Volume 2, No. 12, December 2001

 (This is the second and concluding part of the article on the impending worldwide recession. In the first part we saw the link between the current severe economic crisis and the war-mongering of the imperialists, particularly US imperialism. In this concluding article we shall examine details of the severity of the economic crisis throughout the world, to understand the gravity of the situation and its implications for revolution — Author)

The OECD has predicted the worst growth rate in 18 years (since 1982) for its member countries. Its 30 members are expected to grow by just 1% this year and 1.2% in 2002. It also predicts that for many countries, like the EU countries, the situation next year could even be worse than the current year. World trade growth in the first half of 2001 fell to as low as 1%, compared to 12.5% in the same period last year.

Through October and early November 2001daily reports continued to appear of TNCs retrenching their employees. Motorola, the US telecom mammoth laid off a further 7,000 in November, taking the years total to 32,000 — 26% of its work force. It faces its first operating loss in 45 years. The collapse of a yet another giant, Enron, and its proposed take over by Dynegy Inc. for a mere $9.5 billion, is a further indication of the depth of the crisis. The French telecom giant, Alcatel, announced a third quarter (July to Sept.) loss of $507 million and retrenchment of 10,000 workers. Deutche Bank, Germany’s biggest bank, announced further job cuts of 4,500, taking the years’ total to over 7,000. Airlines throughout the world have suffered losses of about $12 billion this year and retrenched 2 lakh employees. Lately, the Belgian airlines, Sabena, closed down, while the Swiss and Scandinavian airlines reported huge losses and job cuts. In October 2001 the US lost over two lakh jobs, the highest in two decades. Unemployment in the US jumped by as much as half a percentage point in just one month, taking it to 5.4% in October. The IMF has estimated that by the end of next year 26 million people will lose their jobs.

Worst affected by the recession will be countries of the third world that have little or no social security system. In just the past two months agricultural prices have dropped by about 5%, which will hit farmers in the third world the hardest. The World Bank has said that as a direct result of the ‘slowdown’ 40,000 children worldwide will die from disease and malnutrition and 10 million more people will fall below the bank’s extreme poverty line of $1 a day. Already major countries like Turkey, Argentina and Indonesia are facing its worst economic crisis in post world war two history.

In the year 2000 itself, GDP growth rate in the US halved to 2.5% compared to 5% in the previous year. As a result of falling share prices, the net worth of American households fell in the year 2000 for the first time since records have been kept 55 years ago. By end 2000 certain economists were already predicting a severe crash of the US economy. In an article published in Dec. 2000, entitled, USA: Making of a Crash, (11) Fredrick Claremont brought out the gravity of the situation, when he said: "by all indicators the US economy is on the skids: tumbling stock markets, the drop in personal incomes, vastly diminished consumer confidence and lower consumption. Debt loaded balance sheets have become the nightmare of Corporate America as US non-financial corporate debt is surging with unprecedented velocity, already engulfing 45% of GDP." He predicted that what was unfolding was "the grim rumblings of one of the worst economic collapses in the making since the end of the Second World War".

The US economy entered the current year, amidst a drastic fall in the Stock Exchange, falling corporate profits, increasing unemployment and reduced consumption expenditure, and spiraling debts of both the government and of the private citizen. There appeared no positive sign from any sector that could work to revive it.

Well before the Sept. 11 attack there was already talk of the economy going into recession. Even after the massive dose of funds pushed into the consumer’s hands (the interest reductions alone gave an extra $6.5 billion to consumers on their credit card expenditure) and the resulting increase in consumer spending by 2.5%, the growth rate dropped to as low as 0.2% in the second quarter of the year. (14) All economic indicators dropped drastically: industrial production fell again in July for the 10th consecutive month — the longest period of decline since 1983; corporate profitability was down 12% and corporate defaults were soaring; the use of industrial capacity at 77.4% was the lowest since 1983; and the stock exchange dropped a further 8% in the first six months of the year. (15)

