Le Monde in the summer of 2004. In the above chapter in Capital, Marx reports that in 1844 legislation on the working day was extended to cover women, who were equated with children as having the right to a maximum 12-hour working day. Night shifts for women were prohibited because of negative effects on health.

In the summer of 2004 – 160 years later – a company in Paris that manufactured ink and ink cartridges, with mostly women employees, announced that it was introducing a night shift in order to “maintain competitiveness”. Otherwise it would have to move to China. The union was forced to accept the change.

Innumerable other examples include the Neva garment factory in Estonia, paid for by the Soviet working class, now owned by Borås Wäfveri of Sweden, where the monthly wage for a seamstress is SEK 600 (about USD 90) and the work-week is 60-70 hours. Output includes men’s shirts sold for SEK 400-600 apiece in Sweden. Another garment factory in Vladivostok reported in The Inter­national Herald Tribune pays Chinese and Russian girls USD 11 per month for 6-7 day work-weeks, 10-14 hours per day.

This process is accelerating within the OECD countries, as growing numbers of the population cannot survive on their wages, particularly in the US and UK, but also in Germany.

At the same time, the World Bank cynically defines poverty as an income of 2 dollars or less per day. This means that a person in Stockholm living on a below-subsistence income of SEK 3,200 (USD 500 approx.) per month is not poor.

But although over the past ten years labor unions in Western Europe have repeatedly accepted lower wages and degraded working conditions as the price of continued employment, unions are still seen by capital as a major obstacle to achieving a minimal and uniform wage level.

In 2003 the EU was expanded to include a number of former socialist countries in Eastern Europe, where wages are only a fraction of those in Western Europe. This has given European capitalists new ammunition for their drive to establish Dr. Schlotterer’s uniform pan-European wage level through an assault on labor unions, wages and working conditions. The issue came ahead in a conflict in Sweden.

The Laval case – dumping wages

In 2004 a Latvian company called Laval un Partneri submitted the winning tender for construction of a school in Vaxholm, a municipality outside Stockholm. The company set up a Swedish subsidiary, brought in construction workers from Latvia, and paid them wages that were about 30% of the Swedish union wage. They worked a 56-hour week, which is nominally illegal in Sweden.

The Swedish Building Workers’ Union asked Laval to sign a collective bargaining agreement that would ensure the Lettish workers of Swedish union wages and working conditions as well as sickness insurance and pension contributions. Laval refused and the union organized a blockade of the construction site, which was permissible under Swedish law. Other Swedish unions cooperated, and Laval’s subsidiary was forced into bankruptcy in the winter of 2004-05.

At the same time, Laval filed a suit against the union in the Swedish Labor Market Court, which comprises representatives of both capital and labor. The company claimed that the union’s action was in violation of EU law on two counts – it discriminated against foreign companies, which is prohibited by the Treaty of Rome, and it prevented free movements of capital and people, two of the cornerstones of the EU. The Swedish court ducked the issue by referring to the EU Court of Justice.

The EU court did not hand down a decision until December 2007, as the leaders of the EU discussed ways and means of avoiding a confrontation that might provoke undesirable reactions. The decision is a skilled exercise in double-talk that effectively denies the rights of the union. The Court stated that the issue at stake was

…the relationship between fundamental rights and the principles of free movement within the internal market (i.e. the single EU market stipulated by the Maastricht Treaty).

It then found that pay rates set by industry-wide collective bargaining, as in Sweden, could not be applied. Regarding the blockade by the union, the Court found that “the right to take collective action constitutes a fundamental right which forms an integral part of the general principles of Community law, but that that right must nevertheless be reconciled with the fundamental freedoms guaranteed by the Treaty, with the result that the exercise of that right may be subject to certain restrictions, in accordance with the principle of proportionality.

It further found that

the right to take collective action by which undertakings established in other Member States may be forced to sign the collective agreement… is liable to make it less attractive, or more difficult, for such undertakings to carry out construction work in Sweden, and therefore constitutes a restriction on the freedom to provide services…This is a case of direct discrimination (by the union) based on nationality for which there is no justification.

The Court’s decision officially opened the door to massive wage dumping across the EU, which was in fact already in progress. Capitalism brought extremely high levels of unemployment to the former socialist countries in the East, which has generated a mass exodus to Western Europe in search of jobs. Employers in the West are happy to provide them at wages far below union rates. Mass trafficking of women to the West, including poverty-stricken mothers, is also part of this exodus.

4. Intensified expansion of monopoly capital, continued concentration of power and wealth in the hands of a small minority of the population.

Since the mid-19th century capitalism has shown a marked tendency toward creation of monopolies, oligopolies (control of a sector by a few companies) and cartels (agreements for division of markets). Over the past 160 years the capitalist system has experienced about 30 major crises, and after each crisis the number of firms in the sectors most affected has been reduced.

The general pattern has been for a new industry to attract many investors seeking higher returns on capital. As the industry becomes over-crowded, margins decline and many firms are driven into or close to bankruptcy, which leads to mergers and acquisitions, and the number of competitors is reduced. It has often occurred that the few remaining firms join international cartels, as they realize that continued competition would be a gamble and might be fatal. Such cartels have been evident for years in such industries as aluminum, heavy electrical equipment and the grain trade. In the US cartels were known as trusts in the late 19th century, and provoked massive popular resentment that culminated in the Sherman Anti-Trust Act. But the tendency to concentration has persisted, in the US and all other capitalist countries.

This applies particularly to the financial sector. At the start of the 20th century Lenin showed that finance capital had come to play a key role in the growth of monopoly capital (Imperialism, the Highest Stage of Capitalism, 2010, orig. 1916).

The symbiosis of industrial and financial capital was reinforced in the period between the two world wars, especially in Italy and Germany, whose economies were structured around cartels that were enforced by the State.

Since 1945 the consolidation of financial and industrial capital has been continuous, and by the end of the 1950s giant corporations in the US, Europe and Japan were already dominating the international capitalist economy. The stagnation that became evident in the industrial sector in the early and mid-1970s has been a powerful stimulus to the further growth of monopolies. Insufficient utilization of production capacity, insufficient consumer demand due to declining wages, and unsatisfactory returns on capital invested in industry led to, among other things:

  • A dramatic increase in mergers and acquisitions from the mid-1980s onward
  • An explosion of individual, corporate, and public-sector debt (see below)
  • Wave after wave of financial speculation, consolidation of financial institutions.

Franz Neumann pointed out that the main function of Fascism was to enable German industry to realize its potential for generating profits. Realizing that potential remains a problem for the owners of today’s capitalist system, as shown by the figures for capacity utilization, which have been oscillating between 60% and 85% for the past 40 years.

