The crisis is unfolding relentlessly and with gathering speed. In November the USA shed jobs at the fastest pace in 34 years. World GDP has registered a sharp fall. The recession was preceded by a financial crisis (the so-called credit crunch). However, this was merely a prelude to the real crisis. As always, the bourgeois economists draw the conclusion that the cause of the crisis is a lack of credit. In reality, the lack of credit is caused by the crisis.

During the boom, everyone is prepared to borrow and lend, confident of obtaining handsome profits. As always there was a large element of speculation in all this. The dizzying rise of stock market prices bore no relation to the real situation. It must be borne in mind that, in the last analysis, the profits of the capitalists can only be derived from the unpaid labour of the working class. As long as surplus value is extracted, the capitalists, landlords, bankers and stock exchange speculators, can all make a profit. The illusion is created that this merry carnival can go on forever. But this process sooner or later comes up against the inherent contradictions of the capitalist system.

The second phase has now begun - the crisis of the real economy. Millions of workers face short-time working, cancellation of overtime or sackings and closures. The bosses are demanding wage cuts, under threat of closure. This means a general reduction in living standards, which in turn means a new fall in demand, with more closures, unemployment and new cuts. Falling activity means a fall in tax returns, which in turn must mean new cuts in social spending.

Payroll employment in the USA fell by 533,000 in November - the biggest monthly drop since December 1974. Unemployment has risen to 6.7 percent. However, this understates the seriousness of the situation. A broader definition that includes people who have given up looking for work, would mean a figure of 12.5 percent. There is now a spate of closures. The Bank of America is to sack 35,000 workers after it took over Merill Lynch. Dow Chemicals is closing 20 plants with the loss of 5,000 jobs in the USA and Europe. A further 2,300 jobs will go in 3M. Anheuser-Busch InBev is axing 6 percent of its US workforce (three quarters in St. Louis).

Nobody now repeats the nonsense that the crisis would be confined to the USA. This is an international phenomenon. The big Japanese company Sony is to shed a further 16,000 workers, cut back on investments and outsource some of its production. It has halved its annual profits forecast as a result of a slump in demand for its LCD televisions. The Anglo-Australian mining company Rio Tinto is cutting capital expenditure and selling assets to pay back $10 billion of debts. It will cut 14,000 jobs by the end of 2009. Woolworth, a major department store in Britain, is closing after a hundred years, with the loss of 30,000 jobs. The list is never-ending and growing all the time.

The growing alarm of the ruling class is reflected in the succession of panic measures adopted by governments and central banks, which are no longer aimed at preventing recession but only of blunting its effects. But despite all these measures, the crisis is deepening and spreading all the time. The world economy has entered a downward spiral, and nobody knows where the bottom lies or when it will be reached.

In the past the bourgeois economists denied the possibility of a recession. Now the only question before them is whether it will be a deep recession or a depression. For the millions affected by factory closures, bankruptcies, sackings and evictions, however, the difference is merely semantic. The bourgeois and their pet economists imagine that all crises are caused by the lack of "confidence" and that therefore a few encouraging speeches (accompanied by large donations of public cash) will solve the problem. They do not understand that confidence does not drop from the skies but reflects actual conditions. Contrary to this superficial and idealist explanation (which explains nothing), we reply: it is not the lack of confidence that causes the crisis, but the crisis that gives rise to a lack of confidence.

It is necessary to bear in mind that unless the capitalists sell their commodities, no surplus value can be realised. The ability to find markets is limited by the limited consumption of society. Sooner or later a point is reached where markets are saturated and no buyers can be found. In the crises of 1990-91 and 2001 demand did not fall much. In the first case the rapid development of Asia (China) provided a cushion that prevented the recession from developing into a slump. After this, the huge increase in credit and the speculative housing bubble kept the whole thing going. But the basis was completely unsound.

This situation could not be maintained. In effect, the capitalists avoided a deep slump for two decades but only at the cost of creating the conditions for an even more serious recession in the future. This explains the alarm with which the bourgeois view the present crisis.