Layoff announcements reached such levels not seen since the 1980s. In June, Business Week reported that claims for jobless benefits had risen over the 4-lakh mark, " a level usually associated with recession". By end August US jobless was at a nine-year high reaching 4.9% of the population. (16) The job cuts continued apace. Big layoffs were taking place in the automobiles sector, IT sector and even in the financial services sector. Ford and General Motors temporarily closed down their US plants, as did other motorcar plants. Ford retrenched 5000 more white-collar workers. The steel industry was in the doldrums, with 18 firms having gone bankrupt. AOL Time Warner announced a 7.5% job cut reducing staff by 1,200. Over-and-above the 25,000 jobs lost since the beginning of the year in the investment banking firms, Citigroup announced another 3.500 job losses, and Morgan Chase and Goldman Sachs announced plans for big operational cuts.

Corporate profits have been falling at a dramatic speed. In the first quarter of 2001, the S&P’s top 500 companies showed a drop of 6.1%; in the second quarter profits fell by 17.3%. Profits in the technology segment fell by 40% in the first quarter, and was expected to drop by 60% in the second quarter. Overall profits of major companies are expected to drop by 8% this year. In the second quarter, companies’ capital spending plummeted by an (annualized) 13.6%, its biggest drop since the 1982 recession.

It was under these desperate circumstances that the Bush administration came out with its monetarist medicine to boost domestic spending and spur new investment. In unprecedented measures, the government reduced interest rates 8 times in every month from January to September 2001, thereby reducing the interest rates by over half from 6.5% to 3%. (12) This was meant to boost consumption due to availability of cheap credit (the bulk of US consumers purchase on credit cards and through installment payments), and spur corporate investment by reducing the cost of capital. In addition to this, they decided on a $1.3 trillion tax rebate of which $38 billion was refunded in the current year, with the sole purpose of further boosting consumption expenditure. (13)

Yet, in spite of such drastic measures (where the tax cuts alone amount to boosting the GDP by half percent) the economy has not recovered; on the contrary it went into an even deeper depression. The third quarter corporate profits reported were the worst in a decade. So, for example, both Kodak and Intel reported a 77% drop in third quarter profits. In spite of all the money pumped in and nine consecutive cuts in interest rates, third quarter (July to Sept) results showed that the US’s economy contracted (i.e. was minus) by 0.4%.

After the Sept. 11th attack, there was a leap in the number of layoffs. The airlines have already retrenched over one lakh; Boeing announced a 30% cut, laying off 30,000; Honeywell announced a 12,000 cut, tourism and hotels were announcing big cuts, as was insurance, banks and the entire IT and telecom sector. As the New York Times reported "six days ago (i.e. before Sept. 11) the economy seemed to be at best stagnant. Now, as a result of last week alone, many experts believe that it is already contracting, perhaps by as much as an annual rate of 1%". (17)

With layoffs continuing, consumer confidence falling and investment stagnating, the US economy is all set to go into recession. In the month of October the huge layoffs continued, and there were numerous reports of a drop in corporate profits. Sears Roebuck cut 22% of its workforce, Bank of America 7.5% of its investment branch, Kodak cut 10%, the huge entertainment industry has cut 10% of its 1999 peak, and Merrill Lynch announced cuts of 15% of its worldwide workforce. This is just some of those reported; daily reports appear of US companies laying off workers. With all other efforts of revival having so far failed, Bush’s war cry can be an attempted solution of last resort. No doubt, other compulsions are also there, but an attempt at economic revival through war is one factor. With the crisis deepening, in end October, the US government announced yet another $100 billion stimulus package plus a further half percent cut in interest rates (the third cut since Sept.11), bringing it down to 2% — the lowest since 1961. More important, it placed its highest ever order for defence equipment — of hundreds of the latest fighter jets worth roughly $300 billion with Lockheed Martin. Deliveries of these are expected from 2006. No wonder it was defence stocks that were doing the best on the American stock exchange. Yet, there is no sign of a recovery.

What then is the genesis of this recession in the USA?