Today, the domination of monopoly capital and the concentration of power and wealth in the hands of a tiny minority are evident for anyone who has eyes to see or the patience to plow through statistics on the Internet. For example, the 500 companies on the Fortune magazine list control about two-thirds of world trade, much of it between themselves. Giant firms such as Cargill, Dreyfuss, Archer Daniels Midland and Monsanto control much of the world’s supply of food and seed. The international automobile industry is for the most part an interlocking directorate in which corporations are in nominal competition actually own shares in each other. From white goods to semi-conductors, the rule is monopoly, oligopoly or cartel.

Nowhere is this more apparent than in the financial sector, in which a handful of giant banks and financial institutions control the capitalist world’s money supply, currencies and financial assets. At year-end 2009, the world’s ten largest banks accounted for about 70% of global banking assets.

Greater concentration of capital in the form of both financial and physical assets in order to safeguard and increase profits has always been an attraction for capitalists. But it is now a necessity for the rulers of the system, just as it was in Fascist Italy and Germany, and this necessity has become acute. The current concentration of capital is unprecedented.

5. Terror and military aggression as integral components of domestic and foreign policies.

The evidence presented in Chapter 8 shows that Fascist terror and aggression were squarely in the tradition of previous ruling-class policies. These included attempts by the British government to pacify unruly inhabitants of the Middle East and Afghanistan between the world wars by aerial bombardment and the use of poison gas, as documented by David E. Omissi in Air power and colonial control (Manchester University Press 1990).

Winston Churchill on poison gas:

I do not understand this squeamishness about the use of gas… I am strongly in favor of using poisoned gases against uncivilized tribes. The moral effect should be so good that the loss of life should be reduced to a minimum… Gases could be used which cause great inconvenience and would leave a lively terror and yet would leave no permanent effect on most of those affected.

The objections of the India Office to the use of gas against natives [in Afghanistan]are unreasonable. Gas is a more merciful weapon than high explosive shell and compels an enemy to accept a decision with less loss of life than any other agency of war. The moral effect is also very great. There can be no conceivable reason why it should not be resorted to.

Since 1945, the imperialist countries have made wars of aggression part of the status quo. When a war is not actually being in progress, it is often because the government is too busy preparing for the next one.

Like Fascist aggression, the wars waged by the West have targeted the Communist movement and the working class. The targets have included movements within the neo-colonies aimed at liberating them from imperial dominance (see Chapter 13). Unlike the Fascists, the imperial powers did not dare to use military force directly against the Soviet Union.

Since the dismantlement of the USSR, wars of aggression in Iraq, Yugoslavia and Afghanistan have involved continuous terrorism against civilians by both ground forces and aircraft, including so-called drones. The nature of the aerial war against Yugoslavia in 1999 was identified by Walter J. Rockler, one of the prosecutors at the Nuremberg Trials, in War Crimes Law Applies to U.S. Too, published in the Chicago Tribune, 23 May 1999 (emphasis has been added):

As justification for our murderously destructive bombing campaign in Yugoslavia, it is of course necessary for the U.S. to charge that the Serbs have engaged in inhuman conduct, and that President Slobodan Milosevic, the head Serb demon, is a war criminal almost without peer.

President Clinton assures us of this in frequent briefings, during which he engages in rhetorical combat with Milosevic. But shouting ‘war criminal’ only emphasizes that those who live in glass houses should be careful about throwing stones.

We have engaged in a flagrant military aggression, ceaselessly attacking a small country primarily to demonstrate that we run the world. The rationale that we are simply enforcing international morality, even if it were true, would not excuse the military aggression and widespread killing that it entails. It also does not lessen the culpability of the authors of this aggression.

As a primary source of international law, the judgment of the Nuremberg Tribunal in the 1945-1946 case of the major Nazi war criminals is plain and clear. Our leaders often invoke and praise that judgment, but obviously have not read it. The International Court declared:

‘To initiate a war of aggression, therefore, is not only an international crime, it is the supreme international crime differing only from other war crimes in that it contains within itself the accumulated evil of the whole’.

At Nuremberg, the United States and Britain pressed the prosecution of Nazi leaders for planning and initiating aggressive war. Supreme Court Justice Robert Jackson, the head of the American prosecution staff, asserted ‘that launching a war of aggression is a crime and that no political or economic situation can justify it.’ He also declared that ‘if certain acts in violation of treaties are crimes, they are crimes whether the United States does them or whether Germany does them, and we are not prepared to lay down a rule of criminal conduct against others which we would not be willing to have invoked against us.

From another standpoint of international law, the current conduct of the bombing by the United States and NATO constitutes a continuing war crime. Contrary to the beliefs of our war planners, unrestricted air bombing is barred under international law. Bombing the “infrastructure” of a country – waterworks, electricity plants, bridges, factories, television and radio locations – is not an attack limited to legitimate military objectives. Our bombing has also caused an excessive loss of life and injury to civilians, which violates another standard. We have now killed hundreds, if not thousands, of Serbs, Montenegrins and Albanians, even some Chinese, in our pursuit of humanitarian ideals.

NATO forces totalled about 3.2 million men and women before the “accession” of 12 Eastern European and Balkan countries in 1999, 2004 and 2009. The Fascist army that invaded the Soviet Union in 1941 totaled about 5.1 million troops and was then regarded as the most powerful military force in world history. Given the tremendous advances in technology over the past 70 years, especially in electronics and aviation, the resulting increase in firepower, and the deployment of nuclear warheads, NATO undoubtedly surpasses the Fascist armies of 1941 in destructive power.

NATO describes itself as “committed to fulfilling the goals of the North Atlantic Treaty Organization signed on 4 April 1949. As Rockler stated, the organization is not in fact committed to those goals. The web site also refers to “a modernization process designed to ensure that NATO can effectively deal with 21st century threats”. The threats are not directly identified. A search at the site for the “NATO mission” resulted only in links to secondary missions such as anti-piracy. I could not find any general statement of NATO’s purpose or goals.

NATO was originally established as a response to a non-existent military threat from the Soviet Union. Given the opacity of the NATO website, the function of this military organization in a world where “Communism is dead” may legitimately be questioned.

The NATO has two basic functions. It will be used to keep the EU population in check whenever necessary, and to counter a resurgence of Communist movements in Eastern Europe and the former Soviet Union. It is also being used to promote imperialist interests “out of theatre”, i.e. anywhere, as in the wars of aggression against Afghanistan and Libya. In addition, NATO will be used against perceived competitors to Western imperial dominance.

