Marxism takes its point of departure from the world economy, not as a sum of national parts but as a mighty and independent reality which has been created by the international division of labor and the world market, and which in our epoch imperiously dominates the national markets. The productive forces of capitalist society have long ago outgrown the national boundaries.¹Leon Trotsky, The Permanent Revolution, introduction to the German edition, 1930.

That is how Leon Trotsky characterized world capitalism in 1930, as a “mighty reality” of which each national capitalist formation was an integral part, closely interrelated with all the others.

As Marx and Engels wrote in The Communist Manifesto, capitalism was from its origin a global mode of production. Marx’s study of primitive accumulation in Capital shows that the plundering of gold, silver, and the other riches of the American colonies and elsewhere played a role in the emergence of this mode of production, a role no less important than that played by the expropriation of the serfs in the fields of England. But since the end of the 19th century, this world economy has become a much denser network. The nodes have greatly expanded in the increasingly intense circulation not only of goods but also — and above all — of capital itself. Over time, several powers have emerged, undertaking vigorous economic development, because they recognized how important that development was in displacing Britain’s former centrality to the global circulation of capital and goods. A new multipolar world is beginning to take shape, both in the economic and political spheres.

As Samuel Berrick Saul pointed out, in the 1890s “a large part of multilateral trade was based … upon a complex net of activity embracing whole continents or sub-continents, derived from a new world-wide division of functions.”²Samuel Berrick Saul, Studies in British Overseas Trade, 1870–1914 (Liverpool: Liverpool University Press, 1960).

The spatial configuration of the world economy and interstate relations reached at the end of the 19th century would reveal a new contradiction — a source of conflict in the global village during the imperialist epoch. It is the very one mentioned by Trotsky in this article’s epigraph: a conflict between increasingly internationalized productive forces and the nation-state as a space within which relations of production are articulated. “One of the basic reasons for the crisis in bourgeois society is the fact that the productive forces created by it can no longer be reconciled with the framework of the national state,” Trotsky argues in The Permanent Revolution.³Leon Trotsky, The Permanent Revolution, chap. 10, 1930.

A.L. Helfand, who wrote under the pseudonym of Parvus, was one of the first to use Marxism to analyze the consequences of the changes that were taking place. Helfand collaborated with Trotsky in the period before the Russian revolution of 1905, although later they would break with each other over Helfand’s rapprochement with the German state, of which he would become the commercial representative in Constantinople. Analyzing the geopolitical tensions in central Europe and the Russo-Japanese war of 1904, Parvus argued that “the nation-state, as it had developed with capitalism, had outlived its day.”⁴Isaac Deutscher, The Prophet Armed (London: Oxford University Press, 1954), 103. Translator’s note: Deutscher attributes this to an article by Parvus in Iskra as part of a series that began in issue no. 59, February 10, 1904. Parvus stressed the interdependence of nations and states, and understood in this framework that the Russo-Japanese War was “the start of a long sequence of wars, in which the nation-states, impelled by capitalist competition, would fight for their survival.”⁵Ibid. This international perspective would be deepened by Trotsky, become the basis for establishing his perspectives on revolution in Russia, and subsequently for systematizing a theory of international revolution.

For some authors, this contradiction is far from an exclusive novelty of the imperialist epoch. For example, Simon Clarke has observed that

the contradiction between the global character of capital accumulation and the national form of the state is not a new phenomenon, but has been a characteristic of capitalism since the earliest stages of commercial capitalism, underlying the historical development of capitalist states within the international state system.⁶Simon Clarke, “Class Struggle and the Global Overaccumulation of Capital,” in Robert Albritton and Makoto Itoh, eds., Phases of Capitalist Development: Booms, Crises and Globalizations (London: Palgrave Macmillan, 2001)

But the configuration of a world articulated entirely by capitalist relations — completed during the second half of the 19th century, with a series of powers competing in an increasingly fierce manner to secure exclusive markets and investment destinations — exacerbates this contradiction. Once the great powers have completed their conquest of the world, they have to face the music: nothing can be accomplished by advancing on noncapitalist spaces. Any given power could advance only at the expense of others. The contradictory fusion of the dynamics of geopolitical competition and capitalist economic competition exacerbates tensions at both poles. In an increasingly integrated world economy, the pressure on it by the most developed capital blocs has repercussions on the nations lagging behind, which exacerbates social tensions. This contributes to growing instability in interstate relations. It then becomes evident how central is the contradiction Trotsky pointed out between internationalized productive forces and their organization in a world divided into states.