The crisis of overproduction is a necessary aspect of capitalism from which the capitalist can never escape. It arises from the inbuilt contradiction within capitalism, where maximization of profit and accumulation of capital can only take place through increased exploitation of the masses generally, and workers in particular. But, the more the exploitation, the less is people’s purchasing power, resulting in shrinkage of the market. So, as accumulation proceeds apace and with it production of commodities necessarily grows, the market for this does not grow proportionately resulting in a crisis of overproduction.

In the early 1990s, taking advantage of the setback to communism and people’s movements, US big capital launched an offensive against the people throughout the world. This resulted in enormous profits to the TNCs and the mass impoverisation of the masses throughout the world and even in the US. Real wages in the US has been declining for more than 20 years, taking them to the 1987 levels, which itself was below 1967’s. This resulted in the enormous accumulation of capital but stagnant markets. A look at the Fortune 500 listings indicate this clearly, where profits have been huge, but sales stagnant, particularly of US TNCs. Throughout the 1990s these huge surpluses were used to buy up other companies in a wave of Mergers and Acquisitions unprecedented in the history of capitalism. Each acquisition was followed by a ‘rationalisation’ package, which entailed the displacement of thousands of workers. So, with these M & As, though profits skyrocketed due to greater productivity (particularly through the large investments made in the IT sector), markets did not increase due to displacement of labour, reduction in social security and a drop in general working conditions (outsourcing, contracting, etc.). Though part of these lacunae was made up by a gigantic rise in salaries of the officer class, and particularly the top one percent, it could in no way balance the market shrinkage caused by the huge drop in purchasing power of the masses worldwide. Besides M & As, vast amounts of the surplus went in speculative activities, creating the bubble economy. With markets not growing, little of the surplus went into creating new production. With impoverisation reaching unimaginable levels, and capital accumulation continuing at a frenzied pace, a crisis of overproduction was inevitable.

The pace of Acquisitions has its limits, and the froth of speculative profits can exist only on the base of the productivity economy. Once the base becomes shaky the bubbles in the froth begin to burst. This was the situation that hit Japan a decade back, it is what began hitting the US economy from mid-2000. The cycle of dropping consumer demand, rising stocks, increasing layoffs and reduced corporate profits has been pulling the US economy down since a year. The Bush administration has sought to revive it by increasing consumer demand by continuous cuts in interest rates and a massive tax rebate — but, so far, this has been ineffective. After the Sept.11 attack it has, in addition, sought a Marshal-Plan type infusion of funds, together with war expenditure. It is yet to be seen what impact this has on the economy.

Now, to look at the second aspect — the bubble economy, built around gigantic quantities of debt (mostly bonds and equity shares). There is no aspect of the US economy that is not laden with massive amounts of debt. The Public Debt, the Corporate Debt, the Trade Debt (called Current Account Deficit — CAD) and even the Household Debt, have all reached astronomical levels. These have been built on the basis of the confidence gained by: a strong dollar, high interest rates, and the rise of an exceedingly powerful banking industry which has grown to mammoth size through 8,000 M & As (in the 1980-98 period) involving $2.4 trillion in acquired assets. As a result money from all parts of the world have been flowing into the US economy.

According to the Federal Reserve Board’s data the aggregate outstanding public debt grew from $1,028 billion in 1964 to $25,679 billion in 1999 — an annual compound rate of 9.6% which far outstrips the growth of GDP. This amounted to more than half the world’s outstanding public debt. It is this vast infusion of funds that resulted in a rate of market capitalization in the 1994-99 period faster than that of even the 1925-29 boom. An example of this bubble was reflected in the rise and fall in value of the dot com stock. To take an example, Yahoo’s share price dropped from $237 to $15; Lycos from $109 to $11.25. (19)

If we look at the domestic business financial sector’s debt, it rose from $53 billion in 1964 to over $7.6 trillion in 1999 — a 144-fold increase. In the foreign trade sector, the CAD grew nearly ten-fold over the 8 years from -$48 in 1992 to -$420 billion in 2000 — i.e. 4% of the GDP. (19) This huge deficit requires an annual injection of $500 to sustain it.

