World Perspectives 2016: Advancing Counterrevolution and Acceleration of Class Contradictions Mark the Opening of a New Political Phase

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A new political phase has begun. The following document summarizes the most important political developments in the world during the last 12 months which mark the opening of this new phase. Based on this analysis we offer an outlook for 2016 and elaborate the crucial tasks for the working class. We will not deal with all issues in similar detail, since the Revolutionary Communist International Tendency (RCIT) has published extensive statements and analysis on many of them in the recent past. Therefore, in this document we shall focus on our analysis of the world situation, while elaborating in less detail the RCIT’s strategic and tactical conclusions for the class struggle. For these latter perspectives we refer readers to our recently published Open Letter for Revolutionary Unity as well as other documents. ^[1] Finally we draw the readers’ attention to the fact that this document expands upon the analyses of the global political situation which the RCIT has published during the past three years. [2]

 

I.             The Main Features of the New Political Phase

 

1.             The following issues will be decisive on world politics in the coming period:

i)             The stagnation of the global capitalist economy and the looming next Great Recession;

ii)            The advancing counterrevolution as a result of the offensive of the bourgeoisie against the working class and the oppressed exemplified by (a) the anticipated liquidation of the Syrian Revolution by a Great Powers’ settlement, (b) the rise of the right-wing forces in Latin America, and (c) the increasing repression and militarization of the EU.

iii)           The accelerating imperialist war drive – by the US, Russia, UK, France and Germany – in the Mashreq and Maghreb (Middle East and North Africa) against Islamist-led popular rebellions and, related to this, the stream of refugees flooding into the neighboring countries as well as into Western Europe;

iv)           The continuing aggravation of the inter-imperialist rivalry between the western imperialists (the US, EU, and Japan) on one hand and the eastern imperialists (Russia and China) on the other.

2.             The counterrevolutionary offensive in the context of the accelerating capitalist contradictions opens a new interim period. In this period the working class and the oppressed – particularly in the Mashreq and Maghreb, Latin America and Europe – are faced with the danger of serious defeats. Against this backdrop, the working class suffers particularly seriously from its crisis of leadership. Given the lack of revolutionary leadership, the working class and the oppressed are misled by reformists, petty-bourgeois nationalists and Islamists.

3.             At the same time the class struggle is on the rise in the two most populous and demographically growing continents, Africa and Asia. While, with important exceptions, many of these struggles currently ostensibly have just an economic character, they reflect the growing importance of these regions of the world proletariat (one could say its “strategic reserve divisions”). In particular, the economic crisis in China, combined with an increasingly combative and self-confident proletariat, could result in a political explosion. Naturally, such a possible revolutionary situation in the world biggest country and one of the two biggest imperialist powers would have dramatic global implications and would immediately change the character of the current political phase. However, here too the working class desperately needs new, revolutionary leadership in order to meet the challenges.

4.             The accelerating crisis of the global capitalist system will unavoidably sharpen – in all world regions – the clashes and struggles being waged along the three fronts of imperialism’s contradictions: (a) the struggle between the bourgeoisie and the world proletariat; (b) the struggle between the Great Powers and monopoly capital against the oppressed people in the South; and (c) the conflicts between the imperialist rivals. These, in turn, will provoke revolutions, counterrevolutions and wars, and offer numerous opportunities (as well as dangers) for the working class to advance in its struggle for liberation.

5.             This is why the RCIT considers the main task to be the overcoming of the crisis of working class leadership by advancing the formation of a revolutionary party, both nationally and internationally. In order to draw closer to this goal, the RCIT calls for serious discussion and if possible steps towards unification among serious revolutionary forces. This is the purpose of the RCIT’s Open Letter which we launched recently.

II.            The Decay of the Productive Forces and the World Historic Revolutionary Period which Opened in 2008

 

6.             As we have outlined in numerous documents during the past seven years, a world historic revolutionary period opened in 2008 with the start of the Great Recession which brought about the acceleration of class contradictions and exacerbated inter-imperialist rivalry. [3] The political phases within this historic period are impossible to understand without a clear picture of the period itself since it is such periods – lasting for years, if not decades – which constitute the economic and political contexts of the fundamental dynamic of class contradictions and is the result of the development of the productive forces and the relations between the oppressor and oppressed classes as well as between the imperialist powers.

7.             Most fundamentally, the new historic period which opened in 2008 is characterized by a dramatic decay of the productive forces. While the epoch of imperialism is generally marked by a stagnation of the productive forces, within it there are periods of varying tempos and dynamics for the development of the productive forces. For example, a period of relative growth, as was the case during the “long boom” in the 1950s and 1960s, was an exception to the overall trend of the epoch, and was attributable to the revitalization of productive forces which had been utterly devastated during the preceding decades by two world wars. Furthermore, the groundwork for this resurgence of capitalistic growth was laid by the historic defeats of the working class, the establishment of the US’s absolute political, economic and military hegemony in the imperialist camp, and the reactionary Yalta agreement between the victorious imperialist powers and the Stalinist bureaucracy. However, such an exceptional period of a “long boom” could not last for very long. It ended in the late 1960s with the revolutionary events in 1968, the collapse of the Bretton Woods system, and a recession in 1974/75. A new period of crisis, depressed accumulation of capital, and ever-strengthening contradictions of capitalism created the preconditions for the eventual financial meltdown of 2008 and the opening of the new historic period. [4]

8.             The fundamental cause behind depressed capital accumulation (or over-accumulation) and the consequent crisis-ridden business cycle of the capitalist world economy is the law of the tendency of the rate of profit to fall. As Marx elaborated in Capital Vol. III, this means that, in the long run, the share of surplus value becomes smaller relative to all of the capital invested in production (in machinery, raw materials, etc., as well as wages as wages paid to workers). Therefore, the surplus value which can potentially be used for the reproduction of capital on an extended level becomes less and less. This inevitably leads to disruptions and crises and a historic tendency of decline. While numerous left-reformists and centrists (e.g., the CWI) openly or clandestinely ignore this law, Marx emphasized:

„This is in every respect the most important law of modern political economy, and the most essential for understanding the most difficult relations. It is the most important law from the historical standpoint. It is a law which, despite its simplicity, has never before been grasped and, even less, consciously articulated.“ ^[5]

9.             A number of Marxist economists – like Andrew Kliman, Michael Roberts, Guglielmo Carchedi, Alan Freeman, Minqi Li, Feng Xiao, Andong Zhu and Esteban Ezequiel Maito – have demonstrated in their works the historic validity of the law of the tendency of the rate of profit to fall (see e.g., Figure 1, 2. 3 and 4). Naturally, over-accumulation of capital and the tendency of the rate of profit to fall is not a linear process, but its tempo and dynamics are influenced by various counter-veiling tendencies – most importantly by the relation of forces between the classes, i.e., the political class struggle. [6] However, while such factors can for some time slow down or temporarily halt the fall of the rate of profit (as happened in the 1990s, for example, as a result of the coalescing neoliberal offensive, advance of imperialist globalization, and the collapse of the Stalinist workers’ states), they cannot stop – or even reverse – the decline for in the long run.

 

Figure 1. World Rate of Profit and Average Rate in Core and Peripheral Countries (1869-2010) ^[7]

 

Figure 2. World Rate of Profit (G20 Countries), 1950-2011 -Simple Mean, in % ^[8]

 

Figure 3. Profit Rate and Accumulation, "World" 1870-2005 [9]

 

Figure 4. Inflation-Adjusted Before-Tax Profit Rates, 1947-2009 (US Financial as well as Nonfinancial Corporate Sector) [10]

 

10.          The tendency of the rate of profit to fall led in turn to a decline of the rate of capital accumulation, i.e., the expanded reproduction of capital, as well as of output. In Table 1 we see the decelerating dynamic of the growth of the global Gross Domestic Product from an annual average of +3,8% in the 1970s to +3,2% (1980s), +2,8% (1990s), +2,6% (2000s) to +2.4% (2011-2013). The industrial sector, which is a better indicator for the dynamic of capitalist output because it represents the core of capitalist value production, shows an even clearer declining tendency in the old imperialist countries. As Table 2 demonstrates, industrial growth has declined in the imperialist centers from a positive range of 5–13% in the 1960s down to an actual reduction in the 2000s.

