Source: Published in To the Masses: Proceedings of the Third Congress of the Communist International, 1921 (https://www.haymarketbooks.org/books/897-to-the-masses), pp. 102-133
Translation: John Riddell
HTML Markup: David Walters & Andy Bluden for the Marxists Internet Archive, 2018
Copyright: John Riddell, 2017. Republished here with permission
Comrades, at the First and Second Congresses, we described the world situation in appeals and manifestos, without entering into a more detailed discussion. The task then was to characterise the new situation created by the War in its overall and outstanding features and to impress this on the consciousness of the working class. The question before us now is much more complex. The third year after the War is almost over. Very important economic and political developments have taken place. Capitalism still lords it over virtually the entire world, and we must assess whether our perspective – that of world revolution – is still broadly correct under present circumstances. There has been a shift in the relationship of forces – that is undeniable. The question is simply whether this change reflects some deeper alteration, or whether it is more superficial in character.
If we place ourselves back in the mood that prevailed in 1919 – that was the most critical year for capitalism after the War – and compare the psychological situation, the mood of the classes, the parties, the state power, and so on, with their counterparts today, we must recognise that the bourgeoisie today still feels strong. In the past it was perhaps stronger, but at the very least it feels much stronger now than it did in 1919. I have a folder of material from influential newspapers and the like on the Communist and revolutionary danger around the world, and I will now read a few of these quite instructive quotations.
The Neue Zürcher Zeitung is a Swiss bourgeois paper, very conservative and rather clever, which follows the political development of Germany, France, and Italy with some degree of understanding. Here is what it wrote on 26 March about the March Action in Germany. Unfortunately I could not track down this issue and must translate back from my Russian translation. But the sense of it is unchanged.
Germany in 1921 is quite different from in 1918. Governmental consciousness has been strengthened to such a degree that Communist methods run into resistance in every layer of the population – even though the Communists, who during the days of revolution were only a small handful of determined people, have since become ten times more numerous.
On 28 April, when both camps were preparing for the May Day holiday, we find the following statement in Le Temps:
We need only review the path travelled during the past year to be fully reassured. Last year May Day was to signal the beginning of a general strike that, in turn, was to be the first stage of a revolution. Today total confidence reigns in the nation’s effort to overcome all the crises flowing from the War.
Neue Zürcher Zeitung, once again, wrote as follows in April about the situation in Italy:
1919: The bourgeois parties, verging on complete collapse, hopelessly fragmented, and in suicidal resignation were giving way before the unified onrush of the disciplined masses of the red forces. 1921: The bourgeois contingents have united in a solid coalition and are advancing into battle, confident of victory, while the Bolsheviks, divided and discouraged, hardly dare to show their face. And all this thanks to Fascism.
Let me take an example from a quite different source, namely a quote from a resolution of our Polish Communist sister party. If I am not mistaken, it had a party conference early in the year, where it was decided to take part in the parliamentary elections. In motivation, the resolution states:
In the winter of 1919 the struggle turned in favour of the bourgeoisie, which then constructed its state apparatus. Thanks to the Polish Socialist Party, the workers’ councils were strangled by the government. Given these facts, the party is obligated to utilise the electoral struggle and the parliamentary platform.
There is no suggestion here that the Polish Communist Party intended to alter its stand on principles. It simply evaluates the present situation differently from the way it did in 1919.
Flowing from this, the objective situation of Social Democratic parties with regard to the state and the bourgeois parties has changed. Everywhere the Social Democrats are being pushed out of the government. When they are readmitted, it is only temporarily – as in Germany, where this happened under foreign pressure. The Independent party [USPD] has executed a complete turn to the right, also under the pressure of this new situation, or of its psychological reflection, for they overestimate its significance. We see the same thing in the trade unions. There has been a consolidation. The Independents of each country and the Social Democrats of each country, who differed so greatly a year or eighteen months ago, have come closer, thanks to the good offices of Amsterdam.
The old Social Democratic opposition lives today in bigamy with both the Second and Two-and-a-Half Internationals, and these two ladies are not at all upset about it. This triangular marriage provides the best demonstration today regarding the disappearance of the tendencies to oppose the state that were noticeable among the Independents during 1919 and 1920.
These three postwar years were a time of the most enormous mass movements the world has ever seen. Russia, the country that suffered most deeply during the War, was drawn by the March 1917 revolution into the tempest of revolution.
As early as 1917, great mass strikes on economic issues broke out in Britain. At the end of that year, the Russian proletariat took power. I will not try to hide the fact that at that time the road from our seizure of power here to the taking of power in countries of Central and Western Europe seemed much shorter than it turned out to be. This fact also forms part of our evaluation of the world situation. In 1918 there were major strikes in the neutral countries. At the end of that year, military collapse triggered revolution in Germany and Austria-Hungary. A rather chaotic proletarian mass movement for economic goals broadened out more and more. In 1919 we had bloody fighting in January and March.[2] At the end of 1919, in the United States, there were major strikes of miners and railway workers. Then came the raging fury of the bourgeoisie, the destruction of workers’ organisations, the arrests, and all that. In 1920 we witnessed the Kapp Putsch in Germany and then the great struggles of armed workers and the campaign of revenge by ‘democracy’.[3] For the working class in France, the most critical moment was the May Day celebration and, following on it, the general strike of railway and other workers.[4] In Russia, the Red Army attempted an offensive against Warsaw,[5] which was linked in many ways with many expectations and hopes regarding the international situation. That initiative failed, as did also the great mass action in Italy in September 1920, when the workers occupied the factories but the [Socialist] party failed utterly. That movement awakened the bourgeoisie from its demoralisation; the conduct of the workers’ party drove it into an offensive. Turati says that the movement failed because Italian workers were not mature enough to occupy the factories and take charge of production. He’s right in one sense: the Italian workers still have not purged Turati and the Serrati people from their ranks.
In Czechoslovakia a general strike took place in December 1920. In 1921 we witnessed the March battles in Germany, the miners’ strike in Britain, the general strike in Norway[6] -the greatest struggles that the world has ever seen. But the main thing is the outcome of these struggles: the bourgeoisie remained in control. And Otto Bauer, theoretician of the Two-and-a-Half International, says that the fact that the bourgeoisie is still in power signifies the bankruptcy of the Third International. We had always counted on world revolution taking place in the final phase of the War or immediately after it, he says, and now this estimate or prophesy or hope is shown to be entirely wrong and misplaced. But we did not make some bet with the Second International that obliged us to complete the revolution when the War ended. So we feel under no obligation to pay the wager, that is, to concede the leadership of the proletariat to the Two-and-a-Half International. This was and is not a matter of some purely objective fact, independent of us, that can be foreseen and prophesied, like some astronomical occurrence, except that we made an error in calculation. Rather it is a matter of taking power, which has to be carried out by human beings.
That is the goal for which we are striving, and if we did not achieve it by some specific date, that does not mean the Third International is bankrupt.
All that is required is to examine the world economic and political situation and our fundamental attitude to revolution more precisely. Why was it that during the War, and even before the War, at the Stuttgart Congress of the Second International, we drew a link between international proletarian revolution and war?[7] Because the War, which was then foreseen for the first time, would necessarily disrupt the equilibrium of the entire economic structure of society. We must ask whether this did in fact occur and whether, if that is the case, the bourgeoisie – the ruling class, capitalism – has already been able in the course of three postwar years to recreate that devastated and undermined equilibrium.
Comrades, to appraise the economic situation is a very complex matter. Statistics always lag behind. Economic statistics in capitalist society are highly imprecise as a result of the anarchy of the economy itself, and this will surely remain the case. The War did in fact break out, causing not only the economy but the entire state apparatus, including its statistics, to jump clear off the tracks. The figures – and I will cite quite a few – are not entirely precise. I will always indicate which figures that applies to. Well, we will have to use the imprecise figures if we are to obtain even an approximate concept of conditions.
In recent years we throw around concepts of billions here and billions there, without getting a good grip on what that means in terms of the national or world economy. I will begin with the simplest, most basic facts: worldwide production of goods. Let us start with agriculture. If we compare the total harvest of 1920 with the average of the last five prewar years, we find that the world harvest remains about the same – it is about twenty million quintals [one million tons] lower.
If we set aside America, however, the pattern changes entirely. The harvest in the belligerent countries was 37 percent lower than before the War. In the neutral countries it was roughly unchanged. In the overseas countries it was 21 percent higher, not including Russia. Before the War, Russia provided the world market with about 100 million quintals on average. In 1920, after the War, the world market had to do without about 120 million quintals. Even today we find that American farmers are holding rather high stocks of grain, which they cannot sell because of the fall in prices on the world market.
