Capitalist Trade and the Looming 3rd World War

By Yossi Schwartz, Revolutionary Communist International Tendency (RCIT), 15 July 2018,

Thirty years ago Fukuyama announced the end of history in the form of American capitalism. At that time he could point out to some facts in support of his claim. The Berlin Wall was about to fall and the Soviet Union was collapsing. For the prophets of profit everything seemed to suggest that only liberal capitalist democracy would allow people to thrive in an increasingly globalized world, and that only the steady advance of laissez-faire economics would guarantee a future of free, democratic states, untroubled by want and oppression, living in peace and contentment.

Only the extremely naïve bought into this fantasy, only to wake up during the 2008 crisis. By now most of the workers and oppressed in the world know that capitalism means misery, exploitation, corruption, bonapartist regimes, environmental catastrophes and devastating local wars.

Do we exaggerate?

On Friday, June 16, the U.S. announced a 25 percent tariff on up to $50 billion of Chinese products, prompting Chinese President Xi Jinping’s administration to respond with a 25 percent tariff on $34 billion of U.S. goods.

Later on Monday, June 18, President Donald Trump threatened additional tariffs at a rate of 10 percent on $200 billion worth of Chinese goods. In response, China’s Commerce Ministry has promised counter measures if Washington goes ahead.

The United States and its historical allies are on the brink of a full-scale trade war after European and Canadian governments reacted to Donald Trump’s decision to impose tariffs on steel and aluminum producers. EU companies would face a 25% duty on steel and a 10% duty on aluminum.

In a statement of the RCIT we wrote:

The Global Trade War has begun. After months of negotiations without result, a cycle of punitive tariffs and retaliatory tariffs between the U.S. and China – the world’s two biggest imperialist Great Powers – has started on 6 July… From the point of view of US imperialism, the logic of Trump’s aggressive trade policy is perfectly clear. As we have shown in our analyses of the world situation, the world’s biggest Great Power faces a historic decline since years. Irrespective of its internal fragility and bizarre performance (like Nero, Trump is the perfect intellectual and moral personification of the decay of a hegemonial power), the White House attempts to stop or even reverse this decline by a policy of aggressive jingoism and protectionism.” (1)

This is not only our assessment:

The United States is turning against China because of a trade deficit, which was at a record high of £198 billion last year, amid fears of World War 3 breaking out between the global superpowers, a trade expert has warned […] The former president of the National Foreign Trade Council, William Reinsch, told CNBC: “The prevailing view in Washington now is that, this year, he is determined to bite somebody and China is the most likely target.” (2)

Why this trade war?

Why this trade war? Trump claims that other countries are unfair to the U.S and that they use the US as a piggy-back ride. However, the real reason is the declining of US economy.

The import-export balance of the US with China, as can be seen in Table 1, clearly demonstrate this:

Table 1 (3)

Month                                    Exports                  Imports                  Balance

January 2018                      9,835.3                  45,788.0                -35,952.8

February 2018                    9,806.1                  39,067.6                -29,261.5

March 2018                         12,382.1                38,256.7                -25,874.6

April 2018                           10,268.0                 38,230.0               -27,962.0

TOTAL 2018                       42,291.5                 161,342.4              -119,050.9

In Table 2 we can see the figures for 2017. (3)

Table 2

Month                                    Exports                  Imports                               Balance

January 2017                      9,961.1                  41,343.1                                -31,382.0

February 2017                    9,735.8                  32,804.3                                -23,068.5

March 2017                         9,719.2                  34,186.9                                -24,467.8

April 2017                           9,805.7                  37,465.6                                -27,660.0

May 2017                             9,862.2                  41,783.1                                -31,920.9

June 2017                             9,717.4                  42,289.2                                -32,571.7

July 2017                              9,979.1                  43,589.2                                -33,610.1

August 2017                       10,828.3                45,817.8                                -34,989.4

September 2017                 10,911.7               45,429.7                                -34,518.0

October 2017                       12,963.4              48,167.7                                -35,204.2

November 2017                 12,765.0               48,127.8                                -35,362.8

December 2017                  13,644.8              44,465.7                                -30,820.9

TOTAL 2017                       129,893.6              505,470.0                            -375,576.4

What causes this negative balance for US economy? After all, until some years ago the US was the only superpower and China was a source of cheap labor for the U.S capitalist class.