 

Table 1. Average Annual Growth Rate of the World Gross Domestic Product, 1971–2013 (in % p.a.) ^[11]

 

1971–1980           +3.8%

1981–1990           +3.2%

1991–2000           +2.8%

2001–2010           +2.6%

2011–2013           +2.4%

 

Table 2. Growth Rate of Industrial Production in USA, Japan and EU-15, 1961–2010 (in % p.a.) ^[12]

 

                                USA                       Japan                    EU-15

1961–1970           +4.9%                    +13.6%                  +5.2%

1971–1980           +3.0%                    +4.1%                    +2.3%

1981–1990           +2.3%                    +3.9%                    +1.7%

1991–2000           +4.0%                    +0.1%                    +1.6%

2001–2010           -0.2%                     -0.4%                     -0.3%

 

11.          The tendency of capitalist decline becomes even more pronounced if we examine the dynamic of capital accumulation in the imperialist metropolises during the same period (see Table 3 as well as Figures 5 and 6). While the growth rate of capital accumulation in the US, Japan und EU-15 was between 5% and 15% in the 1960s, it declined to between 2% and 5% in the subsequent decades. In the first decade of the new millennium, there was outright stagnation or even decline (with a growth rate of between +0.4% and -1.9%). Figure 7 shows the marked slowdown of growth of the capital stock in Germany. On a global scale, capital investment as a share of GDP declined from 26.1% in the 1970s to 21.8% in 2009. [13]

 

Table 3. Growth Rate of Gross Fixed Capital Formation in USA, Japan and EU-15, 1961–2010 (in % p.a.) ^[14]

 

                                USA                       Japan                    EU-15

1961–1970           +4.7%                    +15.7%                  +6.0%

1971–1980           +3.3%                    +3.5%                    +1.9%

1981–1990           +3.5%                    +5.7%                    +2.8%

1991–2000           +5.4%                    -0.6%                     +1.8%

2001–2010           -0.4%                     -1.9%                     +0.4%

 

Figure 5. Nominal Net Fixed Capital Formation in Western Imperialist Countries, 1991-2014 (as % of GDP) ^[15]

 

Figure 6. Net Investment and Capital Stock Growth before and since the Great Recession ^[16]

 

Figure 7. Germany: Capital Stock Growth Rate Declining ^[17]

 

12.          To this we should add that, in bourgeois economic statistics, the category of Gross Fixed Capital Formation is a figure distorted upward since it includes dwellings (the “value” of which can be unjustifiably high given the speculative nature of the property market) and intangible assets (which includes “investments” to buy trademarks, copyrights and patents from others). In its recent outlook on the global economy, the United Nations points out that official investment figures massively overestimate productive capital accumulation: “Investment in productive capital has been even weaker than the total investment figures suggest, as dwelling and intangible assets account for the majority of investment in developed economies. According to OECD data on fixed capital formation, investments in intangible and intellectual property assets together represent the largest share of fixed capital formation in a number of developed economies in 2014, including in Germany (47.2 per cent) and the United States (42.3 per cent). Acquisition of intangible assets, such as trademarks, copyrights and patents, may increase financial returns to firms without necessarily increasing labour productivity or productive capacity.” ^[18] In addition, a decreasing share of investment is used to expand capital stock, and instead is increasingly directed to replacing depreciated fixed capital. According to the McKinsey Global Institute, 56% of global gross capital formation is used to replace consumed capital, while only 41% is channeled to net capital investment. (The remaining 3% is invested in replacing inventory). ^[19]

13.          As the rate of profit declines, capitalists prefer not to invest their money in the real economic production but instead use it to speculate in the financial sector. This trend has been particularly observable in recent years. As we have discussed in previous World Perspective documents the US administration reacted to the Great Recession with so-called quantitative easing (QE). ^[20] This means that central banks buy up government, corporate and mortgage bonds by “printing” money by the central bank in the hope of injecting “liquidity” into the economy. It was nothing less than this state-capitalist financial Keynesianism which kept interest rates low so that the capitalist class, which is deeply in debt, would have to pay only minimal interest and while at the same time boosting the prices of bonds and shares, thereby increasing the profits of financial capitalists. However, it did not revitalize the accumulation of capital in the real economy. The United Nations, expressing their narrow bourgeois view considers this development as “surprising”. It reports: ”While QE injected liquidity into the financial system, a significant portion of that additional liquidity actually returned to central banks’ balance sheets in the form of excess reserves, which possibly explains why QE has had only limited effects on boosting aggregate demand or investment rates in many developed countries. Between January 2000 and August 2008, the excess reserves of banks on the Fed’s balance sheet averaged $1.8 billion. The total volume of excess reserves in the Fed reached $1 trillion by November 2009. As of October 2015, the Fed has excess reserves of $2.6 trillion, which represents nearly 75 per cent of total assets purchased by the Fed since the onset of the financial crisis. The ballooning of excess reserves since the crisis demonstrates that financial institutions generally chose to park their cash with the Fed instead of increasing lending to the real economy” ^[21] (see Figure 8).

 

Figure 8. Excess Reserves of Financial Institutions Held with the United States Federal Reserve ^[22]

 

14.          Finally, we can also verify the declining dynamic of the productive forces by looking at the development of labor productivity. As we can see in Figure 9, 10 and 11 the average growth of labor productivity has gradually declined in nearly all capitalist countries since the 1950s. This long-term tendency has particularly accelerated in the new historic period of capitalist decay which opened in 2008. As we can see in Table 4, labor productivity (measured in output per hour worked) declined significantly in nearly all major capitalist economies since the beginning of the new period.

 

Figure 9. Labor Productivity Performance in Long Run Comparative Perspective, 1950-2013 (GDP per hour worked; annual average growth) [23]

 

 

Figure 10. Labour Productivity Growth, 1990-2013 (Growth in GDP per hour worked) ^[24]

 

 

Figure 11. Labor Productivity Growth in Western Imperialist Economies, 1973-2014 (Growth in GDP per hour worked) [25]

 

Table 4. Growth of Labor Productivity, Before and After the Great Recession in 2008/09 [26]

Average percentage change per year (Measured as real GDP per hour worked)

Country                                                2001–2007                           2009–2014

France                                                   1.5                                          0.9

Germany                                             1.3                                          1.2

Japan                                                    1.6                                          1.2

United Kingdom                               2.2                                          0.3

United States                                     2.0                                          0.9

China                                                    9.5                                          7.4

India                                                     4.4                                          7.0

Russian Federation                          5.4                                          2.0

South Africa                                       3.1                                          1.5

 

15.          This decline of productivity has been caused by the falling rate of profit and depressed capital accumulation, and not by rising wages for the working class. In fact, quite the opposite is true: world-wide wages grew less in 2009–13 than in the years 2000–08, i.e., before the Great Recession. According to the United Nations, the gap between the average annual growth of global wages and of labor productivity was +0.2% in the period 2000–08 but +0.6% in 2009–2013. In other words, the capitalists were able to substantially increase the rate of surplus in the new historic period. ^[27]

16.          Finally, another feature which reflects the decline of the productive forces is the significant slowdown in world trade. In the past few years, world trade grew less than half of its rate of growth before the Great Recession: “At 3.6 percent in 2014, global trade growth continued to be substantially weaker than its pre-crisis average of about 7 percent.” [28] In Figure 12 we show a graph of the Credit Suisse which compares global trade with the dynamic of industrial production. Such a development has similarities to the inter-war period in the 1920s and 1930s. While world trade grew substantially before 1914, it was massively reduced after the World War I. This reflected the general decline of the productive forces at that time. Obviously, the bourgeois economists today don’t think in such historic terms. But they do manage to indicate the cause of the decline of world trade. In a recently published essay, the World Bank economists identify “weak demand” as an important factor, which is just another way of expressing the negative consequences of the present crisis on investment and consumption. In addition they point out that the period of advancing globalization of trade is over and protectionism is on the rise: “There are signs that protection continued to rise even after 2009. For instance, in the year leading to May 2014, Group of Twenty (G-20) members put in place 228 new trade restrictive measures. Worryingly, while the measures imposed since 2009 were meant to be temporary ones, the vast majority of trade restrictive measures taken since the global financial crisis have remained in place.” ^[29]

 

Figure 12. Global Trade in Relation to Industrial Production ^[30]

 

17.          Finally, the slowdown in world trade reflects the rise of China as an economic power. Today, Chinese enterprises produce much fewer parts and components for foreign corporations than they did in the past. Instead Chinese corporations increasingly complete the production of commodities themselves in their own country before exporting them (see Figure 13). The World Bank comments: “The decline in China’s trade elasticity can be explained by the rising amount of domestic value added in its exports. For instance, the share of Chinese imports of parts and components in China’s total exports has declined from a peak of 60 percent in the mid-1990s to the current share of approximately 35 percent, implying a diminished fragmentation of the production process. Further evidence of this change is the substitution of domestic inputs for foreign inputs by Chinese firms, which underpins the rise in domestic value added to trade.” ^[31]

 

Figure 13. China’s Imports of Parts and Components as a Share of Total Exports of Merchandise ^[32]

 

 

18.          Furthermore, the deceleration of the growth of world trade is not only a reflection of the decline of the productive forces; it also directly affects them negatively. As we know, the capitalist world economy is dominated by a small number of monopolies. Some years ago, economists published a study which was widely discussed in the academic community and which came to the conclusion that 147 alone corporations controlled 40% of the global economy: “They discovered that global corporate control has a distinct bow-tie shape, with a dominant core of 147 firms radiating out from the middle. Each of these 147 own interlocking stakes of one another and together they control 40% of the wealth in the network. A total of 737 control 80% of it all.” [33] Clearly such mega-corporations need a large, i.e., global, market to produce and sell their commodities, to invest their capital, etc. Any reduction of the world market has massively negative consequences for prospects of increasing their profits. Under such circumstances, it is unavoidable that the capitalist monopolies, and the Great Powers as their political instruments, will increase their aggressive efforts to outmaneuver their rivals, to protect “their” markets and spheres of influence and to launch wars if necessary for their interests. Trotsky remarked at the beginning of World War I:

“The forces of production which capitalism has evolved have outgrown the limits of nation and state. The national state, the present political form, is too narrow for the exploitation of these productive forces. The natural tendency of our economic system, therefore, is to seek to break through the state boundaries. The whole globe, the land and the sea, the surface as well as the interior has become one economic workshop, the different parts of which are inseparably connected with each other. This work was accomplished by capitalism. But in accomplishing it the capitalist states were led to struggle for the subjection of the world-embracing economic system to the profit interests of the bourgeoisie of each country. What the politics of imperialism has demonstrated more than anything else is that the old national state that was created in the revolutions and the wars of 1789-1815, 1848-1859, 1864-1866, and 1870 has outlived itself, and is now an intolerable hindrance to economic development.” [34]

If such an assessment was correct in 1914, it is ten times more correct today, when the monopolies have accumulated so much power, and when capital accumulation and technique have developed so much in the past 100 years!