For example, on 30 March 2010 the NATO website featured a “Review” of “The Coming Role of Asia”, which refers to the Asian “security agenda” and fingers China as a future adversary, partly because NATO claims that China has invested more money in Afghanistan than any other country.

The case of Israel

The state of Israel now fulfils towards the oppressed peasants of many countries – not only in the Middle East but also far beyond it – a role not unlike that of the Jews in pre-1795 Poland: that of a bailiff to the imperial oppressors (Israel Shahak).

The founders of the Zionist movement expected the future Jewish nation in Palestine to serve as an outpost of Western “civilization”, which is a euphemism for imperial power. Herzl in Der Judenstaat (The Jewish State): “There [Palestine] we shall be a sector of the wall of Europe against Asia, we shall serve as the outpost of civilization against barbarism.”

The Zionists were clearly aware that their state could not hope to maintain itself without the support of at least one major Western power. Herzl was convinced Zionism could succeed only if it were allied with a major Western power.

The unstated assumption of Herzl and his successors was that the Zionist movement would achieve its goal not through an understanding with the local Palestinians but through an alliance with the dominant great power. (Avi Shlaim, The Iron Wall: Israel and the Arab World, 2000.)

Great Britain and Germany were initially the obvious candidates. Among other rulers, Zionist representatives approached Kaiser Wilhelm and offered to enlist the future state as a colony of the German Empire.

After the defeat of Germany in 1918 and the eclipse of the UK as a major power after 1945, the US was the only appropriate choice. However, it was apparently not until after the 1967 war in the Middle East that Washington realized the advantages of a commitment to Israel.

The methods employed by the Zionists during the ethnic cleansing of the Palestinians in 1948 are described at the start of Chapter 7. The imperial powers have never even suggested the use of economic sanctions or military force against the Zionists, who in repeated violation of international law and the UN have engaged in a continuous genocide ever since the state of Israel was established. In contrast, intervention in Yugoslavia during the 1990s was marketed as motivated by Serbian violations of the same law. In recent years the murderous Israeli attacks on Lebanon and Gaza have not generated any punitive response in the imperial capitals. The Goldstone Report commissioned by the UN is virtually the only official act of recrimination, but the report was condemned by the Congress of the leading imperial power.

Anyone interested in reviewing the crimes of the Zionists might begin with The Insane Brutality of the State of Israel, by Kathleen Christison, a former CIA political analyst who specialized in the Middle East, available at

For the butchery in Gaza, see Israel’s Lies, by Henry Siegman, a former national director of the American Jewish Congress and of the Synagogue Council of America.
This article was originally published in the London Review of Books in January 2009 and is available at

It is not easy to determine why the Western defenders of democracy and human rights offer both direct and indirect support to a State that has continuously violated both of these noble principles. The purchase of the US Congress (excepting a small minority of representatives and Senators) by the Israeli government is certainly a contributing factor, but it is not a sufficient explanation. Nor are the profits made by the US war industry from subsidized weapons deliveries to Israel.

Israeli leaders routinely invoke the Holocaust as an excuse for their actions, which is grotesque in light of their relations with the Nazis as described in Chapter 7. It is sometimes claimed that the Israelis appeal to the conscience of the Western powers. This of course implies that the Western powers have a conscience, which is highly doubtful.

A complete explanation of Western acquiescence in Israel’s crimes would have to take account of Israel’s role as an outpost of imperialism in the Middle East, its arsenal of nuclear warheads as a deterrent to change in the region, and its utility as a promoter of racist propaganda against the Arab and/or Muslim hordes who are threatening Civilization As We Know It.

The mainstream media often refer to Israel as “probably” having a nuclear war arsenal that “may” include about 200 hundred weapons. However, The Third Temple’s Holy Of Holies: Israel’s Nuclear WeaponsWarner D. Farr, Lieutenant Colonel, U.S. Army, published in September 1999 by the United States Air Force, states that as early as 1997 Israel had a nuclear strike force of 400-500 weapons.

The report is part of “the Counterproliferation Papers Series (which) was established by the USAF Counterproliferation Center to provide information and analysis to U.S. national security policy-makers and USAF officers to assist them in countering the threat posed by adversaries equipped with weapons of mass destruction. Copies of papers in this series are available from the USAF Counterproliferation Center, 325 Chennault Circle, Maxwell AFB AL 36112-6427. The fax number is (334) 953-7538; phone (334) 953-7538”.

Given the present state of affairs, we must assume that terror and aggression as practiced by Israel and the NATO countries will continue until the capitalist system is dismantled.

As the general economic crisis of capitalism continues and intensifies, there are signs that the rulers of the system are preparing to employ violence against their own citizens within the imperial countries (see below).

6. Mysticism. The ideological flim-flam generated by Fascist movements in Italy, Spain and Germany contained many irrational and mystical elements.

One common theme was the need to defend European civilization against the threat of the Bolshevik barbarians, identified by the Nazis as Jews. Another theme evoked a mythological idyllic past, when socialism (Bolshevism) did not exist, large monopoly companies did not dominate the economy, society was stable and not exposed to threats from the Reds, and everyone – especially the middle class – lived happily, enjoying the power over the working class that was their natural heritage. In Italy the past was represented as a tableau depicting the glories of the Roman Empire.

After 1945, the main correlative of the mythological idyllic past was the mythological idyllic present, normally labeled The Free World. In this early version of virtual reality everyone enjoyed the benefits of stability, free speech and democracy, untainted by poverty, unemployment, racism, corruption, corporate dominance, inadequate housing or lack of medical care. The Free World also included a number of countries run by various types of bloody dictators (labeled Moderately Repressive Governments by Jeane Kirkpatrick, at one time US Ambassdor to the UN), and by governments including ex-Fascists, as in Germany and Italy.

The Free World was exposed to the same cosmic menace that had previously threatened European Civilization, i.e. Communism. Jews no longer comprised a component of the threat, but racism remained. As Israel gained support the position of the Jews was gradually occupied by other semites known as Arabs, and finally by Muslims, who include both semitic tribes in the Middle East and millions of dark-skinned people in Africa and Asia.

The function of Western Cold-War propaganda was the same as Fascist propaganda. It was designed to legitimize the implementation of policies – including wars of aggression – that promoted the interests of the Western ruling class.

“Globalization”, i.e. the process of achieving global domination by multinational companies and their owners, has attained the status of a natural law. It is presented in the mainstream media by bourgeois economists and governmental/corporate spokespersons as an inevitable development, something that is simply happening, over which we do not and cannot exercise any control. The fact that globalization is an outcome of decision-making by the owners and their assistants is rarely if ever discussed.