Unlike Lenin, with his classic pamphlet, as well as Hilferding, Rosa Luxemburg, and Bukharin, Trotsky did not write a specific study on the question of the imperialism.⁷Translator’s note: The author is referring to four works: Imperialism, the Highest Stage of Capitalism, by V. I. Lenin (1917); Finance Capital: A Study of the Latest Phase of Capitalist Development, by Rudolf Hilferding (1910); The Accumulation of Capital, by Rosa Luxemburg (1913); and Imperialism and World Economy, by Nikolai Bukharin (1915–17). But here we find one of the central points in Trotsky’s characterization of the imperialist epoch. The other aspect that is key in Trotsky’s analysis, which he developed more than the one already mentioned — expressing it throughout his discussions on England, France, Germany, the United States, and the semicolonial countries — is the scramble for world domination at a moment of crisis for England as the dominant power, and the long rise of American imperialism, clear winner of World War I but not yet able to impose itself fully on all the declining powers. With respect to the latter point, Trotsky pointed out,

It is precisely the international strength of United States in the world, and her irresistible expansion arising from it, that compels her to include the powder magazines of the whole world into the foundations of her structure, i.e., all the antagonisms between the East and the West, the class struggle in Old Europe, the uprisings of the colonial masses, and all wars and revolutions. … This transforms North American capitalism into the basic counter-revolutionary force of the modern epoch, constantly more interested in the maintenance of “order” in every corner of the terrestrial globe.⁸Leon Trotsky, The Third International after Lenin, 1929.

Founded after the Russian Revolution of October 1917, the Communist International, also known as the Third International, was the site of convergence for many of those who during World War I held internationalist positions and advocated the transformation of the imperialist war into revolution. It needed to equip itself with a method to account for the sharp changes in the situation. The initial confidence that the seizure of power by the Russian proletariat would continue to spread through Europe, like a tide, was proven false. The weakness of the newly formed Communist Parties, the increased reserves of the ruling classes in the imperialist countries, and the entire effort by the bourgeoisie to save their regime by any means necessary all served to slow down the revolutionary advances of the working class in the West. It was to account for these changes in the situation, as well as its relative precariousness, that Trotsky developed the notion of “capitalist equilibrium.”

Capitalist Equilibrium

At the Third Congress of the Communist International in 1921, Lenin and Trotsky continued the fight initiated at the Second Congress against the ultraleftists who were denying the tendency toward stabilization in the wake of the defeats and deviations of the revolutionary offensives that had taken place at the end of World War I. The central notion Trotsky proposed in his speech at the Third Congress was that the world economy’s tendencies had to be addressed in the context of the interdependent relationship between interstate relations and the class struggle. The articulation between these three dimensions is what Trotsky would define as “capitalist equilibrium,” a categorization with which he sought to analyze the extent to which the conditions for reproducing capital — and therefore the bourgeoisie’s rule — either existed or were deteriorating.

In his speech at the Congress of the Communist International in 1921, Trotsky pointed out,

Capitalist equilibrium is an extremely complicated phenomenon. Capitalism produces this equilibrium, disrupts it, restores it anew in order to disrupt it anew, concurrently extending the limits of its domination. In the economic sphere these constant disruptions and restorations of the equilibrium take the shape of crises and booms. In the sphere of inter-class relations the disruption of equilibrium assumes the form of strikes, lockouts, revolutionary struggle. In the sphere of inter-state relations, the disruption of equilibrium means war or — in a weaker form — tariff war, economic war, or blockade. Capitalism thus possesses a dynamic equilibrium, one which is always in the process of either disruption or restoration. But at the same time, this has a great power of resistance, the best proof of which is the fact that the capitalist world has not toppled to this day.⁹Leon Trotsky, “Report on the World Economic Crisis and the New Tasks of the Communist International,” part I, June 1921, in The Third International after Lenin, 1929.

