Greek Election Signals New Stage in Social and Economic Crisis

The May 6 Greek election set off political and financial shock waves and seems to have opened a new phase in the prolonged economic crisis-depression that began in July-August 2007 with the U.S. sub-prime mortgage crisis and has increasingly taken on the form of a social and political crisis as well.

Last February, a deal was worked out in which the Greek governmental debts were written down by about 50 percent. In return, the Greek government was forced to agree to a stiff austerity program aimed at both the employees of the state and workers employed by private capitalists.

Financial circles openly admitted that the austerity polices would further extend and deepen the already five-year-old Greek recession. But they claimed that a really deep recession throughout Europe had been staved off, and the U.S. media reported that the American recovery was now at long last gaining momentum.

The U.S. Labor Department reported a decline in the unemployment rate from around 9 percent last year to just over 8 percent last month. What the capitalist media largely overlooked, however, is that the decline in the unemployment rate was achieved by an alleged decline in the number of people actively looking for work, the exact opposite of what would normally happen during a period of economic recovery.

If it were calculated honestly, the U.S. unemployment rate would show no real decline since the “Great Recession” bottomed out in 2009. The most that could be claimed using U.S. Labor Department data—but not their phony method of calculating the rate of unemployment—is that the U.S. unemployment crisis is not getting any  worse. However, the most recent unemployment figures indicate that once again the growth in total employment has fallen well below the level necessary to prevent a long-term rise in unemployment when the growth in the size of the working population is taken into account. So in reality, the long-term U.S. unemployment crisis is still growing. (1)

In Europe as whole, the situation is even worse. While the crisis first broke out in the U.S. in 2007 and reached a climax on Wall Street in the third quarter of 2008, the crisis more recently has been more severe in Europe. Official unemployment is now 11 percent, the highest since 1995, when figures began to be kept for European-wide unemployment.

But unemployment varies considerably from country to country. In Germany, Europe’s most economically powerful country by far, the official unemployment rate is “only” 6.7 percent—considerably better than the official U.S. unemployment figures—while in Spain it is over 24 percent, almost matching the quasi-official U.S. unemployment rate of 24.9 percent in early 1933 at the very bottom of the Great Depression. In Greece, it is 22 percent and rising. Therefore, as far as Spain and Greece are concerned, a new “Great Depression” is no longer a threat—it is a reality.

The Greek election

Since the end of the Greek military dictatorship in 1974, Greek politics has been dominated by the “center-left” PASOK and “center-right” New Democracy party. By “center,” the capitalist media means the policies that best serve the interests of the 1 percent led by finance capital. PASOK enjoyed the support of the trade unions and was considered the official “left” party, while the New Democracy is the right-of-center servant of the 1 percent. Both of these parties are in reality totally pro-capitalist and pro-NATO, and pro-American empire in general.

Last February, as part of the austerity agreement, a bankers’ government led by current Greek Prime Minister Lucas Papademos replaced the government of PASOK led by George Papandreou. Papademos is a leader of New Democracy and former vice president of the European Central Bank.

This government agreed to a series of brutal austerity measures. A parliamentary majority for it was cobbled together by forming a “grand coalition” between the two ruling parties, PASOK and New Democracy. In addition, the extreme right-wing, anti-immigrant, racist LAOS party was included to ensure a solid parliamentary majority. The Papademos government then agreed to brutal new anti-worker austerity measures in an already austerity- and recession-wracked Greece.

When the May 6 elections were scheduled in Greece, the capitalists, headed by their 1 percent, figured that with both the “right” and the “left” ruling parties, along with the far-right LAOS party, committed to the austerity program, they couldn’t lose. This is indeed normally the case in elections held under the capitalist system, especially in two-party systems.

Two-party systems

By the late 20th century, the capitalist ruling classes throughout the world had concluded that the best system for them was a two-party system. Historically, the two-party system first developed in Britain and then in the United States. A one-party system such as those that existed in Nazi Germany, Fascist Italy and Franco Spain had the disadvantage to the capitalists that a crisis of party rule can be quickly transformed into a crisis of class rule.

This is exactly what happened in Italy with the downfall of Mussolini’s fascist dictatorship. The same was true of “no party” military dictatorships such as the Greek “colonel’s dictatorship” of the 1960s and early 1970s.

Multi-party systems such as existed in the German Weimar Republic or France under the Third and Fourth Republics and today in Italy have the disadvantage for the ruling class of depending on many small parties that tend to form unstable, often short-lived coalition governments. When these coalitions break down, new elections often have to be called if a new parliamentary majority cannot be cobbled together.

In the declining capitalist system of our day, a multi-party system represents far too much democracy as far as the ruling 1 percent  are concerned. This is true despite the fact that even the most democratic multi-party parliamentary system is still very much a form of capitalist class rule. (2)

From the viewpoint of the ruling capitalist class, a political setup where two ruling parties share power and alternate in office is the best system. When the government party becomes unpopular, the other party is able to take over and give capitalist rule the necessary face-lift. Unlike under a one-party system, the illusion is preserved that since the voters choose which of the two ruling parties forms the government, “the people” actually rule.

In reality, the voters can only reshuffle the exact distribution of power between two ruling parties equally committed to capitalist class rule headed by the 1 percent. What the voters do not get to choose under a two-party system is which two parties are the ruling parties.

When the Great Depression hit the U.S., the Democratic Party was able to take over from the discredited Republican Party, which had largely dominated U.S. politics since the Civil War. Then, in 1968, when the Vietnam War had increasingly discredited the governing Democratic Party, the Republican Party was ready to take over once again. In two-party systems, politics moves in a vicious circle from which the voters are unable to escape.

Since the end of military rule in 1974, the Greek capitalist class has been building up a two-party system around PASOK and New Democracy. Other parties were still represented in parliament, including the Communist Party, but either PASOK or New Democracy was always able to form a government with a more or less stable capitalist majority, sometimes by forming “grand coalitions” with one another. No doubt, the Greek capitalists were looking forward to the day when only PASOK and New Democracy were represented in parliament, much like only Democrats and Republicans are represented in the U.S. Congress.

Last February, as I explained in my earlier reply on Europe, the bankers ousted the PASOK government in Greece as well as the Berlusconi government in Italy in favor of governments that would impose vicious bank-dictated austerity policies. These governments were dubbed “technocratic” by the media, as if technology had anything to do with it.

This kind of direct rule by finance capital—as opposed to the normal veiled rule—is inherently unstable. In Greece, the ruling bankers are eager to reestablish normal two-party rule to cover up the stark nakedness of their regime. However, in the May 6 elections Greece’s shaky two-party system was shattered when the vote for both the two former ruling parties—New Democracy and PASOK—collapsed.

While New Democracy still won the greatest number of votes, it was clear that the overwhelming  majority of the Greek people rejected this reactionary party. The same was true for PASOK. The big gainer was a previously marginal bloc of small left parties called Syriza, which emerged with the second largest number of deputies in the new parliament.