Very soon after the Soviet Union was demolished a new variant of the old Fascist line about the threat to European civilization was announced in the journal Foreign Affairs in 1993by a so-called political scientist named Samuel P. Huntington (then a professor of government at Harvard University) who had discovered that in the “new” post-Cold War world

…the fundamental source of conflict… will not be primarily ideological or primarily economic. The great divisions among humankind and the dominating source of conflict will be cultural. Nation states will remain the most powerful actors in world affairs, but the principal conflicts of global politics will occur between nations and groups of different civilizations. The clash of civilizations will dominate global politics. The fault lines between civilizations will be the battle lines of the future.

In 1996 Huntington developed his theory in The Clash of Civilizations and the Remaking of World Order, which as propaganda is too tedious for mass consumption. Clash of Civilizations Light has been disseminated widely in the mass media and it is now an established fact, especially in the US and the UK, that the Muslims are gunning for “us” and Israel is manning the front lines of defense.

The most interesting aspect of Huntington’s theory is that the conflict between civilizations is not “primarily economic”. Just as the mainstream historians attempt to divorce capitalism from Fascism and the Cold War from Western corporate interests, Huntington relegates the interests and actions of large Western corporations to the shadows of former times. The profit motive is now obsolete. The wars launched by the US, NATO and Israel are required for the defense of Western culture, such as it is.

The Muslim threat fused seamlessly with the War on Terror that was announced after 9 September 2001. Fortunately, the text of the Patriot Act had been prepared prior to the attack on the World Trade Center so that it could be quickly enacted, shielding Americans from terror by shredding the Bill of Rights. The Obama administration has prolonged the Act, so that Americans can now feel safer than ever.

The demonization of Muslims includes Palestinians, although about 25% of them are Christians. In the new Fascist mythology, as in the old, the victims of terror are labeled terrorists.

Haviland Smith, former head of the CIA’s counterterrorism department, in The Burlington (VT) Free Press, September 16, 2001:

If you visited those refugee camps, you would understand immediately why there are suicide bombers. They were worse than any place I’ve seen. Open sewers, absolute poverty, squalor – and absolutely no hope of getting back their land, no hope of being accepted in Lebanon or anywhere else.

The Muslim Threat and the War on Terror are subsets of a higher and more comprehensive menace known as Evil. Like other metaphysical concepts, Evil has no connection with empirical reality or scientific inquiry. Belief in the existence of Evil enables mystical mind games that can be expanded to include Hate, Goodness, the Soul and other gaseous phenomena that are permanently divorced from rational thought. After the bombings on the Moscow subway at the end of March 2010, the NY Times stated that they proved “evil exists”.

In the words of the great satirist Dizzy Gillespie, these phenomena “survive the vicissitudes of the contingent world and move in an odyssey into the realm of the metaphysical”, where they merge with the astral auras of Plato, Madame Blavatsky and Karl Popper.

The essential point about the ideological flim-flam generated by previous Fascist propagandists and modern propagandists for capitalism is that it disables consideration and discussion of social classes and class conflicts, which are real and identifiable. The more evident the aggression of the ruling class against the rest of society becomes, the greater is the need to evade the subject of class.

It should not be inferred that anti-Communist propaganda was abandoned after the Soviet Union was dismantled in the autumn of 1991, as we shall see in the next chapter.  In this connection it should be pointed out that in March 1991 the downtrodden and terrorized citizens of the USSR voted overwhelmingly to preserve it.

Abandoning the sovereign nation-state and international law

Imperialism has always involved forcible entry into other countries or areas in order to reduce their populations to imperial subjects. Since 1492 justifications for imperial ventures have included spreading Christianity, disseminating the benefits of civilization, which is identical with the European or American Way of Life, and self-defense, as when the US was “threatened” by Grenada or Guatemala or Nicaragua, and of course saving a country from Communism.

The need to publicly justify wars and other types of imperial aggression became more acute over the past 200 years as the concept of the sovereign nation-state became generally accepted. The entire body of international law that has developed during this period is built on the principle of sovereignty. However imperfect it may be, this principle is a shield intended to protect a nation from intervention, such as economic sabotage or military attack by other nations, and is a key component of the UN Charter. The countries that are signatory to the Charter, including the US and the members of the European Union, are bound to respect the sovereignty of other nations.

The Hitler government and the corporations that ruled Fascist Germany publicly justified aggression against other nations by invoking the doctrine of the ethnic nation, e.g. das Volk. The ethnic nation supersedes the modern nation-state. The leader of the people is the only person who can proclaim a law. This doctrine denies the validity of state sovereignty and of international law, and therefore abolishes all legal obstructions to aggression. The same doctrine is inherent in Zionism.

A modern Western government in a multi-ethnic state such as Sweden or the UK would not dare to advance a similar doctrine, of course. The new Fascism has attempted to substitute another concept as a justification for aggression – human rights. The war on Yugoslavia 1992-99 was a prototype which was intended among other things to establish the principle that one or more states are entitled to intervene in the internal affairs of another.

In the Western mass media, the violators of human rights in Yugoslavia were automatically and constantly identified as Serbs on the basis of reports from two American PR bureaus (Diana Johnstone). Such events as the ethnic cleansing and murder of Serbs by US-directed forces in Croatia were not mentioned until long afterward, and then only in passing.

The governments of the EU and the US repeatedly charged that the Yugoslav government and the Serbs were violating human rights, partly by committing genocide. There was and is no evidence for these claims, neither in Bosnia nor in Kosovo. But as Heinrich Himmler once said, if you want to turn an untruth into a truth, keep repeating it at the top of your voice and sooner or later you will succeed. The mainstream Western media learned this lesson long ago.

For example, in 1999 the US Secretary of Defense claimed that 100,000 Kosovo Albanians had been killed by the Serbian government, which resembled German claims of repression in Sudetenland prior to the takeover of Czechoslovakia in 1938-1939. The story was a pure fabrication, intended to legitimize the criminal NATO aerial attack.

The British General Michael Jackson led the NATO defenders of human rights into Kosovo in the late summer of 1999. As a lieutenant in the British Army, he was in command of the British troops who fired on peaceful demonstrators in Derry, Northern Ireland, on 30 January 1972, killing 14 of them (Bloody Sunday). Jackson gave the order to open fire. Having thus violated the human rights of the Irish demonstrators, although they may not in fact have been entitled to them under the terms of the British Special Powers Act that governs Northern Ireland, Jackson was eminently suitable to instruct the awful Serbs in the rudiments of human rights, their nature and application.

The claim that governments in capitalist countries are interested in protecting human rights is absurd, given their track record and the living conditions that they impose on most of this planet’s population. Capitalist countries in the US and North America are signatories to the UN Universal declaration on human rights, although they consistently ignore violations of the following:

Article 23: (1) Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment. (2) Everyone, without any discrimination, has the right to equal pay for equal work. (3) Everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection. (4) Everyone has the right to form and to join trade unions for the protection of his interests.