During the boom, when big profits are being made, people will buy and sell, loan and borrow, cheerfully acquire debts in excess of their earnings. If anybody notices that this is all based on speculation and swindling, nobody minds. Are we not rich? Are we not all making money? Live for today and to the Devil with tomorrow! But when the boom reaches its limits - which it must do - this "irrational exuberance" turns into its opposite. Confidence evaporates together with the mirage of never-ending enrichment. Instead of the old cheerful optimism, we have panic and despair. Not greed, but an equally primordial emotion, fear, becomes the predominant mood of the market.

Contradicting all their previous analyses, the bourgeois economists now say that this recession will be longer and deeper than anything since the Second World War. The capitalists are paying the price for the "irrational exuberance" they displayed in the previous period. Terrified of the social and political consequences, they are resorting to desperate policies, which will only serve to exacerbate the problems in the long run. At every juncture the spokesmen of the bourgeois announce that the "worst is now over." Such declarations, which were also made at regular intervals after the Wall Street Crash of 1929, are always followed by further falls on the stock markets and further cutbacks in production.

The bourgeoisie has dug itself into a deep ditch, from which it will not be easy to extricate itself. The banks are sinking under the weight of bad debts. Nobody knows how much these are and therefore nobody knows which (if any) of the banks is viable. This is why the economists say that this recession is not "normal". Some economists now look back nostalgically to the "good old days" of the gold standard, but a return to the gold standard is impossible now. It would lead to a complete collapse and an even deeper slump than the Great Depression of the 1930s.

Before the Second World War the world economy was based on the gold standard, which made sense as a means of regulating money markets. Governments had to hold a certain quantity of gold bullion as a backup to their national currencies. Ultimately, creditors could demand repayment for debts in gold, which, like every other commodity, has an objective value.

The abolition of the gold standard was only possible because after the Second World War, the USA held two thirds of the world's gold in Fort Knox and its industry was intact. It could dictate its conditions to the rest of the world. Everybody wanted dollars because at that time the dollar was as good as gold. The dollar became the international currency (with the pound sterling as a second-class partner). This was a factor in the upswing of world trade after 1945 - the real basis of the economic upswing in world capitalism at that time.

Now, however, all that has changed. The USA has been transformed from the world's biggest creditor to the world's biggest debtor. The dollar remains the world currency, but nobody can be sure how much it is really worth. Unimaginable amounts of fictitious capital have been pumped into the world economy over the last two or three decades. The world market in derivatives alone is more than 500 trillion dollars, most of it of a speculative and fictitious character. The derivatives market amounts to 36 times the value of total US GDP [US GDP stood at $13.8 trillion in 2007] or roughly 10 times the value of entire world output.

The unprecedented expansion of credit in the last period served to maintain high levels of demand in the USA and other countries. But now this has reached its limits. The whole process is thrown into reverse. Now nobody wants to lend money and few wish to borrow. Society is seized with a parsimonious and miserly mood. The masses have no money to spend - only debts to repay. Those who previously lent money cheerfully are now calling in their debts. Many of those who took out mortgages to buy homes are unable to pay and find themselves evicted. Since the price of their homes has fallen, they are saddled with huge debts, which unlike house prices, do not fall.

The bankers, who yesterday were anxious to lend money to anyone, are now anxious to hoard money and not to part with a cent. This miserly and distrustful attitude applies not only to private house owners and small businesses, but also to other banks and big firms. They are not prepared to lend money to other banks because they are not sure the money will ever be returned. Nor are they prepared to advance money to firms to buy raw materials and equipment. They are quite prepared to pull the plug and force businesses to close as if they were matchboxes, throwing thousands out of work without blinking an eyelid.

Since credit is the life-blood of the capitalist system, the interruption of the supply of credit means that not only "bad" businesses will be made bankrupt but "good" ones also. The drying up of credit threatens the whole productive process of society with slow strangulation. The effects can be seen in a sudden spate of bankruptcies and closures, affecting not only small businesses but also major companies, like Ford, General Motors, Sony, Nissan and many others. The main reason for this is the collapse of demand, aggravated by the drying up of credit. Suddenly there is too much steel, too much cement, too many cars, too many empty offices, too much oil... In other words, what we are seeing is a classical crisis of overproduction.

The big US car companies attempted to boost their share of the market by ferocious discounting. This worked temporarily but only at the cost of cutting into profit margins. Ultimately, the result was bankruptcy. Now they are compelled to go, cap in hand, to the US government, which initially agreed to give them a large slice of taxpayers' money to keep them afloat. Coming after the bailout of the banks, this was an unprecedented action, especially if we bear in mind that the Republicans were supposed to be the Party of Free Market Economics par excellence. It was a measure of desperation.