This parliament was so divided that it became clear that it was simply impossible to cobble together a coalition government on an austerity—or, as the media prefers to put it, a “pro-bailout” platform. A new election has been scheduled for June 17 in a desperate move to reestablish the two-party system. Voters are being told that if they don’t vote for New Democracy or PASOK, complete economic collapse will follow. Whether this will work remains to be seen at the time of this writing.

Syriza as a left-Keynesian party

Syriza is not actually a united party but a coalition of smaller left parties, including a right-wing “eurocommunist” split from the KKE—the Communist Party associated with the former Third International—and several small Maoist and Trotskyist groups. Since this blog is focused on economics, we can describe Syriza as a whole not as a Marxist party but rather as a left-Keynesian party.

While some members of Syriza desire a future socialist transformation of society, Syriza’s actual program amounts to the implementation of a Keynesian policy to overcome the crisis within the framework of capitalism and parliamentary rule. Along these lines, Syriza calls for the repeal of all the austerity measures and anti-labor laws that have been passed since the crisis began five years ago. So far, they have stood strong in rejecting the austerity agreements that were reached between the ruling PASOK and New Democracy duo and the bankers last February.

In addition to the repeal of all the anti-labor austerity measures passed in the last five years at the demand of the bankers, Syriza is proposing a three-year moratorium on debt payments—but not a repudiation of the Greek debt.

This is in line with Keynesian doctrine, which holds that the government should increase its debts during economic downturns and repay them only when recovery takes hold. Unlike some left-Keynesians who believe that Greece should pull out of the eurozone and reestablish its own currency that would then be sharply devalued against the euro—dramatically lowering the wages of Greek workers in terms of euros—Syriza favors Greece’s continued participation in the eurozone.

The question of the euro

Syriza believes, not unreasonably, that Greek capitalism, largely built around the shipbuilding industry and tourism and now facing a severe shortage of money capital, is far too weak to finance a Keynesian-like “recovery program” on its own. Instead, it is betting that the European Union as a whole, which includes the strong capitalist economies of Germany and other northern European countries, will have the financial muscle to pull it off.

For this reason, Syriza very much wants Greece to remain in the eurozone. As part of their scare campaign to convince the Greek voters to vote for the “pro-bailout” New Democracy or PASOK in this month’s election, the 1 percent media claims that if Syriza is victorious in the elections, Greece will be forced to leave the euro.

KKE’s disappointing vote

To the left of Syriza is the KKE, the Greek Communist Party. Unlike many other parties associated with the former Third International, the KKE has retained the Marxist perspective of transforming capitalism into socialism through the establishment of a workers’ government. Unlike Syriza, the KKE wants a repudiation of the Greek debt, not a mere moratorium, and it proposes that Greece exit the eurozone and reestablish its own currency.

In the May 6 election, the KKE vote rose from 7.5 to 8.5 percent, a solid gain under normal circumstances. But considering the extraordinary conditions under which the election was held, the question arises: Why wasn’t there a bigger gain for Greece’s most left party?

A reader has written in asking why young people who are being radicalized by the prolonged crisis generally are turning to anarchism rather than to Marxism. The answer to both these questions is the same, in my opinion.

The KKE, like Marxist parties as a whole, are still suffering from the aftermath of the counterrevolutionary events of 20-25 years ago when the ruling Communist Parties in the Soviet Union and Eastern Europe surrendered political power without a fight to a resurgent capitalist class under the pretext of a supposed need to return to a “market economy.”

What’s the point, both today’s anarchist youth as well as the Greek voters reason, of making all the sacrifices that a workers’ socialist revolution requires if at the end of the road stands some Gorbachev or Yeltsin preaching the need to “return to the market”—that is, to capitalist exploitation.

The fact that the ruling Communist Party of China—also a former section of the Third International—has led China along the road of a market economy and capitalist development—ironically far more successfully than the openly pro-capitalist rulers of Russia and Eastern Europe—only further reinforces the point.

While frustrated youth turn towards anarchism, Greek voters figure: Why not give “Keynesian capitalism” another chance? They reason, after all didn’t Keynesian capitalism work at least to some extent since World War II, and in any case wasn’t it far better than the nightmare we have been living through over the last five years? Perhaps the Marxist perspective of a workers’ socialist revolution turned out to be utopian, but certainly what we had as recently as five years ago is not. Why can’t we simply return to that? Essentially this is the program of Syriza.

Upheaval on the Greek right and the threat of fascism

It wasn’t only the “left” wing of Greek capitalist politics that was shaken up by the election. The right wing was shaken up as well. In addition to the collapse of the vote for New Democracy, the right-wing, anti-immigrant, racist LAOS party was wiped out and replaced by the outright fascist Golden Dawn party. LAOS paid the price of its association with the “technocratic” pro-austerity government, just like PASOK and New Democracy did.

The policeman’s lot

One part of the population that voted massively for Golden Dawn were police officers. Police officers are, after all, employees of the state and are being hit by pro-austerity policies to a certain extent not only in Greece but in other countries as well. Under “democracy,” the police are asked to do the dirty work of the ruling class but are occasionally—if not all that often—then blamed for their violations of the democratic rules and excessive use of force.

In contrast, military dictatorships such as the one that Greece had in the 1960s and early 1970s, and even more the full-fledged fascist dictatorships like Nazi Germany, give the policemen a free hand. Use all the force you need to gain confessions and do all the snooping you need to do to “develop” information against the enemies of the capitalists and our officially scapegoated minorities and we will back you to the hilt, fascist dictators say. And they mean it, as the history of the German Gestapo—secret state police—shows all too well. (3)

Fascism and Keynesianism

Unlike the “neo-liberal” right, fascists are not necessarily anti-Keynesian. When LAOS was included in the “technocratic government,” some saw this as a dangerous step toward fascism. However, unlike LAOS, Hitler refused to participate in any of the austerity governments—today they would be called technocratic governments—that ruled Germany between 1930 and 1932. When the reactionary German politician Franz von Papen tried to lure the Nazis into participation in his austerity government in a bid to “tame” him, Hitler turned von Papen down.

Hitler the Keynesian

Once Hitler did come to power—initially as part of a right-wing coalition government but one that he could dominate and quickly transform into an outright Nazi dictatorship, he embarked on a massive policy of deficit spending to reduce unemployment. While this largely involved a massive rearmament program, it also involved some pubic works programs, such as building the autobahn highway system—which of course also had military uses—that Germany is famous for. As a result, German capitalism achieved an “approximation to full employment” by the middle 1930s, an achievement that Franklin Roosevelt’s New Deal came nowhere close to equaling. In the 1930s, there was no better Keynesian than Hitler.

Therefore, unlike the more traditional “neo-liberal” right, fascism has solid “Keynesian credentials” of its own. Indeed, a favorite argument of Hitler admirers today is that the Nazis despite their deplorable “mistakes”—such as attempting to kill off all of Europe’s Jews including all Jewish women and children they could get their hands on—should receive credit for successfully solving the unemployment problem. Therefore, the vote for Golden Dawn on the right, like the vote for Syriza on the left, can also be considered in its own way a vote for a return to Keynesian policies.