Article 24: Everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay.

Article 25. (1) Everyone has right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. (2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.

Given the refusal to intervene in Palestine and given the condition of most of humanity, whose human rights as per Articles 23-25 are being violated every day, the arguments for intervention in Yugoslavia or elsewhere are clearly invalid.

Rewriting the UN Charter

The rulers of the West seemed to be unsure whether the attempt in Yugoslavia to establish a precedent that would legitimize aggressive intervention had actually succeeded. A major step forward in doing so was the Stockholm International Forum 2004: Preventing Genocide – Threats and Responsibilities. The Forum was arranged by Swedish prime minister Göran Persson as part of the government’s Living History project. This was the same Göran Persson who refused to comment on Waffen-SS marches in Riga and to prosecute Baltic Jew-killers. At the insistence of the Israeli government the Swedes did not invite a representative of the Palestinians, although the actions of the Israeli government clearly fall within the definition of genocide in the UN Convention on Genocide.

The delegates to the Forum came from 60 countries. Virtually all of them referred to the Holocaust, which showed that they had a historical perspective on the crime of genocide, since the Holocaust ended 60 years ago. But this perspective was rather narrow, as shown below.

The first two words of the declaration adopted by the Forum are “The Holocaust”. The declaration states that the delegates are

conscious of our obligations and responsibilities under international law including human rights and international humanitarian law, deeply concerned with the repeated occurrence of genocide, mass murder and ethnic cleansing in recent history… We are committed to exploring, seriously and actively, the options presented at the Forum for action against genocidal threats, mass murders, deadly conflicts, ethnic cleansing as well as genocidal ideologies and incitement to genocide, including the concrete proposal presented by the United Nations Secretary-General.

Kofi Annan, then UN Secretary-General, gave the keynote speech at the Forum. He mentioned Yugoslavia, Rwanda in 1994 and Srebrenica in 1995, the latter three times. The alleged massacre in Srebrenica is said to have involved 8,000 deaths, at least 192,000 fewer than during the US-led genocide in Guatemela (see Chapter 8), which was not mentioned during the proceedings of the Forum.

Annan said that in a report to the UN General Assembly in November 1999 he “drew attention to serious doctrinal (sic!) and institutional failings within the UN, including a pervasive ambivalence regarding the role of force in the pursuit of peace”. (Emphasis added.)

He also said that a “Special Rapporteur” should be appointed, supported by the UN High Commissioner for Human Rights, to report directly to the Security Council “making clear the link, which is often ignored until too late, between massive and systematic violations of human rights and threats to international peace and security”.

This was of course the key to the propaganda justifying the attack on Yugoslavia. Alleged violations of human rights within the borders of the sovereign state of Yugoslavia were said to be a threat “to international peace and security”, which they could not have been even if they had been committed.

Annan referred to the International Commission on Intervention and State Sovereignty that had been set up by the Canadian government. It issued a report in 2001 titled The Responsibility to Protect. According to Annan this report (emphasis added)

has altered the terms of debate on this very difficult issue in a most creative and promising way. Thanks to the Commission we now understand that the issue is not one of a right to intervene, but rather of a responsibility – in the first instance, a responsibility of all states to protect their own populations, but ultimately a responsibility of the whole human race to protect our fellow human beings from extreme abuse wherever and whenever it occurs. This nascent doctrine offers great hope to humanity. I believe it will gain wider acceptance… (Emphasis added.)

At the time I expected Annan and the other delegates to suggest that NATO invade India in order to protect the children there, but my expectations have not been fulfilled.

Annan also mentioned the new International Criminal Court but omitted to inform the delegates that the US refuses to recognize its jurisdiction. The position of the US is obviously a “very difficult issue”, so difficult that it cannot even be discussed.

Annan finally reached a climax (emphasis added):

Genocide, whether imminent or ongoing, is practically always a threat to the peace. It must be dealt with as such – by strong and united political action and in extreme cases by military action. And that means that we need clear ground rules to distinguish between genuine threats of genocide (or comparably massive violations of human rights) which require a military response, and other situations where the use of force would not be legitimate.

The US Ambassador to Sweden referred to the Holocaust, Cambodia, Rwanda and “over 25 years of massive assault on humanity in Iraq”, but did not indicate who was behind the assault or who supported the perpetrators. The killings in Rwanda can be traced to US attempts to replace the French and the Belgians as the dominant forces in the region.

The Ambassador advocated the use of “force where appropriate.” He claimed that “the US is committed to working with the international community to ensure that every state fulfills its obligations to guard against those who would exterminate liberty and innocent life”. He said that we all have to “support the rule of law”. The Ambassador also said that “Since the Nuremberg trials, we have all worked to create a framework of principles to secure the rule of law and hold perpetrators accountable”. There was no indication that any of the delegates to the Forum laughed at these statements.

Prime Minister Göran Persson made two speeches, in which he referred to the Holocaust, the former Yugoslavia, which “exploded”, Cambodia and Rwanda. He praised the illegal, NATO-funded so-called Tribunal for War Crimes in The Hague and referred to the International Court of Justice several times, although he also neglected to mention that the US and the UK refuse to obey its decisions despite being signatories to the convention which created it.

Like the jurists who developed the Nazi doctrine of the ethnic nation, Annan and other delegates to the Forum laid a foundation for superseding state sovereignty by declaring the legitimacy of armed intervention in the defense of human rights, which is a clear breach of the UN Charter. The Charter therefore had to be rewritten or comprehensively “reinterpreted”.

Armed intervention according to Annan is legitimate even when genocide is “imminent”, which means that the crime is to be punished before it is committed. Neither Annan nor any of the delegates to the Forum bothered to explain how alleged imminent genocide is a threat to the peace.

Who will provide the evidence to substantiate claims of “massive violations of human rights”? Who will prove that it is about to be committed? The “evidence” presented by the “international community” (NATO) to justify the wars on Yugoslavia, Afghanistan and Iraq shows that Annan’s new doctrine is extremely dangerous. It is also highly selective, as neither Annan, Persson, the US Ambassador or the other delegates referred to any of the following examples of “genocide or other comparably massive violations of human rights”:

  • Atomic bombing of Hiroshima/Nagasaki
  • The terror-bombings by the US of North Korea in the early 1950s, and of Vietnam, Cambodia and Laos in the 1960s and 1970s
  • The slaughter of more than 1 million poor Indonesians accused of Communist sympathies 1965-66 under the supervision of the US government, with no protest from the West
  • Years of slaughter in East Timor, also without protest from the West
  • Mass murder under US supervision in Colombia, Guatemala, El Salvador and other Latin American countries, also without protest from the West
  • Murder and ethnic cleansing of the Serbs in Croatia 1994-95, under US supervision
  • Terror-bombing of Yugoslavia 1999
  • Decades of a massive assault on humanity by the Israeli government
  • The attack on Iraq in 1992, followed by 12 years of bombing by the US and the UK, which together with Western-imposed sanctions resulted in well over a million deaths, including at least 500,000 children

There is no reason to believe that the doctrine of humanitarian intervention will be used for anything else than aggression against states that defy the will of the imperialists, i.e. the owners of the Western world and most of the rest.