If we take cattle raising, we find almost exactly the same pattern. The quantity of world livestock is almost the same as before the War. The stock of the belligerent countries of Europe has declined markedly; that of the neutral countries has remained at the prewar level, and that of the overseas countries has risen. However, we find that the prices of meat on the Chicago exchange – that is the world’s decisive meat exchange – are lower than before the War. So many people were wiped out during the War, and yet the population is nonetheless more numerous than before the War – eighty million more. The marketed harvest is 120 million quintals less than before the War; stocks of meat and grain are available but cannot be purchased. In other words, the world has grown poorer and hungrier. That is an initial simple fact.
If we analyse world production of coal, we find almost the same pattern, but revealed much more sharply. The entire world’s coal production in 1920 amounted to 97 percent of that in 1913, that is, less than before the War. Europe’s supply was 18 percent less; North America’s was 13 percent greater. With cotton and other goods we find a similar ratio. Total production is somewhat or much lower; Europe’s has declined; America’s has risen.
Now let us take national property – not income, but the property that the nations today possess. In estimating national property, figures are quite uncertain and variable. However, they are adequate to enable us to translate this economy of billions, this economy of astronomical figures, into a solid, material economic framework. Before the War, the national property of the belligerent powers was estimated at 2.4 trillion gold marks and the national income of these countries at 340 billion gold marks.[8] That was the yearly income at the highest peak of their economic development. What was consumed and destroyed in the War? Different economists offer varying estimates of this amount. But we can roughly conclude that the War destroyed and consumed about 1.2 trillion gold marks. That is not an exaggeration. The amount comes to 300 billion gold marks a year, during four years of war. The prewar national property of belligerent powers was 2.4 trillion gold marks. The War consumed and destroyed exactly half of this amount.
Moreover, the War did not destroy merely a portion of national property, but also much of yearly income. At the peak of development, this yearly income came to 300 billion gold marks, of which not more than a third – that is, 100 billion gold marks – was available for the War. I will not seek to demonstrate that here, but you can take it as an approximation. Society continued to exist and had to consume, and the productive apparatus as well must normally be maintained at a certain level. However, the War used up about 1.2 trillion gold marks, including 800 billion from national property. This means that a third of the former national property of the belligerent countries was destroyed, reducing it from 2.4 trillion to 1.6 trillion gold marks.
Here is another comparison. Europe had invested capital in various forms in other parts of the world, amounting to 150 billion to 200 billion gold marks. So the destruction through war was six or seven times as great as the amount that Europe employed directly in the exploitation of other parts of the world.
Let us consider the circulation of banknotes. Before the War, banknotes in the entire world amounted to 28 billion gold marks. Now their amount is 250 billion to 280 billion or perhaps 300 billion – that is, ten times as much. What does this tell us? This fact has very great importance for what follows. The foundation of capitalist society in the belligerent countries of Europe sank lower and lower. The countries are impoverished. Simultaneously a superstructure of banknotes has arisen, which is also termed capital. For these banknotes and government bonds – all this is called capital. However, this capital represents, on the one hand, a memory of what has been destroyed and, on the other, a hope of what can be earned – but it does not represent capital that actually exists. It functions as capital, however, as money, and this distorts the shape of the entire society, the entire economy. The poorer the society grows, the richer it appears, regarding itself in the mirror of this fictitious capital.
However, the creation of this fictitious capital shifts the portions of this constantly diminishing income and property that are held by different classes. National income is reduced, but not in the same proportion as national property. This is explained simply by the fact that the candles of capitalist society were burned at both ends, and that the War and the postwar economy were financed not only from national income but also from national property.
It is understandable that someone facing ruin turns his attention above all to doing what is most immediately necessary, rather than to strengthening the foundations of his private business. That explains why Europe’s economy has by and large achieved more in the production of consumer goods – and of current production in general – than it has in raising the real level of the productive apparatus. That means the labour forces devoted to maintenance and expansion of the productive apparatus are insufficient to prevent the impoverishment that has set in from expressing its full impact.
The fact that the productive apparatus was much more devastated than current production is among the most important basic experiences of today’s society. It attracts little notice, but no or very few new factory buildings are going up, and the old ones are not being maintained in good condition. This receives little attention because we are now in a severe crisis and unable to fully utilise the existing means of production. In the housing sector, however, this is very evident, because the population continues to grow, even in times of crisis. These people need housing, and the lack of housing is evident around the world. Many billions would be needed for this purpose. I have tried to demonstrate this. But I will not bore you with these statistics. Many billions would be needed to ease the urgent housing shortage. This stands as evidence that the entire productive apparatus – the foundation of society – is devastated and has declined, something that is not easy to assess in terms of statistics.
This impoverishment does not affect all countries in the same way. Among the belligerent countries, Russia is at one pole. We will exclude it, because it is not part of the capitalist world. We will speak of Russia in another context.
We will also disregard Austria, because the Austrian economy also does not lend itself to straightforward analysis.
So let us start with Germany. Germany and Britain are the two ends of the chain of belligerent countries. In describing Germany’s economic conditions, I will utilise the data of Richard Calwer in his rather interesting study, National Bankruptcy. The question of national bankruptcy has become rather important for the German economy, and rightly so. Calwer estimates the overall production of goods in Germany. This is hard to determine by quantities alone, because the quality of the goods must also be taken into account. He takes a different approach, which should not be underestimated. On the basis of reasonably plausible calculations, he concludes that the production of goods in 1907 represented the labour of 11.3 million workers. Since then, working conditions have altered fundamentally. The work week is shorter; the intensity of labour has fallen, and so on. And he comes to the conclusion that Germany today has no more than the labour of 4.8 million workers, expressed in 1907 units – that is, only 42 percent of the previous level.
Calwer arrives at the same results for agriculture. ‘Here too’, he says, ‘I arrive at the conclusion that agricultural production of goods, in terms of quantity and quality, has fallen to well under half the prewar level.’
Germany’s national debt stands at 250 billion marks. As for Germany’s currency, that’s well known around the world. Circulation of banknotes now comes to about 80 billion or 81 billion, of which only five billion is good money.
Thus Calwer arrives at the conclusion that the mark today is actually worth about 6 – 7 pfennigs.[9] People sought to utilise this fact, saying that Germany was the ‘most victorious’ country on the world market in 1919 and 1920, precisely because its currency was so bad. I have here a passage from the French newspaper Le Temps of 29 April, which says, and I quote:
Germany ought to have been able to utilise this enormous advantage, caused above all by the depreciation of the mark, to pay off its reparations debt bit by bit.
As I said earlier, impoverishment is reflected in the distorting mirror of fictitious capital, leading society to an entirely false self-conception. And as a result, they arrive at this completely insane notion that Germany has an enormous advantage in possessing a completely devalued currency and is therefore in a position – thanks to the impoverishment of its entire economy and productive apparatus – to sell off its goods at cutthroat prices to the French and the British, at the expense of impoverishing the entire economy, the productive apparatus.
Calwer’s analysis leads him to the following conclusion, which I will quote verbatim:
This outcome of disastrous currency and financial policy today can only be violent, given that under present economic conditions a gradual return to orderly conditions on the currency market and in public finances is completely excluded. This catastrophic end, however, is ultimately nothing other than the formal bankruptcy of the government, which gives open expression to what has long been true: the government’s inability to pay.
So – national bankruptcy. If we then express that in material terms, we arrive at the following: Before the War, Germany’s property amounted to 225 billion gold marks; its income, to 40 billion gold marks. That was the high point. That was the estimate of Helfferich, if I am not mistaken, basing himself on statistical research. Today, German property is estimated at 100 billon marks, and income at 16 billion marks. Of course these estimates are only approximate, but they are sufficient to give us a picture of reality.
Tracing German economic development, we find that during the storm and stress of the final period of economic development, from the middle of the nineties to the onset of crisis in 1913 – 14, German national income rose by approximately 1 billion marks a year. More precisely, Germany’s income in the mid-nineties was 22 billion gold marks; in 1914 it was 40 billion gold marks. Over a twenty-year period, that signifies a yearly increase of approximately 1 billion marks.[10] And today – with of course quite different social results – it has been thrown back into the conditions that preceded German capitalism’s time of stormy growth, which created the modern Germany. Under current conditions it is quite clear that Germany will not be able to pay its debts and its so-called reparations requirements. Even such a right-wing economist as Calwer proclaims national bankruptcy to be absolutely inevitable. And now you can read a considerable number of German books on national bankruptcy, written in terms of philosophy, morality, law, and so on. With or without morality, these gentlemen will not avoid national bankruptcy.