At around 6.9 percent of the vote, Golden Dawn is still a long way from equaling the 18.3 percent that the Nazis won in the German elections of September 1930. The Nazi vote made Hitler’s party the second largest in the German parliament after the Social Democrats. As the crisis deepened further, the anti-parliamentary Nazi party, still not taking any governmental responsibility, soon emerged as the largest German parliamentary party. At that point, the German parliamentary system was not long for the world.

The threat of fascism today

Historically, European fascism began as armed militias that emerged out of the disbanded armies of Italy and Germany. These armed bands then waged civil war against Communists, trade unions and even Social Democratic organizations. The first fascists were middle-class army veterans who had become accustomed to military life and had learned how to use weapons. They had little desire to return to civilian life, especially considering the generally dismal economic conditions of the time.

While economic conditions are again dismal, there has not recently been a world war. So these types of fascist adventurers are far less numerous today than they were in 1920s and 1930s. In addition, despite German fascism’s early successes in eliminating unemployment, it did not end so well. Within 12 years, Germany was an occupied nation in ruins, again facing mass unemployment and disgraced by the crimes of the Nazis.

Nor did fascism end so well in Italy, where Mussolini after being executed by Italian partisans made his last public appearance hanging upside down in Milan. Still, the vote for Golden Dawn is a warning of what can happen if this prolonged economic and deepening social crisis is not resolved in a way that is favorable for the working class.

Keynesian tide in elections in France and Germany

Greece was not the only European country to hold elections in May. Like in Greece, the French ruling class has been trying to consolidate a two-party system. Unlike in Greece, in France where the economic and social crisis is far less severe, the elections did not shatter the two-party system. But the presidential elections did unseat France’s right-wing, racist, pro-American empire President Nicolas Sarkozy in favor of the Socialist candidate Francois Hollande. Hollande claimed in his election campaign that he was opposed to more austerity—that is, he favored a more Keynesian policy to combat the stubborn economic depression.

An alarming feature of the French election, however, was the strong vote for the  right-wing, anti-immigrant, racist National Front. Unlike its Greek counterpart, LAOS, the National Front was not discredited by participating in Sarkozy’s pro-austerity government. When Sarkozy appealed to the National Front for support in his failed bid for reelection, the leader of the National Front turned him down.

In May, an election was also held in Germany’s largest state, the industrial state of North Rhine-Westphalia. The Social Democrats defeated the governing right-wing Christian Democrats. Like in France, however, there was no break in Germany’s version of the two-party system.

The big winner was Germany’s oldest party, the labor-based Social Democrats. Indeed, the vote for the Left Party, a coalition between the remains of the old SED—Socialist Unity Party (4), the ruling party in the German Democratic Republic (East Germany)—and a left-wing split from the Social Democrats, declined. Apparently, voters who voted for the Left Party as a protest when it seemed like the Social Democrats couldn’t win returned to the Social Democrats when they smelled a victory for the “left wing” of German capitalist politics.

Unlike France and Greece, there was no big rise in the vote for Germany’s far right or neo-Nazi parties. The only non-traditional party that gained votes was the “Pirate Party,” which opposes moves to restrict freedom on the Internet and is generally opposed to so-called “intellectual property” in computer data files, which today include computer software programs, music, e-books and movies. But the “Pirates” have no program beyond these issues.

The common thread that connects the recent Greek, French and German elections is a rejection of “austerity” and a desire to return to a Keynesian-type policy to end the current depression.

A renewed global recession?

Once again there are signs that a renewed global recession that was staved off late last year is threatening. The BBC reported May 24: “Activity at European businesses hit a near three-year low in May, according to a survey by Markit [a private research group—SW]. Its index, based on a survey of purchasing managers in manufacturing and service sectors, fell to 45.9 in May, a 35-month low.” Any index below 50 percent indicates recession.

There are signs that the renewed downturn is now spreading to Germany, the most recession-resistant European economy. “Activity at French and German factories fell to the lowest level in almost three years, according to the Markit survey,” the BBC reported.

Another May 24 BBC article stated, “The UK economy shrank by 0.3% in the first three months of the year, more than previously estimated, revised figures show.”

This is enough to put Britain into a “technical recession” defined as two quarters of declining GDP. If the markets panic like they did in 2008, the still “mild recession” as far as  northern Europe is concerned would be quickly transformed into a violent recession with sharply rising unemployment even in Germany.

The U.S. economy, though its recovery remains abnormally weak, is not in an actual recession according to the most recent economic figures. Since mid-2009, the prolonged crisis in the U.S. has taken the form of an abnormally weak recovery rather than continued actual recession. But May figures indicate that the very weak recovery is again slowing. The Markit Purchasing Managers’ Index fell to a three-month low of 53.9, down from 56.0 in April. (A reading above 50 indicates expansion.) And the U.S. Labor Department figures confirm the rate of growth of employment has again slowed sharply over the last two months after briefly picking up in the first quarter of 2012.

In recent decades, even minor fluctuations in the capitalist economy have unfolded on a global basis. With the economies of China, India and Brazil also slowing, if the European recession deepens, a return to full-fledged recession can be expected in the coming months. If Obama loses his bid for re-election due to worsening economic conditions, he will likely in his memoirs blame the crisis in Europe for derailing the U.S. recovery just like Herbert Hoover did in his memoirs.

Germany and the international industrial cycle

Germany has had for more than a hundred years Europe’s most productive capitalist industrial economy. That means on average it takes fewer hours of human labor to produce a commodity of a given type and quality there than in any other European country. This has enabled Germany since the late 19th century to moderate the effects of capitalist global downturns on its own economy by increasing its share of the world market at the expense of weaker capitalist countries during periods of contracting or weak global demand.

The only exception to this was the period between 1923 and 1932. Then the combined effects of massive reparation payments and the destruction of the German currency as a result of the hyper-inflation of 1923 meant that Germany depended on largely borrowed money capital, most from the United States. Wall Street banks were willing to lend the Germans a lot of money to take advantage of the high interest rates that prevailed in Germany. In addition, the sharp increase in tariffs within Europe after World War I combined with the U.S.’s stubbornly protectionist policies during the 1920s created massive barriers to Germany exporting itself out of recession like it had done before World War I and would do again after World War II.

Due to its lack of money capital in this economically highly atypical period, Germany was at the mercy of fluctuations of the New York money market. As a result, Germany experienced a nasty recession in 1926, and economic growth ended in Germany in 1928 about a year before it ended elsewhere. Like a cornered beast, German imperialism struck out in the form of the Third Reich.

After World War II, however, the pre-war World War I pattern returned, and while Germany has certainly not been immune to cyclical fluctuations, it has been able to moderate their effects by grabbing more of the world market just like it did in the late 19th and early 20th centuries. Therefore, because of its high relative productivity of labor, Germany has been able to export the current economic and social crisis onto the shoulders of weaker capitalist countries such as Ireland, Portugal, Spain and Greece.

