Impe­ria­lism and the Gre­at Reset Part 3: Late Capi­ta­lism (1945 – 1989)

Lese­zeit59 min

This is the third install­ment of a mul­ti-part series curr­ent­ly seria­li­zed in the Mag­Ma. It con­ta­ins the fol­lo­wing parts:

1. Intro­duc­tion & the Mar­xist Method

2. Clas­si­cal Impe­ria­lism (1895 – 1945)

3. Late Capi­ta­lism (1945 – 1989)

4. Neo­li­be­ra­lism (1989 – 2020)

5. A Fourth Impe­ria­list Epoch?

The ori­gi­nal text in Ger­man can be found here.

Late Capi­ta­lism (1945 – 1989)

The era of capi­ta­lism after World War II has been cal­led late capi­ta­lism by Ernest Man­del and other aut­hors. In this peri­od (las­ting up until 1989) the struc­tu­re of sur­plus pro­fits chan­ged: they were then obtai­ned pri­ma­ri­ly through tech­no­lo­gi­cal rents, which can be obtai­ned only through per­ma­nent tech­no­lo­gi­cal rene­wal. Sur­plus pro­fits could be achie­ved by tho­se firms that are the first to app­ly new pro­duc­tion pro­ces­ses or are the first to launch cove­ted new tech­no­lo­gi­cal deve­lo­p­ments, e.g. in the field of con­su­mer goods. This impli­es a shor­tening of the tur­no­ver time of fixed capi­tal and an acce­le­ra­ted tech­no­lo­gi­cal rene­wal.1

In con­trast, sur­plus pro­fits deri­ved from the explo­ita­ti­on of colo­nies and semi-colo­nies beca­me less important.

The back­ground to this deve­lo­p­ment was the cri­sis of clas­si­cal impe­ria­lism. The acce­le­ra­ted capi­tal accu­mu­la­ti­on of the years 1893 – 1914 was fol­lo­wed by a peri­od of sta­gna­ti­on that las­ted until the begin­ning of World War II. With the gene­ral spread of the new tech­ni­ques of the second indus­tri­al revo­lu­ti­on (such as elec­tric cur­rent, inter­nal com­bus­ti­on engi­ne, che­mi­cal indus­try, etc.) the orga­nic com­po­si­ti­on of capi­tal increased again.2 Becau­se of the incre­asing labor pro­duc­ti­vi­ty of indus­try in the metro­po­li­ses, the ear­ly indus­tri­al pro­duc­tion of raw mate­ri­als in the colo­nies went from being a source of sur­plus pro­fits to being a fac­tor in the decli­ne of the avera­ge rate of pro­fit: raw mate­ri­al pri­ces rose again. This trend began during World War I and rea­ched its peak at the begin­ning of the 1950s.3 This ten­den­cy was exa­cer­ba­ted by the dis­rup­ti­on of world trade and the decli­ning repro­duc­tion of eco­no­mies during World War I, fol­lo­wed by a nar­ro­wing of the world mar­ket as a result of the Octo­ber Revo­lu­ti­on. The­se los­ses could not be com­pen­sa­ted in the long run by increased export of capi­tal to the colo­nies. This again led to a signi­fi­cant capi­tal sur­plus and a sharp drop in the avera­ge pro­fit rate. This was reflec­ted in the high­ly cri­sis-rid­den deve­lo­p­ment of capi­ta­lism in the inter­war peri­od, which cul­mi­na­ted in the gre­at world eco­no­mic cri­sis of 1929. After the Second World War, more than one third of the earth’s sur­face was final­ly with­drawn from the grasp of capi­tal (USSR, Eas­tern Euro­pe, PR Chi­na, Demo­cra­tic Repu­blic of Viet­nam, Demo­cra­tic People’s Repu­blic of Korea).4

The pre­con­di­ti­on for a new ups­wing of capi­tal, i.e. a new long wave with an expan­ding key­note, was the radi­cal increase of the rate of sur­plus value due to fascism and world war in the most important capi­ta­list count­ries.5 This allo­wed a mas­si­ve invest­ment of capi­tal and thus fur­ther uphe­aval of the over­all tech­no­lo­gy, which is cal­led the third indus­tri­al revolution:

  • With the gene­ral use of petro­le­um and nuclear ener­gy, ener­gy pro­duc­tion was once again revo­lu­tio­ni­zed and made con­sider­a­b­ly cheaper.

  • Rising raw mate­ri­al pri­ces led to the fact that capi­tal was again incre­asing­ly inves­ted in the sec­tor of raw mate­ri­al pro­duc­tion. Now – in con­trast to the pre­vious era – high­ly indus­tria­li­zed tech­ni­ques were also used the­re. This remo­ved an important incen­ti­ve to con­cen­tra­te the­se indus­tries in the under­de­ve­lo­ped count­ries. Cheap labor now play­ed a les­ser role than befo­re, and expen­si­ve machi­nery was used with less poli­ti­cal risk in the metro­po­li­ses. Whe­re­ver pos­si­ble, raw mate­ri­al pro­duc­tion was relo­ca­ted the­re. This hap­pen­ed, for exam­p­le, in the are­as of syn­the­tic rub­ber and syn­the­tic fiber pro­duc­tion and was also the back­ground for the then begin­ning tho­rough­go­ing indus­tria­liza­ti­on of agri­cul­tu­re in the high­ly deve­lo­ped count­ries.6

  • At the begin­ning of the new long wave with an expan­si­ve ten­den­cy, much hither­to sur­plus capi­tal flowed into Divi­si­on II. A new sec­tor of dura­ble con­su­mer goods emer­ged, which repre­sen­ted the appli­ca­ti­on of the second indus­tri­al revo­lu­ti­on to the con­su­mer goods sec­tor. The most important sec­tors were auto­mo­bi­le pro­duc­tion and elec­tri­cal appli­ance pro­duc­tion (ref­ri­ge­ra­tors, elec­tric sto­ves, washing machi­nes, radi­os, tele­vi­si­ons, etc.). This sec­tor beca­me the lea­ding indus­try of late capi­ta­lism. The new work orga­niza­ti­on of Tay­lo­rism enab­led a con­sidera­ble increase in pro­duc­ti­vi­ty here. It was based on exten­si­ve stan­dar­diza­ti­on of pro­duc­tion, use of the assem­bly line, extre­me deepe­ning of the divi­si­on of labor, and detail­ed con­trol of the work­force by mana­gers. Demand for dura­ble con­su­mer goods had not been ful­ly satis­fied in the first deca­des after 1945, so the­re was a sel­lers‹ mar­ket. Under the­se cir­cum­s­tances, even a lar­ge inter­nal con­trol appa­ra­tus and rela­tively infle­xi­ble ana­log spe­cial machi­nes con­nec­ted in sequence on the assem­bly line were eco­no­mic­al­ly via­ble. The­se fixed cos­ts only had to be allo­ca­ted to a suf­fi­ci­ent­ly lar­ge pro­duc­tion volu­me (eco­no­my of sca­le).7

In the post­war peri­od, the­r­e­fo­re, num­e­rous fac­tors came tog­e­ther that led to a sta­bi­liza­ti­on of the eco­no­mic ups­wing and thus to a new long wave with an expan­sio­na­ry tendency: 

  • high invest­ment rate 

  • rapid increase in labor productivity

  • Rising rate of sur­plus value cau­sed by the indus­tri­al reser­ve army still pre­sent in the imme­dia­te post-war peri­od, i.e. slower growth of real wages com­pared to labor pro­duc­ti­vi­ty with a simul­ta­neous reduc­tion in social tensions.

  • Recon­s­truc­tion after war­ti­me des­truc­tion in Euro­pe and Japan acted as an addi­tio­nal sta­bi­li­zing fac­tor.8

The sub­stan­ti­al increa­ses in pro­duc­ti­vi­ty enab­led a signi­fi­cant rise in real wage levels in the lon­ger term and thus allo­wed rele­vant parts of the working class to beco­me con­su­mers of indus­tri­al­ly pro­du­ced mass pro­ducts. Eco­no­mic cri­ses and low inco­mes were seen as obs­ta­cles to the other­wi­se assu­red sale of the­se goods. The­r­e­fo­re, a Keyne­si­an eco­no­mic poli­cy was initi­al­ly also in the inte­rest of capi­tal.9

The sys­te­ma­tic pur­su­it of tech­no­lo­gi­cal rents was a struc­tu­ral fea­ture of late capi­ta­lism. This deve­lo­p­ment was made pos­si­ble by the signi­fi­cant sci­en­ti­fic advan­ces, espe­ci­al­ly in the field of phy­sics, sin­ce the begin­ning of the 20th cen­tu­ry, such as the theo­ry of rela­ti­vi­ty and quan­tum phy­sics, which were clo­se­ly lin­ked to revo­lu­tio­na­ry advan­ces in mathe­ma­tics and com­pu­ter sci­ence. Howe­ver, they took place at a time of depres­sed eco­no­mic growth or cri­sis-rid­den eco­no­mic deve­lo­p­ment, and were thus litt­le used.

This did not chan­ge until the Second World War. Sta­te-fun­ded rese­arch led to the deve­lo­p­ment of num­e­rous arma­ments and mili­ta­ry equip­ment based on the­se inven­ti­ons, such as the ato­mic bomb, radar, minia­tu­ri­zed elec­tro­nic devices, the com­pu­ter, and the appli­ca­ti­on of mathe­ma­tics to eco­no­mic orga­niza­ti­on pro­blems. After the war, the­se dis­co­veries could also be used in civi­li­an pro­duc­tion. Thus, sci­en­ti­fic pro­gress acce­le­ra­ted rapidly.

This deve­lo­p­ment con­tin­ued in the post­war peri­od, with pri­va­te-sec­tor rese­arch labo­ra­to­ries play­ing an important role, often in con­junc­tion with govern­ment orga­niza­ti­ons. 10

Tech­no­lo­gi­cal rents can be achie­ved when com­pa­nies mana­ge to set the mar­ket pri­ces of new­ly deve­lo­ped pro­ducts well abo­ve their cost pri­ces. This is usual­ly pos­si­ble if they are able to secu­re a mono­po­ly posi­ti­on – at least tem­po­r­a­ri­ly – for their new­ly deve­lo­ped pro­ducts. This can be achie­ved by being the first to launch a pro­duct on the mar­ket.11

The inflow of capi­tal into the­se pro­duc­tion sec­tors can be inhi­bi­ted by the fol­lo­wing factors:

  • The extre­me amount of capi­tal to be inves­ted, which can be seve­ral bil­li­on dol­lars per manu­fac­tu­ring facility.

  • Intellec­tu­al pro­per­ty rights such as patents.

  • The advan­ta­ge of rese­arch-inten­si­ve lar­ge cor­po­ra­ti­ons over their com­pe­ti­tors in mas­te­ring dif­fi­cult pro­duc­tion pro­ces­ses or deve­lo­ping new products.

In other words, the­re is no – or only a delay­ed – equa­liza­ti­on of pro­fit rates here. Inno­va­ti­ve com­pa­nies were able to secu­re sur­plus pro­fits for a rela­tively long time.