France is, according to its bourgeois newspapers, a country recovering from its wounds. There is no contesting that during the postwar period France can point to several successes. However, it would be a major error to overestimate these successes. It is very difficult to produce statistics on France’s economy, since much more is kept secret there than in other countries. The French bourgeoisie does that, and so too does the French government. The capitalist press of France lies more than in most other countries, and that may well also hold true of economic statistics. For example, I have not yet been able to find in the French newspapers any data on the production of cast iron in 1920. But examining the available statistics, we find that French agriculture in the field of cattle breeding is poorer. In 1913 there were approximately 15 million head of cattle; now there are 12.8 million. The number of horses was then 7 million; now it is 4.8 million.
Production of wheat, 86 million quintals in 1913, is now 63 million quintals. In 1913, production of coal was 41 million tons; now it is 35.6 million tons, counting Alsace-Lorraine and the Saar,[11] or – excluding these newly acquired territories – 25 million tons, hardly more than half the 1913 level, and so on. We must bear in mind that France is healing its wounds not by reorganising its economy but, above all, through the pillage of Germany and its colonies. Thus the improvement of conditions in France is due not to a rise in the economy as a whole, but rather to a transfer of goods from Germany to France. In this process – and here is the key point – Germany loses one and a half to two times as much as France gains.
France’s trade balance for 1919 shows a deficit of 24 billion francs – that is, a surplus of imports over exports.[12] For 1920 the deficit is 13 billion. Thus during these two years of recovery, of improvement, France ran a foreign trade deficit of 37 billion francs. The significance of this for France’s currency is easy to grasp. True enough, in the first quarter of the current year, 1921, France no longer had a foreign trade deficit. There is great rejoicing in the press and parliament over the fact that, in the first three months of 1921, French imports roughly equalled the exports. However, the cleverest French paper, Le Temps, had the following to say on 18 May this year:
The improvement of our trade balance is mainly due to the reduction in imports of raw materials, and this reduction will without doubt result within a few months in an appreciable reduction in the export of manufactured goods.
So it is not the rise of the economy and of exports but the fall in imports of raw materials, that is, a reduction in future production, that has led to a more favourable trade balance. France’s national debt is 303 billion, ten times as much as in 1913. Add to that the reconstruction costs, which they are trying to unload onto Germany and which come to 180 billion francs. That makes half a trillion, all told. The circulation of banknotes came to less than 6 billion francs in 1915;[13] in July 1920 it was almost 39 billion francs, that is, seven times greater.
The French budget offers us a picture of total ruin, the hopeless ruin of the French economy. For this year, the regular expenses come to 23 billion francs, plus 5.5 billion francs for the added expenses of occupation and 23 billion francs for war reconstruction, which makes 51 billion francs altogether. How much is contributed by French taxpayers? So far, payments were such that regular revenue is estimated at 17 billion francs.
Fifteen billion francs must be paid from the national budget every year to retire debts, plus 5 billion francs for the army and bureaucracy – 20 billion altogether, just for interest on the debt and maintenance of the state apparatus. And that is covered only partially by 17.5 billion in regular revenue. The regular deficit thus comes to 5.5 billion francs, without counting the notorious obligations for reconstruction. If you pick up the prominent French financial newspaper, L'Information, and read the article by its editor, Léon Chavenon, you will find this:
The financing of the state must be kept closely connected with the issuing of banknotes. In other words, inflation and the pressure of paper money must be promoted.[14]
He does not conceal the causes. He says, ‘There is no escape from inflation except through open bankruptcy’.
The alternatives are therefore either to cover expenses by paper money, that is, the state remains a con man, tricking the entire world through counterfeiting and phony money, or to publicly admit bankruptcy and publicly declare, ‘There is no escape from inflation except through open bankruptcy’.
France’s leading financial writer and a right-wing Social Democrat – I do not know for sure whether he belongs to the right-wing [Socialist] party or not – arrive at the same conclusion: There is no solution except open national bankruptcy or muddling along by printing paper money. That’s the situation in victorious France, which now holds the position of undisputed leader of Europe.
Britain seemed during the War to be the country that was profiting from it. Comrade Varga’s excellent pamphlet,[15] which we are submitting together with the theses, assesses the situation in Britain very cautiously. Subsequently published facts and figures indicate that Britain’s situation, from a capitalist viewpoint, is even more hopeless than it seemed not long ago. British agriculture expanded during the War as a result of enormous government subsidies. Now it is falling back to its prewar level. Britain’s coal production, where it had a monopoly, amounted to 287 million tons in 1913, and 233 million tons in 1920 – that is, 80 percent of the 1913 level. Cast iron production was 10.5 million tons in 1913 and 8 million tons in 1920, which is also about 80 percent of the previous level. As for the situation in 1921, that is well known. Because of the miners’ strike and its effects, coal production fell in January to 19 million, in February to 17 million, and in March to 16 million tons.
Coal exports – the most important segment of British exports and the basis of exports in general, amounted to 73 million tons in 1913 and 25 million tons in 1920, that is, 34 percent – a third – of the prewar level.
During the first five months of this year, exports ran at about 48 percent of the previous year’s level. Foreign trade as a whole, measured in goods rather than in the shadow-patterns of prices, is a third lower in 1920 than in 1913. For the month of May, the current issue of the leading financial publication, the Economist, tells us the following:
In May 1920, exports amounted to £119 million; in 1921, to only £43 million. And that is not even expressed in goods but in prices, where it represents a decline of 64 percent, which has precipitated the general crisis. We see the same phenomenon, although less pronounced, in the British budget, in its national debt. The British national debt, which before the War was £700 million, amounted on 4 June 1921 to no more and no less than £7,709 million, that is, eleven times higher than the prewar level.[16] Merely the expenditure on the army and navy, which was £86 million before the War, is now £237 million, that is, almost three times greater. And if you consult the reports of the corporate chieftains in banking and industry for the months of March and April, you will find the statement that Britain’s national income is now a third or a quarter less than before the War. Whether it is a quarter or a third less is hard to determine.
The most evident expression of British decline is its currency. The British pound sterling today is not the pound sterling of old. It no longer corresponds to what is stated in its world passport. We read that it now represents only 76 percent of what it claims to be.[17] And nothing characterises the instability of our times better than the fact that the most stable, absolute, and unquestioned thing in the world, the British sovereign (a word that also means ‘ruler’) has lost its old position and now represents only a relative quantity.[18] At a time when Germany is so preoccupied with philosophical relativity – I am referring to Einstein’s philosophy – we can perhaps conceive German philosophy as a revenge against the British economy, since the British pound sterling has now become relative. The Germans, in times of economic hardship, have always taken their revenge in philosophy.
There are also countries that have made gains: above all the United States and in second place Japan. We have here a fact of world-historical significance, which must always be kept in view in any evaluation of the world situation. The economic centre of gravity is no longer in Europe but in the United States. Europe has decayed, and by and large it is decaying more and more. During this same period, the United States has developed enormously. The increase in the number of livestock, horses, and cattle is not very significant. For horses, the increase is to 22 million head, from 20 million; for cattle, to 68 million from 62 million. If we consider coal, we find that the 1913 production of 517 million tons rose in 1920 to 580 million tons – a rather significant increase. Petroleum production in 1913 was 248 million barrels; in 1920, 442 million. A huge increase. Cotton and iron remain at about their prewar level.
There is an enormous increase in shipbuilding. The ships built in 1913 had a total capacity of 276,000 tons; in 1919, 4,075,000 tons; in 1920, 2,746,000 tons. Such shipbuilding has made the United States the leading force in this industry. Before the War, Britain possessed more than half the world’s tonnage and the United States only 5 percent; now Britain has only 35 percent, and the United States 30 percent. In the automobile industry, as is generally known, somewhat less than 900,000 units were built in 1913, and 2,350,000 in 1920. At present the United States has 8.5 million automobiles, that is, one for every twelve inhabitants. The entire rest of the world has 1.4 million.
Exports are two and a half times greater than before the War. Exports have undergone an internal shift and alteration that is very important for the world economy. Before the War, in 1905, finished goods made up a third of US exports; foodstuffs and raw materials accounted for two-thirds. Now the proportion is reversed: 60 percent of exports are finished goods, and only 40 percent foodstuffs and raw materials. That means that the United States has become one of the leading industrial exporters. During the last six years, from 1915 to 1921, the US trade surplus amounted to $18 billion. Now let us look at the US share in the world economy. The United States possesses 6% of the world’s total population and 7% of its land area. In terms of production, it produces 20% of the gold, 25% of wheat, 30% of merchant ships, 40% of iron and lead, 50% of zinc, 45% of coal, 60% of aluminium, 60% of copper, 60% of cotton, 66% of petroleum, and 85% of automobiles.