19.          However, the decay of capitalism manifests itself in manifold ways. When Marxists speak about the decay of the productive forces, they do not limit this phenomenon to economic development. They also mean, first and foremost, the working class and humanity in general as the most important productive force. Marx himself emphasized this idea repeatedly: „Of all the instruments of production, the greatest productive power is the revolutionary class itself.“ [35]

20.          According to the United Nations, 100,000 people die of hunger every day and about 852 million people suffer from chronic hunger. ^[36] This scandalous situation exists despite the fact that the world already produces more than 1 ½ times enough food to feed everyone on the planet (and even the estimated population of 9–10 billion in 2050). [37] However, in a world in which 2.2 billion people live on less than US $2 a day (in 2011), many can not afford to buy sufficient amounts of food. [38] Furthermore, since agriculture and the food industry are dominated by multinational corporations who plan production solely to increase their profits, the quality of food is increasingly degraded. As a result, regardless of the fact that global agriculture produces 17% more calories per person today than 30 years ago, the urban and rural poor are increasingly forced to eat cheap und unhealthful fast food. Hence, according to the WHO, obesity and overweight have become an epidemic. In 2014, more than 1.9 billion adults, 18 years and older, were overweight. Of these over 600 million were obese. In other words, worldwide obesity has doubled or tripled, especially in developing countries, since 1980. Today most of the world's population lives in countries where overweight and obesity kill more people than malnutrition. [39]

21.          Furthermore, as a result of capitalist domination, humanity as a whole is increasingly exposed to the destructive character of many productive forces. Marx and Engels already pointed out in The German Ideology that as long as capital owns the means of production, the productive forces are increasingly transformed into destructive forces: „We have shown that at the present time individuals must abolish private property, because the productive forces and forms of intercourse have developed so far that, under the domination of private property, they have become destructive forces, and because the contradiction between the classes has reached its extreme limit.“ ^[40] As it is well known today, the capitalist system of production for profit is increasingly destroying the climate. As a result, climate change is a accelerating, posing an increasing danger for humanity. In 2008, 36 million people were displaced by natural disasters. At least 20 million of those people were driven from their homes by disasters related to climate change, like drought and rising sea level. But this was only the beginning: according to different projections, the consequences of climate change will have devastating consequences for many countries and their population. With a global warming of three degrees, twelve countries around the world could lose more than half of their present land area and about 30 countries could lose one tenth of their area. A scientist explains: “If that sea-level rise occurred today, more than 600 million people would be affected and would have to find a new home.” [41] Other sources estimate that, “unless strong preventative action is taken, between now and 2050 climate change will push the number of displaced people globally to at least 1 billion.” [42]

22.          The Climate Vulnerability Monitor estimates, “that climate change causes 400,000 deaths on average each year today, mainly due to hunger and communicable diseases that affect above all children in developing countries. Our present carbon-intensive energy system and related activities cause an estimated 4.5 million deaths each year linked to air pollution, hazardous occupations and cancer. (…) Continuing today’s patterns of carbon-intensive energy use is estimated, together with climate change, to cause 6 million deaths per year by 2030, close to 700,000 of which would be due to climate change. This implies that a combined climate-carbon crisis is estimated to claim 100 million lives between now and the end of the next decade” (see Table 5). To this human tragedy one has to add the financial costs. According to the OECD “Inflation-adjusted insurance losses from weather-related natural hazard losses have increased from an annual average of around USD 10 billion in the 1980s to around US$50 billion over the past decade.” ^[43] Concerning future perspectives, the Climate Vulnerability Monitor states: “Climate change caused economic losses estimated close to 1% of global GDP for the year 2010, or 700 billion dollars (2010 PPP). The carbon-intensive economy cost the world another 0.7% of GDP in that year, independent of any climate change losses. Together, carbon economy- and climate change-related losses amounted to over 1.2 trillion dollars in 2010. (…) The world economy therefore faces an increase in pressures that are estimated to lead to more than a doubling in the costs of climate change by 2030 to an estimated 2.5% of global GDP. Carbon economy costs also increase over this same period so that global GDP in 2030 is estimated to be well over 3% lower than it would have been in the absence of climate change and harmful carbon-intensive energy practices.” Most affected by this catastrophe will be those countries which contribute least of all to the climate change – the poor semi-colonial countries. “Least Developed Countries (LDCs) faced on average in excess of 7% of forgone GDP in 2010 due to climate change and the carbon economy, as all faced inequitable access to energy and sustainable development. Over 90% of mortality assessed in this report occurs in developing countries only – more than 98% in the case of climate change” ^[44] (see Figure 14).

 

Table 5. Number of Deaths per Year, 2010–2030 ^[45]

 

                                                                                                                                2010                                       2030

Climate                Diarrheal Infections                                                        85,000                                   150,000

                                Heat & Cold Illnesses                                                     35,000                                   35,000

                                Hunger                                                                                 225,000                                 380,000

                                Malaria & Vector Borne Diseases                              20,000                                   20,000

                                Meningitis                                                                          30,000                                   40,000

                                Environmental Disasters                                               5,000                                      7,000

                                Air Pollution                                                                       1,400,000                              2,100,000

Carbon                 Indoor Smoke                                                                    3,100,000                              3,100,000

                                Occupational Hazards                                                   55,000                                   80,000

                                Skin Cancer                                                                        20,000                                   45,000

World                                                                                                                    4,975,000                              5,957,000

 

Figure 14. Total Deaths and Costs as a Result of Climate Change and the Carbon Economy, 2010 and 2030 ^[46]

 

23.          In addition, the capitalist decay has increased the number of wars and, as a result, there has been a huge and rapid increase of the number of refugees. The UNHCR reports that for most of the past decade, “displacement figures ranged between 38 million and 43 million persons annually. Since 2011, however, when levels stood at 42.5 million, these numbers have grown to the current 59.5 million – a 40 per cent increase within a span of just three years” [47] (see Figure 15).

 

Figure 15. Displacement in the 21st Century, 2000-2014 (in Millions) ^[48]

 

 

24.          The alarming number of displaced persons is the result of local wars and repression. However, given the accelerating economic rivalry between the Great Powers – mainly the US, EU, Japan, Russia and China – it is unavoidable that there will be growing military tensions between them. Given the fact that these imperialist powers – in contrast to semi-colonial countries – possess the most modern nuclear, chemical and biological weapons of mass destruction, any war between them could lead to the death of many millions of people, up to the complete extinction of the human species.

25.          Last but not least, we emphasize the increasing inequality between the classes and between the nations on a global level. According to figures from the Credit Suisse – a source which no one could suspect of anti-capitalist ideology – an insignificant minority (0.7% of the population), representing largely the global capitalist class, owns 41% of the world’s wealth. The global middle class (7.7% of the world population) owes together about the same amount (42.3 of the world’s wealth). The next 22.9% of the world’s population, probably representing the significant share of the working class of the imperialist countries and the middle class of the semi-colonial world, own 13.7%, and the huge majority of the world’s population (68.7%) – representing mostly the working class and the poor peasants of the South – own the little which remains (only 3%) of the world’s wealth (see Figure 16)! Likewise, the latest OXFAM study concludes: “In 2015, just 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity. This figure is down from 388 individuals as recently as 2010. The wealth of the richest 62 people has risen by 44% in the five years since2010 – that's an increase of more than half a trillion dollars ($542bn), to $1.76trillion.Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 41%.” ^[49] OXFAM has demonstrated that this rising inequality is closely connected to the rising exploitation of the working class and the parallel growing share of profit reflected in the globally declining share of labor income (see Figure 17). This decline is particularly noteworthy, since the share of wage laborers in total employment is steadily growing in all regions of the world, representing today about 51% globally (see Figure 18). The progressive economist Thomas Piketty, regardless of his reformist outlook, has also provided a number of valuable statistics which show the massive increase of inequality both in the imperialist as well as in important semi-colonial countries. The following three graphs plot the share of respective national incomes for the top 1% of those countries’ populations during the last century. Note the extended slope downward (i.e., the reduction in inequality) during the “long boom” following the Second World War, but the steep rise during the past 30 years for the English speaking countries and key countries of the South in particular (see Figure 19, 20? and 21).