If we turn to household spending we find that here too the debt has risen dangerously in the last few years. Personal borrowings have leapt from 26% of personal income in 1985 to 34% in 2000. As a result the household saving ratio, as a percentage of disposable income has dropped from 8% in 1990 to less than -0.8% today — a post-war low, similar to the depression year of 1933. (20) In other words, people are spending more than they earn, leaving a huge yearly deficit of $247 billion. A booming stock market (giving an illusion of wealth) and a relatively low unemployment rate aroused confidence for such profligate expenditure that fueled the huge consumer expenditure, which created a demand for not only American goods, but also imports from all over the world. This confidence now lies shattered due to the fall in stock prices and the rise in unemployment, and will strongly impact future purchasing ability.

So, to sum up, the present recessionary-type conditions in the US economy is the result of a combination of a crisis of overproduction together with a bursting of the bubble in the financial sector of the economy. The causes are deep-rooted and all encompassing and not the result of just one or two factors. It is for this reason that recovery (even if partial) will not be that easy as it was with the other downturns in the past three decades.

Japan is already in deep recession, the worst in the post-war period. This recession comes on top of a decade long period of stagnation, which has witnessed four recessions. There is not a single economic indicator that is positive. It is estimated that Japan’s GDP growth will drop by as much as 5% this year. Already, in the second quarter, industrial production dropped at an annualized rate of 17%. (21) Unemployment has skyrocketed to 5.3% from just 2% a few years back. It is at its highest in the post world war II period. Yet, layoffs continue to rise at a frightening pace. In end August, the three major electronics manufacturers, Hitachi, Toshiba and Fujitsu announced layoffs of 20,000 each. All these giant electronic companies are showing huge losses.

Bankruptcies continue at an enormous rate. In October last year Japan’s 12th largest life insurance company, Chiyoda Mutual, went bankrupt with a debt of $27 billion. This was the biggest bankruptcy since World War II. Three months earlier, a departmental store, Sogo, collapsed with debts of roughly $18 billion. In the first eight months of the year 2000 12,625 companies went bankrupt — a rise of 30% compared to the same period in the previous year. (22) Bankruptcies continue to rise. In the first six months of the current year debt accumulated by Japanese corporate bankruptcies totaled $58 billion, hitting the second highest total since the end of World War II.

Japan’s public debt has skyrocketed over the past decade from 55%of GDP to 130% of GDP today. It is now a massive $5 trillion. (23). It has the highest ratio of public debt to GDP in peacetime. Its fiscal deficit has jumped from a surplus of 3% of GDP in 1991, to a deficit of 7% in 2000. Corporate debt is already 97% of GDP. Land prices dropped 5% in the year 2000, the 10th consecutive year of decline. The stock market index has been continuously falling, and in just the 2 months from mid-July to mid-Sept. it dropped 18% to reach its lowest level since 1983. Even the value of the Yen dropped by 7.2% in the first 7 months of this year.

The crisis in the Japanese economy has also resulted in a decline in its control over world markets, even in its own backyard in S.E.Asia. Japan’s FDI around the world has fallen by 36% in the past decade, while that in S.E. Asia has halved. Though FDI investment in China has doubled the absolute quantum is relatively small compared to what it had in East Asia.

Japan’s boom and crash ‘bubble economy’ was an extreme case of what is today unfolding in America. Its massive growth in the pre-1989 period was fueled by speculative mania in real estate and the stock market. Values reached dizzying heights. For example, the lands of the Imperial Palace in Tokyo was worth more than the entire real estate of California. By 1987, Japan alone accounted for 45%of the world’s market capitalization (compared to the then US’s 30%). But since the bubble burst in 1989, its financial sector was crippled with bad debts to the tune of Y 35 trillion ($300 billion). Though the bulk of this had to be written off, these bad debts are continuously being generated and are now 6% of the GDP. To meet these gigantic payments the Japanese govt. continues its frantic borrowings, being the world’s biggest borrower. Its gross borrowings in 2001 will be $560 billion — twice as much as the US. (24)

Though not as drastically hit as Japan and America, the EU is also facing a severe slowdown. Some estimates put the growth in the Euro area in the second quarter of this year at close to zero. Forecasts put the growth rate for the entire EU in the current year at a maximum of 1.9% compared to an average of 2.7% over the past four years. (25) A number of TNCs are laying off workers in thousands. The European Central Bank (ECB) has also cut interest rates three times this year, bringing it down to 4%, in a bid to revive the economy.