Hillel Ticktin, author of a study on the ideas of the Russian revolutionary, has noted that “the concept of a balance of forces played a central role in Trotsky’s thinking. He saw capitalism constantly trying to establish a balance, which is constantly breaking down.”¹⁰Hillel Ticktin and Michael Cox, eds.), The Ideas of Leon Trotsky (London: Porcupine Press, 1995). Translator’s note: Because the book is unavailable to me, this and the following excerpt are, of necessity, translations back into English from Spanish of an original text in English. Thus, it may not correspond exactly to the original. Ticktin makes an important clarification: the notion of equilibrium does not refer to forces that counteract each other by creating a stable situation.

It is not derived from the metaphor of equilibrium in physics, with two weighty materials acting against each other. Instead, this concept involves the view that there are contradictory forces that are part of society and are operating in opposition to each other. To the extent that they can interact and not crush one another, they move into and out of balance. From this perspective, equilibrium is a state that is always reached and broken, until one of the poles of contradiction loses its power and fails.¹¹Ibid.

It is interesting to see how this relationship between two of the three terms, economy and class struggle, played out after World War I in the situation analyzed by Trotsky in 1921: “Immediately following the war, an indeterminate economic situation arose. But by the spring of 1919 a boom set in …”¹²Leon Trotsky, “Report on the World Economic Crisis and the New Tasks of the Communist International,” part II, June 1921, in The Third International after Lenin, 1929. Despite the war’s devastation, the reparations imposed on defeated Germany, and other setbacks, the economy was growing. Why was this happening, something so counterintuitive at first glance?

In the first place, by economic causes: after the war international connections were resumed, even though in an extremely abridged form, and there was a universal demand for every type of merchandise. Secondly, by political-financial causes: the European governments were in mortal fear of the crisis that had to follow the war and they resorted to any and all measures to sustain during the period of demobilization the artificial boom created by the war. The governments continued to put in circulation great quantities of paper currency, floated new loans, regulated profits, wages and bread prices, thus subsidizing the earnings of demobilized workers by dipping into the basic national funds, and thus creating an artificial economic revival in the country. Thus, throughout this interval, fictitious capital continued to distend, especially in those countries where industry continued to slump. The fictitious postwar boom had, however, great political con-sequences. There is some justification for saying that it saved the bourgeoisie.¹³Ibid.

The European governments “inflated” their economies as one way to defuse the situation (while at the same time appealing to armed gangs to “pacify” the insurrectionary masses, such as those in Germany in 1919 that massacred the vanguard and took the lives of Rosa Luxemburg and Karl Liebknecht in a preview of what the Nazis would do). The cost of this rescue,” of course, was to prepare further destabilization of the economy in the future, breakdowns due to the inability to cope with the growing amount of fictitious capital in the form of public debt, uncontrolled inflation, and so on. But along the way, the bourgeoisie gained the only thing it could then aim for: time. The ruling classes were determined to magnify the economic revival, at the cost of preparing the conditions for future upheavals, as a way to contain the upsurge of the masses. At the same time, the pacification of the class struggle, achieved through defeat but reinforced by boosting the economy, gave new impetus to the accumulation of capital (without clearing away the clouds that would afflict it in the very distant future).

The Actuality of the Method

The dialectical relationship between economic fundamentals, interstate relations, and class struggle is highly relevant to the analysis of the current situation. As we have been stating for several years now, world capitalism is still dealing with the effects of the great crisis of 2008, which marked the breakup of the “big enterprise” with which, since, the 1980s, U.S. imperialism had ensured its leadership of the capitalist classes worldwide, and which advanced neoliberal policies and productive internationalization under the ideology of globalization (two paths that allowed for a tremendous offensive against the working classes of many countries for the benefit of the bosses). Faced with the disruptive effects of the collapse of the Lehman Brothers investment bank, which marked a leap in the crisis that began in 2007 with its epicenter in the United States, the main world powers undertook concerted efforts to contain the spread of the crisis. They set out to prevent a new Great Depression, like the one after the 1929 stock market crash, from materializing, with the threat of what that could imply for the domination of the bourgeoisie. In the United States and the European Union, the main effort was to save the banks, much more than to contain the effects in terms of job destruction and loss of business. All in all, it was a huge socialization of private bankruptcies to ensure the banks continued to operate (and return quickly to distributing huge bonuses to their managers and dividends to their shareholders, as in the days before the crash).