As the pro­duc­ti­vi­ty gap bet­ween sec­tors or groups beca­me the most important source of sur­plus pro­fits, the tur­no­ver time of fixed capi­tal was shor­ten­ed and its rene­wal acce­le­ra­ted. At least sin­ce the 1960s, firms in num­e­rous indus­tries tried to radi­cal­ly redu­ce the labor cost share in the cost pri­ce of goods through auto­ma­ti­on and semi-auto­ma­ti­on. On the one hand, this was a reac­tion to the con­sidera­ble wage increa­ses of the time; on the other hand, the rela­ti­ve share of labor cos­ts was increased by che­a­pe­ning con­stant cir­cu­la­ting capi­tal (raw mate­ri­als) and fixed capi­tal (machi­nery).12

The­re was a shift in the labor force enga­ged in the pro­duc­tion pro­cess from the actu­al pro­ces­sing of raw mate­ri­als to pre­pa­ra­to­ry and main­ten­an­ce work. Accor­ding to Marx, the­se acti­vi­ties are just as value-adding as tho­se of the peo­p­le working in the run-up to the actu­al pro­duc­tion pro­cess, such as sci­en­tists, labo­ra­to­ry assistants, draft­smen, etc. This shows an incre­asing inte­gra­ti­on of social labor capa­ci­ty.13

Con­ti­nuous pro­duc­tion and radi­cal acce­le­ra­ti­on of pre­pa­ra­to­ry and repair work shor­ten­ed the pro­duc­tion peri­od. This, in turn, increased the pres­su­re to shor­ten the cir­cu­la­ti­on peri­od, through inven­to­ry plan­ning, mar­ket rese­arch, etc. The (semi-)automatic machi­ne sys­tems requi­red capi­tal invest­ments far hig­her than tho­se of the second indus­tri­al revo­lu­ti­on. The orga­nic com­po­si­ti­on of capi­tal increased con­sider­a­b­ly.14

Howe­ver, very few firms suc­cee­ded in secu­ring long-term mono­po­li­stic sur­plus pro­fits. After an initi­al pha­se of very high pro­fits, almost all of them soo­ner or later pas­sed through pha­ses of cycli­cal decli­ne in sales. The tech­no­lo­gy of the third tech­no­lo­gi­cal revo­lu­ti­on in par­ti­cu­lar enab­led some firms to rea­li­ze sub­stan­ti­al sur­plus pro­fits based on tech­no­lo­gi­cal rents, but the­se dis­ap­peared when the influx of capi­tal into this indus­try led to a sub­stan­ti­al fall in pri­ces. Man­del cites the com­pu­ter and semi­con­duc­tor indus­tries in par­ti­cu­lar as examp­les here.15

If mono­po­lies are unable to secu­re sus­tained sales growth of their spe­ci­fic goods, com­pe­ti­ti­on, even bet­ween mono­po­lies, comes into full play. The dan­ger of a decli­ning mono­po­li­stic sur­plus pro­fit rate, i.e., the ali­gnment of the mono­po­ly pro­fit rate with the avera­ge pro­fit rate, which tends to decli­ne, can be coun­te­red only by con­stant expan­si­on of both sales mar­kets and pro­duct dif­fe­ren­tia­ti­on. Hence the unfol­ding of rese­arch and deve­lo­p­ment descri­bed abo­ve. Attempts were also made to escape the dan­ger of the cycli­cal and struc­tu­ral rela­ti­ve decli­ne in spe­ci­fic demand through inter­na­tio­nal cen­tra­liza­ti­on of capi­tal – i.e., through the crea­ti­on of mul­ti­na­tio­nal cor­po­ra­ti­ons – and through the for­ma­ti­on of con­glo­me­ra­tes.16

Under clas­si­cal impe­ria­lism, the lar­ge mono­po­li­sti­cal­ly or oli­go­po­li­sti­cal­ly ope­ra­ting cor­po­ra­ti­ons or trusts were most­ly limi­t­ed to one coun­try and its colo­nies; inter­na­tio­nal capi­tal inter­de­pen­dence was low. In late capi­ta­lism, the mul­ti­na­tio­nal cor­po­ra­ti­on spe­cia­li­zing in cer­tain pro­ducts beca­me the defi­ning orga­niza­tio­nal form of big capi­tal.17 In some are­as, rapidly gro­wing pro­duc­ti­ve forces and high capi­tal invest­ment meant that pro­fi­ta­ble pro­duc­tion was no lon­ger pos­si­ble at the natio­nal level alo­ne. This was espe­ci­al­ly true of the Euro­pean count­ries, which were smal­ler than the United States.

The search for sur­plus pro­fits in the form of tech­no­lo­gi­cal rents requi­red the con­stant deve­lo­p­ment of new pro­ducts and new pro­duc­tion pro­ces­ses. This shor­tening of the tur­no­ver time of fixed capi­tal and the lar­ge amounts of capi­tal spent on rese­arch and deve­lo­p­ment requi­red maxi­mum pro­duc­tion and sales of the new­ly deve­lo­ped pro­ducts. This was an important incen­ti­ve to pro­du­ce on an inter­na­tio­nal sca­le.18

For­eign pro­duc­tion faci­li­ties were set up to tap the mar­ket in the respec­ti­ve tar­get coun­try. This made it pos­si­ble to cir­cum­vent the still quite high tariffs and other trade bar­riers. Export­ing to the cor­po­ra­ti­ons‹ home coun­try was of rela­tively litt­le importance, and inter­na­tio­nal dis­ag­gre­ga­ti­on of pro­duc­tion was rare. Most for­eign invest­ments were made in the deve­lo­ped capi­ta­list count­ries. The corporation’s head­quar­ters and rese­arch and deve­lo­p­ment faci­li­ties remain­ed in its coun­try of ori­gin. Pro­fits from for­eign invest­ments also flowed back the­re.19

In most cases, the owner­ship of the­se cor­po­ra­ti­ons was far less inter­na­tio­na­li­zed than their pro­duc­tion. As in clas­si­cal impe­ria­lism, they were over­whel­mingly con­trol­led by the lar­ge natio­nal com­mer­cial banks.

3.2 The Afflu­ent Society

Late capi­ta­lism saw a fur­ther sur­ge in capi­ta­liza­ti­on in the indus­tria­li­zed count­ries and an unpre­ce­den­ted ups­wing in living stan­dards. His­to­ri­an Eric Hobs­bawm cal­led this peri­od the gol­den age of capitalism.

Rem­nants of pre-capi­ta­list modes of pro­duc­tion, e.g. in agri­cul­tu­re, han­di­crafts or dome­stic work, lar­ge­ly dis­ap­peared. In agri­cul­tu­re, spe­cia­liza­ti­on, mecha­niza­ti­on and the use of che­mi­cal fer­ti­li­zers and pesti­ci­des even led to a grea­ter increase in labor pro­duc­ti­vi­ty in the post­war peri­od than in indus­try. As a result, most farms were now ope­ra­ting on a capi­ta­list basis and mas­si­ve pres­su­re was exer­ted by capi­ta­list com­pe­ti­ti­on to redu­ce pro­duc­tion cos­ts. This led to the repla­ce­ment of living labor by machi­nes in this sec­tor as well.

At the same time, the are­as of simp­le com­mo­di­ty pro­duc­tion and sub­sis­tence pro­duc­tion, in which, for exam­p­le, the wives of indus­tri­al workers had pre­vious­ly still been acti­ve on a lar­ge sca­le, decli­ned shar­ply. This forced a sta­bi­liza­ti­on and increase in wage inco­mes in the metro­po­li­ses and at the same time for­med the basis for the expan­si­on of the inter­nal mar­ket.20

The share of wage ear­ners in the total popu­la­ti­on increased dra­ma­ti­cal­ly, espe­ci­al­ly at the expen­se of the self-employ­ed midd­le clas­ses. About 90% of the West Ger­man popu­la­ti­on was wage-depen­dent in some way in the 1980s. The ruling clas­ses were also con­sider­a­b­ly uni­fied by the pro­cess of con­cen­tra­ti­on and mono­po­liza­ti­on, the eli­mi­na­ti­on of feu­dal land owner­ship and the moder­niza­ti­on of the self-employ­ed midd­le clas­ses. Thus, the social struc­tu­re of late capi­ta­lism was cha­rac­te­ri­zed by an increased nume­ri­cal pola­riza­ti­on bet­ween capi­ta­lists and wage ear­ners. Howe­ver, this did not lead to a deepe­ning of social tensions.

In the 1960s, a wave of sub­ur­ba­niza­ti­on began. Num­e­rous new resi­den­ti­al dis­tricts-both sin­gle-fami­ly housing estates and high-rise neigh­bor­hoods-emer­ged out­side the inner cities. The mise­ry livng con­di­ti­ons of lar­ge sec­tions of the popu­la­ti­on, which was still ende­mic under clas­si­cal impe­ria­lism, was sub­stan­ti­al­ly alle­via­ted. For the first time, housing was built accor­ding to the prin­ci­ples of the Athens Char­ter, which had alre­a­dy been drawn up in 1933. Even mem­bers of the working class now recei­ved bright and rela­tively lar­ge apart­ments with ple­nty of light, air and sun. Hot and cold run­ning water beca­me as much a stan­dard as a bath­tub, a show­er and cen­tral hea­ting. An urban life­style slow­ly took hold in the coun­try­si­de as well.

The unpre­ce­den­ted rise in the stan­dard of living of wage ear­ners in the indus­tria­li­zed count­ries meant that, in Hobsbawm’s words, avera­ge citi­zens could now live a life that only the wealt­hie­st could afford a gene­ra­ti­on ear­lier. Owning an auto­mo­bi­le, elec­tri­cal house­hold appli­ances, radio, tele­vi­si­on and taking at least one annu­al vaca­ti­on trip beca­me a mat­ter of cour­se.21 At the same time, social secu­ri­ty sys­tems were also expan­ded, redu­cing the risks of wage labor in the event of unem­ploy­ment, ill­ness, acci­dents and old age. In addi­ti­on to indi­vi­du­al mass con­sump­ti­on, the expan­si­on of social infra­struc­tu­re such as hos­pi­tals, schools and uni­ver­si­ties also con­tri­bu­ted to the sta­bi­liza­ti­on of capi­tal accu­mu­la­ti­on. Howe­ver, the expan­si­on of the wel­fa­re sta­te could only be pushed through in pro­tra­c­ted strug­gles.22

The through-capi­ta­liza­ti­on of socie­ty and the impo­si­ti­on of new work and con­sump­ti­on norms led to a gra­du­al dis­so­lu­ti­on of tra­di­tio­nal social con­texts, milieus and ways of life. Even the working-class milieu slow­ly dried up; typi­cal working-class neigh­bor­hoods with their cul­tu­ral and social con­texts were dis­pla­ced by sub­ur­ban dor­mi­t­ory towns. Tele­vi­si­on repla­ced clubs, taverns and the working-class press as means of infor­ma­ti­on and com­mu­ni­ca­ti­on.23

The incre­asing importance of rese­arch and deve­lo­p­ment for gene­ra­ting sur­plus pro­fits in the eco­no­my and the expan­si­on of the wel­fa­re sta­te also increased the need for aca­de­mics, who­se num­bers grew rapidly. Num­e­rous stu­dents now also came from the pet­ty bour­geoi­sie. This was pos­si­ble due to the increased sala­ries of their par­ents and through sta­te sup­port mea­su­res.24

Late capi­ta­lism saw a mas­si­ve expan­si­on and mecha­niza­ti­on of the ser­vice sec­tor. With the incre­asing inter­na­tio­nal divi­si­on of labor and the inter­na­tio­nal objec­ti­ve socia­liza­ti­on of labor, inter­me­dia­ry acti­vi­ties in trade, trans­por­ta­ti­on, and ban­king expan­ded. The­re was signi­fi­cant mecha­niza­ti­on of ser­vice acti­vi­ties in ban­king and insu­rance for the first time through the use of com­pu­ting and boo­king machi­nes. The con­tai­ner also great­ly ratio­na­li­zed and che­a­pe­n­ed ship­ping. Self-ser­vice stores and super­mar­kets led to a mas­si­ve ratio­na­liza­ti­on of com­mer­ce.25 The objec­ti­ve socia­liza­ti­on of ser­vices is also evi­dent in major infra­struc­tu­re faci­li­ties. Local trans­por­ta­ti­on, resi­den­ti­al hea­ting and light­ing, water and ener­gy sup­p­ly were still purely pri­va­te in the mid-nine­te­enth cen­tu­ry. Capi­tal pene­tra­ted the­se are­as, espe­ci­al­ly in con­nec­tion with elec­tri­fi­ca­ti­on. Howe­ver, the lar­ge out­lay of fixed capi­tal and the extre­me­ly long pay­back peri­ods made this sec­tor lar­ge­ly unat­trac­ti­ve to pri­va­te capi­tal, so that in late capi­ta­lism it was most­ly ope­ra­ted by the public sec­tor.26

Howe­ver, strong coun­ter­ten­den­ci­es to the deve­lo­p­ment of the ser­vice socie­ty also exis­ted, becau­se at the same time, per­so­nal ser­vices were also direct­ly repla­ced by mate­ri­al con­su­mer goods, such as house­hold ser­vices by house­hold machi­nes, per­so­nal enter­tain­ment ser­vices (thea­ter, vau­de­ville, musi­cal per­for­man­ces) by enter­tain­ment goods (radio, tele­vi­si­on, video recor­ders), and trans­por­ta­ti­on ser­vices (rail­roads) by trans­por­ta­ti­on goods (auto­mo­bi­les). The­r­e­fo­re, accor­ding to Man­del and Hirsch/​Roth, despi­te con­sidera­ble expan­si­on of the ser­vice sec­tor in late capi­ta­lism, one can­not speak of the exis­tence of a ser­vice socie­ty.27

3.3 The ups­wing in world trade

After World War II, the­re was also a signi­fi­cant expan­si­on of world trade. It grew more than ever befo­re in the histo­ry of capi­ta­lism. This is shown in the fol­lo­wing table:

Table 4.3.1. growth of world trade28

World trade was secu­red by the Bret­ton Woods world mone­ta­ry sys­tem adopted in 1944. It was based on the fol­lo­wing fundamentals:

  • The dol­lar was exch­an­geable for gold at any time accor­ding to a fixed exch­an­ge rate (one troy oun­ce of gold =$35). This was gua­ran­teed by the Fede­ral Reserve.