 

Figure 16. How is the World’s Wealth shared amongst its Population? [50]

                         

Figure 17. Labor income as a share of GDP in countries of different income levels, 1988–2011 [51]

 

Figure 18. Wage and Salaried Employment (% of Total Employment), World and Regions [52]

 

Figure 19. Income Inequality in English Speaking Countries, 1910 – 2010  ^[53]

 

Figure 20. Income Inequality in Continental Europe and Japan, 1910 – 2010  ^[54]

 

Figure 21. Income Inequality in Emerging Countries, 1910 – 2010  ^[55]

 

26.          The increasing exploitation of the global working class has gone hand in hand with accelerating inequality within the working class. As we have already pointed out in our book The Great Robbery of the South, the wage gap between the labor aristocracy (and sectors of the salaried middle layer) on one hand, and the mass of the middle and lower strata of the proletariat on the other, has widened substantially during recent decades. ^[56] This has been demonstrated by the UN in its latest issue of its Human Development Report (see Figure 22). At the same time, unemployment rates are two to four times greater among low-skilled workers than among those who are highly-skilled (see Figure 23). This increasing differentiation within the working class also manifests itself in today’s historically high levels of youth unemployment. According to official figures for 2015, 74 million young people (aged 15–24) were unemployed worldwide. The Arab world is a region that had a youth unemployment rate of 29.8% in 2015. However, there are also countries in southern Europe which also face dramatically high rates of youth unemployment, like Greece (52%) and Spain (53%). ^[57]

 

Figure 22. Declining Share of Wages and Increasing Wage Inequality between Highly-Skilled and other Workers [58]

 

 

Figure 23. Unemployment Rates of High-Skilled and other Workers in Imperialist Countries 1999 and 2011 [59]

27.          To summarize, capitalism is in the throes of a historic period of decline which threatens not only the world economy but also the living standard of the popular masses, and even puts the survival of humanity in danger. The current period is characterized by what Trotsky described as a “declining curve of capitalist development” [60] (see also Trotsky’s diagram below). It is the decay of the productive forces which constitutes the fundamental, the most important factor, for the acceleration of the contradictions between the classes which is so characteristic of the historic period since 2008. It is because of the declining dynamic of capital accumulation and the growth of profits that the bourgeoisie is forced, lest it face ruin, to relentlessly attack the working class. For the very same reason the imperialist bourgeoisie is forced to relentlessly strangle the semi-colonial countries of the South and to wage more and more military interventions and occupations. And it is for the very same reason that the rivalry between the imperialist Great Powers is accelerating, since they have to struggle against one other to gain a larger share of the relatively decreasing production of global capitalist value. Finally, if the imperialist Great Powers are not smashed by revolutionary international working class, their rivalry will lead to World War III. The working class can only end this continuous chain of misery, wars and catastrophes via a world socialist revolution. Rosa Luxemburg’s statement that humanity is faced with the alternative “Socialism or Barbarism” is more relevant than ever. Under the conditions of the early 21^st century, the concretization of Luxemburg’s statement means: “Socialism or Widespread Death through Climate Destruction and World War III”!

 

Diagram 1: Leon Trotsky’s ‘Curve of Capitalist Development’ written in 1923 [61]

 

III.          The World Economy: Facing the Next (Even Worse) Great Recession

 

28.          As we have pointed out in previous annual World Perspective documents on the, the present cycle is characterized by a particularly depressed level of capital accumulation and capitalist value production. Marxist economists like Michael Roberts are therefore right in characterizing the state of the economy since 2008 as a Long Depression. [62] This depression is reflected in the low level of the global rate of profit year-over-year (% yoy) which, based on the projection of Figure 24, is about to cross once again into negative percentages as last happened in the second half of 2007.

 

Figure 24. Global Corporate Profits 1998-2015 ^[63]

 

29.          The downturn of the rate of profit leads to a slower process of capital accumulation as well as of production. While this process is uneven (see more on this below), we can clearly identify a global downturn trend which is about to turn into another recession – a process to which we already drew attention in the RCIT’s last World Perspectives document released in January 2015. In that document we wrote “All in all, there are strong indications that 2015 will not “finally” see a recovery but rather another recession. We believe that this recession will be even worse and deeper than the one of 2008/09, which was already the worst recession since 1929.” [64] The recent events in stock markets – both in China and in the West – indicate that our prediction was correct. While most imperialist economic institutions still promise that 2016 will be better than 2015, they cannot deny the downturn trend of 2015. Recent statistics from JP Morgan and the IMF demonstrate this trend (see Figure 25 and 26). It’s not without reason that big financial capitalists like George Soros are getting pretty nervous: “When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.” [65] The Royal Bank of Scotland has warned investors about a “cataclysmic year ahead” and advises them: “Sell everything except high quality bonds. (…) In a crowded hall, exit doors are small. Risks are high. (…) be cautious in 2016. We have been warning in past weeklies that this all looks similar to 2008. We dust off our old mantra: this is about ‘return of capital, not return on capital’.” ^[66] Similarly Jacques Attali – a former economic adviser to the France’s President François Mitterrand and the first president of the European Bank for Reconstruction and Development – recently warned that “the world is approaching a great economic catastrophe”. [67]

 

Figure 25. Global Manufacturing Output 2013–2015 ^[68]

 

Figure 26. World Trade, Industrial Production, and Manufacturing PMI (Three-month moving average; annualized percent change, unless noted otherwise) ^[69]

 

30.          The IMF cautiously commented in its latest World Economic Outlook: “Global industrial production remained weak through 2014, consistent with the uneven strength in demand across major economies and groups of countries, and slowed markedly over the course of the first half of 2015, reflecting some building of inventories in late 2014 and early 2015 but also lower investment growth. World trade volumes also slowed in the first half of 2015. Weak investment worldwide, particularly in mining, as well as the trade spillovers of China’s growth transition, has likely contributed to this slowing.” ^[70] However, some bourgeois economists think that the capitalist world economy has already entered a new recession. A website related to the Centre for Economic Policy Research recently published an article which calculates, based on the latest data from the International Monetary Fund, that in fact the global economy contracted massively in 2015: “the IMF world economic outlook database reports a reduction of Gross Planet Product (GPP) for the year 2015 by -3,8 trillion dollar (-4.9%). A nominal reduction of GPP of this size has occurred only once since 1980 (the starting year of the IMF database), namely at the start of the Great Recession when GPP contracted by -5.3%” [71] (see also Table 6). Likewise the renowned bourgeois economist Robert J. Samuelson recently published an article in the Washington Post titled “Is the next recession on its way?” [72]

 

Table 6. Years with nominal contractions of Gross Planet Product (1980-2015) [73]

 

Year                                                       Contraction in Percent

1982                                                       -2.0%

1997                                                       -0.2%

1998                                                       -0.6%

2001                                                       -0.5%

2009                                                       -5.3%

2015                                                       -4.9%

 

31.          A historical comparison with the crisis in the 1930s demonstrates the severity of the current depression. Two bourgeois economists have calculated that global industrial output has now fallen behind the post-1929 crash performance. 90 months after the beginning of the Great Recession in 2008, the recovery of world industrial production is actually less than it was at the comparable point in time after the beginning of the 1929 recession (see Figure 27).

 

Figure 27. Comparison of the Post-2008 and the Post-1929 Depression (The y-axis represents the numbers of months that have elapsed since the beginning of each curve.) [74]

 

32.          Given the limited amount of publicly-available data, it is currently difficult for us to say if the next Great Recession has already begun or, if not, when exactly it will start. However, we think the coming recession is likely to be even more severe than that of 2008/09. This is our opinion for three main reasons. First, the coming recession – in contrast to the previous one – seems to be spreading to and assuming a severe character in all major regions of the capitalist world economy. Secondly, financial speculation – a central trigger for the Great Recession in 2008/09 – has not decreased since then. In fact, today the financial bubble is bigger than it was in 2007. And third, corporate and public debt has risen in nearly all imperialist countries, which is why the bourgeoisie will not be able to use massive state-capitalist interventions yet another time to help their corporations escape the worst consequences of the recession simply by raising the national debt.

33.          The 2008/09 recession was characterized by a sharp slump of the economy in the old imperialist countries, while the new imperialist powers, China and Russia, as well as some important semi-colonial countries experienced a more moderate or short recession or even none at all (e.g., China). The situation is very different today. Nearly all important sectors of the capitalist world economy – most Western Great Powers, the two Eastern Great Powers as well as the advanced semi-colonial economies are already in recession or heading towards it (see Figures 28 and 29).

 

Figure 28. Industrial Production (Three-month moving average; annualized percent change) ^[75]

 

Figure 29. Global Industrial Production, 2008–2015 ^[76]

 

 

34.          First, let us briefly deal with the major economies. The US economy seems to be heading towards a slump. Corporate profits there for 2015 were down -5.1% compared with one year before [77] (see also Figure 30). According to statistics from the US Federal Reserve Bank, industrial production on a monthly basis declined between January and November 2015 (the latest available figures) in every month except two. [78] Figure 31 shows a similar trend. As a bourgeois economist commented, such a decline in industrial production has not been witnessed before outside of a recession. [79]

 

Figure 30. US Corporate Profits 2002–2015 ^[80]

 

Figure 31. US Manufacturing Production, March 2012 – November 2015 ^[81]

 

35.          The Eurozone is currently in a somewhat different stage of the business cycle. It has already experienced a kind of stagnation or even recession during in the past few years. Its industrial volume of production declined in 2012 by -2.3%, shrinking again in 2013 by -0.7%, and grew in 2014 but only by +0.9%. However it too faced a slowdown in the past few months after a small recovery. ^[82] Its economy is certainly not strong enough to prevent the world economy from entering another Great Recession.

36.          Japan has already been in recession for some time. JP Morgan expects that its industrial production will have declined in 2015 by -0.8%. [83] While the state – via the Bank of Japan – adopted supplementary “quantitative and qualitative monetary easing measures,” i.e., pumping public money into the market in order to save the financial system and to revive the economy, clear signs of recovery can not be detected.