This proposal of a generous donation to the big car companies was dictated by fear of the social and political consequences of firms like Chrysler and GM going bankrupt, which would mean the loss of millions of jobs. It was also a protectionist measure, directed against foreign car manufacturers. If it is passed, it will undoubtedly lead to similar measures in Europe and Japan. However, the government insisted on wage cuts in return for the package, which the unions rejected. The Republicans therefore voted against the proposal, which was defeated in the Senate. This is a repeat of the earlier conflict between the White House and Congress over the bank bailout. It exposes deep contradictions at all levels of US society.

We are entering into a period of growing protectionism and tensions between the main capitalist nations. The tendency towards protectionism will be even more pronounced under Obama, who will be under pressure to "save American jobs". Let us remember that the Democrats were always inclined towards protectionism. This will provoke retaliation from America's rivals. Already Volkswagen is demanding state aid. Others will follow.

The crisis is revealing deep fissures in the EU. The British and French are putting pressure on Germany to reflate its economy (that is, to increase its deficit in order to create more demand for British and French goods). But Germany is resisting. They see no reason why Germany should pay the price for other people's problems. But the participation of Germany is absolutely necessary if the plans for recovery in Europe are to be successful. They must all reflate simultaneously, or else Germany would benefit "unfairly" from the efforts of the others.

But these proposals have not been well received in Berlin. The German Finance Minister, Peer Steinbrueck derided the general yearning for what he called "the great rescue plan" as futile, saying such a plan "doesn't exist" and dealing with the unprecedented crisis is a puzzle that will be solved by trial and error. The European authorities who believe the answer is lavish spending programs are saying, in effect, "let's get the Germans to pay because they can," he added.

In reality, what Herr Steinbrueck said was correct. He pointed out that while policies can ameliorate the situation, the recession is unavoidable, whatever any government does. The policies of Brown and Bush amount to an attempt to reflate the bubble that caused the present mess in the first place. They have thrown billions at the banks in the hope that they will begin to lend again. But they have failed. The bankers are not prepared to lend under the present circumstances and no amount of interest cuts or state subsidies will make any difference. In any case, the scope for such cuts is minimal. In the case of the USA it is practically zero. One by one, the bourgeois in the richest countries in the world are using up all their resources in a vain attempt to halt a recession that is unstoppable.

In effect the bourgeois are trapped. Whatever they do now will be wrong. If they do not intervene to pump money into the banks and failing businesses there will be a deep slump with massive unemployment as in the 1930s. But if they resort to Keynesian methods of deficit financing, they will create huge debts that will undermine any future recovery and act as a tremendous drag on productive investment, creating the conditions for a long period of cuts and austerity.

The unsoundness of the policies pursued in the previous period is now revealed by a colossal hangover of debts. This has meant that the recession will be deeper and longer than it would otherwise have been. The bourgeois has now to pay the price for the "successes" of the last twenty years. Whole countries now face insolvency. Iceland is already bankrupt. Bank liabilities now represent 700 percent of the GDP of Switzerland, hitherto regarded as a safe haven for capital. The figure for Britain is 430 percent. That of the USA is just under 100 percent - after the huge bailout of the banking sector.

The intensification of the recession will mean a sharpening of tensions between Europe and the USA, between the USA, China and Japan and between Russia and the USA. In the past such tensions would have led to a world war. It was the Second World War that solved the economic crisis of the 1930s through massive arms spending and the wholesale destruction of the means of production during the war. However, the situation now is entirely different. The collapse of the USSR and the colossal power of US imperialism mean that a world war is ruled out. With an annual arms expenditure of about $600 billion, no power on earth can stand against the USA. But there will be constant "small" wars, like the wars in Iraq, Afghanistan, Somalia, the Congo and so on. The conflict between Russia and the USA can lead to wars like the war in Georgia.