  • The exch­an­ge rates of cur­ren­ci­es fluc­tua­ted litt­le within a small pre­de­ter­mi­ned range.

  • From 1958, the cur­ren­ci­es of the most important Euro­pean indus­tria­li­zed count­ries were free­ly con­ver­ti­ble, and from 1964, the Japa­ne­se yen.

The GATT (Gene­ral Agree­ment on Tariffs and Trade), which was laun­ched in 1947, sub­stan­ti­al­ly redu­ced tariffs on trade in goods in seve­ral rounds of nego­tia­ti­ons.29

In this sys­tem, the dol­lar func­tion­ed as both U.S. natio­nal money and world money. It was able to per­form its func­tion as world money becau­se the U.S. balan­ce of pay­ments was con­stant­ly nega­ti­ve after World War II. The dol­lars expor­ted were pri­ma­ri­ly capi­tal inves­ted out­side the U.S. in the form of direct invest­ment or port­fo­lio invest­ment. Ano­ther source was deve­lo­p­ment aid and mili­ta­ry assis­tance.30

The vast reser­ves of U.S. pro­duc­tion and pro­duc­ti­vi­ty made the accu­mu­la­ti­on of dol­lar claims in the hands of for­eign govern­ments and capi­ta­lists in the post­war peri­od not only unpro­ble­ma­tic but down­right desi­ra­ble. The Mar­shall Plan and other reli­ef efforts were able to inject a gre­at deal of addi­tio­nal purcha­sing power into world trade, lea­ding to a meaningful expan­si­on of com­mer­ce and indus­try.31

In the first deca­des of late capi­ta­lism, socie­tal needs for long-term con­su­mer goods such as auto­mo­bi­les and house­hold appli­ances were not yet ful­ly met, even in indus­tria­li­zed count­ries. Dis­tur­ban­ces in the demand, which was in its­elf lar­ge, could ari­se pri­ma­ri­ly from exter­nal fac­tors such as eco­no­mic cri­ses and the asso­cia­ted unem­ploy­ment. Cre­dit-finan­ced, Keyne­si­an-inspi­red spen­ding pro­grams pre­ven­ted the out­break of major eco­no­mic cri­ses and miti­ga­ted eco­no­mic down­turns for seve­ral deca­des.32 The­se natio­nal spen­ding pro­grams could also be effec­ti­ve becau­se the exter­nal inter­de­pen­dence of natio­nal eco­no­mies was still rela­tively low and fixed exch­an­ge rates and capi­tal con­trols exis­ted in most indus­tria­li­zed count­ries except the United Sta­tes.33

The finan­cial sec­tor was sub­ject to strict con­trols and rest­ric­tions under late capi­ta­lism, inclu­ding man­da­to­ry depo­sit insu­rance, sepa­ra­ti­on of com­mer­cial and invest­ment banks (in the U.S.), inte­rest rate rest­ric­tions, and quan­ti­ty rest­ric­tions on cre­dit con­trol­led by the dis­count rate. This was inten­ded to pre­vent ano­ther Gre­at Depres­si­on like the one of 1929.34

3.4 Begin­ning Indus­tria­liza­ti­on of Deve­lo­ping Countries

The era of late capi­ta­lism saw the first par­ti­al indus­tria­liza­ti­on of Third World count­ries. The stra­tegy of import-sub­sti­tu­ti­on indus­tria­liza­ti­on (ISI) envi­sa­ged the deve­lo­p­ment of inde­pen­dent indus­tries in order to beco­me less depen­dent on the export of raw materials.

Howe­ver, this stra­tegy was not par­ti­cu­lar­ly suc­cessful in Latin Ame­ri­ca, Afri­ca and most Asi­an count­ries. This was becau­se extre­me­ly une­qual land owner­ship limi­t­ed the inter­nal mar­ket for indus­tri­al pro­ducts. In most cases, howe­ver, the U.S. and the World Bank pre­ven­ted any fun­da­men­tal land reform and pro­mo­ted only pro­duc­ti­vi­ty increa­ses within the frame­work of lar­ge-sca­le farms (»Green Revo­lu­ti­on«). Many far­mers were no lon­ger nee­ded in agri­cul­tu­re and were forced off their land. They moved to the lar­ge cities, but wit­hout being able to find work in the for­mal sec­tor and lived in slums.35

Also, the num­ber of indus­tri­al workers hard­ly increased becau­se the new manu­fac­tu­ring indus­tries were now com­pa­ra­tively more pro­duc­ti­ve than the com­mo­di­ty-pro­du­cing fac­to­ries with pri­mi­ti­ve indus­tri­al, manu­fac­to­ry methods of the pre­vious era. The signi­fi­cant indus­tri­al reser­ve army pre­ven­ted an increase in indus­tri­al labor wages.

For the­se reasons, a self-sus­tai­ning indus­tria­liza­ti­on pro­cess did not occur in the­se regi­ons. Lar­ge-sca­le accu­mu­la­ti­on of indus­tri­al capi­tal did for the first time take place. Howe­ver, it eit­her lag­ged far behind the labor pro­duc­ti­vi­ty of the indus­try of the metro­po­li­ses, making exports on the world mar­ket impos­si­ble, or the impor­ted modern machi­nes could not be uti­li­zed to capa­ci­ty due to the still nar­row inter­nal mar­ket and ope­ra­ted at a loss. The­r­e­fo­re, the­se count­ries still reli­ed on the export of raw mate­ri­als to finan­ce the import of machi­nery, equip­ment and vehic­les. Howe­ver, world mar­ket pri­ces for the­se raw mate­ri­als sta­gna­ted or rose more slow­ly than tho­se for manu­fac­tu­red goods, as the­se count­ries often no lon­ger held the mono­po­ly posi­ti­on they once did. In addi­ti­on, the pri­ces of com­mo­di­ties pro­du­ced by manu­fac­tures or ear­ly indus­try in the semi-colo­nies had a ten­den­cy to fall to the pro­duc­tion pri­ce of com­mo­di­ties pro­du­ced with the most modern tech­no­lo­gy in the metro­po­li­ses. At the same time, the metro­po­li­ses acted like a mono­po­li­stic sel­ler of equip­ment on the world mar­ket. This cau­sed a con­stant dete­rio­ra­ti­on of the terms of trade to the dis­ad­van­ta­ge of the deve­lo­ping count­ries. The con­sidera­ble out­flow of capi­tal through pro­fit trans­fers and debt ser­vicing also aggrava­ted the situa­ti­on.36

Only a few capi­ta­list-ori­en­ted deve­lo­ping count­ries, such as South Korea and Tai­wan, mana­ged to suc­cessful­ly indus­tria­li­ze during this peri­od. In each case, the pre­re­qui­si­tes were far-rea­ching agra­ri­an reforms that led to a rela­tively homo­ge­neous dis­tri­bu­ti­on of inco­me in the coun­try­si­de and an incre­asing stan­dard of living for the peas­an­try, thus enab­ling the crea­ti­on of an inter­nal mar­ket. On this basis, it was pos­si­ble to build an indus­try for the dome­stic mar­ket with high tariff bar­riers (import sub­sti­tu­ti­on). This deve­lo­p­ment was finan­ced less by exports of raw mate­ri­als than by exports of labor-inten­si­ve indus­tri­al goods, e.g., tex­ti­les, which were com­pe­ti­ti­ve on the world mar­ket becau­se of the initi­al­ly extre­me­ly cheap labor.37

Glo­bal over­ca­pa­ci­ty also con­tin­ued to increase in the 1970s becau­se com­pa­nies from deve­lo­ping count­ries such as South Korea were now ente­ring the world mar­ket and gai­ning access to what was initi­al­ly still a limi­t­ed num­ber of manu­fac­tu­ring lines. They bene­fi­ted from their low wages com­bi­ned with advan­ced pro­duc­tion faci­li­ties.38

Spe­cial eco­no­mic zones were first estab­lished in many Third World count­ries, such as Mexi­co, Cen­tral Ame­ri­ca, the Phil­ip­pi­nes, Malay­sia, and South Korea, whe­re labor-inten­si­ve pro­ducts were manu­fac­tu­red for export to indus­tria­li­zed count­ries. The most important loca­tio­nal advan­ta­ge was the extre­me­ly cheap, often fema­le labor force. Trans­na­tio­nal cor­po­ra­ti­ons in par­ti­cu­lar could now take advan­ta­ge of the com­pa­ra­tively low wages and taxes in the­se count­ries. For the first time, a par­ti­al world mar­ket for labor and pro­duc­tion loca­ti­ons emer­ged. In some indus­tries, such as tex­ti­les, opti­cal devices, elec­tro­nic pro­ducts and steel, mas­si­ve relo­ca­ti­on pro­ces­ses were alre­a­dy taking place in the 1970s. This increased the cost pres­su­re on indus­try in the high­ly deve­lo­ped capi­ta­list count­ries, lea­ding to ratio­na­liza­ti­on invest­ments and con­cen­tra­ti­on on more high-value, know­ledge-inten­si­ve pro­ducts.39

3.5 A New Form of Imperialism

The form of impe­ria­lism after 1945 was fun­da­men­tal­ly dif­fe­rent from that of the pre­war peri­od. As a result of the Allied vic­to­ry in World War II, the United Sta­tes and the USSR beca­me super­powers, while all other gre­at powers, Ger­ma­ny, Japan, Gre­at Bri­tain, and France, were eit­her mili­ta­ri­ly defea­ted or sub­stan­ti­al­ly wea­k­en­ed in the cour­se of the war.

A super­power is defi­ned as a sta­te that can and does influence glo­bal deve­lo­p­ments due to its supe­ri­or capa­bi­li­ties and poten­ti­al. Super­powers are capa­ble of glo­bal mili­ta­ry power pro­jec­tion, which means, among other things, the pos­ses­si­on of stra­te­gic nuclear wea­pons. They are also mari­ti­me powers that exer­cise glo­bal naval supre­ma­cy with num­e­rous – nuclear-powered – air­craft car­ri­ers and sub­ma­ri­nes, or at least aspi­re to do so. Fur­ther oppor­tu­ni­ties for influence ari­se from the extra­or­di­na­ri­ly lar­ge eco­no­mic, indus­tri­al, tech­no­lo­gi­cal, finan­cial and cul­tu­ral poten­ti­al of the­se sta­tes. Super­powers usual­ly have a sta­te phi­lo­so­phy or ideo­lo­gy with which they jus­ti­fy their influence. In the case of the U.S., this was based on their self-iden­ti­fi­ca­ti­on as the Light­house of Liber­ty, City on the Hill, or New Jeru­sa­lem. Their lea­ders belie­ve that they are per­so­nal­ly com­mis­sio­ned by God to bring free­dom to the who­le world. The Soviet Uni­on, on the other hand, deri­ved from the Octo­ber Revo­lu­ti­on, the world’s first socia­list revo­lu­ti­on, the cla­im to march at the fore­front of human progress.