37.          China, as the world’s biggest industrial producer and the second largest economy globally, is of particular importance for the fate of the capitalist world economy. The country is currently experiencing its most serious downturn in the production of value since the restoration of capitalism in the early 1990s, with industrial production having slowed down dramatically (see Figure 32). This downturn has already sent shock waves which reverberated in its domestic foreign stock market as well as those around the world. China’s stock market has already slumped twice – in June-August 2015 and again in January 2016. As in other capitalist countries (e.g., 1929, 2008), China’s stock market was (and still is) characterized by a huge speculative bubble. As a result, stocks of Chinese and Western capitalists listed on the Shanghai exchange were devalued by 4 trillion US-Dollars in the summer of 2015. Western financial capitalists were impacted by the panic: Following China’s Black Monday and Black Tuesday (on 24 and 25 August 2015, when the Chinese stock market plunged by 8.5% and 7% respectively), the next day the US Dow Jones dropped by 1,000 points at the opening of trading, the largest drop ever recorded. In January 2016, the Chinese stock market crashed again despite massive government intervention, increasing nervousness in Western stock markets.

 

Figure 32. China’s Industrial Production (left) and Retail Sales (right), 2005-2015 ^[84]

 

38.          This stock market crash only highlights the monstrous stupidity of the Stalinists and various “Trotskyists” who still consider China a “socialist country” or a “deformed workers state.” The capitalists in China, as well as in the Western countries, have known for a long time that China is a profit-driven economy. China’s three big stock markets (the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Hong Kong Stock Exchange) were ranked in June 2015, according to CNN, among the six biggest stock markets in the world. [85] Given the recent stock market crashes, their exact ranking may have subsequently changed, but the fundamental weight of the Chinese stock markets remains intact.

39.          It is because China has become (a) a capitalist country and (b) an imperialist Great Power that bourgeois economists are worried that China’s decline might have devastating effects for the world economy. “That leaves the other major world economy: China. Already it has slowed dramatically. After averaging almost 10 percent growth between 2006 and 2014, it grew by 6.8 percent in 2015 and is forecast to grow by 6.3 percent in 2016. To put that in context, a one-third drop in the growth rate is comparable to the experience of the United States in the 1970s, and the result in the U.S. case was a decade of stagflation and a collapse of trust in government. But the real worry is that China’s slowdown could easily beget a further slowdown. This is why China is the most obvious source of upset for the world economy next year.” ^[86] Such fears are hardly surprising given the fact that China has contributed about 40% to global GDP growth over the past five years (see Figure 33). It is currently unclear whether the Chinese regime can avoid a full recession by state-capitalist intervention which would involve pumping trillions into the economy and the stock market. However, a full-blown recession in China in 2016 is a realistic possibility. It would be the first cyclical recession since the restoration of capitalism in the early 1990s which opened a period of spectacular growth driven by the super-exploitation of the Chinese working class and the dynamics of primitive accumulation in a huge and growing internal market. [87]

 

Figure 33. China’s Contribution to Global Real GDP Growth, 1990-2014 ^[88]

 

40.          Russia has been in recession since 2014, something also attributable to the Western sanctions following its involvement in the Ukraine. Russia’s GDP for 2015 is expected to decline by -3.8% and this negative trend should continue at least for some time into 2016. [89] Latin America’s economy as a whole is also already in recession with a decline of industrial production of -0.5% in 2014 and a further declines in 2015 (on a quarterly basis) of -0.8% (Q1), -0.6% (Q2), and -0.6% (Q3). ^[90] Brazil, the continent’s biggest economy, is expected to face a slump in GDP of -3.8% in 2015 and a further -3.7% in 2016 (see also Figure 34). The second biggest country, Argentina, is expected to enter recession at the beginning of 2016 – a process accelerated by the devaluation of the peso by more than 30% against the US-Dollar by the new right-wing Macri government. [91]

 

Figure 34. Brazil: Industrial Production (left) and Capacity Utilization (right), 2007-2015 ^[92]

 

41.          India – which is expected to become the most populous nation by 2022 [93] – has experienced a different development. Its economy has grown relatively faster in the last few years and is expected to continue so: its GDP grew by +7.3% (2014), +7.4 (2015) and +7.2% (2016). However, according to JP Morgan, India’s GDP is alleged to have declined in Q4 in 2015 by -2.0%. South Africa is vacillating around a recession with GDP growth of only +1.5% (2014), +1.4 (2015) and an anticipated +1.2% (2016).

42.          Secondly, the capitalists have completely failed to liquidate the financial bubble which triggered the Great Recession in 2008/09. In fact, this bubble is bigger today than it was in 2007. The total stock of financial assets worldwide is estimated to have been $256 trillion at the end of 2014, increasing from $184 trillion at the end of 2008. Total financial assets in the world — measured in terms of all debt securities outstanding, equities and the stock of bank credit — exceeded the pre-crisis level as early as 2010 (see Figure 35).

 

Figure 35. The Stock of Financial Assets, 2002–2013 ^[94]

 

43.          Let us deal now with the third reason why we expect the coming recession to be more severe than the last one. As we have stated in previous documents, the bourgeoisie was able to avoid a complete breakdown of its financial system by means of a wide-range of state-capitalist measures in order to save the banks and corporations. As a result, debt – in particular public debt – rose dramatically during the recession. However, nearly all capitalist countries have failed to reduce their indebtedness in the (moderate) recovery phase since 2010. As a result, global debt (as a ratio to global GDP) has risen from 269% (in 2007) to 286% (in mid-2014; see Figure 36 and also Figure 37 for a more long-term view since 1951.)

 

Figure 36. Growth of Global Debt in $ Trillion and as % of GDP , 2000–2014 ^[95]

 

 

Figure 37 Evolution of Global Debt to GDP ^[96]

 

44.          This process has taken place both in the old imperialist countries (Northern America, Europe and Japan), in imperialist China as well as in many semi-colonial countries (see Figure 38). The McKinsey Global Institute comments: “However, rather than declining, global debt has continued to increase. Total global debt rose by $57 trillion from the end of 2007 to the second quarter of 2014, reaching $199 trillion, or 286 percent of global GDP. Rising government debt in advanced economies explains one-third of the overall growth, as falling tax revenue and the costs of financial sector bailouts raised public sector borrowing. Growing debt of developing economies accounts for half of the growth. China’s total debt has quadrupled since 2007, reaching $28 trillion, accounting for 37 percent of growth in global debt.” ^[97] In Figure 39 we see a detailed list of the level of debt in numerous capitalist countries and by respective sectors.

 

Figure 38. Growth of Global Debt of Old Imperialist Countries (DM) as well as of China, Russia and the Advanced Semi-Colonial Countries (EM), 1970-2015 ^[98]

 

Figure 39. The Debt-to-GDP Ratio in Advanced as well as in Developing Capitalist Economies, 2014 ^[99]

 

 

45.          Because of the massive state-capitalist intervention, public debt has grown hugely in nearly all Western imperialist countries (see Figure 40). The same figure also shows the growing share of foreign investors holding loans, thereby potentially increasing dependency between them, to say nothing of raising tensions. Figure 41 shows not only the growth of government debt in the Western imperialist countries, but also that corporate defaults and debt downgrades have increased. Finally we show in Figure 42 that the old imperialist countries have also failed to reduce the debt of their corporate sector and in the Eurozone it has even increased.

 

Figure 40. Government Debt in Western Imperialist Countries and Changes in Holdings of Government Debt as a Share of GDP (1985-2011) ^[100]

 

Figure 41. Credit Rating of Advanced Economy Government Bonds (2008-2015) ^[101]

 

 

Figure 42. Gross Debt for Non-Financial Corporations in the US, Euro Area and Japan 2005-2015 ^[102]

 

46.          As has already been mentioned, the level of national debt has increased with particular strength in China and advanced semi-colonial countries. Debt service ratios for the private non-financial sector of the BRICS economies (BRICS is the synonym for Brazil, Russia, China, India and South Africa) rose between 2010 and 2014 from nearly 0% to 3.5%. [103] Figure 43 shows how both household as well as corporate debt in China, as well as various advanced semi-colonial countries like Indonesia, Mexico, Thailand, Turkey, Eastern Europe etc., is substantially higher today than before the last recession.

 

Figure 43. Growth of Debt in China and Advanced Semi-Colonial Countries ^[104]

 

 

47.          The case of China is naturally particularly significant because it is one of the biggest capitalist economies in the world. Not only does China have substantial public debt but that of its private sector is also growing rapidly. In fact, China’s corporate sector is more in debt than the its counterpart in any other major imperialist country (see Figure 43, above). Today China’s private sector debt relative to GDP stands at 196%. Credit Suisse writes that “China has had the third biggest credit bubble over a 5-year period of any country in our database.” Figure 44 depicts the exponentially increased growth of China’s private sector debt since the start of the last recession in 2008.

 

Figure 44. China’s Private Sector Debt to GDP, 1986–2015 ^[105]

 

 

48.          Given the massive levels of debt of both the government and the corporate sector in nearly all imperialist countries, it is highly unlikely that the state will be able to intervene to save the banks and corporations after the outbreak of the next recession to the same degree as it did in 2008/09. Consequently, the brutal consequences of the recession will be less moderated by the capitalist state and will result in more bankruptcies and countries declaring default. Not only does this mean that the recession will be more severe than last time, but also makes it likely that popular protests will become more political than in the past. The workers and poor will question the passivity of the capitalist state faced with the crisis. Particularly in Sub-Saharan Africa and South East Asia, a huge number of hunger strikes were already witnessed in 2008, with more moderated ones in 2010. These food strikes are likely to occur yet again with the next recession, and may become even more severe and have increasingly greater political ramifications. Consequently, the workers and oppressed of these areas may become an important factor in the global class struggle. Under such circumstances, revolutionaries will have to fight for a transitional program focused on the nationalization and centralization of all financial institutions without compensation and under workers’ control, for the expropriation of the super-rich, and for a public works program in order to abolish unemployment.