This is reflected in the American dollar’s leading role in the world financial market. Europe’s debt to the United States is $18 billion, a sum that increases daily through non-payment of interest and new loans of $10 million.[19] Europe’s indebtedness to the United States is one of the most important issues in world politics.
Japan has profited a great deal both from war markets and the disappearance of European industrial countries from world markets, although not nearly so much as the United States, because its productive apparatus is much smaller. I will not read the statistics. I will cite only one, namely that coal production, 56 million tons in 1913, was 76 million in 1920, 36 percent more. Other branches of industry, such as glass production, have grown in hothouse fashion. Now, however, as European countries return to the world market, Japanese capitalists are no longer in a position to maintain the position they captured. There are now no fewer than 2,376,000 workers in Japanese industry, of which 270,000 – 12 percent – are organised in trade unions. That says a lot in a still backward country where semi-feudal conditions still persist. The significance of this figure will be grasped by all those who understand the role of the Russian proletariat.
Comrades, I must move on to the central issue before us, that is, whether this pattern will be altered by an evolution toward restoration of equilibrium. But first, I would like to make a brief comment. Capitalism’s statisticians, economists, and government ministers may well say that Russia’s economy has also not advanced during this period. Comrade Lenin will report on the economic situation in Russia. I would like to make a brief comment on this issue in quite another context. The American secretary of state, Mr. Hughes, wrote in a letter to the notorious Mr. Gompers that there was no point in establishing economic relations with Russia, because Russia was now a gigantic vacuum. And the poverty and ruin of Russia’s economy cannot be attributed to the blockade and Civil War, according to Mr. Hughes, because there has been a decline even in the branches of industry that were self-sufficient before the War. Moreover, the Civil War armies were much smaller than those of the Great War. Well, the final argument – forgive me, Mr. Hughes – is truly ingenious, because mobilisation into the armies is a factor in the ruin of Russia’s economy.
But the argument is false in another sense as well, for tsarism, during the great imperialist war, left the most important skilled workers in the factories. It did not require them for the War as we did. It had its aristocracy – trained officers. In our darkest hour, our military apparatus consisted above all of skilled workers, who had to be trained from scratch as soldiers. I can now reveal this secret, since we are now demobilising. During the period when we were fighting on four fronts, our army numbered 5,300,000 men, of which no less than three-quarters of a million were skilled workers. That was an extremely heavy and unbearable loss for the economy.
In addition, Mr. Hughes completely forgets that capitalist Russia formed part of world capitalism and shared in the division of labour of the world market. Even today we suffer from the lack of relatively insignificant and tiny objects that before the War we were unable to produce and whose production we were completely incapable of organising in conditions of blockade and civil war. Our friends who lead the economy have provided a few illustrations of this. For example, we require round and flat cables for our mines. We never produced them here ourselves. Mines in the Donets region suffer enormously from a lack of cables. Everyone knows that metal sieves, essential for paper production, were always imported from Germany and Britain, rather than being made here. Thus branches of industry that were self-sufficient before the War are suffering tremendously. Obviously, it is easy to demonstrate that under those conditions, after the first imperialist war had totally ruined the first army and the capitalist economy, no other government would have been able to conduct a new war for three years, supplying and equipping the army, and so on, without completely collapsing in the process. Only the Soviet government could do that. Obviously I do not intend to deny that we made major errors in this field.
Comrades, we must address the main issue. Even if we come to the correct and indisputable conclusion that, overall, Europe’s productive apparatus has deteriorated, despite the establishment of many factories, that the national income of the belligerent countries has declined by a third compared to before the War – so what? Right after the War ended, we saw a return to normal economic conditions. There was an expansion during 1919 and the beginning of 1920. Then a crisis broke out. Well, that in itself is a sure sign that everything is on the right track. The capitalist economy’s automatic mechanism came back into play, bringing the economy into equilibrium. That is the main point. First I will briefly describe economic trends in this period, which I already sketched out, without saying so, by describing production over the last two years.
The expansion began in the spring of 1919. The entire capitalist world awaited a great crisis and was in mortal fear of its consequences. Preparations had been made for this crisis. But the transition from the war economy to a postwar boom was made almost without encountering any difficulties. The bourgeoisie was very spirited. Prices rose feverishly during 1919 and 1920. Speculators made big gains. But that was not the case with production. That was clear in Britain, France, and especially in Central and Eastern Europe, where, in a period of so-called boom, the decline of production showed no signs of stopping. Nor did this boom affect all branches of industry in the United States, because war production had to be converted to a peacetime basis, that is, into production of coal, petroleum, automobiles, and ships.
Was there an industrial boom? It was simply a commercial and especially a speculative boom. That can be easily explained. The postwar boom had two causes, one economic and one political and financial. The economic cause was the fact that when the War ended, markets for foodstuffs expanded. Prices increased enormously, and the capitalists, who had profited from war speculation, threw themselves into commerce and speculation and made huge profits.
That was facilitated by the fact that the government, which had been very fearful prior to the transition to postwar conditions, simply maintained wartime practices in peacetime. The government continued in peacetime to issue paper money, fuelling inflation; to pay supplements to workers’ wages; to control exports and imports; and so forth. Military censorship and military dictatorship were also preserved after the War. In this way, the speculative wartime boom became a postwar boom, without a real increase in production. On the contrary, in many countries production continued to fall.
As for inflation, it can be best portrayed by the fact that the quantity of banknotes rose in France from 30 billion to 38 billion; in Germany, from 3 billion to 63 billion; in Italy, from 9 billion to 22 billion; and so on. If we consider Berlin, Paris, London, and New York in terms of the economic level before the War, we will find that approximately, purely schematically, in terms of statistics – I wanted to provide you with the statistics, but that would take an enormous amount of time – the level was about the same. Today, after the War and the period of speculative prosperity, we find the following: Germany is poorer; its productive apparatus is much weaker than before the War. France is also poorer, although less so. London, less again. New York, the United States, has become richer.
Turning now to prices, we can perceive the price level in the circulation of banknotes. During the period of prosperity, prices in Germany increased seven times over; in France, the increase was smaller; in Britain, smaller still; in the United States, much smaller. The gap between production and its price-determined superstructure is smaller there, and enormously greater in Germany. The poorer a country is, the richer it appears to be, if we consider its fictitious values to be real – its government debts, its banknotes, and so on. That is the reality of the last expansion, which was a speculative boom. But this fictitious boom, which resulted fundamentally in the impoverishment of the belligerent countries, played a real political role. It has been said by a British professor, who wrote a detailed article about this in the Manchester Guardian’s yearly review,[20] that ‘our most difficult year’ – for the ruling class, that is – was 1919. He says that people returning from the War were quite impatient about the economic situation, ‘and the impatience of men fresh from battlefields is dangerous’. And we prepared for this danger, he continues, by setting a large amount of money into circulation, millions upon millions. The government continues to be the largest artificial market. Workers received various governmental supplements to their wages in various forms, and capitalism was thereby preserved through this dangerous period of military demobilisation. Thus this fictitious boom helped capitalism to maintain its ground.
However, we must consider whether the boom achieved this task. It did increase production in various sectors, which shows that it is capable of raising production still further. Must we conclude from this that when a boom begins after attempted or failed revolutions, this signifies that the revolution is finished? Such a claim is based on the well-known exposition by Marx and Engels in 1850 – 1. In our political life, I believe, the Communist International will soon have to occupy itself a great deal with this question, especially if we now enter another period of expansion, which is far from excluded. I will read the quotation. Engels says here of Marx:
[It] became absolutely clear to him from the facts themselves ... that the world trade crisis of 1847 had been the true mother of the February and March revolutions, and that the industrial prosperity which had been returning gradually since the middle of 1848 and attained full bloom in 1849 and 1850 was the revitalising force of a restrengthened European reaction. That was crucially important.[20]
And in the autumn of 1850, Marx and Engels wrote:
A new revolution is possible only in consequence of a new crisis. It is, however, just as certain as this crisis.[21]
Even now, many comrades base themselves on the notion that crisis is the mother of revolution, and that prosperity is, so to speak, the gravedigger of revolution. This viewpoint was expressed in the commission established by the Executive. When a boom begins, the revolution is at an end. Well, comrades, the quotation that I read is extremely important, and it is not quite precisely expressed by these words. As a prophesy, it is false, and Engels himself concedes that it did not come to be. The crisis was not a cause of the revolution, and the crisis of 1847 was mother of the revolution only in a restricted sense. The revolution of 1848 arose from the pressures of capitalism, which collided with the [feudal] estates and combated them. The revolution of 1848 pretty much did away with the guild system and the survivals of serfdom, and thereby gave capitalism new scope for development. Only under these circumstances could the boom of 1848 – 9 and beyond mark a phase in the revolution’s development. The crisis was thus the last push to revolution, which developed out of the social relations and the development of capitalism, which had outgrown the feudal framework. The boom gave the last push to the end of the revolution, after this revolution had accomplished the most important immediate tasks: sweeping aside the guild system, and so on. Anyone who overlooks that will completely misunderstand the quotation.