In 1945, the United Sta­tes was by far the domi­nant power. It had been almost com­ple­te­ly spared the rava­ges of war and had a glo­bal­ly supe­ri­or mili­ta­ry appa­ra­tus, con­sidera­ble advan­ta­ges in tech­no­lo­gy and pro­duc­tion, and a gigan­tic dome­stic market.

On the other hand, even at the height of its power, it was not pos­si­ble for the U.S. to sim­ply take over its rivals‹ colo­nies becau­se of the strength of the coun­ter­vai­ling power, the USSR, the labor move­ment, and the natio­nal libe­ra­ti­on move­ments, and becau­se of hosti­le public opi­ni­on. Ins­tead, the U.S. exer­cis­ed indi­rect rule glo­bal­ly, descri­bed by the catch­phra­se coin­ed by Hen­ry Luce, »Ame­ri­can Cen­tu­ry.« The colo­ni­al empires of the gre­at Euro­pean powers were dis­sol­ved, not least at the ins­ti­ga­ti­on of the USA, and racism was con­dem­ned by the UN.

The U.S. beca­me the pro­tec­ti­ve power of the pro­per­tied clas­ses of the enti­re world, to whom it offe­red eco­no­mic and mili­ta­ry pro­tec­tion against any fun­da­men­tal chan­ge in pro­per­ty rela­ti­ons and who, in return, pur­sued pro-Ame­ri­can poli­ci­es. U.S. govern­ments sought an inter­na­tio­nal order based on free trade and free accu­mu­la­ti­on of capi­tal. In this sen­se, the U.S. had to beco­me an »ide­al total impe­ria­list« (Robert Kurz), i.e., to act in the inte­rests of world capi­tal bey­ond a mere natio­nal expan­sio­nism.40

It was not pos­si­ble to fight the second super­power Soviet Uni­on in an open war becau­se of the nuclear balan­ce of ter­ror. Ins­tead, the United Sta­tes suc­cee­ded in wrest­ling down the Soviet Uni­on in the so-cal­led Cold War. It was desi­gned as a long-term and com­pre­hen­si­ve stra­te­gic pro­ject on a glo­bal sca­le.41 An important con­stant of this poli­cy was the repres­si­on of all socia­list efforts that envi­sa­ged a redis­tri­bu­ti­on of social wealth, espe­ci­al­ly in the Third World.42 The U.S. stra­tegy con­sis­ted of the fol­lo­wing components:

  • The U.S. used its supe­ri­or mili­ta­ry machi­ne to pro­tect satel­li­te sta­tes around the world against inter­nal and exter­nal thre­ats, for exam­p­le, in the Kore­an and Viet­nam Wars.

  • The U.S. main­tai­ned more than 1,000 mili­ta­ry bases around the world.

  • The U.S. spear­hea­ded coll­ec­ti­ve secu­ri­ty alli­ances such as NATO in Euro­pe, SEA­TO in Sou­the­ast Asia, the ANZUS Pact (now AUCUS) in the Paci­fic to limit the pos­si­bi­li­ty of inter­nal capi­ta­list wars and push back the influence of socia­lism. They also exer­cis­ed decisi­ve influence in Latin Ame­ri­ca through the OAS and main­tai­ned good diplo­ma­tic rela­ti­ons with Isra­el, Iran (until 1979), and the apart­heid regime in South Africa.

  • They con­duc­ted num­e­rous intel­li­gence ope­ra­ti­ons and orga­ni­zed mili­ta­ry coups to over­throw dis­agreeable govern­ments, inclu­ding in Iran, Gua­te­ma­la, the DR Con­go, Bra­zil, Indo­ne­sia, Argen­ti­na, Para­gu­ay, Uru­gu­ay, Boli­via, Peru, the Domi­ni­can Repu­blic, Chi­le, Ita­ly, Tur­key, and Greece. It did not mat­ter whe­ther the govern­ments in ques­ti­on were demo­cra­ti­cal­ly elec­ted or not.

  • The U.S. sup­port­ed coun­ter­re­vo­lu­tio­na­ry mer­cena­ry orga­niza­ti­ons, such as in Cuba, Nica­ra­gua, Ango­la, Mozam­bi­que, Afgha­ni­stan, Ethio­pia, Cam­bo­dia and Laos, in order to pre­vent the con­s­truc­tion of socia­lism in the new workers sta­tes and to dis­credit it.

  • The U.S. sup­port­ed fri­end­ly govern­ments »threa­ten­ed« by libe­ra­ti­on move­ments through mas­si­ve arms ship­ments, as in El Sal­va­dor, Gua­te­ma­la, Hon­du­ras, apart­heid South Afri­ca, the Phil­ip­pi­nes, and South Vietnam.

  • In key are­nas such as Euro­pe and the Far East (Japan, Tai­wan, South Korea), they sup­port­ed the deve­lo­p­ment of strong eco­no­mies based on capi­ta­list prin­ci­ples. To this end, they pro­vi­ded signi­fi­cant eco­no­mic aid and ope­ned their dome­stic mar­ket to pro­ducts from the­se count­ries.43

In the late 1950s, the U.S. fai­led in its attempt at a fron­tal assault on the socia­list sta­tes just shy of the thres­hold of open war (»roll­back«). Examp­les include the U.S.-fueled coun­ter­re­vo­lu­tio­na­ry events in East Ger­ma­ny in 1953 and Hun­ga­ry in 1956, which did not suc­ceed due to the inter­ven­ti­on of the Soviet Army. Now the U.S. reli­ed on an indi­rect stra­tegy to defeat socia­lism. The West’s appa­rent wil­ling­ness to com­pro­mi­se enab­led them to install agen­ci­es of influence in socia­list count­ries, sof­tening their socie­ties from within. This ran­ged from see­mingly spon­ta­neous, but in rea­li­ty meti­cu­lous­ly plan­ned, talks with sel­ec­ted citi­zens of the­se count­ries at embas­sy recep­ti­ons, to the ope­ra­ti­on of see­mingly pri­va­te foun­da­ti­ons such as tho­se of Geor­ge Sor­os, to radio and tele­vi­si­on pro­pa­gan­da, and to the publi­ca­ti­on of jour­nals and the estab­lish­ment of dis­cus­sion groups of the­se jour­nals.44

U.S. glo­bal hegem­o­ny was also pro­mo­ted through its cul­tu­ral pro­ducts, espe­ci­al­ly Hol­ly­wood films, tele­vi­si­on series, popu­lar music, and even forms of coun­ter­cul­tu­re.45 The­se works always con­vey­ed a pro-capi­ta­list ideo­lo­gy. Through intel­li­gence ope­ra­ti­ons, they pushed back Mar­xism in the cul­tu­ral field. They secret­ly pro­mo­ted abs­tract pain­ting and post­s­truc­tu­ra­list theo­ries that oppo­sed Mar­xism and radi­cal femi­nism head-on under the slo­gan of decon­s­truc­ting grand narratives.

The pre­vious major capi­ta­list powers, such as Bri­tain, France, Ger­ma­ny, and Japan, still pur­sued inde­pen­dent trade- , for­eign- , and to some ext­ent, mili­ta­ry- poli­ci­es, albeit within the frame­work of com­mon alli­ances. Sin­ce capi­tal con­trols still exis­ted in Euro­pe and Japan, the indi­vi­du­al sta­tes still had gre­at lee­way in mone­ta­ry and cur­ren­cy poli­cy. At times, clas­hes of inte­rests bro­ke out bet­ween the lar­ge capi­ta­list sta­tes. Howe­ver, the­se no lon­ger escala­ted into major wars, as hap­pen­ed seve­ral times in the peri­od from 1895 to 1945, but could be dealt with and sett­led within the frame­work of inter­na­tio­nal orga­niza­ti­ons such as the UN, EU, G7, IMF, World Bank, GATT and WTO.

The fol­lo­wing fac­tors were decisi­ve for this:

  • Sur­plus pro­fits were main­ly gene­ra­ted by tech­no­lo­gi­cal rents or due to pro­duc­ti­vi­ty gaps bet­ween indi­vi­du­al indus­tries or firms (see abo­ve). The importance of invest­ments in under­de­ve­lo­ped count­ries declined.

  • In prin­ci­ple, the capi­tals of all deve­lo­ped capi­ta­list count­ries could invest in all other indus­tria­li­zed count­ries and in all pro-Wes­tern deve­lo­ping count­ries. Thus, unli­ke in the age of clas­si­cal impe­ria­lism, the­se count­ries were no lon­ger sea­led off by extre­me­ly high tariff walls.

  • The­re was incre­asing capi­tal inter­de­pen­dence among the advan­ced capi­ta­list count­ries. Direct invest­ments by U.S. cor­po­ra­ti­ons in Euro­pe and by Euro­pean cor­po­ra­ti­ons in the U.S. cau­sed the Euro­pean capi­ta­list clas­ses to »dis­ar­ti­cu­la­te,« i.e., to lose their natio­nal cohe­rence. On the one hand, the­re were signi­fi­cant bases of U.S. capi­tal inte­rests in each Euro­pean coun­try; on the other hand, Euro­pean capi­tal owners reli­ed hea­vi­ly on the lar­ge U.S. dome­stic mar­ket and loo­ked pri­ma­ri­ly to the United Sta­tes, rather than their Euro­pean home base, for help when their Third World invest­ments were threa­ten­ed by unrest or revo­lu­ti­on.46

Mili­ta­ry fac­tors also mili­ta­ted against new intra-impe­ria­list wars:

  • The over­whel­ming mili­ta­ry supe­rio­ri­ty of the United Sta­tes made war against it vir­tual­ly impossible.

  • The nuclear »balan­ce of ter­ror« made not only a war bet­ween the two super­powers, the USA and the USSR, de fac­to impos­si­ble, but also wars bet­ween impe­ria­list countries.

  • The USSR in par­ti­cu­lar would have pro­fi­ted from such wars as a com­mon oppo­nent of world capi­tal.47

Thus, the actu­al con­stel­la­ti­on of impe­ria­lism after 1945 does not cor­re­spond to any of the forms of super-impe­ria­lism, ultra-impe­ria­lism, or inter-impe­ria­list com­pe­ti­ti­on bet­ween the tri­ad powers USA, EU and Japan dis­cus­sed by socia­lists.48 It still most clo­se­ly resem­bles the con­cept of ultra-impe­ria­lism, but not in the sen­se of a cozy joint explo­ita­ti­on of the world by the gre­at powers, as pos­tu­la­ted by Kaut­sky, but rather a more hier­ar­chi­cal­ly struc­tu­red world emer­ged as a result of a fur­ther pro­cess of sel­ec­tion through two world wars, whe­re six gre­at powers were repla­ced by two superpowers.

The Soviet Uni­on was able to defeat the fascist mili­ta­ry machi­ne only becau­se of its rapid plan­ned indus­tria­liza­ti­on, which star­ted in 1928 after unneces­sa­ry delays. While the U.S. deve­lo­ped a coher­ent stra­tegy for world coun­ter­re­vo­lu­ti­on begin­ning in 1946 and con­sis­t­ent­ly acted on it until 1989, the Soviet Uni­on had no com­pa­ra­ble coher­ent stra­tegy for con­ti­nuing world revo­lu­ti­on. Sta­lin aban­do­ned this goal by 1936 at the latest, cal­ling the noti­on of world revo­lu­ti­on a tra­gi­co­mic misun­derstan­ding in an inter­view with jour­na­list Roy Howard (The Times). It is only logi­cal, then, that he also dis­sol­ved the Com­mu­nist Inter­na­tio­nal in 1943.49

Stalin’s pur­po­se in taking this step was to appease the Wes­tern powers and win them over to long-term trus­ting coope­ra­ti­on after the war. But impe­ria­lism not only feared the spread of world revo­lu­ti­on. Even the exis­tence of one or more workers‹ sta­tes is unac­cep­ta­ble to it in the long run.50

Ori­gi­nal­ly, Sta­lin did not intend to abo­lish capi­ta­lism in the count­ries of Eas­tern Euro­pe libe­ra­ted from Ger­man fascism by the Red Army. Accor­ding to his con­cep­ti­on, the good rela­ti­ons with the Wes­tern powers were to be con­tin­ued in the post­war peri­od. The Soviet Uni­on was to inte­gra­te into the capi­ta­list world eco­no­my. Howe­ver, as ear­ly as 1946, the U.S. attempt­ed to dri­ve the Soviet Army out of its posi­ti­ons in Eas­tern Euro­pe by means of pro-capi­ta­list forces. Under the­se cir­cum­s­tances, Sta­lin ulti­m­ate­ly had no choice but to break the power of the local capi­ta­lists by expro­pria­ting them.51 All Eas­tern Euro­pean count­ries went over to buil­ding socia­lism and foun­ded the Coun­cil for Mutu­al Eco­no­mic Assis­tance (CMEA) in 1949. It was not until 1955, in respon­se to the crea­ti­on of NATO and the admis­si­on of the FRG into it, that the Soviet Uni­on and the Eas­tern Euro­pean People’s Demo­cra­ci­es for­med the War­saw Trea­ty Orga­niza­ti­on (WTO).