49.          Finally, we highlight the fact that, in light of the stagnation of economies during the last few years, the process of monopolization has advanced significantly. The year 2015 set a new annual record for mergers and acquisitions, with companies around the world spending $5.04 trillion, thereby exceeding the previous record set in 2007. Naturally, it is no coincidence that such waves of mergers and acquisitions peak in the last stage of the business cycle before the economy enters a recession. [106]

 

IV.          The World Political Situation: Class Struggle in a Phase of Counterrevolutionary Offensive

 

50.          As we have stated above, the decline of the productive forces in the present historic period unavoidably aggravates all fundamental contradictions: (a) the class struggle between the bourgeoisie and the working class, (b) the class struggle between the imperialist monopolies and Great Powers and the oppressed peoples, (c) and the rivalry between the imperialism powers. The following factors shape the specific conditions of the current political phase and give it an interim character characterized by the bourgeoisie waging a counterrevolutionary offensive and provoking sharp working class and popular struggles. We do not characterize the present phase as already being counterrevolutionary, since we are currently only at the stage where the bourgeoisie’s offensive is causing significant class confrontations, but have still not reached the point at which the working class and oppressed have suffered a series of strategic defeats.

i) The downturn of the economic cycle and the approaching recession reduces the room for compromises of the bourgeoisie in all countries and drives it to develop even more aggressive means to enforce their interests.

ii) Hence the rivalry between the Great Powers, which has already been aggravated since spring 2014, will intensify even more in the coming period.

iii) The imperialist Great Powers will accelerate their military interventions in the semi-colonial world – first and foremost in North Africa and the Middle East – and collaborate more closely with reactionary dictatorships in order to pacify revolutionary popular uprisings. As a result, terrorist attacks will most likely increase too.

iv) The ruling classes – in the imperialist countries but also in the semi-colonial world – will use the “threat of terror” in order to expand the repressive state apparatus and to abolish democratic rights. Likewise, they will accelerate racism and the national oppression of migrants, and in particular of Muslim minorities.

v) The bourgeoisie all over the world will intensify their attacks on the working class by cutting wages, closing enterprises, laying-off workers, etc.

vi) The working class and the oppressed have suffered a number of defeats and retreats due to the reformist and petty-bourgeois populist leaderships. As a result the Arab Revolution is in retreat (albeit it is not liquidated), the right-wing forces in Latin America are in the offensive trying to topple various popular-front and Castro-Chavista governments, and the ruling class and racist forces are on the offensive in Europe too. Therefore, these three regions are currently the focus of the world situation and it will be of crucial importance if the working class there succeeds in defeating the attack of the ruling class.

vii) However, there are also several other important countries which are experiencing crosscurrents and which, if successful, could turn around the international situation. We name only the four most important and most obvious: (a) The lingering Third Intifada in Palestine; (b) the militant and undefeated working class and youth in South Africa; (c) the working class and youth in Spain and Portugal which is moving to the left; (d) the working class in China which, if it were to massively rise up in an economic class struggle on the backdrop of the slowing down of the Chinese economy could be transformed into political struggles against the Stalinist-Capitalist dictatorship and hence introduce a revolutionary crisis.

51.          All in all, it is important to bear in mind the uneven and combined character of the international development of the class struggle. While the Arab World, Latin America and Europe face counterrevolutionary offensives in the current period due to the relative political intensity of their respective class struggles, Asia and Africa are at a different stage of development. In the latter two continents the class struggle has, in most cases, taken a more purely economic character. However, this can definitely change given the looming Great Recession to come. Especially the developments in Asia and Africa are difficult to predict as the workers and oppressed of these areas might play a key role for global class struggle in the near future. It is not out of the question that the first phase of a new recession will be accompanied by spontaneous mass uprisings in Asia and Africa, as these continents suffer in particular when the price of food and fuel increases rapidly. However, this time around, such uprisings may also have deeper political consequences, i.e., massive rebellions and revolutions against the state, as well as military interventions by the imperialist forces to smash mass resistance more quickly, with the aim of avoiding developments similar to those we have seen in the Arab World.

52.          Before turning in the following sections to our more concrete analyses of these contradictory political developments, we should begin with some preliminary remarks. First, what can we anticipate will happen if the working class and the oppressed do not succeed in reversing the retreat of the Arab Revolution, and in defeating the counter-revolutionary offensive in Latin America and Europe? Similarly, what if, at the same time, the Chinese, Indian, and other Asian proletariats will not transform their economic struggles into political offensives? Such a series of serious defeats could open a counterrevolutionary phase. However, it would be extremely shortsighted to ignore the historical background of such a possible phase. For example, we experienced a counter-revolutionary phase in the first half of the 1990s after the collapse of the degenerated workers states in the years 1989-92 and the US victory against Iraq in March 1991. A counter-revolutionary phase in the present historic period of capitalist decay, wars, revolutions and counterrevolutions, i.e., in an extraordinarily unstable and revolutionary historic period, would be very different. Given the exacerbating rivalry between the imperialist powers (hardly in existence in the 1990s, due to the absolute dominance of the US after the fall of the Soviet Union); given the permanent destabilization of any political and social equilibrium due to the crisis-ridden nature of the capitalist economy; and given the discrediting of the political system, together all these factors make it most likely that such a counter-revolutionary phase would be much shorter than that of the 1990s. In any case, it would be a phase incubating future political crises and explosions. Hence, it would be a phase in which revolutionaries will have to combine educating and organizing the vanguard workers and youth on the basis of the lessons of the previous defeats, with a deepening and consolidation of their roots among militant workers and oppressed through exemplary mass work.

53.          This brings us to the next point. We have repeatedly emphasized that a correct understanding of the present historic period and its revolutionary character is essential in order to find the correct orientation in such tumultuous and explosive times. Otherwise, the evolving of the world situation only leads one to regular being surprised and disoriented, as so often happens among the reformists and centrists in such periods. It is therefore crucial for revolutionary workers and youth to be aware that the present historic period has a long-term character. In fact we are currently only in its early phases. Due to the nature of the capitalist decay, we may witness in this period a number of revolutions à la Russia 1905–07, i.e., working class and popular uprisings which ultimately fail due to the absence of a strong revolutionary party, but whose failure may serve as the basis for the proletarian vanguard to learn from its experience and found such a party. Similarly, revolutionaries must be prepared for world events of huge catastrophic proportions which are realistic possibilities in the present period:

* Great Recessions of qualitatively more catastrophic proportions than the 2008 recession;

* Major social and ecological disasters or wars in the South resulting in the death of hundreds of thousands if not millions of people and forcing whole populations to flee;

* Millions of refugees arriving in Europe and the creation of a far more militarized Fortress Europe;

* An intensification of imperialist wars in the South with disastrous consequences for the oppressed people, the undermining or even abolishing of (bourgeois) democracy and Bonapartist forms of rule around the world, which might spawn a wave of huge terrorist attacks with thousands of dead (including within the imperialist metropolises);

* Massive political crises between the Great Powers resulting in a massive rupture of world trade and the creation of regional blocs with protectionist walls;

* Armed conflicts or wars between the major capitalist countries and, sooner or later, even between the Great powers, resulting in a Third World War.

* Bloody Counterrevolutions (like Indonesia in 1965 or in Chile 1973) in Asia, Africa, Eastern Europe or Latin America in order to smash looming revolutions.

The only way to avoid such developments is for the working class, allied with the poor peasants and the urban poor, to succeed in overthrowing the capitalist system and building a world-wide federation of workers’ and peasant republics. Since this is impossible without the timely creation of a revolutionary world party, the formation of such a force – and as the first step of an international pre-party organization – is the most important and urgent task for all internationalist Marxists. We therefore refer reader once more to the RCIT’s Open Letter for Revolutionary Unity in which we have outlined the programmatic response which we consider indispensable for revolutionaries, in order to help the workers’ vanguard find the correct orientation in as turbulent and explosive time as this. [107]

 

IV.1.       The Accelerating Rivalry between the Great Powers

 

54.          In past years the RCIT has elaborated in a number of documents the exacerbated rivalry between the Great Powers, enhanced by the emergence of China and Russia as new imperialist powers. At this time we will not repeat all the evidence and arguments which we have presented, as these can be re-read in various party publications. Instead, here we will only summarize the most important conclusions and recent events. [108] As we have shown in the past, the relationship between the Great Powers is characterized by a huge and growing disparity between their respective economic and political/military power. Despite the relative economic decline of the Western imperialist powers in the past decades (see the figures on this in Chapter II of this document), they have retained a nearly absolute dominance in important global institutions like the IMF, the World Bank, etc. In the case of the US, the world’s largest imperialist power, this is particularly pronounced. Despite its industrial decline, its over-indebtedness to foreign creditors, its permanent current account deficit, etc., the US-Dollar has remained the dominant world currency and the US is by far the biggest military power. At the same time China, the most rapidly rising imperialist power, does not hold similar political and military power as its rise has been only very recent. And Russia, politically and militarily stronger than it is economically, is also working hard to expand its influence after its collapse in the 1990s. Likewise, Japan’s political and military power is far below its economic weight, as is also the case with Germany. Figures 45 and 46 make graphic these very changes in the global economic equilibrium. In short, the world situation is not dissimilar to the 1930s when Trotsky observed such a disparity among the Great Powers, with the US’s being an economic giant but without colonies and with a relatively weak army; Britain’s still being the biggest Empire with a strong political and military position, but economically much weakened; and Germany defeated after WWI, but with a great economic and military potential. ^[109]