There is a historical law of capital that causes the US economy to lose to China. This law is called the Tendency of the Rate of Profits to Fall.

Marx explained in Capital Volume III the law of the falling rate of profit. “Organic composition of capital” is the ratio of the value of the materials and fixed costs (constant capital) embodied in the production of a commodity to the value of the labor-power (variable capital) used in making the commodity. The higher is the organic composition of capital the rate of profit is lower. When the investment in C is greater than in V, the rate of profit is falling. This is the reason imperialist countries are seeking sources of cheap labor before even considering introducing more advanced machinery.

Trade Wars as a Prelude to Military Wars

Trade wars may lead to military wars. As the Clausewitz’s most famous dictum states about war: it is the continuation of politics by other means. Lenin added that politics is the most concentrated expression of economics.

Thus, the trade war is not only a form of a conflict in general, but may lead to an actual war between the US and other countries like Russia, China, etc. We do not speak only about local and regional wars that take place all the time, but about a world war among the imperialists.

To grasp the meaning of the growing contradictions among the imperialist states, it is necessary to understand the essence of the historical epoch we live in. Already Marx explained that the epoch of social revolution begins when the productive forces of society are in conflict with the existing relations of production. When this happens, the relations of production are transformed from forms of development of the productive forces into their fetters.

We live in an epoch of world economy, but the imperialist nation state is an obstacle to the needs of the world economy. Every imperialist state tries to control the world economy which in turn leads to world wars.

It is not an accident that the US turns now to trade wars. It reflects the fact that the US is a declining imperialist entity and at the same time very strong militarily, while the new Eastern imperialist entities are getting stronger. Trump would like to see the US back as the only superpower, but his policies only serve to further isolate the US and increase the inter-imperialist conflicts.

For the US to regain its position as the sole economic superpower, it has to reduce the salaries of the American workers to the level of those born in China or India. This, the capitalists cannot achieve without tools only provided by fascism. However, the fascist groups in the US are still struggling in gaining mass support.

Some people will argue that since there are no more colonies, a new world war is impossible. In their mind imperialism is the direct military control of the poor countries and they see the imperialist states as if they were a monolith. They may not know it, but this was the theory of Kautsky which stood in complete contradiction to Lenin and Trotsky’s thought.

Seeing imperialism as existing only in form of direct control of colonies is a liberal definition. Lenin explained already in “capitalism the highest stage of capitalism” that imperialism is monopoly financial capitalism. The struggle over markets, raw material and cheap labor in our period is done by financial institutions like the World Bank and the IMF and it is not restricted to the super-exploitation of semi-colonies. It is also the competition among the imperialists themselves. It can easily be seen in the EU where Germany, the stronger imperialist state, is making profits by cutting the profits of weaker imperialist states like the UK.

This is what creates the debate between those who want to stay in the EU and those who want to leave. In reality, both roads lead to misery for the working class and the poor.

The Marxist Classics

Seeing all the imperialists as one block is a reformist illusion. Karl Kautsky argued in 1914 that there is a way out of wars among the imperialist powers. The way is for the ruling classes of the imperialist states to form a joint cartel rather than protectionist measures which lead to war.