Stalin’s suc­ces­sor, Khrush­chev, con­tin­ued his for­eign poli­cy from 1953. Despi­te U.S.-fueled anti-com­mu­nist hys­te­ria and bru­tal roll­back attempts, he sought to achie­ve a glo­bal sett­le­ment with the United Sta­tes in 1959, ris­king the unity of the socia­list camp. For he now open­ly backed a poli­cy of peaceful coexis­tence. Mao did not go along with this pivot and cri­ti­ci­zed Khrush­chev and the CPSU. In respon­se, the Soviet Uni­on with­drew its experts from Chi­na on July 16, 1960, and stop­ped all aid deli­veries. In doing so, it vio­la­ted num­e­rous bila­te­ral trea­ties with the PRC.

On the other hand, the Soviet Uni­on was also able to achie­ve gre­at suc­ces­ses, espe­ci­al­ly in the 1950s and 1960s. The pre-war level of indus­tri­al pro­duc­tion was alre­a­dy excee­ded during World War II, rea­ching 172% of the 1940 level in 1950. Under Khrush­chev, the strong social ine­qua­li­ty of the Sta­lin years was sub­stan­ti­al­ly redu­ced. The population’s stan­dard of living approa­ched that of the West in leaps and bounds. In 1978, for every 100 fami­lies in the Soviet Uni­on the­re were:

  • 84 radi­os

  • 83 tele­vi­si­ons

  • 78 ref­ri­ge­ra­tors

  • 70 washing machines

  • 64 sewing machines

  • 24 vacu­um cleaners

  • 499 wat­ches

Con­sump­ti­on of meat, milk, and eggs approa­ched sci­en­ti­fi­cal­ly based nut­ri­tio­nal norms. As a con­se­quence of the war, housing shorta­ges remain­ed a major social pro­blem. Howe­ver, housing con­s­truc­tion was great­ly acce­le­ra­ted and expan­ded under Khrushchev.

The eman­ci­pa­ti­on of women was pro­mo­ted through the expan­si­on of ser­vice and sup­p­ly cen­ters, can­teens and pre­school faci­li­ties, as well as the impro­ved sup­p­ly of house­hold appli­ances and con­ve­ni­ence foods. The­re were also edu­ca­tio­nal cam­paigns encou­ra­ging men and women to share the remai­ning house­work.52

The cla­im to be at the fore­front of human pro­gress see­med to be con­firm­ed by the Soviet Union’s suc­ces­ses in space tra­vel: in 1957 it laun­ched the first satel­li­te into space, Sput­nik, and in 1961 Yuri Gaga­rin beca­me the first man in space. In 1963, Valen­ti­na Teresh­ko­va beca­me the first woman to fly into space. The Tu-144, the world’s first super­so­nic pas­sen­ger air­craft, took off on its mai­den flight on Decem­ber 31, 1968, ahead of the Con­cor­de. Soviet engi­neers also deve­lo­ped hydro­foils, hover­crafts, nuclear-powered sub­ma­ri­nes, nuclear ice­brea­k­ers, and nuclear freigh­ters. The Soviet Uni­on quick­ly began lar­ge-sca­le nuclear power gene­ra­ti­on with the RBMK (High-Power Chan­nel-Type Reac­tor), WWER (Water-Water Ener­ge­tic Reac­tor), and Fast Bree­der reac­tor lines. It see­med in the 1960s that the Soviet Uni­on could sur­pass the West in fac­to­ry auto­ma­ti­on as well. Orders of magni­tu­de more engi­neers and doc­tors were trai­ned in the Soviet Uni­on than in the West.

As ear­ly as 1949, the Soviet Uni­on was able to deto­na­te its first ato­mic bomb and was thus no lon­ger sub­ject to nuclear black­mail by the USA. During the 1970s, it achie­ved pari­ty with the U.S. in nuclear weapons.

In the 1950s and 1960s, many oppor­tu­ni­ties for advan­cing the world revo­lu­ti­on could not be exploi­ted becau­se of the Soviet Union’s hesi­tant atti­tu­de. The vic­to­ry of the Chi­ne­se Revo­lu­ti­on in 1949 did give a powerful boost to the colo­ni­al revo­lu­ti­on. But the new­ly emer­ged sta­tes were full of social con­tra­dic­tions. Thus, they did not beco­me a buf­fer zone bet­ween the »Free World« and socia­lism, as the lea­ders of the Soviet Uni­on, as well as bour­geois expon­ents of the Third World like Neh­ru, Sukar­no and Ken­yat­ta, expec­ted, but an area of fier­ce social and socie­tal pola­riza­ti­on, whe­re clas­hes and civil wars were con­stant­ly incre­asing. On the agen­da was not a »new demo­cra­cy« of any kind, but a strugg­le bet­ween bour­geois sta­tes and impo­ve­ris­hed mas­ses stri­ving to estab­lish pro­le­ta­ri­an sta­tes.53

Nevert­hel­ess, the Soviet Uni­on impo­sed the poli­cy of peaceful coexis­tence on all Com­mu­nist Par­ties. In situa­tions whe­re the mas­ses moved to the left, but the bour­geoi­sie sought pro­tec­tion against the­se mas­ses from the U.S. in respon­se, this poli­cy was bound to fail cata­stro­phi­cal­ly. Indo­ne­sia is a case in point. Pre­si­dent Sukar­no posi­tio­ned the coun­try at the fore­front of the Non-Ali­gned Move­ment in 1955. He also crea­ted a »Third Uni­ver­sal Theo­ry« bet­ween capi­ta­lism and socia­lism. In rea­li­ty, howe­ver, Indo­ne­sia was a poor capi­ta­list deve­lo­ping coun­try – and becau­se of his fail­ure to inter­ve­ne in the capi­ta­list mar­ket, Sukar­no was also unable to chan­ge any­thing about it. The Com­mu­nist Par­ty of Indo­ne­sia, the second lar­gest Com­mu­nist Par­ty in the world, had been sworn into coope­ra­ti­on with Sukar­no by Moscow and Bei­jing (!). Nevert­hel­ess, the dome­stic bour­geoi­sie saw in this par­ty a mor­tal dan­ger to its posi­ti­ons of power. In a mili­ta­ry coup orga­ni­zed by the United Sta­tes, Sukar­no was ous­ted in 1965 and mil­li­ons of com­mu­nists were mas­sacred by Isla­mist forces. Coup gene­ral Suhar­to ruled the coun­try dic­ta­to­ri­al­ly until 1998 and led it into the ranks of the West. Indo­ne­sia has not reco­ver­ed from this blood­let­ting to this day. Popu­lar move­ments have prac­ti­cal­ly cea­sed to exist the­re sin­ce 1965.

By con­trast, the Cuban Revo­lu­ti­on of 1959 was more suc­cessful. Howe­ver, Fidel Cas­tro and his com­ra­des-in-arms from the M‑26 – 7 move­ment were not initi­al­ly socia­lists, but left-wing bour­geois revo­lu­tio­na­ries who ori­gi­nal­ly only wan­ted to eli­mi­na­te the dic­ta­tor­ship of Ful­gen­cio Batis­ta and res­to­re bour­geois demo­cra­cy. Howe­ver, this pro­ved impos­si­ble due to the power of the United Sta­tes, and after a few years the Cuban govern­ment had to expro­pria­te the local and U.S. capi­ta­lists. Thus the Cuban Revo­lu­ti­on beca­me a socia­list one. This was a reaf­fir­ma­ti­on of Trotsky’s theo­ry of Per­ma­nent Revolution.

The Cuban Revo­lu­ti­on led to an upsur­ge of class strug­gles in many Third World count­ries. In 1964, Leo­nid Brezhnev was elec­ted gene­ral secre­ta­ry of the CPSU. He main­tai­ned the poli­cy of peaceful coexis­tence, but under his govern­ment natio­nal libe­ra­ti­on move­ments in Third World count­ries recei­ved grea­ter sup­port, inclu­ding arms ship­ments. For exam­p­le, the FNL in Viet­nam, the MPLA in Ango­la, the FRELI­MO in Mozam­bi­que, the PAIGC in Gui­nea-Bis­sau and the Cape Ver­de Islands. The Soviet Uni­on sup­port­ed new workers’ sta­tes such as Viet­nam, Afgha­ni­stan, Iraq, Syria, Libya, Alge­ria, Mali, Upper Vol­ta, the People’s Repu­blic of Con­go, Mada­gas­car, Ango­la, Mozam­bi­que, Gui­nea-Bis­sau, Cape Ver­de, Sudan, and Ethio­pia through eco­no­mic and mili­ta­ry aid. As late as 1986, near­ly 1.6 bil­li­on peo­p­le, or almost 40 per­cent of the world popu­la­ti­on of 4 bil­li­on at the time, lived in count­ries bey­ond the reach of capi­tal.54

The Soviet Uni­on faced very serious chal­lenges in the 1970s and 1980s:

  • The stan­dard of living of the popu­la­ti­on had to be rai­sed fur­ther so that it would even­tual­ly catch up with and over­ta­ke that of the West.

  • The new workers‹ sta­tes in the Third World had to be sup­port­ed to such an ext­ent that their plan­ned indus­tria­liza­ti­on would lead to a rapid and noti­ceable impro­ve­ment in the people’s stan­dard of living. This would make it pos­si­ble to push back pet­ty-bour­geois forces within the­se count­ries and win fur­ther under­de­ve­lo­ped count­ries to the socia­list camp.

  • The Soviet Uni­on had to keep up in the arms race. In the 1980s, this meant abo­ve all buil­ding its own laser-based mis­sile defen­se in space, expan­ding its sub­ma­ri­ne fleet by buil­ding the fourth gene­ra­ti­on of sub­ma­ri­nes, sub­ma­ri­ne bases on the Atlan­tic, for exam­p­le in Ango­la, and crea­ting its own air­craft car­ri­er units. Only in this way could U.S. naval supre­ma­cy be broken.

  • In order to demons­tra­te that the socia­list camp was inde­ed at the fore­front of human pro­gress, an inten­si­fi­ca­ti­on of the space pro­gram, Soviet moon and Mars landings (which did not mate­ria­li­ze after 1969) and a moon sta­ti­on would have been just as neces­sa­ry as the gene­ra­liza­ti­on of civi­li­an super­so­nic flight.

This would have requi­red a labor pro­duc­ti­vi­ty far abo­ve that of capi­ta­lism. In fact, the Soviet Union’s labor pro­duc­ti­vi­ty was at best half that of the United Sta­tes.55 The main cau­se was the ori­en­ta­ti­on of each socia­list coun­try toward the inde­pen­dent con­s­truc­tion of socia­lism. Coope­ra­ti­on bet­ween the­se count­ries was seen as a useful com­ple­ment, but it was not con­side­red abso­lut­e­ly neces­sa­ry. This stra­tegy goes back to Stalin’s theo­ry of socia­lism in one coun­try, which he estab­lished in 1924 imme­dia­te­ly after Lenin’s death.