The diplomatic clashes and tensions will add a further ingredient to the general instability. The uncontrollable spread of terrorism is a symptom of the underlying crisis. All these phenomena, which sentimental pacifists bemoan, are merely an expression of the underlying cause, which is the contradiction between the colossal potential of the productive forces and the narrow limitations of private property and the nation state. The bigger powers (especially the USA) will try to use their muscle to intimidate their rivals and grab markets and sources of raw materials, but the capitalists cannot find a way out of the crisis by taking the road of war as they did in 1914 and 1939. Therefore, all the contradictions will be expressed internally, through a growth of the intensification of the class struggle.

The eyes of the bourgeois are now fixed on China, from whence they hope that salvation may come. But China is now firmly embedded in the capitalist world market and must suffer the consequences of the downturn along with all the rest. In order to keep unemployment at its present levels a growth rate of at least eight percent is required. If growth falls below this level, the prospect arises of serious social conflict. The latest IMF estimate for China's growth in 2009 is now only 5 percent. Dominique Strauss-Kahn, managing director of the IMF, said: "We started with China at 11% growth, then 8%, then 7%, then China will probably grow at 5% or 6%." This is still high when compared to the growth rates in the USA and Europe. But it is a sharp fall in comparison to the kind of growth rate of around 10 percent enjoyed by China in the last period. And it is not clear that even this level will be reached.

China has a large internal market, probably about 300 million. But this is insufficient to absorb the huge productive capacity that Chinese industry has built up over the last two or three decades. The falling demand in the US market is hitting China's exports. The contraction in Chinese industrial production deepened in November with steel production down 12.4% from a year earlier, steel mill product deliveries down 11.3%, generation of electricity off by 9.6% and petrochemicals output down as well. In November year-on-year exports fell sharply by 2.2 percent, whereas analysts had expected them to rise by 15 percent. To understand the change, it must be remembered that between 2000 and 2006 China's exports grew at an annual rate of 26 percent. In the same month imports fell by 18 percent. This was the first time since 2001 that imports have fallen.

There are emerging signs of overproduction and overinvestment in China, whose internal market, though considerable, is not big enough to absorb the colossal productive potential built up over the last two or three decades, and which is now reaching its limits. The first warning of a crisis was the sharp fall on the stock exchange, which has lost about 60 percent of its value. But the crisis is not confined to the stock markets. House prices are falling, construction is slowing and industry is slowing faster than GDP. Car sales in November in China fell by over 10% year on year. Power generation, generally regarded as a reliable index of economic growth, fell by 7 percent.

These figures have altered the views of western economists on China. The previous optimism is fast turning to pessimism. The Economist (13th December 2008) stated: "Optimists even hoped that these huge emerging markets (India and China) might provide the engines that could pull the world out of recession. Now some fear the reverse: that the global downturn is going to drag China and India down with it, bringing massive unemployment to two countries that are, for all their successes, home to some two-fifths of the world's malnourished children."

It is true that China has huge reserves, which it can use to foment public works schemes to develop the infrastructure. In November the government announced a four trillion yuan (nearly $600 billion) fiscal stimulus package. But according to some estimates, this would add up to an increase of GDP by just over one percent. This is insufficient to get the kind of results that China needs. Beijing only has one other option: to try to solve the crisis by exporting more. This brings it into a direct collision with Europe and the USA, which is pressurising China to reflate in order to import more. Paulson visits Beijing to ask China to revalue the yuan, but Beijing is more likely to support a devaluation, which will deepen the contradictions between China and the USA.

The leaders are afraid that the worsening economic situation will produce what one of them referred to as "a reactive situation of mass-scale social turmoil". The Economist (13th December 2008) reports: "Each week brings fresh reports of factory closures, particularly in the industrial belt around the Pearl River Delta in Southern China. Unpaid workers have been staging violent protests." The same journal adds: "Indeed, demonstrations and protests, always common in China, are proliferating, as laid-off factory workers join dispossessed farmers, environmental campaigners and victims of police harassment in taking to the streets."

The slowdown in China is hitting Japan, for whom the Chinese market has become increasingly important. In the three months to September the Japanese economy shrank at an annualised rate of 1.8 percent. Other emerging economies are even less able to provide the necessary stimulus to the world economy than China. All will be dragged down in the next period. This signifies social and political convulsions on a huge scale. The chaos in Thailand is a further indication of this.