The doctrine has now been enshrined as the so-called Right 2 Protest, a principle which violates international law and gives the capitalist nations license to invade and devastate any country which does not obey the dictates of imperialism – almost always under the guise of protecting human rights. However, this doctrine has not yet been evoked against the massive genocide and human rights violations committed by the United States of America in Iraq, Afghanistan or Libya.

Results of the new Fascism

The results of the new and higher form of Fascism that has been emerging over the past 30 years are apparent to anyone with eyes to see. They include:

  • Increasing control of national economies by multinational corporations through the IMF, World Bank, the WTO, the EU and other anti-democratic institutions.
  • Widespread and increasing starvation, malnutrition and disease, partly be­cause multinational pharmaceutical companies are not interested in selling drugs in poor countries for low profits.
  • Privatization, dismantling of the public sector – an attack on democracy as well as denial of basic services to the non-rich.
  • An environmental disaster of global proportions, which is accelerating as WTO rules make environmental legislation illegal if it interferes with profit maximization.
  • Massive and rising unemployment.
  • Increasing use of slave and semi-slave labor.
  • Comprehensive attempts by TNCs to control the world’s food and pharmaceutical supplies, e.g. as WTO sanctions the transfer of property rights in plants, animals and human genes to private corporations.
  • Waves of mergers as the process of monopolization increases, resulting among other things in increasing concentration of wealth and power as well as lost jobs, even within the middle class.
  • An increasing tendency to the use of force without respect for international agreements and institutions – as in the Balkans, the Middle East, Afghanistan, Libya and Latin America.

Originally, Fascism was a response to a crisis. The development of the new Fascism is accelerating in response to the current socio-economic crisis.

The root of the current crisis – exploitation of the working class

The crash of 2008 was generally reported in the mass media as an economic crisis and subsequently described as the cause of an economic crisis that has involved mass lay-offs. In reality, the real economy, in which goods and non-financial services are produced, has been in crisis since the early 1970s.

Despite hopeful signs and “green shoots” the crisis persists (as of 2012g). “If you can see light at the end of the tunnel it’s probably a train”, as an anonymous American said about the war in Vietnam. The persistence of the crisis is the background to accelerating Fascist tendencies throughout the world. It cannot be understood without examining its historical evolution.

The capitalist system has experienced about 30 serious crashes since the mid-19th century. The magnitude of the present crisis is traceable to an unprecedented expansion of credit, financial services and fictitious capital, which Karl Marx described as “money that is thrown into circulation as capital without any material basis in commodities or productive activity”. But the crisis itself, like all the others, is rooted in one of the basic contradictions of capitalism – the disparity between the buying power of the working class and the value of the goods and non-financial services that are offered for sale.

This disparity in turn results from the accumulation of capital by the owners of the system, as they appropriate the lion’s share of the value produced by the working class. Some of this capital is consumed, some is invested, and some is used for speculation together with the fictitious capital generated in the financial-services sector.

Maximizing capital accumulation requires continuous expansion of production, which tends to increase as if there were enough mass purchasing power to absorb it. Sooner or later the gap between production output and purchasing power becomes so great that demand cannot absorb production, and the system crashes (this is sometimes called a crisis of over-production). Production has to be reduced, workers lose their jobs, purchasing power declines even more, and physical capital is destroyed. The financial-services sector is rocked by an earthquake. Fictitious capital goes up in smoke. The self-destructive cycle continues until output and purchasing power are roughly in balance, the cycle is reversed, and the system starts to grow again, enabling a restart of speculation.

Speculation is thus a distorted reflection of the real economy, i.e. the production of goods and non-financial services. The disproportionate accumulation of capital in the hands of the owners has been an integral element of every capitalist crisis. It is a prime factor in the waves of speculation that precede and sometimes accompany large-scale declines in mass purchasing power.

Pre-World War 2 

During the second half of the 19th century purchasing power was enhanced repeatedly as new jobs were generated in new industries, and wage increases were achieved by trade-unions. But the crashes recurred nevertheless. After a long depression triggered by a major crash in 1873, new jobs were generated at the turn of the century in Western Europe by armament programs in the run-up to World War 1. The war itself absorbed large numbers of workers and generated large orders for industry.

Shortly after the war ended, the British economist John Maynard Keynes pointed out that unless the contradiction between purchasing power and production could be resolved, capitalism would be subject to even bigger and more persistent crashes. He was right. The crash at the end of the 1920s lasted throughout the 1930s, except in Germany, where rearmament and militarization partially closed the gap. (See John Kenneth Galbraith, A Journey Through Economic Time, 1994.)

The Great Depression did not come to an end until the outbreak of World War 2. For example, unemployment in the US in January 1940 was about 20%, officially. By April 1942, four months after the US entered the war, it was down to 1%.

Post World War 2 – growth followed by stagnation

After 1945, a number of factors generated more purchasing power and stimulated economic growth in the West. These factors included:

  • A vigorous expansion of the public sector, creating jobs and social insurance systems which among other things ensured that unemployed workers retained part of their purchasing power
  • Wage increases achieved by trade unions
  • The strong expansion of the automotive industry, based on extension of credit to both the working class and the lower-middle class
  • Development of industries such as plastics, electronics and aviation
  • Wars in Korea and Vietnam.

In Western Europe, public-sector growth, social insurance systems and wage increases resulted from class struggle, with the Soviet Union serving as a benchmark for Western Europe.

However, competition between firms in a capitalist economy requires continuous reductions in production costs. The relentless drive to increase production efficiency through automation, mechanization and new technologies has a continuous negative effect on formation of jobs and extension of purchasing power.

For example, a study published by the Swedish Trade Union Council (LO) in the early 1970s showed that with the technology available in 1960, more than 60,000 additional jobs would have been required in Sweden in order to achieve the production output recorded in 1970 with the newer technology that had been developed. Relative to population, this would have corresponded to about 600,000 new jobs in the UK, or close to 2 million new jobs in the US.