The Sino-Soviet rift in par­ti­cu­lar was to have fatal con­se­quen­ces: During the first Five-Year Plan 1953 – 57, Chi­ne­se indus­tri­al pro­duc­tion increased by 141% and the yield of agri­cul­tu­ral food pro­ducts by 20%. By 1967, with the help of the Soviet Uni­on and fur­ther rapid indus­tri­al growth, Chi­na was to beco­me a modern indus­tri­al agri­cul­tu­ral coun­try with a stan­dard of living com­pa­ra­ble to that of Bul­ga­ria. After ano­ther 10 to 20 years, a through-indus­tria­liza­ti­on of Chi­na would have been pos­si­ble. The Sino-Soviet rup­tu­re in 1960 and Mao’s mad pro­jects of the Gre­at Leap For­ward and the Cul­tu­ral Revo­lu­ti­on pre­ven­ted this deve­lo­p­ment. They cau­sed a deve­lo­p­ment lag in Chi­na of at least 20 years.

Only clo­se coope­ra­ti­on among all workers‹ sta­tes would have made pos­si­ble a sca­le eco­no­my with labor pro­duc­ti­vi­ty com­pa­ra­ble to or hig­her than that of impe­ria­list count­ries. This is espe­ci­al­ly true for cos­t­ly high-tech­no­lo­gy pro­duc­tion such as com­pu­ter chips and other semi­con­duc­tors. A Chi­na alre­a­dy ful­ly indus­tria­li­zed in the 1970s could have both taken over part of the high but neces­sa­ry defen­se expen­dit­ures of the socia­list bloc and made a major con­tri­bu­ti­on to the sup­port of the new workers sta­tes, a much lar­ger one than the Soviet Uni­on and its allies were able to do alone.

As is well known, things tur­ned out dif­fer­ent­ly: the United Sta­tes, under Pre­si­dent Nixon, allied its­elf with the PRC in 1971. Under Pre­si­dent Car­ter and his secu­ri­ty advi­ser, the Rus­si­an-hater Zbi­gniew Brze­ziń­ski, from 1977, hey laun­ched a new round of arms race and sup­port­ed mer­cena­ry orga­niza­ti­ons around the world to rever­se the pro­gress of the world revo­lu­ti­on made in the 1970s. This poli­cy was seam­less­ly con­tin­ued and radi­cal­i­zed by U.S. Pre­si­dent Rea­gan begin­ning in 1981. It pro­ved suc­cessful and led to the West’s vic­to­ry in the Cold War in the epo­chal year of 1989.56

In the area of con­ven­tio­nal arma­ments, NATO slow­ly achie­ved mili­ta­ry supe­rio­ri­ty over Soviet com­bat tech­no­lo­gy in the 1970s and 1980s. GDR mili­ta­ry offi­ci­als esti­ma­ted the com­bat value of an NVA (East Ger­man Army) divi­si­on with an index num­ber of 0.85, a Soviet Army divi­si­on with 1, a Bun­des­wehr (West Ger­man Army) divi­si­on with 1.15, and a U.S. Army divi­si­on with 1.25. This tech­ni­cal infe­rio­ri­ty was to be com­pen­sa­ted by a par­ti­cu­lar­ly high phy­si­cal per­for­mance of the sol­diers. For this reason, pre-mili­ta­ry trai­ning was intro­du­ced in all Eas­tern bloc count­ries in the 1970s.57

In the Afghan war, the radi­cal Isla­mic muja­hideen shot down Soviet Mi-24 attack heli­c­op­ters in rows using U.S. Stin­ger mis­siles. They suc­cee­ded in brea­king Soviet air supe­rio­ri­ty, deci­ding much of the out­co­me of the war.

In addi­ti­on to con­ven­tio­nal com­bat tech­no­lo­gy, the U.S. deve­lo­ped num­e­rous new nuclear wea­pons start­ing in 1976, which shifted the balan­ce of ter­ror signi­fi­cant­ly in favor of imperialism.

For it was during the­se years that the third nuclear wea­pons tech­no­lo­gy revo­lu­ti­on took place:

  • The first era of nuclear wea­pons bet­ween 1945 and 1960 was defi­ned by the inter­con­ti­nen­tal long-ran­ge bom­bers. It was matched by the nuclear stra­tegy of mas­si­ve retaliation.

  • The second era of nuclear wea­pons bet­ween 1960 and 1974 was cha­rac­te­ri­zed by inter­con­ti­nen­tal bal­li­stic mis­siles. The nuclear stra­tegy of fle­xi­ble respon­se cor­re­spon­ded to it.

  • The third era of nuclear wea­pons bet­ween 1974 and 1990 was cha­rac­te­ri­zed by fur­ther rapid pro­gress in wea­pons tech­no­lo­gy: ultra-pre­cise war­heads, mul­ti­ple war­heads, kil­ler satel­li­tes, laser wea­pons, sub­ma­ri­ne-hun­ting tech­no­lo­gies. It was matched by the deca­pi­ta­ti­on strike stra­tegy.58

The U.S.’s new MX inter­con­ti­nen­tal bal­li­stic mis­siles with mul­ti­ple war­heads had a tar­ge­ting accu­ra­cy of less than 30 meters, thanks to the latest com­pu­ter tech­no­lo­gy, accor­ding to data from the 1980s. The Pers­hing II medi­um-ran­ge mis­siles sta­tio­ned in Wes­tern Euro­pe and the sub­ma­ri­ne-laun­ched Trident II mis­siles even had a tar­get accu­ra­cy of 10 meters. This made deca­pi­ta­ti­on strikes pos­si­ble, for exam­p­le, against the Com­mu­nist Par­ty head­quar­ters in Moscow as well as com­mand cen­ters, com­mu­ni­ca­ti­ons and recon­nais­sance faci­li­ties loca­ted the­re – with an extre­me­ly short war­ning time of 6 minu­tes or less. In con­trast, Soviet inter­con­ti­nen­tal bal­li­stic mis­siles had a tar­get accu­ra­cy of only 300 meters and were not sui­ta­ble for pre­cis­i­on strikes.

Even in the event of a deca­pi­ta­ti­on strike, the Soviet Uni­on was still left with sea-based mis­siles for a second strike. Howe­ver, during the 1970s and 1980s, the United Sta­tes made a major effort to detect Soviet sub­ma­ri­nes. This was alre­a­dy done incre­asing­ly well by SOSUS59, a glo­bal hydro­pho­ne net­work on the oce­an flo­or, and in the future was to be done pri­ma­ri­ly by what was known as vor­tex detec­tion. Satel­li­tes were to be able to accu­ra­te­ly detect sub­mer­ged sub­ma­ri­ne signa­tures from orbit by obser­ving wave height, wind speed and direc­tion, and oce­an tem­pe­ra­tu­re, for exam­p­le, swel­ling water. This should also work under clouds. Repor­ted­ly, the U.S. was only a few years away from a breakth­rough in the 1980s. After 1989, howe­ver, this rese­arch was dis­con­tin­ued.60

With the SDI pro­gram (mis­sile defen­se with laser wea­pons in space)

the U.S. wan­ted to shoot down approa­ching Soviet inter­con­ti­nen­tal bal­li­stic mis­siles. Howe­ver, until 1989, U.S. rese­ar­chers could not sol­ve the ques­ti­on of whe­re the enorm­ous amounts of ener­gy nee­ded for this would come from.

The Soviet Uni­on respon­ded to the new pin­point U.S. nuclear wea­pons, which were to be used for deca­pi­ta­ti­on strikes, with the Peri­me­ter sys­tem, known in the West as the Dead Hand. At gre­at mate­ri­al expen­se, under­ground com­mand cen­ters were built near Moscow and at some reser­ve sites, which made it pos­si­ble to launch their own nuclear mis­siles in the event of a deca­pi­ta­ti­on strike, ful­ly auto­ma­ted if neces­sa­ry. When this beca­me known in the West, con­side­ra­ti­ons of a deca­pi­ta­ti­on strike sud­den­ly dis­ap­peared from the colum­ns of for­eign poli­cy jour­nals such as For­eign Affairs.

To coun­ter vor­tex detec­tion, Soviet design bure­aus deve­lo­ped plans for a fourth gene­ra­ti­on of sub­ma­ri­nes. The con­ti­nua­tion of unde­tec­ted deter­rence pat­rols in the world’s oce­ans by mis­sile sub­ma­ri­nes was to be achie­ved by allo­wing the­se boats to dive to depths of 1,500 to 2,000 meters. This would be made pos­si­ble by inter­con­nec­ted sphe­res of tita­ni­um. The speed should be up to 60 knots, rea­li­zed with a water jet pro­pul­si­on wit­hout pro­pel­lers. This would have requi­red very powerful nuclear reac­tors ope­ra­ting in the fast neu­tron spec­trum, for exam­p­le sodium-coo­led fast bree­ders or tho­ri­um high-tem­pe­ra­tu­re reactors.

Howe­ver, the Pro­ject 941 mis­sile sub­ma­ri­nes (known in the West as Typho­on) were alre­a­dy pushing the Soviet Uni­on to the limits of what was eco­no­mic­al­ly fea­si­ble. The envi­sio­ned fourth-gene­ra­ti­on sub­ma­ri­nes would have been orders of magni­tu­de more expen­si­ve. The strugg­ling Soviet eco­no­my would not have been able to build them in the 1980s.

To coun­ter the U.S. mis­sile defen­se pro­gram SDI, the Soviet Uni­on deve­lo­ped its own mis­sile defen­se, Pro­ject Pol­jus (»Pol«). Satel­li­tes with high-ener­gy lasers were to shoot down approa­ching U.S. inter­con­ti­nen­tal bal­li­stic mis­siles. Soviet engi­neers even mana­ged to sol­ve the ener­gy pro­blem. The lasers were to be powered by nuclear reac­tors with a power of 200 to 300 MW, which would be inte­gra­ted into the Pol­jus satel­li­tes. The indi­vi­du­al parts of the reac­tors and lasers would then have been trans­por­ted to a space sta­ti­on by the Soviet space shut­tle Buran and assem­bled the­re. In this way, the Soviet Uni­on wan­ted to res­to­re the stra­te­gic balan­ce. After all, if only one of the super­powers had a mis­sile defen­se, it would be an offen­si­ve wea­pon, sin­ce it allo­wed that power to launch a nuclear attack wit­hout being des­troy­ed its­elf. But if both sides had effec­ti­ve mis­sile defen­ses, this would no lon­ger be pos­si­ble. By the late 1980s, pro­to­ty­pes of Pol­jus61 and the Buran space shut­tle exis­ted. After the break­up of the Soviet Uni­on, the pro­grams were dis­con­tin­ued. Just as it would not have been able to build a fourth gene­ra­ti­on of sub­ma­ri­nes in the 1980s, the Soviet Uni­on would not have been able to afford the huge expen­dit­ures for mis­sile defense.

In addi­ti­on, Soviet living stan­dards sta­gna­ted in the 1970s and even decli­ned slight­ly in some years. Ulti­m­ate­ly, the Soviet eco­no­my was no lon­ger able to absorb all the neces­sa­ry arms expen­dit­ures and at the same time impro­ve living stan­dards. The main cau­ses of this deve­lo­p­ment were, in addi­ti­on to insuf­fi­ci­ent coope­ra­ti­on bet­ween the workers‹ sta­tes, exclu­si­ve­ly exten­si­ve indus­tri­al deve­lo­p­ment until the 1980s, an ina­de­qua­te infra­struc­tu­re and a cha­os of lea­der­ship bet­ween Uni­on, repu­bli­can and local aut­ho­ri­ties, which was fur­ther aggrava­ted by the num­e­rous free-mar­ket reforms under Khrush­chev and Brezhnev.62 A lega­cy of the Sta­lin era was the strong posi­ti­on of the fac­to­ry mana­ger, which, tog­e­ther with the mar­ket reforms, led to fac­to­ry ego­ism and chao­tic eco­no­mic plans.

This nega­ti­ve deve­lo­p­ment acce­le­ra­ted the turn away from Mar­xism among the popu­la­ti­on and par­ty lea­der­ship, which had alre­a­dy dege­ne­ra­ted more and more into an ideo­lo­gy of legi­ti­ma­cy under Sta­lin. As ear­ly as the 1970s, for exam­p­le, a poi­so­no­us Ukrai­ni­an natio­na­lism was spre­a­ding that has deve­lo­ped into the open fascism we see today.