Doug Henwood has written in and asked why Norway and Sweden are able to still follow Keynesian-like policies with some success. The ability of a government to follow a Keynesian-like policy is determined by the amount of money—not real capital—that is in the country. Norway and Sweden have highly efficient productive capitalist economies. Like in Germany, a commodity of a given type and quality can be produced with relatively little labor, and therefore like Germany they can export their way out crises. Exports bring in money from abroad, which is the necessary ingredient for Keynesian-type policies. Since most of their exports are to northern European countries like Germany itself rather than the crisis-ridden southern European countries, they have managed to avoid recession in recent months.

One of the reasons for the high productivity of the economies of Sweden and Norway is that they are located near Russia, and their working classes were strongly attracted by the October socialist revolution. As a result, the capitalists had to make major concessions to the workers of those countries in both wages and social benefits. This made the commodity labor power expensive in those countries, giving the capitalists strong incentives to find ways of economizing on labor power. In other words, they sharply increased the productively of labor by replacing labor with machines.

Germany and the current crisis

The uneven effects of the crisis within Europe is creating a wave of resentment against Germany, especially in Greece. This reinforces memories of World War II. In the European spring of 1941, while Hitler and his generals were making final preparations for their attack on the Soviet Union, Mussolini ordered an attack on Greece. The Italians met fierce resistance, and Germany was forced to attack Greece in order to prevent a potentially disastrous defeat for the axis powers. Greek resistance bought valuable weeks for the Soviet Union and is one of the reasons why the Germans failed to reach Moscow before the bitter Russian winter of 1941 kicked in.

However, the German occupation left an aftermath of bitterness against Germany that the United States can exploit today. In a sense, it gives America a chance to play once again the role of the “liberator” of weaker European countries from the rampages of German imperialism—even if this time the rampage is financial rather then military. The Obama administration is saying that it favors a policy of “growth” as opposed to the “austerity” policies being pushed by Germany’s right-wing chancellor, Christian Democrat Angela Merkel.

Is the Triad the main enemy?

Syriza’s leaders complain that Greece is at the mercy of its creditors represented by the so-called Triad, consisting of the International Monetary Fund, the European Commission, and the European Central Bank. This list is not complete. It leaves out the U.S. Federal Reserve System and U.S. Treasury and the big Wall Street “money center” banks that make up  what in effect functions as the central banking system of the entire capitalist world under the dollar system.

Also left out is the the North Atlantic Treaty Organization, NATO, which functions as the military arm of “the Empire” in Europe, the Middle East, Afghanistan and Pakistan.  If the Greek people were to finally rise in rebellion against a pro-austerity government in Athens, NATO would undoubtedly move to crush the rebellion in blood unless the workers in uniform of the NATO countries moved to stop it. The anti-war movement, especially in the United States, must therefore remain on high alert as the European crisis continues to unfold.

Germany and NATO

Before we buy the picture of a runaway “Fourth German Reich” laying waste to other European countries, we should look at the number of U.S. troops in Europe. According to Wikipedia, the biggest U.S. international deployment aside from Afghanistan and the U.S. itself is in Germany with 53,526 military personnel stationed there. Taking Europe alone, the second biggest deployment is in the other main former axis power, Italy, with 10,817. This is followed by Britain with 9,317. In Greece itself, there are 379, at latest count, U.S. armed forces personal.

Does Germany need the 53,526 U.S. armed personal to defend it against some foreign aggressor? Who threatens Germany? Poland or even Russia? Of course not.

The U.S. armed forces are in Germany 67 years after Germany’s unconditional surrender for one reason, to make sure that Germany in no way ever again challenges the U.S. either politically or militarily. Economic competition is allowed but only on American terms. Merkel and her Christian Democrats—as well as the Social Democrats—understand this very well and make it the basis of their entire policy.

Why scapegoats?

One conclusion that any careful reader of this blog should draw is that it is the capitalist system as a whole, and not a particular capitalist or capitalist nation or even groups of capitalist nations, that breeds capitalist crises. Most individual capitalists live in fear of them. So do central bankers; just ask Ben Bernanke. Rosa Luxemburg explained that while the capitalist system, though it has many benefits for the members of the capitalist class such as enabling them to live in luxury without working, it also has some “thorns,” in the  form of crises, for them as well.

Only the working class can end these crises, and only insomuch as it wins political power and uses this political power to transform the system into socialism can these nasty “thorns” be removed.

The elemental forces of the capitalist economy and its cyclical movements between boom and bust confront the individual members of capitalist society, including even the most powerful individual capitalists, as a force of nature. Capitalist economic crises are often described as “storms,” “hurricanes,” “cyclones” or “tornados.” When crises give way to booms, the press talks about the return of fair economic weather. The unmastered relationships between the  producers under the capitalist system appear as a natural force that individual humans have no more control over than they have control of natural forces such as the weather.

In the past, human beings personified the forces of nature as gods—human beings who differed from other humans only in being immortal and having the power to manipulate the forces of nature. For example, there were gods of storms, gods of thunder, volcano gods and so on.

As science has more and more revealed the natural laws behind storms and volcanos, the belief in weather and volcano gods now seems quaint, at least for educated people.

The laws that govern the capitalist economy have also been revealed by first the classical economists and then far more completely by Marx. However, modern bourgeois economists who dominate the universities, including Keynesians, have obstructed the spread of knowledge about how the capitalist economy really works. Imagine if the universities refused to hire or hired very few meteorologists and geologists but instead hired pseudo-scientists who claimed that they had “scientifically” refuted the theories of the meteorologists and geologists.

Suppose our pseudo-scientists claimed that there was no real reason for storms, earthquakes and volcanic eruptions to occur. If storms, earthquakes or volcanic eruptions occur anyway, the pseudo-scientists explain it is because people or governments refuse to obey the god-given laws of weather and geology.

This is exactly the situation we confront in economics today. The forces that govern the capitalist economy appear mysterious and god-like not only to uneducated people but to the educated as well.

Our “neo-classical” marginalist economists claim that they have scientifically refuted Marx for the nth time, and proven that capitalism is stable. If crises do occur, it is because the people anger the gods of economics by insisting on “socialist” policies that “make everybody poor.”

Keynesianism and scapegoating

But it is not only right-wing “neoclassical” economists who keep people in ignorance about how capitalism really works. Keynesians do so as well.

“The truth,” Paul Krugman writes in newest book, “End This Depression Now,” “is that recovery would be almost ridiculously easy to achieve; all we need is to reverse the austerity policies of the past couple of years and temporarily boost spending.”

He continues, “The strong measures that would all go a long way toward lifting us out of this depression should include, among other policies, increased federal aid to state and local governments, which would restore the jobs of many public employees; a more aggressive approach by the Federal Reserve to quantitative easing (that is, purchasing bonds in an attempt to reduce long-term interest rates); and less timid efforts by the Obama administration to reduce homeowner debt.”

Why then, if it is so easy to end the current prolonged depression and its massive unemployment, isn’t the crisis ended? Keynes, after all, published his “General Theory” 76 years ago—enough time one would think for its lessons to sink in. The only conclusion is that some “evil group of people” is standing in the way. Krugman blames leaders of the U.S. Republican Party, who simply refuse to grasp the simple truths revealed by Keynes 76 years ago, along with the timidity of the Obama administration, which for some unexplained reason is not standing up to them.