The threat of catastrophe was averted in 2008 only through a formidable battery of emergency measures. These included the injection of liquidity to banks through public bailouts, which led to a jump in government debt, especially in the United States and the European Union. Fiscal measures were taken to stimulate activity and increase public works and social security spending (which occurred very unevenly in different countries, with China carrying out the largest-scale interventions), which again increased state debt. There was an unprecedented monetary intervention in the capital markets through quantitative easing (a large-scale pumping of money to ensure the value of stocks and bonds), a measure inaugurated by the U.S. Federal Reserve Bank (the Fed) that was later imitated by the central banks of other countries — on top of nearly 0 percent interest rates that prevailed almost until the end of 2015. In these ways, the response to the 2008 crisis was the large-scale application of all the “crisis containment” measures exercised during all the preceding decades.

The main thing, however, is that this battery of initiatives made it possible to contain the most dramatic episode generated by the shock — but only to make way for new chapters. In that sense, if the Great Recession could be considered over, it opened a “tectonic fault” in what we could call the “neoliberal capitalist equilibrium” — and which no one has been able to seal. The recovery that began in the United States in 2009 has been the weakest in the last 75 years, with (weak) growth failing to reverse the much more degraded balance of employment and wages. In the European Union, the cost of containment measures ended up making unsustainable the imbalances that characterize those economies most exposed by the architecture of a union built for the benefit of the global competitiveness of European capital. The austerity response to the crisis, applied through the “troika” mandate under Germany’s auspices (supported by France), plunged Greece, Spain, Portugal, Italy, and Ireland into economic depression. The severe tax cuts were not limited to the Eurozone.

Today, it has been 12 years since the “Great Recession.” Although it ended in 2010, we see that despite all the resources the ruling class put into play to contain its worst effects, even at the cost of producing numerous adverse “unbalancing” effects, and always with the aim of ensuring that its power was not challenged, it could not avert this danger. In 2019, a new wave of class struggle opened up around the world, with Chile and France as two of its main theaters. An earlier one, in 2010–12, had its epicenters in the Middle East and the European Union. Now the scope is much more global.

A return to a pre-crisis “normalcy” — that is, rebuilding the lost balance — is proving highly unlikely. Sectors of the ruling class have sought to channel discontent over neoliberalism and globalization into nationalist solutions, with xenophobic discourses and the promise of protectionist policies. Trump and the finally completed Brexit are the most obvious examples of this. The crisis of the “neoliberal consensus” has also had its expressions on the Left in these years, with the growth of sectors we have defined as “neoreformists” who seek to give new life to the pretense of achieving improvements for the working class and popular masses in the capitalist framework. We see it in the United States, with Elizabeth Warren and above all Bernie Sanders (whose performance four years ago, when he challenged Hillary Clinton, was already notable) successfully positioning themselves in the Democratic Party camp. Meanwhile, in the Spanish state, Podemos joined hands with the Socialist Party in the government.

Within this framework, interstate relations have become increasingly contentious. In the case of Trump, there is considerable distance between his isolationist discourse and his practice — primarily because the most influential sectors of the U.S. imperialist bourgeoisie are reluctant to abandon the good results that globalization of production has meant for their profits. But beyond the fact that these interests of the most transnationalized bourgeoisie act as moderators, the tendencies moving in the opposite direction are increasingly insufficient. We see this in the case of the United States and China, the country the United States sees as its great strategic competitor, and with which it has just secured a truce in the long trade war initiated in 2018. This pause is primarily about the upcoming elections, but it does not resolve the background of the conflict, and it will thus be reopened just after the elections, if not before. We also see a growing gap among the former main NATO allies, who view American power with growing mistrust.

Through the cracks of a world economy that sees forecasts of economic downturn (and the possibility of a new recession) in the coming years and these incipient geopolitical disputes, a rise in the class struggle has crept in. What is necessary for victories to emerge from this new cycle is to address the construction of revolutionary parties that will allow the working class to capture hegemony and fight for power. Trotsky’s method of analyzing the international situation and its unstable equilibrium is a fundamental compass in navigating this challenge.

First published on February 2 in Spanish in Ideas de Izquierda.

Translation: Scott Cooper