For a number of reasons, GDP growth rates in the OECD countries dropped from 5-6% annually in the 1950s and 1960s to 2-3% in the early 1970s, a massive decline of about 50%. GDP growth has remained low ever since. This is a trend. Figures for specific years may vary.

The solution – credit

As production continued to outstrip purchasing power, in the early 1970s the bourgeoisie found a solution in the form of credit – on a scale never seen before. Credit to individuals, both working- and middle-class, to manufacturing firms, to service industries, and to so-called developing countries.

Imperialist expansion and the development of an international network of slave labor also contributed to augmenting purchasing power within the OECD countries, by providing cheaper goods.

Another word for credit is debt. By the end of the 1970s, the capitalist world, including the neo-colonies, was floating on a sea of debt. It was apparent to anyone with an elementary knowledge of Marxist economic theory that the situation was unsustainable.

Unsatisfactory profitability and over-capacity

The bourgeoisie faced another worrisome problem in the early 1980s. There was an evident imbalance between the mass of accumulated capital and the volume of profitable opportunities for investment in production. The return on capital employed was too low, and the rate of profit in many sectors was falling.

Although profit rates in industry were in decline, in absolute terms the amount of capital accumulated by the bourgeoisie continued to grow. Since the rate of return on industrial investment was not as attractive as it once had been, where could the bourgeoisie find profitable alternatives?

The answer was provided by the rapidly expanding sector for financial services, including the credit market, both domestic and international. Capital began pouring into this sector, which expanded at an unprecedented rate.

Since the 1970s the stagnation in the real economy has been reflected in persistent over-capacity. It is not easy to collect accurate figures for all the OECD countries, but indications are that utilization of production capacity has fluctuated between 65-80% since the early 1980s. So that 20-35% of capacity has been unutilized virtually year-round. At the end of the 1990s, Jack Welch, then head of GE in the US, said “We have over-capacity in every sector”.

Tremors preceding the earthquake

The real economy has thus been in crisis for almost 40 years. The symptoms have included stagnation, over-capacity, declining real wages for the working class and large sections of the middle class, continuously increasing unemployment, rising poverty rates, and exponential expansion of credit and speculation. In Western Europe, dismantling of the public sector since the early 1990s has also reduced purchasing power.

The insatiable thirst for accumulating capital requires the working and middle classes to earn less money, but to buy more goods and services. The only way to bridge the gap between declining purchasing power and the need to increase production has been to drive the working class and large sections of the middle class deeper and deeper into debt. Some years ago, the point was reached where the debt burden exceeded 100% of personal income. As consumers are saturated with debt, demand is now falling at rates not seen since the early 1930s – and it will continue to do so.

During four decades, persistent tremors have heralded the earthquake to come. The tremors have included a deep international recession in the early 1980s, repeated crashes in stock- and real-estate markets, repeated crises throughout Latin America, bank crises in the early 1990s, the crisis in Japan that began in 1990 and continues today, repeated crises in currency markets, the crash in Mexico in the mid-1990s, when the Clinton regime injected 53 billion dollars of public funds to save private US investors, the downfall of the so-called tiger economies in 1997, the bursting of the dot-com bubble at the end of the 1990s, and subsequent crashes too numerous to mention.

The market mantra is dead

For almost 40 years, while the real economy was inexorably sliding downhill, the sea of debt was rising and the tremors were becoming more intensive, the high priests of capital chanted the mantra of the mythical self-adjusting self-balancing market, where an invisible hand ensures the prosperity of all.

The market mantra is dead. The invisible hand has become visible, as governments violate the mythical precepts by pouring public money into the financial sector. Whatever the high priests may say, the evidence is revealing yet again what Marxists have always known – the disastrous problems generated by capitalism cannot be solved within the framework of the capitalist system.

How can the system be maintained?

As indicated above, lack of adequate purchasing power is the basic problem. Driving the working- and middle classes deeper into debt no longer appears to be a viable option, as credit limits have already been reached. Generating more employment opportunities would help, but the possibilities seem limited.

One reason is that corporations search continuously for ways to reduce manpower requirements in order to remain competitive and maximize profits. As noted above, this is in direct contradiction with the need to increase purchasing power in order to maintain the very same production that is supposed to generate profits. As Karl Marx pointed out, production without consumption is as ridiculous as consumption without production.

I was once asked whether capitalists don’t realize that their need to “rationalize” production exerts constant downward pressure on purchasing power within the society that they live in. I answered that a capitalist cannot afford to think in terms of society. He/she is forced to focus on “the bottom line” despite all the blather about corporate social responsibility. As Margaret Thatcher said in an interview published in Women’s Own magazine, 31 October 1987, “And, you know, there is no such thing as society. There are individual men and women, and there are families”.

The long-term prospects for boosting purchasing power by creating more jobs are dim, to say the least. During the first half of the 1940s, World War 2 provided a temporary solution as large numbers of unemployed were absorbed by the armed forces and industry required new workers in order to handle the massive orders from the public sector. But both the military and the war industry have been rationalized. In the 21st-century, wars cannot absorb enough man/womanpower to make a significant difference in purchasing power. The war industry continues to increase production without significant increases in the workforce.

As previously indicated, in the 19th century the emergence of new industries created a need for greater investment and generated new jobs. But comparable new industries have not yet appeared. The so-called service sector seems to be the only one that is capable of expanding within the imperial countries, and the evidence indicates that both the number and the wages of new employees in fast-food joints and other points of service are too low to make a difference. The wages have to be low in order for the owners to maximize profits.

Persistent and increasingly high levels of unemployment can therefore be expected in both the EU and the US, especially since manufacturing companies are frenetically engaged in relocating production to low-wage countries, where workers in new jobs cannot afford to purchase the products that they make, as in England in the 19th century before the advent of unions, and even after.

The poor, as someone once said, are always with us. The problem is that their numbers are increasing within the OECD countries. An article entitled The new poor in The NY Times of 21 February 2010 by Peter S. Goodman was headlined “Millions of Unemployed Face Years Without Jobs” and is one of the few I have seen in the mainstream media that describes reality. The text begins:

Even as the American economy shows tentative signs of a rebound, the human toll of the recession continues to mount, with millions of Americans remaining out of work, out of savings and nearing the end of their unemployment benefits.

Economists fear that the nascent recovery will leave more people behind than in past recessions, failing to create jobs in sufficient numbers to absorb the record-setting ranks of the long-term unemployed.

Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives – potentially for years to come.

Goodman then describes a previously middle-class family that has been struck by disaster and faces the possibility of homelessness, to which growing numbers of people are doomed.