But there are other possible scapegoats. Between 1873 and 1945, and to some extent still today, “international Jewish financiers” were often blamed—or investment banks with Jewish names such as Goldman-Sachs. During the stagflation of the 1970s, wealthy “Arab oil Sheiks” were blamed. Immigrants and foreigners who are “taking away our jobs” are almost always blamed. In the past, Jews, who were pictured by right-wing politicians—by no means only Nazis or other fascists—as foreigners no matter how long their ancestors had lived in the country, were blamed. Today, it is Muslims.

From anti-Semitism to Islamophobia

Just like in the past—and to some extent still today—Jews are pictured as seeking “world domination” through their alleged control of world finance, on one side, and being behind the workers’ movement, on the other. Today, Muslims are accused of plotting to create a “new Caliphate” that will force Christian Europeans to follow the Islamic religious Sharia law.

Muslims, after all, sometimes wear “funny dress,” insist just like orthodox Jews do that men and women dress modestly and that women cover their hair, and stubbornly refuse to eat pork. And just like Jews, Muslims refuse to acknowledge Jesus Christ as Lord and Savior and God Himself.

Islamophopia is therefore supplementing and replacing the traditional anti-Semitism aimed at Jews. In Europe since Hitler, there haven’t been so many Jews around, but the number of Muslims is increasing. And after all, our backward racist Christian Europeans—and Americans—can reason, aren’t Muslims also of the Semitic race? (5)

Kick the immigrants—especially Muslim immigrants—out and unemployment will disappear. That is the cry of the National Front in France, LAOS and Golden Dawn in Greece, as well as the more respectable Conservatives in Britain, and the Christian Democrats in Germany as well as the Republicans in the U.S.—where the immigrants are largely Latinos but also include growing numbers of Muslims.

Other scapegoats include other countries that are beating “our” country at the capitalist game—fill in the blank—in the vicious everyday “game” of capitalist economic competition. In the 1970s, Japan was blamed for the “stagflation crisis” and the difficulties that the U.S. auto industry was beginning to experience. More recently, China has been and is being scapegoated.

Germans as scapegoats

Today in Europe, however, it is Germany itself that is getting blamed for the European crisis. The story line is that Germans under right-wing Chancellor Angela Merkel are insisting on a policy of debt repayment and austerity that is driving the economies of the weaker European countries, especially Greece, ever deeper into economic and social crisis. It is ironic that Germans are being pictured as “vicious usurers,” just like the Nazis in their time when Germany was down blamed “international Jewish” usurers for ruining Germany’s economy.

Why the workers’ movement must fight against scapegoating

All this scapegoating has one thing in common. It covers up the truth that the real cause of capitalist crisis is the capitalist mode of production itself and the capitalist class. The blame should not be placed on individual capitalists or particular groups of capitalists despite the fact that they—with a few honorable exceptions such as Karl Marx’s co-worker Frederick Engels—insist on maintaining this system because it allows them to live in luxury without having to work despite its “thorns” in the form of crises.

The big capitalist debate on how to get a real recovery going

Today, the capitalist economists and politicians are divided between the supporters of “deflation” and “inflation” as the road out of the crisis. The most extreme “deflationists,” like Texas congressman Ron Paul, favor a return to the gold standard, which presumably would lead to a major fall in prices. How much of a fall would depend in part on exactly how much gold the dollar would be fixed at under the hypothetical new gold standard.

Historically, under the gold standard, as our regular readers should know, the fall in nominal prices as well as prices in terms of gold—under the gold standard they are by definition the same—played a crucial role in paving the way for a recovery after a crisis. The fall in prices expands the “real money supply.” Lower prices stimulate gold production increasing the money supply not only in terms of purchasing power but absolutely as well. As indebtedness is reduced, the system shifts from a credit back to a cash basis.

Inflation, too, erases old debts, but unlike deflation, inflation creates new debts. Deflation, in contrast, wipes out debt—both through bankruptcies but also through the repayment of existing debt without taking on new debt. Today, this is called “de-leveraging.” During “de-leveraging,” money’s role as a means of payment grows at the expense of its role as a means of circulation.

For example, if homeowners decide to pay off their mortgages, the money they use to pay off the mortgage debt cannot be used at the same time to purchase commodities. During the “de-leveraging,” which can sometimes take years, monetarily effective demand contracts, which facilitates the liquidation of the generalized overproduction that caused the capitalist crisis in the first place.

Indeed, the inflation of credit that precedes every capitalist crisis is simply a mirror image of the growing overproduction. During the initial “healthy” phase of expansion, the system relies on mobilizing the huge reserve of idle money that was built up during the preceding crisis. However, once capitalist production is expanding full throttle, the surplus cash is run down. To continue prosperity beyond this point, it is necessary to rely on the expansion of credit money and credit in general. Credit—including credit money—increasingly replaces cash in circulation.

It is well and good to institute strict financial regulations when cash is abundant, but once it grows scarce “financial engineering” is needed to maintain prosperity. Regulation must be abandoned in favor of “free market solutions.” In other words, financial regulation works well as long as it is not needed and must be abandoned as soon as it is needed.

Eventually, the expansion of credit reaches its limit—if only because one piece of money cannot pay off two debts at the same time—and the next crisis erupts. During the deflationary phase of a crisis-depression, the resulting “underproduction” compensates for the preceding “overproduction.” This means not only sharp declines of production and trade but soaring unemployment. Workers do benefit from the lower cost of living—as long as they are not in debt themselves—but are devastated by either reduced hours of work or no employment. Small farmers and businessmen especially, as they often are in debt, are wiped out in droves. (See posts on ideal industrial cycle.)

John Maynard Keynes believed there must be a better way to keep capitalism healthy than periodic deflations. He believed correctly that the deflation-crisis and depression phases of the capitalist industrial cycle were becoming increasingly intolerable for society. But since he was both a member of and loyal to the capitalist ruling class, he couldn’t see that capitalist crises couldn’t be abolished without abolishing the capitalist system that breeds them.

If investment were weak, Keynes argued that the government should deliberately increase its deficits by increasing spending and cutting taxes. If money was in short supply, the “monetary authority” such as the Federal Reserve System and the European Central Bank should simply print more money. Since the monetary authority must have the power to print more money up to “full employment,” currency should not be convertible into gold, since that would interfere with its power to issue money in sufficient quantity to ensure “a reasonable approximation of full employment.”

Once a recovery got going, Keynes believed it would feed on itself as corporations increased investment and hired more workers, who in turn would buy more commodities. As soon as the recovery was on solid footing, only then should the government raise taxes and reduce spending and pay back the debts it incurred during the preceding period of slow growth. Keynes believed that such an active policy of government intervention would stave off serious crises and make capitalist prosperity permanent.

Therefore, unlike Marx, Keynes believed that capitalist crises were avoidable given correct government policies. If incorrect policies failed to prevent a crisis, its cure was simple, just as Paul Krugman claims.