More generally, capitalist development is not limited to these cycles of boom, then strain, decline, crisis, and gradual easing of the strain, and so on. That does not fully capture the development of capitalism in its entire historical scope; there is more to it than that. For capitalism has two types of motion. The first is the motion seen in the development of productive forces. The curve moves upward, and this ascension takes place through fluctuations and oscillations – namely, the fluctuations of crisis and boom. If we have stagnant development, let us say over a period of fifty years, we will still observe cycles, but they will not be as precise as in a feverishly vibrant capitalist country. If we examine capitalism that is developing upwards, we observe the same fluctuations, but the curve rises upwards. If we examine a decaying capitalist society, the curve points downward, but development still takes place through these fluctuations.
A table published in the Times this January displays for us a period of 138 years, from the wars for North American independence to the present day. During this time, if I am not mistaken, we had sixteen cycles, that is, sixteen crises and sixteen booms. Each cycle lasted about 8 2/3 years, that is, almost nine years. That is the zigzag motion.
The table shows an overall upward trend. It begins with £2 [in foreign trade] – that is, twenty-four gold marks – for each inhabitant of Britain. During this period the population increases approximately four times over, but foreign trade rises much more, reaching £30.5 per person in 1920. This is expressed in gold, not in current money, by which the total reaches £65 for each member of the population. We observe a similar development in production of pig iron. The two lines are more or less parallel through this period. We see that 1851, the year of which we have just spoken, marked the beginning of capitalism’s rapid development. Pig iron production in 1848 was 4.5 kilos per person. By 1913 this figure had reached 46 kilos. Then a reverse motion begins.
That is the overall outcome, the overall result of these 138 years of development. If we examine the curve more closely, we find that it consists of five segments. From 1781 to 1851, development is very slow – indeed, stagnant, during entire decades. Then from 1851, from mid-century, there is a movement upwards. We see this in the fact that foreign trade rose from £2 to £5 per person. It then rises, during twenty-two years, from £5 to £21. Pig iron production rose during these years from 4.5 kilograms per person to 13 kilograms. Then, beginning in 1873 – the year of the great crash – a period of depression begins. From 1873 to 1894, we observe stagnation in British foreign trade, even taking into account only real foreign trade, not the political profits, what foreigners left in Britain, and the proportion of capital invested abroad. In twenty-two years, there was a decline from £21 to £17.4. Then an upswing, going £17 to £30 in 1913. Then the War and postwar periods. Here we have the same story. From 1913 to 1917 there was very little increase. But from 1917 to today, it has reached £46. Comrades, this is very important for an understanding of the present situation and the situation that is now beginning.
Capitalist development is thus characterised by a primary movement and these secondary movements, which are always taking place on the foundation of the primary movement. Rise, decline, and stagnation – along this curve there are fluctuations, that is, improvement in the economy or crisis, but they do not tell us whether capitalism is developing or declining. These fluctuations are like the heartbeat of a living person. The heartbeat shows merely that he is alive. Obviously, capitalism is not yet dead, and because it lives, it must inhale and exhale. In other words, there must be fluctuations. But just as the inhaling and exhaling of a dying man is different from that of a growing individual, so too in this case.
It is very dangerous to rely on the quotation from Engels and disregard these fundamental facts. Immediately after 1850, when Marx and Engels made their observations, what began was not an ordinary, normal, usual expansion, but a time of rapid growth, after the 1848 revolution had broadened the basis for capitalism. That is the decisive point.
During this time of rapid growth, periods of prosperity and boom were always very pronounced, and the crises were superficial and brief in character. It was this period that put an end to revolution. The question before us now is not whether a period of expansion is possible but whether this fluctuation in the economy is following an upwards or downwards line. That is the most important aspect of the whole question.
This brings us back to the basic facts that we have discussed: Europe has fallen into decline; Europe’s productive apparatus is now on a much lower level than before; the economic centre has shifted over to the United States, not in gradual fashion but through US exploitation of Europe’s war markets and its thrusting aside of Europe on the world market. This is a historical situation that never existed before and will not happen again. In the course of four and a half years, Europe lost its entire strength – not only its current, living energy, but what had been accumulated – a generation of workers that were thrown into the War. That entire energy became the basis for the development and expansion of the United States. This fact, in my opinion, is what enabled the United States to carry out a complete about-face in such a short period of time.
However, this event is not something that can be repeated, because Europe, before its decline, had created an entirely artificial market for the United States, a market that cannot be replaced. After creating a market for the United States through its decline, Europe has now collapsed entirely as a US market. Before the War, the European market made up more than half – 60 percent – of US exports, and this proportion rose higher during the War. US exports rose to three times the prewar level. After the War, it turns out that Europe is a severely impoverished continent, which is quite unable to continue obtaining goods from the United States, because Europe has nothing to offer as an equivalent. It is unable to provide gold or goods in payment.
And that also explains the crisis that began in Japan and the United States. After the brief period of boom, which lasted a year and a half, a very real crisis began, which above all calls out to Europe: ‘You are poor, you are ruined; make do with what you have. You cannot import anything more from the United States.’ And the same crisis calls to the United States: ‘You got rich because you were able to bleed Europe white during four, five, six years of war. But that’s all over now. The countries over there are ruined. Their productive apparatus must be rebuilt from scratch and restored; each nation must re-establish its inner division of labour.’
The economies of France and Germany are moving along automatically, propelled by the impulse of prewar years and the War. Germany, however, must move backwards, in order to carry out a rebalancing and achieve proper proportions. Just as scarcity had to be organised in wartime, so it must be done today, unless a revolution takes place. If this process continues, it will be necessary to establish proportion in this impoverishment, beginning with the relationship among the many branches producing production and consumer goods. That means working out the necessary relationship through wars and through partial recoveries, unless revolution intervenes.
The same is true in France, in Europe as a whole, where a readjustment of relations is taking place during a time of economic regression, among the capitalist countries that have suffered most, that are most impoverished. During this readjustment, the United States as well will feel its impact, because what was formerly its most important market is no longer there to its previous extent. This signifies that, for the United States, the crisis is not transitory and normal, but the beginning of a lengthy period of depression.
Let us go back to our chart, where we have defined different periods of time: a period of stagnation, lasting seventy years; then a twenty-two-year period of expansion, from 1851 to 1873. We note that the twenty-two years of stormy growth included two crises and two booms. But the booms were really large, while the crises were shallow. Then from 1873 to the middle of the 1890s, there is another time of stagnation or very slow expansion. Then again an enormous rise. That is adaptation, adjustment. When capitalism in one country bumps up against the limits of its markets’ capacity to absorb, it must locate other markets and adapt to them. The character of these segments of time – whether of stagnation, rise, or decline – is determined by great historical events, such as economic crises, revolutions, and the like. That is the most important element in capitalist development.
At present, capitalism has entered a period of lengthy and deep depression. Really, the beginning of this period should perhaps be dated from 1913. That is looking backward; it is very hard to prophesy. It is not excluded that, after twenty years of rapid development that gave us the modern Germany, the world market had in 1913 already grown too narrow for the developed capitalism of Germany, Britain, and North America. And the fundamental truth of that statement is shown by the fact that these gigantic products of capitalist development then settled accounts on this issue. Each one told itself that, in order to avoid this decades-long depression, it would bring on the severe crisis of war, destroy its opponent, and claim a monopoly over this world market, which had grown too narrow. However, the War lasted too long. It brought about a crisis that was not only acute but very protracted, completely ruining the productive apparatus of Europe’s capitalist economy. It made possible the feverish development of the United States, bringing about Europe’s exhaustion, and thus leading to this great crisis in the US. We now have the very depression that they wanted to avoid, and it has now been escalated to the highest degree by the impoverishment of Europe.