The­r­e­fo­re, the Soviet lea­der­ship under Gor­ba­chev (CPSU Gene­ral Secre­ta­ry from 1985) saw no other way out than to capi­tu­la­te. In par­ti­cu­lar, the SDI pro­gram had left the Soviet Uni­on fatal­ly out­gun­ned. All the more bit­ter­ly, the­se new tech­no­lo­gies were in part bluff. The tar­ge­ting accu­ra­cy of U.S. mis­siles is sta­ted to be much lower today than was clai­med in the 1980s. Neither a space-based mis­sile defen­se sys­tem nor, at least offi­ci­al­ly, a vor­tex detec­tion sys­tem for sub­ma­ri­nes have actual­ly mate­ria­li­zed. The Soviet Uni­on was also nowhe­re near as far behind in the pre­cis­i­on of nuclear wea­pons as was clai­med in the 1980s, and also belie­ved by Soviet scientists.

In the 1970s and 1980s, the West deli­bera­te­ly put the Soviet Uni­on under eco­no­mic stress through its arma­ment pro­jects and indu­ced it to incur huge expen­dit­ures. At the same time, Soviet for­eign exch­an­ge ear­nings col­lap­sed after 1985, as the U.S. cau­sed Sau­di Ara­bia to shar­ply lower the pri­ce of oil for a peri­od of time. The Soviet Union’s main exports had been oil and gas sin­ce the 1970s.

The West had won the Cold War. The most important cau­se of the fail­ure of the first attempt at socia­lism was ulti­m­ate­ly its low labor pro­duc­ti­vi­ty. This con­firms Lenin’s well-known state­ment: »Labor pro­duc­ti­vi­ty is in the last ins­tance the most important, the decisi­ve fac­tor in the vic­to­ry of the new social order.»63

3.6 The gene­ral cri­sis of late capitalism

The suc­cess sto­ry of the West, howe­ver, obscu­res the fact that the late capi­ta­list social order was not free of cri­ses eit­her, and its vic­to­ry in the Cold War was by no means a fore­go­ne con­clu­si­on. For in the 1970s and 1980s, it was not only real socia­lism that fell into cri­sis, but also late capitalism.

A first sign of this cri­sis was that many workers at the height of late capi­ta­list eco­no­mic deve­lo­p­ment rejec­ted this mode of pro­duc­tion and wan­ted to switch to socia­lism. In the second half of the 1960s, full employ­ment was achie­ved in most capi­ta­list count­ries. The power of the working class was at a peak during this period.

In May 1968 in France, stu­dent pro­tests were the spark for a gene­ral strike by the working class. It now serious­ly posed the ques­ti­on of power. Wit­hout the betra­y­al of the PCF, the over­throw of the capi­ta­list explo­ita­ti­ve order in France would pro­ba­b­ly have occurred.

In Ita­ly, the 1970s were mark­ed by the most vio­lent workers‹ pro­tests, strikes, lef­tist ter­ror by the Red Bri­ga­des, and sta­te coun­ter­ter­ro­rism. They are the­r­e­fo­re cal­led the years of lead (»Anni di piom­bo«). The U.S. con­side­red the situa­ti­on in Ita­ly so cri­ti­cal that, tog­e­ther with Pro­pa­gan­da Due, it orga­ni­zed a coup in the mid-1970s (which did not mate­ria­li­ze). Howe­ver, such bloo­dy coups did take place in the NATO count­ries Greece and Turkey.

In the FRG, the con­di­ti­ons were not so far advan­ced. But here, too, the­re were wild­cat strikes in 1973 and 1974 that were suc­cessful and whe­re workers were able to push through sub­stan­ti­al wage increa­ses against the will of the unions.

For the first time ever in histo­ry, after 1968 an enti­re gene­ra­ti­on of stu­dents throug­hout the West tur­ned to the left, pro­test­ing vehe­men­t­ly against the Bil­dungs­not­stand (1960s cri­sis in Ger­man edu­ca­tio­nal sys­tem), aut­ho­ri­ta­ri­an forms of tea­ching and out­da­ted cur­ri­cu­la in uni­ver­si­ties, per­pe­tu­al impe­ria­list wars, bru­tal anti-com­mu­nism, and ende­mic sexu­al and fema­le oppres­si­on. As socio­lo­gist Pierre Bour­dieu dis­co­ver­ed, the rela­ti­ve socioe­co­no­mic decli­ne of aca­de­mics is the back­ground of this deve­lo­p­ment. Whe­re­as a degree used to ensu­re access to the ruling class, in the post­war peri­od it beca­me a mass phe­no­me­non and, in many cases, a pre­re­qui­si­te for pur­suing any pro­fes­si­on at all. Under the­se cir­cum­s­tances, aca­de­mics ten­ded to over­turn the enti­re social field, for exam­p­le through revo­lu­ti­on.64 The ’68 move­ment shook Wes­tern socie­ties to their foun­da­ti­ons. It took more than a deca­de for the ruling class to adjust its mecha­nisms of domi­na­ti­on to this development.

In many Wes­tern count­ries, the sexu­al revo­lu­ti­on of the ear­ly 1970s tho­rough­ly res­haped people’s sexu­al lives in just a few years, enab­ling tho­se who were able to sei­ze the new oppor­tu­ni­ties to live much hap­pier lives. The hip­pies beca­me pio­neers of this sexu­al revo­lu­ti­on.65 The women’s move­ment also took off considerably.

In the 1970s, the fac­tors that had allo­wed two deca­des of unin­ter­rupt­ed growth began to expi­re. The law of the ten­den­ti­al fall of the rate of pro­fit, ulti­m­ate­ly cau­sed by the rise in the orga­nic com­po­si­ti­on of capi­tal, made its­elf incre­asing­ly felt again. The long wave of expan­sio­na­ry growth tur­ned into a long wave of sta­g­nant growth. As a result, the eco­no­my grew much more slow­ly during the 1970s and 1980s than before.

Sur­plus pro­fits from tech­ni­cal rents in the elec­tri­cal and che­mi­cal indus­tries decli­ned. The domi­nant lar­ge cor­po­ra­ti­ons such as IBM were expo­sed to incre­asing com­pe­ti­ti­ve pres­su­re, which signi­fi­cant­ly redu­ced the pri­ces of their pro­ducts and end­an­ge­red their mono­po­ly.66

Toward the end of the 1960s, the­re was con­sidera­ble over­ca­pa­ci­ty in many mar­kets for long-term con­su­mer goods, which led to pri­ce cuts and a reduc­tion in manu­fac­tu­r­ers‹ pro­fit rates.67 Euro­pean and Japa­ne­se manu­fac­tu­r­ers made signi­fi­cant advan­ces in pro­duc­ti­vi­ty. They incre­asing­ly suc­cee­ded in com­pe­ting against U.S. firms in the U.S. mar­ket as well. Con­se­quent­ly, over­ca­pa­ci­ty or unde­r­uti­liza­ti­on of pro­duc­tion capa­ci­ty occur­red first in the U.S. industry.

A signi­fi­cant increase in the rate of sur­plus-value as a reac­tion of capi­tal to the incre­asing dif­fi­cul­ties was initi­al­ly impossible.

In the 1960s, pri­va­te inter­na­tio­nal money and cre­dit mar­kets emer­ged for the first time, becau­se inco­me from pri­va­te U.S. capi­tal invest­ments was often not repa­tria­ted but inves­ted with for­eign – main­ly Bri­tish – banks, which began to orga­ni­ze a trade in them. The so-cal­led euro­dol­lar mar­kets were thus not sub­ject to strict dome­stic U.S. regu­la­to­ry mea­su­res, such as reser­ve requi­re­ments and inte­rest rate rest­ric­tions, which brought high pro­fits to inves­tors and banks.68

The deve­lo­p­ment of the euro-dol­lar mar­kets is reflec­ted in the fol­lo­wing table:

Table 4.6.1. size of Euro­dol­lar mar­kets69

Euro-dol­lar mar­kets made it incre­asing­ly dif­fi­cult to defend fixed exch­an­ge rates against cur­ren­cy spe­cu­la­ti­on. This is becau­se, sin­ce the 1960s, pri­va­te invest­ments accoun­ted for many times the reser­ves held by cen­tral banks. This deve­lo­p­ment also con­tri­bu­ted to the end of the fixed exch­an­ge rate system.

In the years bet­ween 1973 and 1979, the pri­ce of oil rose two and a half times. The­se pri­ce increa­ses had a sho­cking effect on many eco­no­mies and aggrava­ted the eco­no­mic dif­fi­cul­ties of all count­ries that depen­ded on oil imports. OPEC count­ries, on the other hand, initi­al­ly accu­mu­la­ted mas­si­ve balan­ce-of-pay­ments sur­plu­s­es and inves­ted much of the­se sur­plu­s­es in the Euro­dol­lar mar­kets, the volu­me of which con­tin­ued to grow.70

In the 1970s, many govern­ments, espe­ci­al­ly of the deve­lo­ping count­ries, bor­ro­wed from pri­va­te banks. Inte­rest rates were initi­al­ly still rela­tively low becau­se the­re was an over­sup­p­ly of mone­ta­ry capi­tal due to the petro­dol­lars inves­ted in the Euro­dol­lar mar­kets at various banks, which led to low inte­rest rates. Incre­asing­ly, bor­ro­wing by deve­lo­ping count­ries was for the pur­po­se of being able to pay the oil bill, as well as old inte­rest and prin­ci­pal pay­ments. This laid the ground­work for the Third World debt cri­sis in the 1980s, when the Volcker shock cau­sed inte­rest rates to rise world­wi­de.71

Almost all deve­lo­ping count­ries were affec­ted by this debt cri­sis. The loans gran­ted by the IMF for debt res­truc­tu­ring gave it the oppor­tu­ni­ty to inter­ve­ne deep­ly in count­ries’ eco­no­mic poli­ci­es, impo­sing dra­stic bud­get cuts, social cuts, pri­va­tiza­ti­on and libe­ra­liza­ti­on. Two lost deca­des for deve­lo­ping count­ries thus began.

With the col­lap­se of the Bret­ton Woods sys­tem of fixed exch­an­ge rates and the rede­ema­bi­li­ty of the dol­lar in gold in 1973, the need of com­pa­nies to hedge against the now fluc­tua­ting exch­an­ge rates through for­ward tran­sac­tions increased. To this end, many new finan­cial instru­ments were deve­lo­ped, such as hedge funds and deri­va­ti­ves, which were later used pri­ma­ri­ly for spe­cu­la­ti­ve purposes.

In the 1970s, most govern­ments in the indus­tria­li­zed count­ries were still try­ing to sti­mu­la­te eco­no­mic growth through a Keyne­si­an, expan­sio­na­ry mone­ta­ry poli­cy. To do so, they accept­ed sub­stan­ti­al bud­get defi­ci­ts. Howe­ver, such spen­ding pro­grams incre­asing­ly lost their effect, becau­se even in times of eco­no­mic boom the­re was still signi­fi­cant over­ca­pa­ci­ty. As a result, com­pa­nies were neither able nor wil­ling to respond to the poli­cy-indu­ced increa­ses in demand with a cor­re­spon­ding expan­si­on of pro­duc­tion. Accor­din­gly, the gro­wing bud­get defi­ci­ts led not so much to an increase in pro­duc­tion out­put as to an increase in pri­ces. Thus, infla­ti­on occur­red in the face of eco­no­mic sta­gna­ti­on, which was refer­red to as stag­fla­ti­on.72 In addi­ti­on, the Euro­pean eco­no­mic area in par­ti­cu­lar was so inter­de­pen­dent that spen­ding pro­grams in one coun­try often led to an increase in imports rather than an expan­si­on of out­put at home.73

Moreo­ver, by the 1970s, mar­kets for con­su­mer dur­a­bles such as auto­mo­bi­les were essen­ti­al­ly satu­ra­ted in indus­tria­li­zed count­ries. Alt­hough tech­no­lo­gi­cal pro­gress meant that new con­su­mer dur­a­bles such as VCRs, PCs, DVD play­ers, cell pho­nes, smart pho­nes and LCD tele­vi­si­ons were con­stant­ly being deve­lo­ped, none of the­se goods was able to trig­ger the kind of long-las­ting sur­ge in demand that the auto­mo­bi­le had in the post­war peri­od. The popu­la­ti­on thus reacts to an increase in purcha­sing power less with the new acqui­si­ti­on of dura­ble con­su­mer goods pro­du­ced by lar­ge cor­po­ra­ti­ons in fac­to­ries with the hig­hest pro­duc­ti­vi­ty, and more with the demand for ser­vices. The­r­e­fo­re, big busi­ness also had much less inte­rest in Keyne­si­an poli­ci­es, sin­ce it would no lon­ger have bene­fi­ted from the increased purcha­sing power of the popu­la­ti­on.74

The incre­asing importance of finan­cial mar­kets, the dimi­nis­hing effec­ti­ve­ness of spen­ding pro­grams and the sharp rise in glo­bal eco­no­mic inter­de­pen­dence led to a syn­chro­niza­ti­on of eco­no­mic cri­ses, which fur­ther inten­si­fied them. The Gre­at Depres­si­on of 1974/75 was the most seve­re sin­ce 1929, and unli­ke smal­ler reces­si­ons after World War II, it hit all deve­lo­ped capi­ta­list count­ries at the same time.75

Many peo­p­le in the 1980s were blin­ded by the mili­ta­ry, poli­ti­cal, and cul­tu­ral strength of the West. In fact, howe­ver, its eco­no­mic situa­ti­on during that deca­de was deci­dedly dif­fi­cult. Pro­fits in indus­try were very low, and stock mar­ket decli­nes were accu­mu­la­ting, such as on Black Mon­day, Octo­ber 19, 1987, when the Dow Jones index fell 23% in one day. Wages rose slow­ly or sta­gna­ted. Govern­ments waged bru­tal cam­paigns against uni­ons and cut back the wel­fa­re sta­te. Unem­ploy­ment in the West kept rea­ching record levels not seen sin­ce the gre­at Gre­at Depres­si­on of 1929.