Today’s policymakers don’t dare consider the classical deflationary solution, which did work well for the capitalist system in the past and in theory could work again. The reason is that the credit system has reached such a level of development that its collapse would create a crisis of such intensity—not simply a repeat of 1929-33—that society would likely disintegrate into chaos unless the working class quickly took over. In theory, it is true that after years of chaos a strong recovery would then take hold and last for a few decades—interrupted by only “mild recessions” until the inevitable next major crisis hits. This assumes that modern society survives, which unlike the case even as late as the 1930s is far from certain.

The reason this is true is that bank-issued credit money has increasingly replaced legal-tender token money in basic retail trade. In the past, when business picked up and retail trade expanded, cash would flow out of bank reserves into general circulation. Bank reserves would come under pressure and this would limit the further expansion of bank credit and therefore credit as a whole.

However, to the extent that bank-issued credit money—credit and debit cards and now smart phones—replaces cash, this is no longer true. This not only leads to inflation of credit card debt, previously non-existent, but it also frees up the banks and the credit system in general to inflate other types of loans, including mortgage loans.

Today, middle-class people in the imperialist countries as well as the capitalist class proper, which between them command the lion’s share of the capitalist world’s purchasing power, increasingly carry around very little cash. Cards and phones are safer than cash, since in the event they are stolen the bank can always be notified and the cards and phones deactivated. But if cash is stolen, there is nothing to prevent the robbers from spending the money.

This is well and good as long as there is no credit crisis. To use Marx’s terminology, credit enables capitalist production to expand much further beyond the capitalist limits of production than ever was the case before.

But what would happen if a credit crisis triggered by a crisis of overproduction caused a general collapse of the credit system? The circulation of even essential commodities like food could abruptly collapse. Real hunger could break out even in affluent middle- and even upper-class communities because even if these people still had substantial “financial assets” they would lack the ready cash necessary to purchase food. The subsequent declines in production, employment, world trade, and agricultural prices would far exceed anything seen even during the super-crisis of 1929-33 let alone other major capitalist crises of the past. It is questionable if society could survive such a shock.

This is why despite the preaching of far right “neo-liberals” like Ron Paul and “Austrian” economists, serious policymakers like Democratic President Obama or the Federal Reserve System’s Republican chairman Ben Bernanke do not dare embark on full-scale deflationary policies.

Why Keynesian inflation is not a viable solution

On the other hand, the kind of all-out Keynesian assault on the current depression advocated by Krugman and other left Keynesians would lead sooner or later to a flight from paper money into gold. True, devaluation like deflation does stimulate gold production and thus lay the foundation for a new expansion of the market. But unlike classic deflation, devaluation also increases the demand for cash in its “hardest” form—gold bullion. This can lead to a type of crisis where the demand for gold increases far faster then any conceivable rise in gold production can increase its quantity.

The big advantage of a gold standard for the capitalist system is that it keeps the demand for gold bullion low. If there is very little possibility of a devaluation of the currency—which was the case during the heyday of the international gold standard—why hold gold bullion? Even if the banking system collapses, banknotes are a far easier way to hoard cash than are gold coins or bars.

And most importantly, unlike gold itself the quantity of banknotes can if necessary be rapidly increased in a crisis. However, during a “stagflation” crisis like that of 1979-80 it is not the demand for banknotes that is soaring but the demand for gold bullion itself. Since the supply of gold bullion, unlike banknotes, cannot be dramatically increased in the short run, the only way out is to decrease the demand for gold bullion by sharply increasing interest rates. This is exactly what happened during the “Volcker shock.”

Today, however, the economy is much more “leveraged” than it was during the “Volcker shock” era. A sudden increase in interest rates could mean a far more severe recession than the Volcker shock era recession, especially since the economy has become accustomed to extremely low interest rates. In the worst case, it would bring about the collapse of bank-issued credit money that would bring about the nightmare, scarcely conceivable as late as the Volcker shock era, that I discussed above.

The ‘solution’ of today’s policymakers

Today’s policy makers are attempting a middle solution, which is only making the capitalist system increasingly unstable. Real old-fashioned deflation that would lay the foundation for another capitalist “great boom” is out of the question. But for the reasons discussed above, they are also unwilling to follow the advice of Krugman and attempt an all-out inflationary assault on capitalist stagnation. What does that leave? Muddling through.

In the period following the 2008 panic, the policymakers moved in a Keynesian direction, though not as far as the more left Keynesians such Krugman desired. They everywhere ran large deficits, and the U.S. Federal Reserve Board greatly increased its supply of token money in order to finance these deficits.

A new cycle emerges in the world economy

Since the end of the “Great Recession,” the global economy has been going through a strange new economic cycle of approximately one-year duration. During the upside of the cycle, the dollar price of gold spikes, leading to sharply higher oil prices and then fuel and food prices. Businesses, anticipating still further price rises, move to increase inventories, production rises and jobs growth accelerates. In rich countries, especially in the United States, there are complaints about soaring gasoline prices. In poor countries, people face real starvation as food prices soar. Fearing a repeat of 1979-80, the U.S. Federal Reserve System halts its latest round of “quantitative easing.”

This paves the way for the downside of the yearly cycle. The European debt crisis grows worse and economic growth suddenly slows in the U.S., Europe, China, India, Brazil and elsewhere. The dollar price of gold falls sharply as investors stampede instead into U.S. Treasury bonds and other dollar-denominated assets, causing the dollar’s rate of exchange to rise against other currencies, threatening the U.S. position in world trade. The price of oil and gasoline falls. Businesses, fearing that the bottom will fall out of the market like it did in third quarter of 2008, halt their inventory accumulation. The global economy is on the edge of full-scale recession once again.

Then, just as a new global recession appears at hand, the Federal Reserve hints that is considering a new round of quantitative easing, or at least promises continued minimal interest rates for even more years to come. Stock market prices recover, but nervous investors start to sell off their Treasuries and dollar-denominated assets, the dollar price of gold rises once again, followed by higher oil prices. Soon gasoline and then food prices take an upward jump. Businesses move to build up inventories before prices rise even more and growth rates pick up. The media proclaim that the recovery is at long last gaining momentum.

A year ago we were entering the downward phase of the mini-cycle with the European debt crisis deepening and world growth slowing just like we were the year before that. Today, we are faced with exactly the same situation, though it does appear that with each loop of this cycle the European debt crisis becomes more ominous. How long can this last? One thing is sure, the world capitalist economy cannot tolerate this situation much longer.

What should the Greek workers demand?

This is not the place to write a program for the Greek or European workers in general. This can only be decided by the workers’ parties, trade unions and other mass organizations in Greece and the rest of Europe. But I can make a few observations.

First, we always have to keep in mind that the capitalist system as a whole is responsible for the crisis and resist scapegoating of all kinds, whether aimed against immigrants, Jews, Muslims, Chinese or, yes, even the Germans. Any concessions to scapegoating of this type is death for the workers’ movement.