Amongst all the Euro zone countries Germany, which accounts for one-third of its GDP, has been the worst hit. In the second quarter of the current year GDP growth rate was zero; industrial output grew by just 1.1%; and inflation reached 3.5%, the highest since 1993. (26) In Germany unemployment has gone over the psychological barrier of 4 million and continues to rise as major and minor companies are reducing staff. Most predict that the German economy will not grow by more than 1% this year. The slowdown in Germany has seriously impacted neighbouring countries, which depend on Germany for much of their exports. Poland, the Czech Republic and Austria each send over one-third of their exports to Germany.

In Britain, manufacturing slipped into recession this year by falling for two consecutive quarters, while total industrial production fell by 2.2% compared to the same period last year. Total output of financial services in the city of London dropped from 4.6%of GDP in 2000 to 1.6% this year. It has been estimated that nearly one-and-a-half lakh jobs will be lost in the city of London alone by the end of next year.

Of the other EU countries, Italy’s GDP fell by an annualized rate of 0.5%; that of the Netherlands was zero, and France’s economy had also slowed.(27)

After the Sept. 11 attack the index fell sharply on all the European stock exchanges, with London’s falling to a three year low.

Through the 1990s though Europe’s growth rate has been somewhat sluggish, it has not had that type of volatility as witnessed in America and Japan. If America goes into recession, which seems most likely, it will pull the entire world’s economies down with it, including that of Europe. Though it may not be that badly devastated, it does not have the strength to act as a counterbalance to recession in America. It too is likely to be badly hit.

Ever since the collapse of the state capitalist economies a decade back these economies have been in a state of chronic sickness. The EBRD (European Bank for Reconstruction & Development) reported that only Poland and Slovania were close to regaining what was lost during the 1990s. Till 1996, for East Europe as a whole, GDP was still 15% below 1989 levels. (28)

Russia is in a chronic state of atrophy. GDP in Russia has fallen by over 40% since 1989.(29) All business has been taken over by the mafia. Capital flight continues unabated, estimated to reach a gigantic $25 billion in the current year. The Rouble has little value, and estimates indicate that about 75% of all business transactions are carried out without using money —— either through barter or by mutual non-payment. The black economy continues to be half the GDP. Russian made civil goods accounts for less than 1% of world markets (US is 36%, Japan 30%). Russia’s GNP is ten times smaller than that of the US. Its per capita annual GDP at $3,500 is five times smaller than the average of the G-7 countries. Though Russia saw some growth last year due to the hike in oil prices, this year the growth rate has already dropped by half. (30) Besides, inflation, which was under reasonable control for the last two years, has once again risen to 25% this year.

If Russia is in a bad state the CIS countries are in an even worse condition. A large part of the population of these countries is living in a state of acute poverty and even starvation. The expectancy of life has dropped by 5 years. Instances of TB and hepatitis have doubled since 1990. Ukraine has seen the collapse of its living standards since 1991. In a country like Moldova, half the population lives on a yearly income of $220, compared to $2,000 in 1992. In these countries the average monthly wage varies from $25 in Azerbaijan, $30 in Armenia, $40 in Kyrgyzstan, $60 in Uzbekistan; and even in countries like Bulgaria and Romania it was $70 and $90 respectively.(31) A large part of the population of the CIS and East Europe have migrated to the West, working in manual jobs, as prostitutes, etc.

These countries have been in an acute state of crisis and recession for the last decade, a world economic downturn can only push them deeper into the morass.

With the East Asian economies totally dependent on exports, mostly to America and Japan, these economies have been acutely hit by the downturn in these countries. Real GDP turned negative in the first two quarters of this year in Singapore, Taiwan and Thailand. Singapore’s production fell by 11%in the year to May 2001. Exports from East Asia declined by 10% over the past year, compared to a growth of 30% in early 2000. Even China’s exports have slowed from 40% to 4% over the past year.(32) many stock markets fell by over 30% in the year 2000. It is estimated that unemployment will leap by 12% in the current year.

