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 After the Second World War, more than one third of the earth’s surface was finally withdrawn from the grasp of capital (USSR, Eastern Europe, PR China, Democratic Republic of Vietnam, Democratic People’s Republic of Korea).⁴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 percent 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 Africirca

• 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 percent 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 percent and the yield of agricultural food products by 20 percent. 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 percent 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 percent. 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.

Footnotes

Cover Image: Wikimedia Commons contributors, »File:Bundesarchiv B 145 Bild-​F040735-​0010, Salzgitter, VW Autowerk.jpg,« Wikimedia Commons, the free media repository, https://​commons​.wikimedia​.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).