The Keynesian economists like Paul Krugman and the Syriza economists in Greece, on the left, as well as the right Keynesians of the fascist Golden Dawn agree with “deflationists” of the traditional “neoliberal” right that the key to economic recovery is a rise in the rate of profit of the capitalists. They simply differ on how to bring the necessary rise in profits about.

The neoliberal right argues that only a radical increase in the rate of exploitation of the workers can lead to a recovery for the Greek, European and world economies. The workers, the neoliberals say—especially the Greek workers—are lazy and spoiled by years of welfare-state “socialism.” Lower wages, reduced social security, pensions and vacation time, higher retirement ages for the old and less spending on education for the young, more taxes on the workers, fewer on the capitalists—this will increase profits and eventually lead to a recovery and the full employment promised by liberal “neoclassical” and Austrian marginalist economics.

The Keynesians quite correctly point out that if such policies are carried out, not enough people will be able to buy the commodities that the capitalists are physically able to produce. Profits will remain low or non-existent and unemployment will only rise for years to come. What is needed, the Keynesians of both the left and the right proclaim, is a radical increase in government spending, government deficits backed up by more quantitative easing by both the  European Central Bank and the U.S. Federal Reserve System. Inflation, the Keynesian economists claim, despite the  demonstration of the 1970s to the contrary, won’t be a danger until “full employment” returns.

Only then should  governments move to reduce deficits and rein in monetary expansion. The way out of the crisis, according to the  Keynesians, is not through a contraction of credit and a return to a cash-based system but rather through a still further expansion of credit. But where  will the money come from to pay the new debts? That is simple, according to the Keynesians, it will be printed by the “monetary authorities.”

So the right-wing reactionaries as well as both progressive and “fascist” Keynesians agree that an increase in the profits of the capitalist class headed by the 1 percent is the key to a return to prosperity. They only differ on how exactly to achieve it

The workers must reject both the deflationary and inflationary solutions to the crisis, especially since neither is viable today. The capitalists are claiming, just like they did during the Great Depression 80 years ago, that millions and millions of workers are simply unemployable.

The workers’ answer should be that the right to a job as well as housing and health care takes priority over the right of capitalists to make profits. If the capitalists cannot profitably carry out production, they must give up the means of production to the organized working class. To enforce this, the working class must massively organize itself as the state and take over the means of production that the capitalist cannot operate at a profit.

The question of the Greek debt and the euro

Of course most Greek workers, not to speak of other European workers, consider such a program to be unrealistic today. This is 2012 and not 1917! For this reason, transitional demands must be developed that fill the gap between the current level of consciousness—the rejection of austerity—and the only real solution: the transfer of political power to the massively organized Greek working class and the takeover by the workers of the means of production and exchange.

I will address only two concrete questions:

First, I think that Greece should repudiate its debts to the European and other bankers. It seems that any short-term easing of the economic situation is not possible without a repudiation of the debt burden. Just as Argentina did during its economic crisis of 2001, which was even worse than the Greek economic crisis is today, the debt should be repudiated.

Second, there is discussion on whether Greece should leave the eurozone and reissue its own currency. A section of the Keynesian economists favor this demand, though Syriza rejects it so far. The Keynesian argument in favor of Greece leaving the euro is that once the Greek government and “monetary authority” can again issue its own currency, this currency can be radically devalued against the euro.

This would dramatically lower wages and prices in Greece in terms of euros. Tourists from wealthier countries would flock to Greece to enjoy its fine Mediterranean climate and examine the ancient ruins of Greek classical civilization at dirt cheap prices. Money would flow into Greece and the profits of Greek capitalists would recover, and so would the Greek capitalist economy.

Other Keynesian economists, including those of Syriza, oppose this. They fear that such a devaluation would undo the whole euro system, plunging Europe as a whole into prolonged economic decline. If Greece leaves the euro, won’t Spain, Portugal, and then Ireland and finally maybe Italy leave it, too?

The euro would be reduced to little more than a currency bloc between Germany and France. How long would that last? European countries would return to a policy of competitive currency devaluations, capital controls and maybe even tariffs. Not only the euro but the whole European common market would be shattered. What would little Greece have in the way of a meaningful recovery if the entire European economy goes down the drain?

I believe that the euro question is something of a trap. As long as Greece remains under a capitalist government, it should be a matter of relative indifference where the “monetary authority” that issues the currency is located. Of course, if the workers were to seize power and defeat NATO before the workers in other European countries take power, the Greek workers’ government would have to issue its own currency just like it would have to establish a state monopoly of foreign trade. But this is for the future to decide.

Long live the fight against austerity. Victory to the Greek workers!

_______

1 It seems likely that much of the growth in employment that was reported by the U.S. Labor Department earlier simply reflected the unusually mild winter weather. The Labor Department, other governmental agencies and the Federal Reserve System make adjustments for seasonal trends. So, for example, the post-Christmas slump in business and employment that occurs every year does not show up in the employment and other economic statistics. But they make no attempt to adjust for the effects of weather outside of normal seasonal patterns.

2 The U.S. has the most perfected two-party system. In Congress, no party other than the Democrats or Republicans is represented in either the House of Representatives or the Senate. There are only two “independents,” the retiring Joseph Lieberman of Connecticut, who was originally elected as a Democrat but lost the Democratic primary and therefore ran as “independent” with the support of the Republicans. The only other independent is “socialist” Bernie Sanders of Vermont, who is not a member of any organized socialist or even social democratic party but works with the Democrats.

In Britain, the two-party system consisted of the Whigs and later Liberals, led by elements of the landed aristocracy aligned with the rising capitalist class, and the Tories, or later Conservative Party, the party of landed property. In the 19th century, the British trade union movement aligned itself with the Liberals.

In the 20th century, Britain’s two-party system was transformed when the trade unions withdrew their support from the Liberals and formed the Labor Party along pro-capitalist, pro-imperialist lines. The liberals have lingered on as a capitalist “third party” that tries to position itself between the Conservatives on the right—now representing big business directly rather than being the party of landed property—and Labor on the “left.”

Since the German capitalist class failed to realize a bourgeois revolution of its own, it was unable to form a “great party” of capital before the rise of the Nazis. Instead, the right wing of German politics was represented by many small capitalist, landlord and “middle-class” parties.

The first “great party” of German capitalism was therefore actually the Nazi party itself—officially called the National Socialist German Workers Party, which was neither a socialist nor a workers’ party. All the other capitalist parties were disbanded, and their members if they wished to remain active in politics had to join the Nazi party. The two labor-based parties, the Communist Party and the Social Democratic Party, were outlawed.

After Germany’s defeat, great care was taken in (West) Germany not to recreate the “excessively democratic” multi-party system of the Weimar Republic. Instead, the “experiment” of having one party of capitalist reaction was continued. Considering Germany’s defeat and its record, the new ruling party of the right could hardly call itself Nazi or National Socialist. Instead, the new outright pro-capitalist ruling party was dubbed the “Christian Democrats.”

Naturally, many of the new Christian Democrats had been Nazis during the Third Reich, including some of the highest-ranking members. Among the “former” Nazis were Kurt Georg Kiesinger, who served as chancellor of West Germany from 1966 to 1969. Franz Joseph Strauss, the leader during the 1950s and 1960s of the quasi-independent Bavarian branch of the Christian Democrats, called the Christian Social Union, had also been a Nazi during the Third Reich.