After a five-year period in which India grew at 8.8 percent, exports fell in October by 12 percent compared to the same period last year. Hundreds of small textile firms have gone out of business. But big firms are also in crisis. The car industry has suspended production. Sales of the Ambassador, India's most popular car, have slumped. Pakistan already stands on the verge of bankruptcy. The central bank has revised its projected figures for growth to 7.5 percent and this is too optimistic. The real growth may fall to 5.5 percent - the lowest since 2002.

With a budget deficit of about 8 percent of GDP, India, unlike China, has very little room to manoeuvre. If China needs a growth rate of 8 percent in order to absorb the seven million people entering the labour market each year, how can India absorb a workforce that is expanding at a rate of about 14 million annually? Its main growth has been in sectors like information technology, which does not employ large numbers of workers. A rapid growth in youth unemployment in India will produce explosive conditions in society. "And as in China unrest and even insurgency are widespread." (The Economist)

The fall in world demand is being expressed in a general fall in commodity prices. Oil has fallen from a peak of $147 to about $40 in a few months. This will affect all the oil producing economies in the Middle East, Iran, Indonesia, Nigeria, Mexico, Russia and Venezuela. Russia has the third highest surplus in the world but this has fallen by $144 billions since August. There is a flight from the rouble, underlining the fears of the bourgeois for the future. The ruling clique is trying to distract the attention of the masses from the crisis through foreign adventures (such as Georgia). But the developing crisis must sooner or later express itself in a crisis of the regime and the growth of opposition, strikes and protests.

The Ukrainian economy is in crisis and the country has to borrow $16 billion from the IMF. The economic crisis is deepening the political crisis, which has an endemic character. The impasse of the regime expresses the complete failure of capitalism to solve the problems of the Ukraine or any other of the former Soviet Republics. The pro-US government has avoided elections but in reality it is hanging by a thread. Most of the other former Soviet Republics are in an even worse position.

The sharp fall in the price of oil will intensify the pre-revolutionary ferment in Iran, where the regime of Ahmadinejad is hanging by a thread. There is already widespread discontent and anger among the youth, but also among the workers and middle class. There has been a wave of strikes. The fact that the Americans have decided to withdraw from Iraq means that they will be forced to open negotiations with Iran and Syria to cover their rear. This deprives Ahmadinejad of his main card - anti-American chauvinism and war-mongering rhetoric. Deprived of the external enemy, the contradictions within Iran will come to the fore with revolutionary implications.

In the poorest countries of Africa elements of barbarism have begun to appear and in some cases threaten to engulf society and push it back to savagery. In the Congo five million people have perished in a murderous civil war. In Zimbabwe people are faced with the horrors of starvation and cholera. In Sierra Leone over 70 percent of the population live on 70 cents a day and two-thirds of the women are illiterate. To the nightmare of hunger and poverty are added the scourge of malaria and AIDS. Everywhere the productive forces stagnate or decline, creating more unemployment, poverty and despair.

It is not difficult to portray the whole world as a nightmare or a lunatic asylum. These are the symptoms one associates with the senile decay of a system that has outlived its historical usefulness, like the Roman Empire in the period of its decline. But there is another side to the picture. There is ferment in society and the beginnings of revolt. This naturally begins with the youth, which on the one side are the first victims of the crisis, in the second place are highly sensitive barometer for the moods of discontent that are maturing silently in the bowels of society.

It is true that the suddenness of the crisis has shocked not only the bourgeois but also the workers. There will be a certain tendency to cling to jobs and even accept cuts in the short term, especially as the union leaders offer no alternative. But there will also be a general mood of anger and bitterness, which will sooner or later find its way to the surface. It is inevitable that the first layers to move into action will be the youth. It was always the case. The youth, beginning with the students, are always a sensitive barometer of the moods developing in society. They can anticipate big movements of the workers, as in 1901-3 in Russia and 1968 in France.

In Italy and Germany there have been big protest movements of the youth. In Spain the students strikes this autumn were organised and led by the Marxist-led Students' Union. There have also been upheavals of the youth in Hungary and earlier in France. But in Greece this movement has acquired an explosive and semi-insurrectionary character and was combined with a general strike of the workers. This is a serious warning to the bourgeois of what can happen in other countries. It shows the falsity of the argument that the onset of economic crisis will inevitably lead to a paralysis of the working class.