The following table (33) gives a picture of the projected fall in GDP growth rates for the current year:

Change in GDP (%)

 The ‘Asian Tigers’, the ‘Asian Miracle’, the ‘emerging economies’ much propagated as the model for third world countries, were nothing but sweat shops for American (and to a lesser extent, Japan) TNCs. Their ‘boom’ in the 1990s was nothing but part of the American IT boom, with these countries manufacturing components for the US IT giants. Then came the 1997 economic war on these countries by US TNCs and the financial tycoons. The huge devaluations that resulted from these attacks, meant that export prices in dollar terms dropped by more than half, giving windfall profits to the US PC manufactures. Though exports boomed again, the terms of trade were extremely unfavourable to these countries. Besides, through the devastation of these countries, domestic consumption dropped, making these countries even more dependent on exports. So, for example, S. Korea’s exports of goods and services jumped from 30% of GDP in 1996 to 45% of GDP last year; Thailand’s rose from 39% to 66%. (34) Quite obviously they are at present far more vulnerable to international fluctuations in the economy than ever before, particularly that of the US.

The following table (35) gives a picture of the extent to which these countries are dependent on exports, particularly those of electronic goods:

With such massive dependence on exports to the US (Japan accounts for 13%), the slump in the US IT sector since last year, has hit East Asian economies severely. In May 2001electronic production in the US was down a huge 35.5% compared to the same month last year. The impact on East Asian manufacturers of such a drastic fall, who have been used to galloping increases (for the last 20 years spending on IT in the US has grown at two to three times the rate of the economy), can well be imagined. In addition, the US TNCs have sought to push the impact of the recession on to these component manufactures, by forcibly reducing rates of the goods purchased. To take an example, the price of standard 64-megabyte RAM chip dropped 90% from $8.9 to $0.9 between June 2000 and July 2001.

So, these ‘tigers’ will be seriously affected by an American recession.

Though severely damaged, the above-mentioned economies are not the worst to be hit. The two ideal models of IMF structural adjustments, Argentina and Turkey, are in the midst of their worst ever crisis in modern history. Argentina is the third largest economy in Latin America, and Turkey is the largest in the Middle-East region. Both have been the most faithful lackeys of the US, implementing all IMF/World Bank stipulations with a fervour that made their Western bosses ecstatic. Both have recently received gigantic IMF bailouts; but their crisis persists, nay deepens. Caught in the quicksand of recession, both are also sucking their neighbours into the vortex.

Argentina, which has faced a capital flight of $80 billion, finds its currency {which is pegged (1peso=1dollar) to the dollar} in a state of collapse. For a decade the dollar has been fully convertible (on capital account) with the peso, and the Central Bank is therefore unable to print pesos unless it has dollars to back it. As a result there is no cash in the country, and so the local authorities have resorted to issuing another paper note, called ‘pataconeses’ to pay salaries. As this has no legal tender, the dollar regime has, de facto, pushed the country into the dark ages of a barter system. Argentina has now been in recession for three successive years.

But, in Latin America, Argentina is not alone in a state of crisis. Mexico has a zero growth rate in the current year, compared to 7% last year. With 80% of its exports going to the US, the crisis can only deepen. Brazil, the largest economy in the region, also went into recession in the third quarter of this year. Brazil’s currency has lost 22% in the first six months of this year. This, in spite of Central Bank intervention and interest hikes. Chile’s peso is also falling, and Uruguay is already in recession. Rarely in the past decade have the prospects for Latin America’s economies seemed so threatening. In fact, entire Latin America is already in recession.

In Turkey, where its currency is not thus pegged, the Turkish Lira has recently lost 50% of its value with respect to the dollar. In the first six months of this year six lakhs lost their jobs; unemployment is now at 42%; hundreds of businesses have been going bankrupt and inflation is at 65%. (For Turkey’s crisis see earlier issues).

The plight of the people of these countries has been turned into a nightmare.