The decision to call the party “Christian” implied to a population that had been strongly indoctrinated in anti-Semitism during the Third Reich that the few surviving Jews would have a second-class role at best in the new “great party” of German capitalism. Today, the same message holds for Germany’s growing Muslim population.

A two-party system, however, needs a left pillar as well. In (West) Germany, the labor-based ex-Marxist Social Democrat Party was ideal for this role. This party had gone over to German imperialism with its infamous vote for war credits in August 1914. After World War I, it allied itself with the proto-fascist Free Corps bands to put down the attempted workers’ revolution in Germany. The Social Democratic leaders were heavily implicated in the murders of Karl Liebknecht and Rosa Luxemburg, who had been leaders of the Social Democrats when it was a Marxist party.

Under the Third Reich, however, the Social Democrats were outlawed by the Nazis. They were able to resume their role in Germany’s political system only because Germany was occupied by the “democratic imperialism” of the United States and its satellites Britain and France. Today, the Social Democrats are not only pro-capitalist and pro-imperialist, they are, like the Christian Democrats, pro-U.S. empire.

Germany does have a few smaller parties. For example, there is the ultra-pro-business Free Democrats, which most directly represents the interest of big business. The Green Party is a middle-class party that had its roots in the “New Left” student movements of the 1960s. The Greens have been allowed to participate in various coalition governments with the ruling parties in exchange for its support of the U.S.-NATO war against Yugoslavia and other NATO wars Germany has participated in.

A little known fact about Germany’s recent political history is that while the German Communist Party was outlawed in West Germany during the Cold War, the Christian Democrats were a legal party in the German Democratic Republic. True, they were not allowed to challenge the ruling Socialist Unity Party in elections—instead they were allotted a number of seats in East Germany’s parliament—and were obliged to pledge loyalty to the German Democratic Republic’s socialist system, a pledge they promptly betrayed in 1989. Germany’s current reactionary chancellor, Angela  Merkel, was originally a member of the East German branch of the Christian Democratic Party.

In France, the multi-party system of the postwar Fourth Republic has now given way to a two-party system. The various traditional bourgeois parties have united under the label “Union for a Popular Movement,” which faces off against the “center left” that has its historical roots in the Second International but has had no pretense of being any kind of Marxist party for many decades.
France’s two party system is not yet completely consolidated. In addition to the
18 percent of the vote won by the far-right National Front candidate Marine Le Pen, Jean-Luc Melenchon, the candidate of the Left Front, a coalition between various leftish forces, among them the Communist Party and some French Trotskyists who managed to overcome their historic hatred for one another, won 11 percent of the vote. If the economic and social crisis in France were to deepen like it has in Greece, the emerging French two-party system would likely shatter.

Italy had a multi-party system before Mussolini, but after World War II the capitalist politicians were united in the Italian version of the Christian Democratic Party that faced off against the labor-based but increasingly opportunist “eurocommunist” Italian Communist Party. This two-party system lacked the stability of the other two systems, because the labor-based Italian Communist Party was banned during the Cold War from participating in the central government, since many of its members continued to identify with the Soviet Union.

After the Russian and Eastern European counterrevolutions restored capitalist rule in those countries, both the Italian Communist Party and the Christian Democratic Party broke up into numerous smaller parties, recreating the pre-Mussolini multi-party system.

In Spain, since the death of Franco in 1975, the capitalist ruling class has moved to establish a Spanish version of the two-party system. The former Franco supporters organized themselves in the so-called Popular Party, which faces off against the labor-based Socialist Workers Party. The Socialist Workers Party has its roots in the Second International, and like all the Second International parties, has long been completely pro-capitalist and pro-imperialist.

3 Unlike what is commonly believed, the Gestapo did not grow out of the brown-shirted Nazi stormtroopers or even the elite black-uniformed SS that emerged out of the stormtroopers. Rather it was a continuation of the traditional German political police system.

The Gestapo was the new name given by the Nazis to the Prussian political or state police—in American terms the “Red Squad” of the German state of Prussia. Its roots were in the 19th-century Prussian secret police, who in their day had spied on Marx himself. In the mid-1930s, the Hitler government merged the Prussian Gestapo with the “Red Squads” of the other German states, giving the Gestapo nationwide authority.

During World War II, the Gestapo worked closely with the existing police systems of the occupied countries with the exception of the Soviet Union. In occupied Soviet territory, the Gestapo had to establish new police forces out of the ranks of the pro-capitalist elements that rallied to the Nazi cause.

In West Germany, shortly after World War II, “former” Gestapo men played a key role in the establishment of the Federal Office for the Protection of the Constitution, as the political police of West Germany was called. Since German unification, this political police agency—the direct heir to the 19th-century Prussian secret police, the Weimar Republic-era state political police, and the Gestapo itself—has the authority to operate throughout the present-day German Federal Republic.

4 Recently, a scandal ensued when a former employee of Goldman Sachs revealed that Goldman Sachs put its own profits ahead of its clients. That is, it put profit above all—just like every capitalist enterprise is obliged to do under pain of ruin under the capitalist system! Like Bank of America and JPMorgan Chase,
Goldman Sachs has played an infamous role in the current economic crisis. But this flows from the nature of the capitalist system and the role of banking within it.

Banking firms like Goldman-Sachs, Morgan-Stanley, Bank of America, JPMorgan Chase and Wells Fargo take advantage of the crisis to enrich themselves—though they can also go under as happened with Lehman Brothers. But again, it is the capitalist system has a whole and not individual banking firms that produce the crisis.

In the old days, the Wall Street investment banks were divided into the “Protestant” banks led by the firm of J.P. Morgan, by far the most powerful investment bank—no Jew or for that matter Catholic could get a job at J.P. Morgan.

Another group of Wall Street investment banks were owned by Jews of German descent, including Goldman Sachs. A Jew if he had the necessary German-Jewish background—no East European Jews need apply—could get a job with one of the “Jewish” banks such as Goldman-Sachs and pursue a career in investment banking.

If you were Catholic, you were pretty much out of luck as far as a Wall Street investment banking career was concerned. If you really loved banking, perhaps you could get a job at the small community bank in San Jose, California, called Bank of Italy, later changed to Bank of America, and now headquartered on the East Coast. But San Jose was a long way from Wall Street in those days.

In the early 1970s, the Wall Street investment banks were converted from partnerships into corporations, making the old division between “Protestant” and “Jewish” investment banks increasingly meaningless.

4 The Socialist Unity Party was itself put together from a merger of the old Communist Party of Germany, or KPD, with some members of the Social Democratic Party of Germany, who whether out of conviction or careerism were willing to cooperate in the building of socialism in the German Democratic Republic, or East Germany.

5 Most Muslims are not Arabs and do not speak Arabic or other Semitic languages. Many Muslims immigrants in Europe today are not actually Semitic by this definition—for example, Muslims from Pakistan and Turkey.

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