The text continues:

Every downturn pushes some people out of the middle class before the economy resumes expanding. Most recover. Many prosper. But some economists worry that this time could be different. An unusual constellation of forces – some embedded in the modern-day economy, others unique to this wrenching recession – might make it especially difficult for those out of work to find their way back to their middle-class lives.

Labor experts say the economy needs 100,000 new jobs a month just to absorb entrants to the labor force. With more than 15 million people officially jobless, even a vigorous recovery is likely to leave an enormous number out of work for years.

Some labor experts note that severe economic downturns are generally followed by powerful expansions, suggesting that aggressive hiring will soon resume. But doubts remain about whether such hiring can last long enough to absorb anywhere close to the millions of unemployed.

The key problem in terms of reconstituting purchasing power is described in four paragraphs:

Large companies are increasingly owned by institutional investors who crave swift profits, a feat often achieved by cutting payroll. [Capitalists have always craved swift profits.] The declining influence of unions has made it easier for employers to shift work to part-time and temporary employees. Factory work and even white-collar jobs have moved in recent years to low-cost countries in Asia and Latin America. Automation has helped manufacturing cut 5.6 million jobs since 2000 – the sort of jobs that once provided lower-skilled workers with middle-class paychecks.

’American business is about maximizing shareholder value,’ said Allen Sinai, chief global economist at the research firm Decision Economics. ‘You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.’ (Emphasis added.)

During periods of American economic expansion in the 1950s, ’60s and ’70s, the number of private-sector jobs increased about 3.5 percent a year, according to an analysis of Labor Department data by Lakshman Achuthan, managing director of the Economic Cycle Research Institute, a research firm. During expansions in the 1980s and ’90s, jobs grew just 2.4 percent annually. And during the last decade, job growth fell to 0.9 percent annually.

’The pace of job growth has been getting weaker in each expansion,’ Mr. Achuthan said. There is no indication that this pattern is about to change’.

And it has not.

The persistent problems of consumer debt and insufficient purchasing power have not been solved, primarily because they cannot be solved without a massive transfer of wealth from the ruling class to the working- and middle classes. Unemployment is at record highs, and rising. Personal bankruptcies and evictions from dispossessed homes continue to rise to record levels. Poverty is increasing globally. The number of starving people world-wide has risen to more than one billion for the first time.

Another, less well-known indicator also shows that economic activity is not on the increase. The Baltic Dry Index (BDI) measures shipping rates for large bulk carriers that transport commodities such as coal, various types of crucial metallic ores, cement, cocoa, grains, phosphates, fertilizers, and animal feed. As a measure, it is immune to speculation and is an accurate reflector of industrial activity world-wide. In contrast to many other types of important economic data, it is updated every day.

From May to December 2008 the BDI fell by 94% because of a steep drop in demand for shipping. This in turn resulted from the global slowdown in economic activity as well as the unavailability of credit for purchases of goods and payment of time charters on ships.

The BDI recovered somewhat in the late spring and early summer of 2009, almost exclusively on the basis of a temporary increase in demand for imports in China. Since then the index has been very volatile and has remained at a low level. Among other things, a steep collapse in demand for container ships also reflects the decline in the real economy.

Given the reality of the systemic crisis, it is reasonable to ask whether at some point the growing number of people within the imperial countries whose lives are being permanently ruined by the capitalist system will start to take action, and whether they will demand an alternative to the system.

The ruling class is preparing for crowd control

At the more rarified levels of the ruling class there is evidence that a “return to normalcy” is not expected within the foreseeable future, and precautions are being taken to deal with the unrest that is anticipated. People without jobs, money or homes may become desperate. The reduction in public-sector spending that results from the so-called rescue of the financial sector is one of the factors that are expected to stimulate unrest. Expenditure for war is another. For example, the bulk of outlays by the Obama administration is for wars, bank rescues and interest payments on the huge public debt. There is not much left over.

In June of 2009 the World Bank reported that about 1 trillion dollars will be drained from the economies of the world’s poorest countries this year as a result of the financial collapse. Debt-ridden countries will be subject to IMF and World Bank schemes for even more austerity in labor markets and the public sector. The citizens of these countries may not take kindly to the pressure, as in Latvia.

Earlier in 2009 IMF head Dominique Strauss-Kahn predicted increasing unrest, saying it could happen “almost everywhere. It may worsen in the coming months.” He was presumably upset by the widespread protests in the Baltics and former Eastern European socialist countries, as well as in Russia. The Royal Bank of Canada warned of “regime collapse and sudden movements to the left” in Eastern Europe and the former Soviet Union. In April the British police sealed off a large portion of London in order to protect the members of the G-20 group from angry protesters, many of whom were identified as middle-class by the police commissioner who is responsible for what is called “public safety”. Violent protests and waves of strikes have occurred repeatedly in other Western European countries since the start of the year.

Dennis C. Blair, the US Director of National Intelligence, presented his annual report in February 2009. It identified the global economic crisis as the greatest threat to America’s security. He said that the longer the crisis drags on, the greater the threat it will pose to political stability.

Economic crises increase the risk of regime-threatening instability if they are prolonged for a one- or two-year period. And instability can loosen the hold that many developing countries have on law and order, which can spill out in dangerous ways into the international community.

Blair referred to “violent extremism” in Europe during the depression of the 1930s and warned that “about 25% of all countries have already experienced low-level instability”, mostly in Eastern Europe and the former Soviet Union, and that if the crisis continues there is a risk of regime change. He said this would make it more difficult to open national markets to international capital.

Blair’s warnings are reflected by the recall of at least two US army brigades from Iraq to the continental US. According to the newspaper Army Times, their task is to deal with emergencies traceable to natural or human causes, such as “civil unrest” and demonstrations.

According to a report published as early as 4 November 2008 by the Strategic Studies Institute of the US Army War College, in case of state- or nation-wide “dislocation of the social order” the Department of Defense will have to become an “enabling hub” to ensure authority. In other words, a military dictatorship would have to be established in Washington.

In Western Europe, special-forces units have received training in urban street fighting to combat “civil unrest” in a number of countries, including Sweden and France. With the EU Commission and the US government as executive directors, the ultimate guarantor for maintenance of the existing European social order is of course NATO.

Franz Neumann’s profile of German Fascist society is becoming increasingly more appropriate for the emerging Fascist society of the 21st century:

A small group of powerful industrial, financial and agrarian monopolists tending to coalesce with a group of party hierarchs into a single bloc disposing of the means of production and the means of violence… [They rule] a large mass of workers and salaried employees without any kind of organization and without any means of articulating their views and sentiments.

The continued and intensified propaganda war against Communism is a key element in the evolution of the new Fascist society. This will be discussed in the next chapter.