That covers the main features of what I believe must be said, comrades, in describing the economic situation. We have not taken into consideration the entire revolution. Capitalism is still there and continues to develop, whether or not it has potential for growth. It was in 1919, I believe, after the first indications of this boom, that an Englishman – I believe his name is Paish – proposed organising an international loan of £2 billion, that is, more than 40 billion gold marks, in order to carry out reconstruction. It was then considered that if an international loan of this magnitude could be established, and the reconstruction work then undertaken, this would bring about a prosperity unprecedented in world history. In other words, this distorted picture of capitalism led these people astray to such a degree that they thought, ‘We have destroyed so much – cities, agriculture, railways – we have sunk so many steamships, that if we print a picture of all that is destroyed on government bonds and write on that, 40 billion to 50 billion gold marks, it will immediately make us immensely rich.’ The horrendous mechanism of capitalist society misleads even the capitalists themselves. Then it turned out not to be like that at all. The railways must now be restored on a level that is much lower than before the War, and that must be done in the face of total social devastation.
Now we come to the question of social equilibrium. It is always said – and this is the theme song not only of someone like Cunow, but of Hilferding – that capitalism automatically recreates its equilibrium on a new basis. This concept of automatic development is the most important characteristic of reformism. Of course capitalist equilibrium would be re-established, if only the social expressions of class struggle did not intervene in this cruel game. If the working class of Europe and the world were to submit passively to all capitalism’s experiments in re-establishing its normal inner relationships, this would mean that during twenty or thirty years, twenty or thirty million working men and women would be ruined in Europe – for emigrating to the United States is futile now. The United States has five million unemployed and will have even more during the next years and decades. Emigration can no longer serve as a safety valve. As I said, the unemployment question in the United States will remain a constant factor for many years to come. A generation of workers will waste away, and a new capitalist world equilibrium will be established, with the United States as the world’s leading power and Europe relating to the United States as Spain formerly did to Britain.
Imagine Europe’s shrivelled civilisation in the framework of a new restored capitalism. Theoretically, such a situation is conceivable. The automatic operation of capitalist society will lead it there, provided that we exclude the agency of class struggle. In this regard I have a very interesting statement by a quite clever German reactionary, Prof. Otto Hoetzsch. Writing on the economic situation, he says that we will now have to carry out wage reductions around the world. Workers will not take that lying down and will go out on strike. That is inevitable, whether we call it the automatic functioning of capitalism or capitalist exploitation. However, it is no trivial matter whether we face the automatic functioning of a capitalism as imagined by the opportunists, for whom only the will of the capitalist class is an objective reality. As these gentlemen see it, the will of the revolutionary class does not exist, and thus for them capitalism’s entire development proceeds automatically. Hoetzsch tells us we can call this either automatic functioning or exploitation. That means it will be automatic, if the working class is led by reformists, and it will lead to a rebellion against exploitation if the working class is led by a living Communist Party.
This puts a very different complexion on this process of restoring capitalist equilibrium. It is quite significant at this stage that Europe has been thrown back, that Germany is just as poor as it was in the mid-1890s. But Germany’s social structure has not been thrown back – quite the contrary. The intensification of social antagonisms during the twenty prewar years has been heightened even more by the course of the War and postwar years, by the period of prosperity and also the period of crisis. So we have a decline in the economic foundation of both national property and income and, simultaneously, a heightening of class antagonisms. That means simply a sharpening of struggle of the classes concerned with their share in this diminishing national income.
And that is the catch in the schematic portrayal of the restoration of equilibrium imagined by people like Heinrich Cunow and others. Everything that capitalism is forced to do in order to take a step in the direction of restoring equilibrium only ruins it even more and drives the working class into even more energetic struggle.
The first task in achieving the new equilibrium is to put the productive apparatus in order. That requires the accumulation of capital. For this accumulation, the productivity of labour must be increased. How? Through heightened and increased exploitation of the working class – since the reduced productivity of labour after the War, during the last three years, is an evident fact. In order to restore the world economy on a capitalist basis, a universal equivalent is required – the gold standard. Without the gold standard, capitalist economy cannot exist. For when prices execute their danse macabre, bouncing up or down by 100 percent in the course of a month, as often happens in Germany, in response to fluctuations in the value of Germany’s currency, then production does not take place. The capitalist is then not interested in production because speculation, beckoning from afar, offers greater profits than the slower development of production.
What does it mean to re-stabilise the currencies? For France and Germany, it means declaring national bankruptcy. But a declaration of national bankruptcy entails an enormous shift in the country’s property relationships. States that have declared national bankruptcy face a new struggle for shares in the new national property. That signifies a giant step toward class struggle. All this also means the loss of social and political equilibrium, and therefore a revolutionary movement.
However, declaration of national bankruptcy does not bring restoration of equilibrium, but rather brings the lengthening of the workweek, abolition of the eight-hour day, heightened intensity of exploitation. This, of course, runs into immediate resistance from the working class, since – to use Hoetzsch’s words – that is capitalist exploitation. In a word, the restoration of capitalist equilibrium is possible, in an abstract, theoretical sense. But it does not take place in a social and political vacuum; it can be achieved only through social classes. Each step toward restoring the equilibrium of economic life, even the smallest, means a blow to the fluid social equilibrium on which these gentlemen are dependent. That is the key factor.
From this we can draw the conclusion that the course of events, whether rapid or slow – we cannot argue about the tempo of events, after history has betrayed us so infamously in this matter – leads to revolution. There is no victorious proletarian dictatorship in Central or Western Europe. But to have the audacity to claim, as the reformists do, that capitalist equilibrium has been insidiously re-established during this period – this is an insolent and ignorant lie. Even the most reactionary of the reactionaries do not say this, if they have a modicum of brains, like Hoetzsch. In his annual review, he says roughly that the year 1920 brought neither revolutionary victory nor restoration of the capitalist world economy. He said it is a fluid and quite restricted equilibrium.
Chavenon, whom I have quoted, says that for now France’s only option is to further ruin the capitalist economy through budgetary measures and inflation of banknote circulation, leading to overt bankruptcy. I have made an effort to explain what that means. I have portrayed the most acute crisis that the capitalist world has ever experienced. Three or four weeks ago, you could sense in the capitalist press a hint of an approaching recovery, an approaching period of prosperity. Now this breath of spring has been revealed as premature. There has been a modest improvement in the financial situation, which is under less strain than before. In commerce, prices have dropped, which means no revival of commerce. The stock markets are lifeless, and production is still on the decline. Only a third of American metallurgical productive capacity is being utilised. In Britain, the last of the blast furnaces have been shut down. A downwards trend is still to be seen.
This downwards trend does not signify that things will continue in this fashion forever. That is excluded. The capitalist organism will have to inhale. It will have to inhale some fresh air in the form of a degree of recovery, but to call it prosperity would be premature. A new stage must begin, in order to eliminate the contradiction between this superstructure of fictitious wealth and the poverty that underlies it. The economic body will continue in the future to be wracked by spasms of this type. Altogether, as I have said, this offers us a picture of profound economic depression.
This depression will compel the bourgeoisie to press the working class harder and harder. This can be seen already in the wage reductions that have begun in the buoyant capitalist countries – the United States and Britain – and then spread across all Europe. That leads to major wage struggles. Our task is to broaden these wage struggles and imbue them with an understanding of the economic situation. That is quite obvious. But the question is whether these major wage struggles – the miners’ strike in Britain provides the classic example – will automatically be transformed into social revolution, the ultimate civil war, and struggles to win political power. To pose the question in that way would be non-Marxist. We have no such automatic guarantee regarding the course of events.
But if this crisis gives way to a transitory boom, what does that mean for our development? Here, many comrades say that if a recovery begins in this period, it will be the undoing of revolution. By no means. For there is simply no automatic linkage between the revolutionary working-class movement and crisis. Rather than an automatic linkage, what we have is a dialectical interaction. It is crucial to understand this.
Let us review what happened in Russia. The revolution of 1905 was suppressed. The workers suffered major losses. The last revolutionary spasms were in 1906 and 1907. In the fall of 1907 a great world crisis began, announced by a Black Friday on the New York stock exchange.[22] A very severe crisis weighed on Russia during 1907, 1908, and 1909. This crisis completely crushed the movement in Russia. Given that the workers had suffered so much in struggle, the depression necessarily had a crushing effect. At the time, we in Russia debated what would lead to revolution: a crisis or a period of recovery, and many of us then advanced the viewpoint that only a new expansion could revive the revolutionary movement in Russia. And that is what happened. During 1910, 1911, and 1912, we experienced a recovery and a boom, which rallied the demoralised, debilitated, and discouraged workers. They once again realised their importance for production, and went over to an offensive, first economic and then political. On the very eve of the War, we saw the working class so strengthened by this prosperity that it could have gone over to the attack.