The bourgeoisie would like to resort to repression. This is shown by the recent declarations of Cossiga in Italy, which have a clearly Bonapartist character. But Greece shows the limitations of this policy. It was the murder of a young school student by the police that brought the masses onto the streets. The right-wing government considered a state of emergency but Karamanlis could not use force to impose order on the streets because that would have taken Greece to the brink of a civil war. He had to back down. The government was paralysed.

What the Greek events show is the weakness of reaction and the enormous strength of the working class at the present time. If the leaders of the Greek labour movement had had a revolutionary policy, they could have taken power. But without adequate leadership the movement will be reduced to pointless rioting, which the government will eventually bring under control. Nevertheless, the movement was a serious warning to the Greek capitalists of the mood of rage and frustration that exists in society. The ND government is finished. A new stage in the class struggle is opening in Greece. And tomorrow the same process will emerge in one country after another.

In Latin America the revolution has already begun. This is not an accident, and we explained it a decade ago, when we decided to orient the IMT towards Latin America. In this continent capitalism has broken at its weakest link. The Venezuelan Revolution has reached a critical point, where its future direction must be resolved one way or another.

The crisis of capitalism hits Latin America hard, although it is unfolding unevenly, affecting some countries more than others. Brazil, the economic giant of the region, expects to grow by 4 percent (which is probably optimistic) whereas Mexico, closely linked to the US economy, is expected to grow by only 0.4 percent. However, at different rates and at different times, all will be affected.

In October, the IMF forecast a growth rate of 3.5 percent for Latin America in 2009. Two months later, the World Bank cut its estimate to 2.1 percent and Morgan Stanley is predicting a fall of 0.7 percent for the seven biggest economies of the region. In the last two months there have been stock market and monetary crises and shortages of credit. This has followed a fall in exports and sharp falls of commodity prices. The slowdown in China affects demand for Venezuelan oil, Peruvian minerals, Argentine soya and Brazilian iron ore and orange juice.

The crisis in the USA affects the continent in a more direct way. Whole towns, villages and even regions of countries like Mexico, El Salvador, Honduras, Colombia and Ecuador depend on the remittances of their nationals working in the USA or Europe. Since the immigrant workers are the first to be sacked, these are now forced to return home. So these countries are at the same time deprived of foreign currency and obliged to absorb an influx of labour when unemployment is already rising.

The reformists have argued that the "Venezuelan model" would guarantee immunity from the problems associated with the "neo-liberal model". But this is a reformist illusion. Because the revolution has not been carried through to the end, Venezuela is still subject to the vicissitudes of the capitalist world market. The falling price of oil means that the reforms of the past period are under threat. Morgan Stanley predicts an economic contraction in both Venezuela and Argentina in 2009, of 1 percent and 2 percent respectively. This will mean that the reforms and misiones will be in difficulty. In addition to the general crisis of capitalism, the Venezuelan economy is suffering from sabotage and a strike of capital aimed at destabilising the Bolivarian government and causing mass discontent. Despite all the appeals to the capitalists, private investment is practically non-existent and there is a flight of capital. Only the state sector maintains the economy.

Sooner or later the Revolution will have to decide whether to advance and carry out the socialist transformation of society, or else be driven back, one step after another, to ignominious defeat. The demand for drastic measures against the counterrevolution and expropriation under workers' control is growing, and matters must be settled. In the past US imperialism would have intervened militarily to abort the process, but now this is very difficult. The US is bogged down in Iraq and Afghanistan and cannot open another front in Latin America, which would have revolutionary consequences inside the USA itself.

It is now a question of either-or for the Venezuelan Revolution. The forces of the counterrevolutionary bourgeoisie have taken heart from their partial advance in the November election, which has given them important points of support from which to launch a new offensive. The economic crisis will give them further impetus. Chavez has called for more expropriations and proposes to stand again for President. Chavez could use his majority in the National Assembly to approve this even without a referendum. This would provoke clashes on the streets, which would pose the question of power point blank. The battle lines are drawn that will settle the fate of the Revolution one way or another.