The capi­ta­lists laun­ched a con­cer­ted coun­ter­of­fen­si­ve a few years later in respon­se to the mass labor pro­tests descri­bed abo­ve in the late 1960s and ear­ly 1970s to break the power of the working class in the West once and for all, and suc­cee­ded in doing so in the 1980s. The fol­lo­wing stages were important for this:

  • Mili­ta­ry coup in Chi­le in 1973. Intro­duc­tion of a bloo­dy peri­phe­ral neo­li­be­ra­lism as a glo­bal expe­ri­men­tal laboratory.

  • Defeat of the French workers in the occu­pa­ti­on of the LIP watch fac­to­ry in Besan­çon 1973 – 76.

  • Bank­rupt­cy of the city of New York in 1975 and struc­tu­ral adjus­t­ment pro­gram at the expen­se of the working class.

  • Struc­tu­ral adjus­t­ment pro­gram in Gre­at Bri­tain in 1976 at the expen­se of the working class.

  • Sup­pres­si­on of the 1981 air traf­fic con­trol­lers‹ strike in the U.S. by the Rea­gan administration.

  • Hea­vy defeat of the U.S. United Auto Workers (UAW) uni­on in con­nec­tion with the 1980 Chrys­ler bailout.

  • Defeat of the major strike at Fiat in Ita­ly in 1980.

  • Bru­tal poli­ce sup­pres­si­on of the 1984 miners‹ strike in Bri­tain by the That­cher government.

  • The Kohl government’s 1986 amend­ment to the Labor Pro­mo­ti­on Act in West Ger­ma­ny made strikes con­sider­a­b­ly more difficult.

The working class was fur­ther wea­k­en­ed by the so-cal­led Volcker shock in 1979, the year in which Paul Volcker, then chair­man of the U.S. Fede­ral Reser­ve, rai­sed the key inte­rest rate to 20%. This trig­ge­red a seve­re eco­no­mic cri­sis in all indus­tria­li­zed count­ries, which dro­ve ailing com­pa­nies into bank­rupt­cy and signi­fi­cant­ly increased unem­ploy­ment in gene­ral. It also bru­t­ally cho­ked off the con­s­truc­tion indus­try, as inte­rest rates rose to such heights in all Wes­tern count­ries that housing con­s­truc­tion came to a standstill for seve­ral years. The­se fac­tors fur­ther wea­k­en­ed the uni­ons and cau­sed real wages to vir­tual­ly sta­gna­te sin­ce that time.

The extre­me increase in inte­rest rates by Volcker also led to a lot of for­eign capi­tal flowing into the US. This allo­wed the U.S. govern­ment to use public debt to make the expen­dit­ures neces­sa­ry for a super­power, even wit­hout cur­ren­cy reser­ves. In par­ti­cu­lar, the gigan­tic rear­ma­ment pro­gram of the Rea­gan govern­ment could be finan­ced and the Soviet Uni­on could be armed to death (600-ship navy, MX nuclear mis­siles, SDI pro­gram of a laser-based mis­sile defen­se in space, etc.).

Despi­te all efforts, pro­fits could not be sus­tain­ab­ly increased in the 1980s. Accor­din­gly, the­re was also no stron­ger eco­no­mic growth. This chan­ged only with the cata­stro­phic defeat of socia­lism in the epo­chal year 1989.

More on this in Part 4.


1 Man­del, Der Spät­ka­pi­ta­lis­mus, pp. 178, 205, 230, 296.

2 Ibid. p. 175.

3 Ibid. p. 59

4 Man­del, Mar­xis­ti­sche Wirt­schafts­theo­rie, p. 610

5 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 149.

6 Ibid. p. 60.

7 Revel­li, p. 3. & Hirsch, p. 50.

8 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 166. & Alt­va­ter, Alter­na­ti­ve Wirt­schafts­po­li­tik, p. 37.

9 Huss­on p.149 & Revel­li p. 3.

10 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 233.

11 Ibid. p. 238.

12 Ibid. pp. 176 & 179.

13 Marx, pp. 146 – 147. Ed. Note: Man­del is refer­ring here to Marx’s manu­script »which was ori­gi­nal­ly inten­ded to be inte­gra­ted into Capi­tal. Marx wri­tes here: Sin­ce with the deve­lo­p­ment of the real sub­sump­ti­on of labour under capi­tal or the spe­ci­fi­cal­ly capi­ta­list mode of pro­duc­tion it is not the indi­vi­du­al worker but rather a soci­al­ly com­bi­ned labour capa­ci­ty that is more and more the real exe­cu­tor of the labour pro­cess as a who­le, and sin­ce the dif­fe­rent labour capa­ci­ties which coope­ra­te tog­e­ther to form the pro­duc­ti­ve machi­ne as a who­le con­tri­bu­te in very dif­fe­rent ways to the direct pro­cess by which the com­mo­di­ty, or, more appro­pria­te here, the pro­duct, is for­med, one working more with his hands, ano­ther more with his brain, one as a mana­ger, engi­neer. or tech­ni­ci­an, etc., ano­ther as an over­loo­ker, the third direct­ly as a manu­al worker, or even a mere assistant, more and more of the func­tions of labour capa­ci­ty are included under the direct con­cept of pro­duc­ti­ve labour, and their repo­si­to­ries under the con­cept of pro­duc­ti­ve workers, workers direct­ly exploi­ted by capi­tal and altog­e­ther sub­or­di­na­ted to its valo­ri­sa­ti­on and pro­duc­tion pro­cess.« See: https://​www​.mar​xists​.org/​a​r​c​h​i​v​e​/​m​a​r​x​/​w​o​r​k​s​/​1​8​6​4​/​e​c​o​n​o​m​i​c​/​c​h​0​2​b​.​htm

14 Man­del, Der Spät­ka­pi­ta­lis­mus, p.181.

15 Ibid. p. 472,

16 Ibid.

17 Mixed groups with ope­ra­ti­ons from com­ple­te­ly dif­fe­rent, unre­la­ted indus­tries also occur­red, but they were less common.

18 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 295.

19 Revel­li, p. 9.

20 Hirsch, p. 51, & Man­del, Der Spät­ka­pi­ta­lis­mus, p. 346.

21 Hobs­bawm, p. 333.

22 Hirsch, p. 67.

23 Hirsch, p. 67. & Man­del, Der Spät­ka­pi­ta­lis­mus, p. 358.

24 Hobs­bawm, p. 373.

25 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 351.

26 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 352.

27 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 371, & Hirsch, p. 59.

28 Alt­va­ter et. al., Alter­na­ti­ve Wirt­schafts­po­li­tik, p. 31.

29 Alt­va­ter et. al, Alter­na­ti­ve Wirt­schafts­po­li­tik, p. 29.

30 Alt­va­ter, Die Welt­wäh­rungs­kri­se, p. 60.

31 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 423.

32 Huss­on, p. 149.

33 Har­vey, p. 20.

34 Huff­schmid, p. 110.

35 Die­ter, p. 41.

36 Man­del, Der Spät­ka­pi­ta­lis­mus, p. 341

37 Men­zel, p. 46.

38 Bren­ner, pp. 60 & 66.

39 Alt­va­ter et. al, Alter­na­ti­ve Wirt­schafts­po­li­tik, p. 69 & Hirsch, p. 85.

40 Kurz, p. 31.

41 Wagen­knecht, p. 12.

42 Har­vey, p. 54.

43 Har­vey, p. 57.

44 In the East Ger­man Sta­te Minis­try for Sta­te Secu­ri­ty, this was cal­led »Kontakttätigkeit/​Kontaktpolitik.« See: Grim­mer, p. 254 & Nit­sch­ke, p.395.

45 Har­vey, p. 54. & Dep­pe, p. 37.

46 Panitch.

47 Kurz, p. 37.

48 Man­del, Der Spät­ka­pi­ta­lis­mus, p.308.

49 Trots­ky, Die ver­ra­te­ne Revo­lu­ti­on, p. 208. Frank, Geschich­te der Kom­mu­nis­ti­schen Inter­na­tio­na­le. Vol. 2., p. 735.

50 Man­del, Fried­li­che Koexis­tenz und Welt­re­vo­lu­ti­on (ISP Theo­rie 1), p. 11.

51 Kahn, p. 51.

52 Mey­er, p. 382.

53 Man­del, Fried­li­che Koexis­tenz und Welt­re­vo­lu­ti­on, p. 27.

54 Cal­cu­la­ti­ons based on Die Län­der der Erde, Köln 1986

55 Mey­er, p. 382.

57 Syl­la, p. 182.

58 Kaku, p. 194.

59 SOSUS = Sound Sur­veil­lan­ce System

60 Kaku, p. 189

61 Howe­ver, wit­hout laser and nuclear reactor.

63 Lenin, p. 416.

64 Bour­dieu, Homo academicus.

65 In Eas­tern Euro­pe, such a revo­lu­ti­on was not neces­sa­ry becau­se the­se count­ries had not gone through the reac­tion­a­ry res­to­ra­ti­on peri­od of the post­war period.

66 Man­del, Die Kri­se, p. 80.

67 Bren­ner, p. 50.

68 Alt­va­ter et. al, Alter­na­ti­ve Wirt­schafts­po­li­tik, p. 62.

69 Ibid., p. 62 & 65.

70 Ibid. p. 56

71 Ibid. p. 66

72 Bren­ner, p. 69.

73 Alt­va­ter et al., Alter­na­ti­ve Wirt­schafts­po­li­tik, p. 132.

74 Huss­on, p. 150

75 Man­del and Wolf, Ende der Kri­se oder Kri­se ohne Ende. p. 11.

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Cover Image: Wiki­me­dia Com­mons con­tri­bu­tors, »File:Bundesarchiv B 145 Bild-F040735-0010, Salz­git­ter, VW Autowerk.jpg,« Wiki­me­dia Com­mons, the free media repo­si­to­ry, https://​com​mons​.wiki​me​dia​.org/​w​/​i​n​d​e​x​.​p​h​p​?​t​i​t​l​e​=​F​i​l​e​:​B​u​n​d​e​s​a​r​c​h​i​v​_​B​_​1​4​5​_​B​i​l​d​-​F​0​4​0​7​3​5​-​0​0​1​0​,​_​S​a​l​z​g​i​t​t​e​r​,​_​V​W​_​A​u​t​o​w​e​r​k​.​j​p​g​&​o​l​d​i​d​=​6​6​0​9​4​0​535 (acces­sed March 1, 2023).

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