What Marx said of capitalism can also be applied to imperialism: monopoly creates competition and competition monopoly. The frantic competition of giant firms, giant banks and multi-millionaires obliged the great financial groups, who were absorbing the small ones, to think up the notion of the cartel. In the same way, the result of the World War between the great imperialist powers may be a federation of the strongest, who renounce their arms race. Hence, from the purely economic standpoint it is not impossible that capitalism may still Jive through another phase, the translation of cartellization into foreign policy: a phase of ultra-imperialism, which of course we must struggle against as energetically as we do against imperialism, but whose perils lie in another direction, not in that of the arms race and the threat to world peace.” (4)

Similarly, Trotsky wrote in 1914 in “War and the International”:

The forces of production which capitalism has evolved have outgrown the limits of nation and state. The national state, the present political form, is too narrow for the exploitation of these productive forces. The natural tendency of our economic system, therefore, is to seek to break through the state boundaries. The whole globe, the land and the sea, the surface as well as the interior has become one economic workshop, the different parts of which are inseparably connected with each other. This work was accomplished by capitalism. But in accomplishing it the capitalist states were led to struggle for the subjection of the world-embracing economic system to the profit interests of the bourgeoisie of each country. What the politics of imperialism has demonstrated more than anything else is that the old national state that was created in the revolutions and the wars of 1789-1815, 1848-1859, 1864-1866, and 1870 has outlived itself, and is now an intolerable hindrance to economic development. The present war is at bottom a revolt of the forces of production against the political form of nation and state. It means the collapse of the national state as an independent economic unit.” (5)

If there were illusions that WWI was the last devastating war, along came WWII and proved that world wars are part of the capitalist world system. Since 2008 the decline of world capitalism has continued, but in different countries in a different pace.

Only Socialist Revolution Can Stop WWIII!

However, a third world war is not an inevitability. The fact that the US is a decaying economic empire, while China is a rising imperialist power, makes such a war a possibility. We live in a historical period characterized by wars, revolutions and counter-revolutions. The trade wars may lead to world war unless the imperialist system will be overthrown and be replaced by a world socialist federation.

For a socialist revolution a world revolutionary party is necessary. We saw a terrible defeat in the Arab countries of what is known as the “Arab spring”, due to the lack of Leninist type leadership. The Stalinist parties have backed the military coup in Egypt and Assad’s regime in Syria. The “Revolutionary Socialist” affiliated with the British SWP, vacillated between Morsi, the liberal bourgeoisie and Abdel Fattah el-Sisi, instead of fighting for a working class revolution. Other right-wing centrist organizations, like the IMT and the CWI, refused to defend the Syrian revolution claiming that the revolution was kidnapped by Islamists – a reflection of their Islamophobia.

The uprisings of the working class and the oppressed are inevitable. However, if we will not succeed in building a new revolutionary working class International, these uprisings we be defeated and the road to WWIII will be opened.

Today, as we in the RCIT have shown time and again, there are, almost, no more direct colonies but semi-colonies, super-exploited by the imperialists. The increasing economic power of imperialist China that super-exploits Africa, for example, is an obstacle to the exploitation of Africa by the US imperialists.

The U.S. economy grew at a 2.2% annual rate in the first three months of the 2018. (6) According to the Marxist economist Michael Roberts:

The updated data do confirm is my guess last year that 2016 would show a fall in the US rate of profit – and by all the measures mentioned. Moreover, of course, Marx’s law of profitability over the long term is again confirmed. There has been a secular decline in US profitability, down by 28% since 1946 and 15-20% since 1965; and by 6-10% since the peak of 2006. So the recovery of the US economy since 2009 at the end of the Great Recession has not restored profitability to its previous level.” (7)

At the same time, by 2016, China has been the world’s second largest economy, with a GDP of over $10 trillion. However, the struggles of the Chinese working class have caused the rate of profit to fall. Nevertheless, it is much higher than in the US.

China’s staggering growth – an average of 10 per cent between 2002 and 2012, according to World Bank, paved the way for the emergence of China as an engine of capitalist global growth. (See Figure 1)

Figure 1 (See below)

Stumbling into WWIII?

Some may argue that since the capitalist imperialist class is aware of the devastating power of destruction of nuclear weapons, none of them would dare cause a third world war that will revert humanity to the stone age in the best of cases. However, WWI wasn’t caused by this or that intention of any of the ruling classes or politicians. It started because of an uncontrollable urge of the imperialist states to re-divide the colonies once no more white spots (unconquered colonies) remained on the map.