And so today, in a time when the working class is deeply exhausted by the crisis and the struggles, if it is not able to achieve victory – which is quite possible – a change in the economic situation, a spell of prosperity, would not be harmful for the revolution but, on the contrary, would be extremely positive in its effects. It would be harmful only if this boom marked the onset of a lengthy period of prosperity. And the precondition for such a protracted prosperity is an expansion of the market. But this is excluded. The capitalist economy embraces the entire globe. Europe’s impoverishment and the lucky rise of the United States in the vast war markets justify the assumption that this prosperity cannot be restored through capitalist development in China, Siberia, and South America – areas where American capitalism finds and secures markets, of course, but to an extent that bears no relationship to the European market. Therefore, we are on the edge of a period of depression; there is no disputing that.
In this framework, a recovery from this crisis would signify not the death knell of the revolution, but rather a possible breathing spell for the working class, in order to resume the offensive on a higher level. That is one possibility. The other is that the crisis shifts from severe to sluggish, and then grows severe again, stretching out for years. None of this is excluded. It is quite possible that the working class, grown astute through experience, will summon up all its strength in the major capitalist countries and win state power. The only variant that is excluded in the years ahead is the automatic restoration of capitalist equilibrium on a new basis and a new capitalist upsurge. Given the overall economic stagnation, that is completely impossible.
However, there is another factor that must be considered: the international situation; the relationship among the capitalist states. I have already taken much too much of your time and will strive to be as brief as possible. In a word, the result of the War in this domain, that of international relations, is the opposite of what the War was supposed to achieve. What did the War mean? The War is armed imperialism, imperialism wielding its weapons. What is imperialism? It is capitalism’s drive to eliminate small countries. And ‘small country’ means not just Switzerland – no, it means France, Germany, and so on. Capitalism strives to create a world imperialism for the capitalist productive forces. That is the nature of imperialist development. Germany gave this tendency its most striking and sharp expression. Germany declared: All Europe under our control! France wanted from the start to partition Germany. The spirit of French capitalism set its stamp on the constellation of European states. We now have small countries in Europe in a manner quite different from before the War. Where Austria-Hungary stood, there are now ten tariff boundaries. To employ a much-used expression, Europe has been completely Balkanised.
These frictions and antagonisms, which led to the growth of militarism, have not been removed. Their effect is much stronger than before. Prior to the War, in 1914, the world’s armies (excluding Russia) amounted to 5,152,000 men; now, in the first half of this year, the total is 7,014,000. So militarism has increased. If we include Russia at the time when its armies were at their peak, the second figure is even higher. Even in Central and Southeast Europe, a region that is fully exhausted and impoverished, we see a growth of militarism, precisely as a result of the many new states, each with its tariff barrier, its border, and its army. It is just the same with naval construction. This militarism is also the greatest impediment to economic development. Indeed, one of the most important causes of the War was the concept that Europe’s economy could not tolerate an armed peace. Better a horrific end than horror without end. But now it has been shown that the end is no end at all, and that the horror after the end is even worse than before the horrific end, namely, the recent war.
The antagonism between France and Britain grows increasingly acute. We need only follow the semi-official French press. The antagonism between Britain and the United States has, however, has actually been growing in automatic fashion – and here we have a genuine automatic process – bringing closer tomorrow’s bloody collision. Everyone knows what the motive forces of this antagonism are; we have seen them in the economic statistics. Britain has been driven out of its position as the dominant economic power on the world market. British industry is decaying. Two American workers produce as much as five in Britain. That has been confirmed by American and British statistics, by the best British economic journal. Two American workers, thanks to better organisation, produce as much as five workers in the highly conservative fabric of Britain’s economy.
Britain has been displaced in the field of coal exports. As I have said, the United States produces 70 percent of petroleum, which has now become the most important factor internationally. Now the Americans are complaining about Britain. In recent years the British have been buying up petroleum resources around the world and now own about 90 percent of the world’s petroleum resources. These resources currently are only a potential; you might say they are underground. Over there, in the United States, the wells produce 70 percent of the [world’s] petroleum, which is then flung at the internal and external market. As for Britain, however, it has located the oil resources geologically, but to exploit them capital must be invested, which is unavailable. If the time comes when Britain possesses 90 percent of the petroleum reserves and the US wells begin to run dry, if that were the case, this would be one more reason for the United States to hasten the day of a decisive battle. In defence of their claims to Mexican and Mesopotamian oil, the Americans say, ‘Within ten to fifteen years our automobile-based economy will be left without any petroleum. We'll be high and dry.’ Well, if that were true, it would be just more reason to go to war before that dreadful day arrives. There is nothing more acute, precise, and automatic.
In 1924, the tonnage of the US navy, based on current construction, will be significantly greater than that of the British and Japanese navies taken together. Until now, Britain’s guiding principle has been that its navy must be stronger than the next two strongest navies taken together. Now North America is acquiring a navy stronger than those of Britain and Japan combined. Many Americans in the Democratic Party are shouting, ‘By 1923, and perhaps even by the end of 1922, we will be just as strong as Britain.’ The warning memento mori [remember you must die] is now inscribed in Britain’s calendar: if you let this moment slip by, you are finished.
Before the War, we had the armed peace. It was said that two railway trains were on the same track, speeding toward each other, and that their collision was inevitable. But just where this would happen was not known; the hour was not marked down in the calendar. Now we have it inscribed on the pages of the calendar of world history. It will happen in 1923 or 1924. Either Britain will say, ‘I am being shoved aside and converted into a second-rate power’, or it will summon all the strength it has inherited from the greatness of its past, cast this strength into the grisly game, and bet its entire future on this card, within a quite limited period of time.
All relationships, alignments, and groupings among the various second- and third-rank powers are now subordinated to this, the fateful question for the capitalist world. It is hardly a moment suitable for restoration of capitalist equilibrium. That is quite evident from the standpoint of the ruling classes and also for the working classes of not only these two countries but the world. Social development and antagonisms have sharpened to that degree. The economic foundation has fallen, and in the foreseeable future it will not rise again, or its rise will be insignificant. It will necessarily fall in a number of countries and in significant branches of production. Social divisions will be more acute. So too will international relations, simply because the world has grown poorer. That is true in relations among the national capitalist classes and also among the social classes.
Let us consider the social classes. We have the monopolised bourgeoisie, which utilises its monopoly to exploit impoverishment and grow richer out of it, and the non-monopolised bourgeoisie, which is growing poorer both absolutely and relatively. Their profits are declining; they are threatened with ruin; their proportional share of national income becomes smaller and smaller.
As for the peasantry, in the early stages of the War, it seemed to be growing richer. Peasants collected a great deal of paper money and paid off mortgages. It’s on this basis that apologists for capitalism asserted that the capitalist economy had become more stable. However, as our theses explain,[23] agriculture consists not of paying mortgages but of cultivating the soil. In this regard, the peasantry has been placed in a most difficult situation by the decay of industry. We see the impoverishment of the farmers in the United States, Canada, Australia, and South Africa. In Japan we see a broad movement of tenant farmers. Across Europe, the broad mass of the peasantry is experiencing increasing difficulties. As for the so-called new middle classes, on whose stability both conservatives and reformists based all their hopes, these new middle classes are decaying more and more as a result of the overall impoverishment and, in particular, the collapse of the currencies. The peasantry is changing from a force sustaining the state to a force for unrest and rebellion.
For the working class, this creates a situation that is on the whole very favourable in terms of revolution but is simultaneously very complicated. We do not have before us the chaotic, elemental onslaught whose first stage was visible in Europe in 1918 – 19. We then had some historical justification in thinking that, given the bourgeoisie’s disorganisation, this onslaught could press onward, rising higher wave by wave, that in this process the thinking of leading layers of the working class would clarify, and that, within one or two years, the working class would achieve state power. It was historically possible. Well, it did not happen.
History, with the help of the bourgeoisie’s own good or bad intentions, cunning, cleverness, organisation, and instinct for power, granted this class a rather long breathing spell. There were no miracles. What had been destroyed, burned, and shattered did not come back to life. Nonetheless, in this impoverished environment, the bourgeoisie was well able to get its bearings and restore its state, taking advantage of the working class’s weaknesses. Since then the situation has become more complicated, but it remains favourable from a revolutionary point of view. Perhaps we can now say with greater confidence that the situation is fundamentally completely revolutionary. But the revolution is not so obedient and tame that it can be led around on a leash, as we once thought. It has its ups and downs, its crises and its booms, determined by objective conditions but also by internal stratification in working-class attitudes.