This will be a period of enormous turbulence and instability - a period of revolution and counterrevolution that can last for years, with ebbs and flows. In the past, a pre-revolutionary or revolutionary situation would not last long. It would either end in the victory of the revolution or of the counterrevolution in the form of fascism or Bonapartism. But under present day conditions that is not the case. In the past, the bourgeoisie in Europe and elsewhere had important reserves of support in the population, particularly the class of small peasant proprietors. This is no longer the case. The middle layers of small proprietors has been whittled away by the development of capitalism, while the working class has grown and become the majority of society in many countries. In the past the students were drawn from rich families and were inclined to fascism. Now in most cases, the students are on the left. The ruling class is not strong enough to move towards reaction, but the working class is being held back by its leadership. This means that the present situation of unstable equilibrium between the classes can last for some time.

The revolution never moves in a straight line. There will inevitably be ups and downs in the movement, as there were in the Russian and Spanish Revolutions in the past. Between February and October 1917 there were periods of enormous upswing, but also other periods of tiredness, despair and even reaction (July-August). The same was true in Spain between 1931 and 1937, where we had the Two Black Years (El Bienio Negro) in 1934-5. But in a situation where the pendulum is swinging to the left, such "lulls" are only the prelude to a new and even stormier revolutionary upsurge.

The objective situation that we have now entered will be far more similar to the interwar period, or the 1970s, than to the last twenty years. Similar conditions will tend to produce similar results. The masses will be far more open to our ideas than they were in the past.

The degeneration of the mass organizations has reached unheard-of depths in the last period. The Social Democrats have abandoned all pretence to standing for socialism and the former "Communists" have abandoned all pretence to standing for communism. It is an irony of history that precisely at this moment they have renounced all claims to stand for a revolutionary change of society. Now history is taking revenge on them.

The striking successes of the Marxists in Rifondazione Comunista in Italy and in the French Communist Party are an indication of the profound change that is taking place. In the past such a turn in events would have been unthinkable. It shows the existence of deep discontent in the rank and file. The same discontent exists in all the mass organizations. It will grow as the crisis unfolds and the policies of the leadership are exposed in practice.

It is true that consciousness tends to lag behind events, but sooner or later it catches up with a bang. That is precisely the meaning of a revolution. We are approaching that critical point now. There is a general development of an anti-capitalist mood in society, not just in the working class but also in the middle class. People who never questioned capitalism before are now increasingly discontented. This is a very dangerous situation for the ruling class. And the crisis has only just begun.

The occupation of the Republic Windows and Doors factory in Chicago (which has now been settled) shows the revolutionary potential that is being prepared in the USA itself. These were mainly poor paid Latino workers. The factory was forced to close because the banks were refusing credit, and the bosses were not going to give the workers redundancy pay. This is what sparked off the occupation. The workers said: "we have no money to pay our mortgages; we will lose not only our jobs but our homes!" So they occupied. But then the question of property was raised. The idea took root among the workers: these assets belong to us! This is how consciousness is rapidly transformed in the course of struggle.

In Belgium the big banking concern Fortis collapsed, and the company was plundered by French and Dutch capitalists. Fortis was regarded as the "People's Bank". 700,000 people had shares in it. But the shares collapsed and lost 90 percent of their value. This provoked a wave of anger directed against the banks. Everywhere we see the same indignation against the bankers and capitalists, who are obliged to lean on the leaders of the working class to hold onto power.

In the crisis of capitalism, the workers' parliamentary leaders cling to the ruling class and the trade union leaders cling to the parliamentary leaders. In such periods the ruling class prefers the reformist workers' leaders in government. Their policy is to use and discredit. They will use these leaders to do the dirty work and then cast them aside like a dirty dishrag. Then they will say to the masses: "Now you see what socialism means!" Thus, a contradiction opens up between the tops of the movement, which are moving to the right, in the direction of class collaboration, and the rank and file, which is moving to the left, looking for radical solution and militant action. Sooner or later this internal contradiction must be resolved. The coming period will see all sorts of crises and splits in the traditional organizations of the working class.

Big possibilities are opening up for the Marxists, and the social crisis is still at the early stage. As the crisis develops, the radicalization of the working class will reach levels not seen for decades. Ideas that were listened to by tiny handfuls will find a mass audience. The basis will be laid for the creation of mass Marxist tendencies everywhere. This is ultimately the only guarantee of the future socialist transformation of society.

London, 15^th December

• The Crisis: Make the bosses pay! - Manifesto of the International Marxist Tendency by International Marxist Tendency (November 4, 2008)