For the superficial minds WWI broke out because of the assassination of Archduke Franz Ferdinand on June 28, 1914, by an 18-year-old student named Gavrilo Princip in Sarajevo, Bosnia. Princip was motivated by the annexation of Bosnia and Herzegovina by the Austro-Hungarian Empire. Austria-Hungary retaliated by declaring war on Serbia, as country after country took sides either with the Central Powers (Germany, Austria-Hungary and their allies) or the Allies (France, Britain, Russia and toward the end of the war, the United States).

Thus, it is not a question of the intentions of the ruling classes, but the very nature of the epoch that applies pressure toward world war 3.

Some would point out that between WWII and today more than 50 years have passed, which proves that it is possible for the ruling classes to avoid world wars. What they ignore is the fact that after WWII the imperialists were busy rebuilding their devastated economies and super-powers like the US and Europe enjoyed a high level of rate of exploitation through cheap post-war labor. The collapse of Stalinist Russia had also bought some extra time for the western imperialists.

In the 1980s China was still a weak economy and a source for super-exploitation for western capital. Today, the US and Europe’s economies, with every economic boom-bust cycle, are still unable to restore their previous rate of growth. Increasing the organic composition of capital (newer machines) reduces the number of employed workers and results in a rising rate of exploitation. Profits can be made only by exploiting flesh and blood workers. Bourgeois economists tend to confuse the source of profit and the realization of profit in the market.

The Working Class and World War

The history of WWI and WWII shows that to start a world war it is necessary for the imperialists and their servants to first destroy the struggles of the working class by different means – including the promotion of bourgeois workers’ parties, popular fronts and even fascism.

Popular fronts are coalition governments that include bourgeois workers’ parties. They appear in a time that the crisis of the capitalist system is severe, the working class is fighting, organized and getting ready to assume power through revolution. The main role of popular fronts is to foster high hopes only to later have them smashed, creating a major demoralizing psychological effect. Once the workers are demoralized, the popular front had served its purpose, and so the ruling class disposes of it through a military coup or fascism.

Mussolini came to power in 1922, after a long period of intense class struggle with the Italian working class occupying factories in September 1920. The Socialist Party was growing very fast. In southern Italy a strong peasant mass movement was developing. A socialist revolution was more than possible. Yet the Socialist Party’s leadership perspective was of a bourgeois democratic revolution, very similar to the Mensheviks in Russia. Unlike in Russia, there was no Bolshevik party to lead the workers to power. The Communist party was formed only in January 1921 as a split from that Socialist Party.

The revolutionary uprising was followed by defeat. Looking for a radical solution, the middle class of the cities and the countryside turned to the fascists. The Fascists served the needs of the bourgeoisie to smash the organizations of the working class, and to atomize the workers. As fascism was a mass plebeian movement, it was able to do the job the capitalists couldn’t. The offices of the trade unions, the Communist and the Socialist party, the co-operative movement, the newspapers of the left, were all destroyed. The working class movement was atomized. It took the Italian working class twenty years before it recovered from that defeat.

In France the popular front of Leon Bloom came to power in 1936 with the help of the recently Stalinized Communist party, and as expected, it ended with the Nazi-oriented Vichy regime.

In Spain the Popular front that forced the workers to give back the occupied factories, forced the peasants to return the occupied lands and dismantled the workers’ militias, and as expected, it ended with the victory of the Fascist Franco.

Without such a series of demoralizing defeats, WWII would never have existed.

Today, the international working class has not yet been defeated. The outcome of the growing crises of the world economy will lead either to socialist revolutions or defeats that will open the road to a third world war.

What is missing above all is a revolutionary working class International. The road to building such an International is similar to the way that the Third International was built, a Zimmerwald type Conference. What we need is a strong working class tendency that agrees on the major issues. For example: the nature of Russian and Chinese imperialism, rejection of the popular fronts, the use of the Leninist United Front tactic, standing with all oppressed nations without giving political support to their existing leadership, defending democratic rights, and most importantly the need for a world socialist revolution.


(1) Michael Pröbsting: The Global Trade War has Begun. What is its Meaning and what should be the Response of Socialists? 13 July 2018,







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