After the War and three postwar years, we now have before us an entirely new working class. This is not the prewar working class, which grew up systematically during the prewar expansion and organised itself industrially, in trade unions, and to some extent in parties, with all the prejudices and also the advantages of that epoch. We now have a newly constituted working class, which has grown feverishly out of the ruined petty bourgeoisie, the peasantry, and the working-class women who were previously housewives and are now women workers. The drawing of working-class women into paid labour is particularly significant in France and Japan. This new working class also includes the old layer of trade unionists, the old party bureaucrats, and the skilled workers from before the War, educated by the unions and always careful to pay their dues, in order through the unions to gradually obtain a better life. It also includes the working-class youth, awakened to life by the thunder of war. All these forces have been drawn, thrown, and catapulted into political struggle by these great events. One layer learns lessons at a different time than another. One layer burns its fingers and becomes somewhat more cautious, even as another is eager for struggle without foreseeing the consequences of this struggle. That explains why the situation evolves in so much more complicated a fashion. Of course, if the bourgeoisie had given way right at the outset, we could have educated the workers later on. If we held power, we could have educated the backward layers. But the bourgeoisie has kept the state apparatus in its hands, mounting a fearful resistance, and we collide with this resistance, one layer of the working class after another. And here the most important task of the Communist Party becomes the process, on this foundation, of welding these different layers together, politically and organisationally, in the struggle against capitalism. The most important task is winning and welding together these layers. And in the midst of these complicated class relationships, we must be able to struggle at the head of these masses. The peasantry is a much more favourable milieu for us than it was before the War.
It is possible that when the showdown struggle breaks out, the new middle classes will cling to their mother, to the bourgeoisie. However, in a time of growing struggles, it has become possible to neutralise these middle classes politically, that is, to prevent them from fighting against us. We also see the struggle within the bourgeoisie. We will not seek, as the opportunists do, to become representatives of the non-monopoly bourgeoisie. We must rally the working class around us and, increasingly, gain a foothold in the peasantry and middle class. In this way we will sharpen the struggle between the monopolised bourgeoisies of France and Britain, who are now conducting their decisive battle for power.
To sum up, the situation now, at the time of the Third Congress, is not what it was during the First and Second Congresses. Then we mapped out the broad perspectives and the general line, saying that this line, this direction will enable you to win the proletariat and the world. Is that still true? Absolutely! In this broad sense it is completely correct. However, we did not predict the ups and downs along this line, and we are noticing them now. We notice them through our defeats and disappointments and the great sacrifices and also through our erroneous actions, which took place in all countries, including major errors here in Russia. Only now do we see and feel that we are not so extremely close to the final goal, the winning of power, the world revolution. At that time, in 1919, we thought it was a matter of months, and now we say it is perhaps a matter of years. We cannot say precisely, but we know all the better that development is headed in this direction, and that during this period we have become much stronger around the world.
We do not yet have the majority of the world proletariat on our side. However, we have a much greater portion than was the case one or two years ago. Analysing this situation tactically – an important task of this congress – we must conclude that the struggle will perhaps be prolonged and perhaps will not stride forward as feverishly as one might wish; the struggle will be difficult, demanding many sacrifices. Accumulated experience has made us more astute. We will be able to manoeuvre in and through this struggle. We will know how to apply not only the mathematical line, but also how to utilise the changing situation for a purely revolutionary line. We will also know how to manoeuvre during the decay of the capitalist class, always with the goal of bringing the working-class forces together for social revolution. In my view, both our successes and our failures have shown that the difference between ourselves and the Social Democrats and Independents does not consist in the fact that we said we will make the revolution in 1919 and they responded that it will come only later. That was not the difference. The difference is that, in every situation, the Social Democrats and Independents support the bourgeoisie against the revolution, whereas we are ready and will remain ready to utilise every situation, whatever form it takes, for the revolutionary offensive and for the conquest of political power. (Thunderous applause)
1. This report, printed here as published in the congress proceedings, was subsequently edited and expanded by Trotsky for separate publication. An English translation of the expanded version can be found in Trotsky, The First Five Years of the Communist International, vol. 1, pp. 174 – 226.
2. The January 1919 events refers to the suppression of the so-called Spartacus uprising in Berlin, during which Rosa Luxemburg and Karl Liebknecht were murdered by government troops. The March 1919 events refers primarily to the Freikorps attack on Lichtenberg, a Berlin stronghold of the revolutionary workers’ movement, on 9 – 12 March, in response to a false rumor published in Vorwärts that revolutionaries had stormed a police station and executed seventy officers in cold blood. Between armed battles with revolutionary workers and summary executions, the Freikorps killed up to 1,500 and wounded 12,000 workers.
3. On 13 March 1920, Wolfgang Kapp and Walther von Lüttwitz led a military coup that overthrew the republican government led by the SPD. While the SPD itself offered little resistance, officials of the SPD-led trade-union federation[0] called a general strike that was observed by twelve million workers, virtually the entire proletariat. In the face of the general strike and developing armed workers’ resistance, the coup collapsed by 17 March. Subsequently, German army units attacked worker detachments that had led resistance to Kapp.
4. A one-day general strike in France on 1 May 1920 opened a broad strike movement of CGT unions led by the railroad workers, eventually involving nearly 1.5 million workers. In face of severe repression, the railroad strike ended a month later in defeat, with 22,000 workers losing their jobs.
5. In April 1920 Polish troops launched an offensive in Soviet Ukraine. The Red Army was able to push them back into Polish territory and then continued its advance toward Warsaw, where it was stopped. Soviet troops were then forced to retreat. An armistice ending the war was signed in October.
6. A general strike in Norway lasted from 26 May until 6 June 1921. Called by the Norwegian federation of trade unions in solidarity with a strike by seamen against massive wage cuts, the strike involved 120,000 workers, virtually the entire proletariat of the country.
7. The Second International’s Stuttgart Congress, held 18 – 24 August 1907, was the scene of a debate on war and militarism. A left-wing amendment to the congress resolution, proposed by Rosa Luxemburg, V.I. Lenin, and Julius Martov and approved by the congress, read, ‘In case war should break out,’ workers must ‘intervene for its speedy termination and to strive with all their power to utilise the economic and political crisis created by the war to rouse the masses and thereby hasten the downfall of capitalist class rule’. For the full text of the resolution adopted, see Riddell (ed.), Lenin’s Struggle for a Revolutionary International 1907-1916 (New York: Pathfinder Press, 1984), pp. 33 – 36.
8. In 1921 a gold mark was worth about US$0.25.
9. One hundred pfennigs equalled one mark.
10. Both the German and Russian texts here read, ‘twenty-eight years’ and ‘four billion marks’. The translation follows Trotsky’s edited text in First Five Years of the Communist International, (New York: Pathfinder Press, 1972), vol. 1, p. 186.
11. As part of the Versailles Treaty, Alsace and Lorraine – predominantly German-speaking territories that had been ceded by Germany following the Franco-Prussian War of 1871 – were to be annexed by France. The coal-rich Saar Basin, formerly German-held, was to be administered by the League of Nations for fifteen years, after which a plebiscite would be held there on whether it would belong to France or Germany. During that time, coal from the region was to go to France.
12. In July 1921 one French franc exchanged for approximately US$0.13.
13. The German text here reads, ‘three billion francs'; the translation follows the Russian text.
14. A reference to Thesen zur Weltlage und die Aufgaben der Kommunistischen Internationale, which Trotsky co-authored.
15. The German text at this point reads 7,709 billion, an apparent misprint. The Russian text is also garbled. The translation follows Trotsky’s edited text,
16. Trotsky’s edited text makes clear that Trotsky is comparing the value of the pound relative to its prewar relationship to the US dollar. In July 1921 one pound sterling exchanged for US$3.56.
17. A sovereign was a gold coin with a nominal value of one pound sterling.
18. By one estimate, US$1.00 in 1921 had the same buying power as US$11.30 in 2011.
19. The author of the article Trotsky quotes is Edwin Cannon.
20. Frederick Engels, introduction (1895) to The Class Struggles in France, 1848 – 50, Marx and Engels, Collected Works, vol. 27, p. 507.
21. From Marx and Engels, ‘Review: May to October [1850]’ in Marx and Engels, Collected Works, vol. 10, p. 510. The same quote appears in Marx, The Class Struggles in France in Marx and Engels, Collected Works, vol. 10, p. 135.
22. A reference to the panic of October 1907, in which the New York Stock Exchange fell nearly 50 percent from its peak of the previous year. The panic spread throughout the country, with many banks and companies going bankrupt.
23. A reference to the ‘Theses on the World Situation and the Tasks of the Communist International’.