 

Figure 45. Rise and Decline of Great Powers: China’s and US’s Share of the World Industrial Production 1980-2015 (in Percent) ^[110]

 

Figure 46. Distribution of Global Fixed Capital Investment, 2003 and 2013 ^[111]

 

55.          As a result of these huge disparities, it is hardly surprising that a growing number of imperialist think tanks fear a complete breakdown of the global order and its retrogression to that of earlier historical periods in which rival empires existed and waged war against one another. The US’s Atlantic Council and the Russian IMEMO have recently published a joint study about future developments expected in world politics. They warn: “Despite the promise of cooperation and integration emanating from the rapid globalization of the past few decades, the potential for major state conflict is growing because of deep fragmentation within and between societies. The old confrontation between capitalism and communism has given way to nationalism and conflicts of intellectual and moral values with more or less religious and historical-psychological overtones. These differences are even more serious when linked to the domestic political interests of particular countries’ ruling circles. Compared to the last twenty years, the big powers will be more likely to get involved in various conflicts and to take opposing sides in the period of 2015-35. They might be unintentionally drawn into direct armed conflict as a result of an escalation of crises. This risk applies most immediately to the differences between Russia, the Shanghai Cooperation Organization (SCO), and the United States/NATO in the post-Soviet space, and, less likely, to Chinese and US relations with both countries’ allies and partners in Asia. The growing turbulence in the Middle East and, to a lesser extent, South and East Asia sets the stage for conflict between the major powers and a potential breakdown of the world order. A conflict involving the great powers would end the already challenged ideal of an inclusive liberal world order and put the global economy at risk.” The authors continue: “The potential for breakdown of the international liberal order is greater than ever before. The possibility of turning the clock back to a more inclusive, integrated world order, in which interstate competition was kept in check and there was more scope for cooperation, seems remote.” One of the scenario of which they warn is called “A New Cold War” and described as follows: “In a repeat of Churchill’s 1946 dictum: a new curtain descends across the world. As was in the first half of the earlier Cold War, establishing an equilibrium in this world order would be an immense feat. Countries do not know each other’s redlines. Major state-on-state conflict is no longer unthinkable. Nationalism is rearing its ugly head. Revisionist history is afoot. Globalization is seen as a sham—despite the numbers of people who have climbed out of poverty, the East and South see globalization as a device that has promoted Western interests. In the West, globalization is seen as benefitting the United States’ and its allies’ enemies. In this scenario, war breaks out between the major powers, first on Russia’s borders in the wake of the ongoing crisis in Ukraine and then in Asia, where the United States and China come to blows.” [112]

56.          Another think tank, which is close to the Republican Party in the US, has recently published a book in which it outlines its views on the main challenges for US imperialism. The authors warn that “our world could turn much darker with little notice” and compare the world situation with the 1930s where Russia and China play the role of fascist Germany and Japan at that time: “We do not yet face a cataclysm like that of the late 1930s. But it is fair to compare our era to that of the early 1930s, when the democratic powers seemed to have lost much of their military edge and, equally important, their self-confidence and will to use their power. At the same time, pitiless dictators and virulent ideologies were making use of new technologies to threaten, in ways previously inconceivable, the international order.” [113] As a conclusion, the authors advocate: “At the heart of American foreign policy should be our conception of international order. That order is only partly about free trade, although it is important to remind ourselves and others of just how important a world of low tariffs and diminished barriers to commerce has been to the prosperity that has brought hundreds of millions out of poverty since the World Wars. That conception of order must include: the freedom of smaller states to live without fear of invasion or military coercion; commitment to the rules that govern the great commons of mankind—including sea and space—and rights of free passage and peaceful use thereof. And it must include as well the maintenance of a world that is friendly to the existence of free peoples and limited government. The United States does not seek to impose its form of government by conquest, but it should never stint in its defense of the basic ideas that have defined us: limited government; freedom of speech, religion, and assembly; protection of private property; and an independent judiciary.” [114]

57.          Credit Suisse, one of the big players in the global financial sector, has also recently published a long-term prognosis about future economic and political developments. It views the rise of rivaling great powers as a significant change which “point towards a more multipolar world. However, there is a narrative that points to the geopolitical risks of such a development—from regional conflicts, cyberwars and ‘great power’ rivalry.” According to the authors there exists the danger of a scenario which “is a darker, negative one that recalls the collapse of globalization in 1913 and the subsequent onset of the First World War. (…) The kinds of things we watch for are—a trend slow­ing in economic growth and trade with the added possibility of a macro shock (from indebtedness, inequality, immigration), a rise in protectionism, a geopolitical/military clash between the great powers, currency wars, a climate event(s), the rise of broad-based anti-globalization political movements and a backlash against global corporations, or a reversal in transitions to democracy.” [115]

58.          China’s character as a belated, backward but rising imperialist power has been confirmed once more by several political and economic developments in the recent past. Several reports showed that China’s capitalists are increasingly employing industrial robots in order to raise their corporation’s competitiveness against their rivals. Still, China’s economy lags still far behind their competitors in terms of productivity: For now, China has just 30 robots per 10,000 manufacturing employees, trailing South Korea (437), Japan (323), Germany (282) and the U.S. (152), according to the International Federation of Robotics. [116] However, China also is investing heavily in robots as its wages soar and its population ages. It has become the world’s largest market for industrial robots and is projected to install more industrial robots than any other country by 2016. [117] Likewise China (without Hong Kong and Macao) has overtaken the US as the home country to the largest number of billionaires throughout the world. Today, out of 1,877 US-Dollar billionaires worldwide, 596 have their homes in China while 537 dollar billionaires live in the US. [118] Even official Chinese sources are forced to admit these developments. Two Chinese academics wrote in an official journal that “5% of Americans have controlled 60% of the wealth, while in China 1% of the families have controlled 41% of the wealth of the whole country, a far greater concentration than that of the United States.” [119] These figures confirm once more that Chinese monopoly capital has emerged and constitutes the ruling class on which imperialist China is based.

59.          The sharp and open outbreak of the rivalry between the Great Powers started in the spring of 2014, intensified in 2015 and will do so even more in the coming period. This is clear from a number of events in the recent past. The civil war in the Ukraine has been frozen temporarily as a result of the Minsk II agreement between the Western powers and Russia in February 2015. This confirms, by the way, our assessment that the belligerent parties – the Poroshenko / Euromaidan government in Kiev as well as the leadership of the Donbass Republics – are primarily not independent actors but rather proxies of US/EU and Russian imperialism respectively. [120] However, the US and EU are continuing their sanctions against Russia, albeit important sectors of the European capitalists and an increasing number of EU governments are feeling uncomfortable with them because of losses to businesses and because they need Putin’s collaboration in liquidating the Syrian civil war. At the same time, Russia, while suffering from the economic consequences of the sanctions, does not show any sign of giving in to the West’s demands.

60.          Syria has become another focus of the rivalry of the imperialist Great Powers as well as of their collaboration against a common enemy – the ongoing Arab Revolution. Currently Russia is the state which has undertaken the most serious military intervention in Syria. While Russia mostly executes air strikes, it does so while using the Syrian regime forces and Iranian units as their ground troops. The US and the EU – despite their rivalry with Moscow – have accepted the fact that they will be forced to accept Putin as a partner in liquidating the Syrian Revolution. After stopping Obama from launching a military strike in Syria in September 2013, then annexing the Crimea formally and the Donbass region de-facto in 2014, Russian imperialism has again demonstrated its vigor by its current massive military intervention in Syria and its ability to force the Western Great Powers to collaborate with it. At the same time, US, UK, French and German imperialism are determined both to collaborate with Assad and Putin in liquidating the Syrian Revolution while at the same time making sure that they will have a sphere of influence in a post-war Syria.

61.          Another area of exacerbated rivalry between the Great Powers is the struggle in the economic and financial fields. In December 2015 the International Monetary Fund approved China's Renminbi into its group of elite reserve currencies. With this decision, the Renminbi is joining the US-Dollar, Euro, Japanese Yen and British Pound in the list of currencies the IMF uses as an international reserve asset. [121] This is clear confirmation from the Western imperialists that China has become a capitalist and imperialist Great Power, contrary to the fantasies of various reformists and centrists.

62.          At the same time the civil war in the Ukraine has provoked another dispute in the IMF between the Great Powers, one which is likely to have major long-term consequences for the architecture of this global financial institution. The US and its Western allies recently initiated an important change in the IMF’s lending policy, ending its traditional policy of “non-toleration of arrears to official creditors.” [122] The creditor leverage that the IMF has used until now has been that, if a nation is in financial arrears to any government, it cannot qualify for an IMF loan – and hence, for packages involving other governments. Naturally, this system has helped to retain the dominance of Western imperialism – and first and foremost, that of the US – and the dollarized global financial system. The change of rules was provoked by the Ukraine’s pro-Western government defaulting on its payment of interest for its debts to Russia. (Putin provided the former Ukraine government with a $3 billion loan at a 5% interest rate in 2013.) Instead of refusing to lend any new loans to the Ukraine, the Western powers changed the IMF rules and offered their lackeys in Kiev new loans. While this is a setback for Russia in the short-term, it has long-term consequences for the IMF and the US-dominated financial institutions. It demonstrated to China and Russia that the IMF is the Western imperialist’s financial instrument and will further accelerate their drive to build new and alternative financial institutions.