So, wherever we look in the world we see nothing but countries hurtling towards economic devastation. The situation appears to be getting from bad to worse. According to a recent estimate by the ‘Centre for Economic and Business Research’, (36) the GDP may fall next year by as much as 2.2%. Morgan Stanley has predicted a global growth rate of just 1.25% for the coming year.

What then would a recession of such magnitude mean for the world’s people?

It would mean, first and foremost, a great danger of growing fascism and wars. Second, it will mean heightened contention between the major imperialist powers. Third, it means great revolutionary potential for the oppressed masses of the world.

Since the last few years, we have seen a growth in the fascist forces throughout the world, with many right-wing governments themselves introducing fascist measures and promoting fascist organizations. This can clearly be seen in Europe. Also, in Japan the new prime minister has for the first time openly paid homage to the fascist’s war memorial of those killed in WWII. In the US, the Bush administration, even before Sept. 11, had openly been pushing the most reactionary policies regarding militarism, Zionism, ecology, and on numerous other issues.

After the Sept. 11 attacks, both the US and British rulers, together with their media, have gone crazy, whipping a maniacal war hysteria, jingoism and racist paranoia. Attacks on non-whites, particularly Moslems, have been encouraged, and have been taking place on a wide scale, with even the police taking part. Not only has Bush been speaking like a Hitler, but even Blair has outdone the extreme right-wing Tories in his xenophobic statements. British tabloids and TV have been whipping up panic and have carried massive footage glorifying the war preparation. The message sort to be portrayed was: the good civilized west versus the Islamic beasts! Immediately civil liberties are being curtailed, and the police are being equipped with draconian powers, normally seen only in the third world countries. It is portrayed as a clash of civilizations, much similar to what the old colonialists said.

The US has threatened a long war — first Afghanistan, then Iraq, and then anyone who does not bow before the almighty. It is not just a war against terrorism (i.e. mass discontent of the masses), but a war to grab, seize and maintain markets, in a fanatical drive to overcome the recession. Its WAR, besides being against pockets of resistance, has the twin purpose of browbeating third world countries into greater servility to US dictates, and also of keeping the other imperialist powers out of its spheres of influence. As has already been mentioned all these factors can be seen in the war unfolding in and around Afghanistan.

In this period of recession, the most affected will be the masses throughout the world. Unemployment will skyrocket, the agrarian economy will crash, social security will be further cut with govt. spending being geared to war and sustaining a monolithic fascist state, and millions more will be pushed to death by hunger, starvation and disease. And in the name of war and national chauvinism, all civil liberties, trade union rights, and rights to free speech and movement, will be ruthlessly curbed. Xenophobia, racial hatred, and communal passions will be incited, creating rivers of blood, sprouting from the springs of frenzy. And, together with all this inhumanity there will be wars — imperialist sponsored wars, fascist wars, wars that kill, maim and slaughter lakhs for the sole purpose of enhancing profits of a microscopic few.

Where Maoists forces exist they will lead these revolts and take it forward towards the seizure of power. Where they do not exist they will get formed, as it is only they who wield the political and organisationsal ability to take on the fascists, and it is only they who have a real alternative to the crumbling, degenerate and inhuman system. Besides, with this ruthless offensive of imperialism, vast sections of the masses will be drawn into this struggle, opening up the scope for the widest possible front against US imperialist aggression and all the lackeys that ally with them.

The increasing exploitation and oppression in these times of recession will catalyse the revolutionary process, by drawing in the vast masses into the great historical movement for a just order. Besides, in these conditions of economic crisis, the dogfights amongst the reactionaries will intensify as they scramble for their shares in the diminishing cake. This, together with the greater contention amongst the imperialist powers, will facilitate greater mobility and speedier advance for the revolutionary forces, through an astute handling of the contradictions within the enemy camp.

The present situation, though fraught with grave dangers, is opening up avenues for great advances in the revolutionary movement. There is urgent need to build the widest front against the fascists and the US imperialist sponsored war effort, under the leadership of the proletariat. What Com. Mao said in 1970 is once again relevant today: "people of the world unite, defeat US imperialism and all its running dogs".

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