63.          In fact, China and Russia have already started to do so. China initiated the foundation of the Asian Infrastructure Investment Bank, ratified by China’s parliament in November 2015, which is intended as an alternative both to the US/Western-dominated World Bank and IMF as well as the Japan-dominated Asian Development Bank. It has an authorized capital of $100 billion and its headquarter will be in Beijing. China, India and Russia are the three largest shareholders, with a voting share of 26.06%, 7.5% and 5.92%, respectively. China’s AIIB project found wide support with 57 founding member states. ^[123] While the US and Japan boycott it, important European imperialist power like Britain, France and Germany have joined it – despite the pressure from Washington not to do so. This is the second project of the Eastern imperialist powers to create alternative financial institutions after they previously created the New Development Bank (NDB) in 2014/15. The NDB is a bank of the five BRICS states (China, Russia, India, Brazil, and South Africa). It has starting capital of $50 billion, which should increase to $100 billion over time. In addition, the BRICS set up, in a separate agreement, a reserve currency pool worth over another $100 billion.

64.          As a consequence of the accelerated rivalry, China and Russia are increasingly challenging the dominance of the US-Dollar as the main currency for trade and as a reserve currency. In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi and Russian Rubles, not in US-Dollars. In addition, the Russian Finance Ministry announced on 6 November that the Russian government will issue state bonds in 2016 to an as yet undetermined amount in Renminbi. In fact, we have already seen for some time an accelerating process of de-dollarization. Today China’s Renminbi has become the main currency for payments between China and the rest of the Asia-Pacific region. Its use has more than tripled over the past three years and has outstripped the Yen and the US-Dollar. In international trade settlement and investment, the Renminbi was used in January-April 2015 for 31% of payments between China (including Hong Kong) and the rest of the Asia-Pacific region, up from 7% back in April 2012. The currency’s ascent came mostly at the expense of the US-Dollar, which was used in just 12.3% of payments, down from 21.7% in April 2012 (see Table 7). ^[124] According to China’s RMB Internationalization Report 2015, released in July last year, China’s Renminbi has become the world’s 5^th most used payment currency, the 2^nd most used trade finance currency, and the 6^th most traded currency in 2014. [125] The Financial Times reported in October 2015, that the Renminbi has already surpassed the Japanese Yen and become the 4^th most-used currency for global payments (2.8%). Nevertheless, the US-Dollar remains by far the most used currency with a share of 44.8% (see Table 8). [126] In summary, while the US-Dollar is still the dominant currency, the Chinese are rapidly increasing their influence in the currency market.

 

Table 7. Currencies Used for Trade between China and the Asia-Pacific ^[127]

Currency                              Jan–Apr 2012                     Jan–Apr 2015

Australian Dollar              12%                                        12.1%

US-Dollar                             21.7%                                    12.3%

Hong Kong Dollar            21.8%                                    16%

Japanese Yen                      28%                                        23%

Renminibi                           7%                                          31%

 

Table 8. Global Payment Currencies (by August 2015) [128]

Currency                              Share

US-Dollar                             44.82%

Euro                                       27.20%

British Pound                     8.45%

Renminibi                           2.79%

Japanese Yen                      2.76%

 

65.          This development is also reflected in the establishment of an alternative cross-border payments system both by China as well as Russia. Until recently, cross-border payments were executed globally using the SWIFT system, which is dominated by the US and the EU. However, after the Western powers excluded Russia from SWIFT as part of their sanctions in the course of the Ukraine crisis in 2014, Russia was forced to establish an alternative system. China had already previously decided to establish its own cross-border payments system (called Cross-Border Inter-Bank Payments System or CIPS) and finally succeeded doing so in October 2015. These steps make the Eastern imperialists also financially more independent of the Western-dominated payments system. [129]

66.          A further arena where rivalry between the Great Powers increasingly takes place is the current round of free trade agreements. The US recently announced the intention to create the Trans-Pacific Partnership (TPP) which should lower or abolish tariffs and making trade cheaper. This agreement includes, besides the US, 11 Asian, Latin American and Oceania countries. As an alternative, China is promoting the Regional Comprehensive Economic Partnership (RCEP), a proposed 16-nation free-trade area. RCEP would include, among others, Japan and Australia (which are also part of TPP) as well as India, South Korea and Indonesia (which are not part of TPP). The two free trade projects reflect the struggle of the two imperialist giants: TPP would represent 13% of global trade, RCEP around 12%; in terms of global GDP, TPP represent 36% and RCEP 29%. [130] The struggle for Asia’s market is crucial since it is the second largest regional market (with 32.0% of world merchandise imports and 31.5% of its exports in 2014; Europe is the biggest market with import/export shares of 36.8% and 36.4% respectively) [131] Between the years 2000 and 2014, the US share of trade in Asia declined by nearly half, while China’s share grew rapidly (see Figure 47). In 2000, US exports accounted for 12.3% of the Asian import market. Yet, 14 years later, US exports were just 6.6% of the Asian market. Japan fared even worse. At the same time, China’s share of the Asian import market grew from 8.3% (2000) to 18.7% (2014) of the total Asian import market. ^[132]

 

Figure 47. China’s and the U.S.’s Share of Asian Trade, 2000-2014 [133]

 

67.          On a political and military level, China trails behind the US (but not other Western imperialist powers like Japan or Germany). It is now starting to send military abroad by deploying 700 combat troops in South Sudan, a country in which China has major economic interests. ^[134] In the maritime realm, Beijing has underlined – via military maneuvers and the construction of military outposts on the Spratly Islands – its own version of the Monroe Doctrine according to which, what China calls the South China Sea, belongs exclusively to itself. ^[135] Naturally US imperialism is alarmed by China’s claims, since it views Asia as it own sphere of influence. The Council on Foreign Relations, a semi-official think tank close to the US Administration, therefore call Washington to “thwart Beijing’s objective to systematically undermine American strategic primacy in Asia.” [136] However, China’s Monroe Doctrine has provoked the indignation not only of its imperialist rivals but also of smaller Asian nations (like Vietnam, the Philippines, Malaysia, etc.). China’s project to build a channel from the Atlantic to the Pacific through Nicaragua (as an alternative to the US-dominated Panama channel) and its plan for a Transcontinental Rail project in Latin America are other examples of its plans to expand its global influence. [137] All this reflects the rise of the Eastern imperialist Great Powers and the decline of their Western rivals. A recently published article by a reactionary British journalist, entitled “Our spoiled, emasculated, de-spiritualised societies in the West are in terminal decline,” reflects these developments. The author concluded: “What we were seeing in 2015, more than ever before, were the signs of one of history’s great geopolitical shifts, as the centuries-old hegemony of the West gives way to the new powerhouses of the outside world. In the face of every kind of new external challenge, the leaders of the EU and the USA have never looked weaker or more bemused – as over how to deal with the flood of refugees and the terrorist threat unleashed from a Middle East reduced to chaos by our vainglorious interventions in Iraq, Afghanistan and Libya. Never have our politicians and political institutions been held in less respect.” He adds “We might well be haunted by the brilliant title of that otherwise not very good book written by Otto Spengler in the Twenties, Der Untergang des Abendlandes (The Decline of the West). All civilisations, as we know, eventually decline, and Spengler’s title was just 90 years ahead of its time.” [138]

68.          In summary, the rivalry between the monopolies as well as between the Great Powers has continued to accelerate. The sharks are fighting more aggressively for their share of fish in a shrinking sea. As a result, the process of monopolization – in which bigger capitalist corporations swallow smaller ones – accelerates, as we mentioned above. In the political sphere, this means that the rivalry between the imperialist powers unavoidable accelerates and increases the danger of a Third World War. While such a war between the Great Powers is unlikely in the near future, such dangers will increase with the deepening of the capitalist crisis and the exacerbation of the contradictions.

 

IV.2.       Counterrevolutionary Offensive: The Retreat of the Arab Revolution Continues Despite Heroic Popular Struggles

 

69.          The RCIT has analyzed the state of the Arab Revolution in a number of documents in the past seven months. ^[139] Here we will summarize only the most important conclusions. The retreat of the Arab Revolution, which we noted in 2013, continues. In fact, today the danger of its final defeat is bigger than ever before. The petty-bourgeois left-liberals, the reformists and the Islamists have led the revolutionary upheavals into a cul-de-sac. As a result, in most cases the Arab dictatorships were either able to retain power (Syria except the liberated areas, Bahrain, Algeria, Morocco, the other Gulf monarchies) or the ruling elite managed return power to itself via a coup d’état (Egypt) or “democratic” elections (Tunisia). Currently, the imperialist Great Powers are aggressively intervening – particularly in Syria – in order to increase their respective spheres of influence while at the same time liquidating the revolutionary process. In short, the Arab Revolution faces the sword of Damocles as the Great Powers and their local flunkies continuously try to strangle it by supporting old and new dictatorships, as well as by means of foreign military intervention.

70.          However, it is by no means inevitable that the Arab Revolution will end in defeat. In fact, the new uprising of the Tunisian workers and youth completely refutes the idiotic claims of many reformists and centrists that the Arab Revolution had ended in defeat, or that it had been the product of a conspiracy by Western imperialists. The popular rebellion in Syria is continuing despite all obstacles, the Yemeni people are fighting heroically against the Saudi invasion, the Egypt workers and youth continue to take to the streets fighti