Europe and America

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Part 1

EDITOR’S NOTE: The myth that America “isolated” itself from Europe after the Versailles Treaty, and that this “isolation” made possible the present war, is today a central doctrine of Washington’s mythology. America’s real role in Europe after World War I is described in the following document of that period. Nor is this document merely an archive; it throws a clear light on America’s role in the coming postwar period.

By the beginning of 1924 the defeat of the German revolution posed point-blank the question of America’s new role in Europe and the consequences flowing from the altered relations between Europe and America. The theoretical analysis of this all-important development and the programmatic position on it had to be elaborated by the Bolsheviks while Lenin was on his death-bed and, in fact, after Lenin’s death. This task was fulfilled by Leon Trotsky.

Two documents comprise Trotsky’s main work in this field in the period prior to his expulsion from the Communist International and exile to Alma-Ata. The first is a speech he delivered July 28, 1924 and later published (Izvestia, August 5, 1924) under the title The Premises for the Proletarian Revolution. The second, a speech delivered February 15, 1926, was issued, together with the first, by the State Soviet Publishers as a pamphlet, “Europe and America.

Trotsky’s introduction (February 25, 1926) follows:

“This pamphlet contains two speeches made two years apart. What joins these speeches together is unity of subject: both are devoted to a characterization of the economic and political world situation. The speeches are also bound together by unity of the basic idea: both proceed from the relation of the USA to Europe as the basis for evaluating the world situation.

“Needless to say, the essential character of the world situation is by no means exhausted in these reports. The question of the colonies, of the national-revolutionary struggle of the Eastern peoples is touched upon in them only to the extent that this was necessary in order to clarify the fundamental proposition: the hegemony of the United States in the capitalist world and the consequences flowing therefrom. The question of the position and perspectives of the East under the radically altered interrelations between America and Europe is a subject that demands a special and independent analysis. Such an analysis, however, cannot change the basic formulation of the question in this pamphlet. Without submitting the Eastern problem to a detailed analysis, this problem, in its gigantic historical scope, is throughout taken into account in these speeches.

“The staggering material preponderance of the United States automatically excludes the possibility of economic upswing and regeneration for capitalist Europe. If in the past it was European capitalism that revolutionized the backward sections of the world, then today it is American capitalism that revolutionizes over-mature Europe. She has no avenue of escape from the economic blind alley other than the proletarian revolution, the destruction of ‘the tariff and state barriers, the creation of the Soviet United States of Europe and the federative unification with the USSR and the free peoples of Asia. The inevitable development of this gigantic struggle will unfailingly inaugurate as well the revolutionary epoch for the present capitalist overlord, the United States of America.”

The basic ideas here outlined by Trotsky represented at one time the official position of the Communist International. But shortly after the publication of Trotsky’s pamphlet, these Ideas were rejected by the Stalin-Bukharin leadership. America’s role vis-à-vis Europe, the impasse of European economy, and even the slogan of the Socialist United States of Europe were among the central issues in the struggle of the Russian Left Opposition against the Stalinist revisionists.

In the 17-19 years that have elapsed since these views were first elaborated by Trotsky, the form of presentation has of course become dated, but not the basic ideas, nor the method whereby these ideas were arrived at.

We begin the publication of Europe and America with the February 1926 speech. This translation by John G. Wright is from the Russian original.

The Two Poles of the Labor Movement – The Most Perfected Type of Conciliationism

Comrades: The contemporary world labor movement is polarized: two poles determine, with unprecedented clarity, the two basic tendencies within the world working class. One of them, the revolutionary pole, is in our country, the Soviet Union; the other, the conciliationist pole, is in the United States. Never before have there been such perfected forms and methods of reformism, that is, politics of compromise with the bourgeoisie, as are to be found in the American labor movement for the last two or three years.

Politics of class compromise has been observed in the past; we have observed it through the eyes of history and with our own eyes. We estimated – and this was correct so far as the past is concerned – that opportunism in its most perfected form was furnished in the pre-war epoch by England where the perfected type of conservative trade unionism was produced. But today it is necessary to say that English trade unionism of the classic era, that is, of the latter half of the nineteenth century, bears the same relation to existing American opportunism as handicraft production does to an American factory. In the United States there is now a vast movement of the so-called company unions, that is, organizations which, in contrast to the trade unions, consist not only of workers but also of the bosses, or rather representatives of both. In other words, the phenomenon that occurred at the time of the guild organization of production, and which disappeared after feudalism, has now assumed unprecedented and entirely new forms in the most powerful capitalist country. If I am not mistaken, Rockefeller was the initiator of this movement before the war. But this movement spread to the most powerful concerns of North America only recently, beginning with 1923. The American Federation of Labor, the official trade union organization of the labor aristocracy, has adhered with certain reservations to this movement which signifies the complete and absolute recognition of the identity of interests between labor and capital, and consequently the rejection of the need for independent class organizations of the proletariat, even in the fight for immediate objectives.

Along with this, we find at this very time in the United States the development of labor savings banks and insurance societies where representatives of labor and capital sit side by side. Needless to say, the widespread notion that American wage levels assure a very high standard of living is extremely exaggerated; nevertheless, this wage level does permit the upper layer of the workers to make certain “savings.” Capital siphons off these savings through the medium of labor banks and puts them at the disposal of enterprises in that branch of industry where the workers are able to save from their wages. In this way the bosses increase their circulating capital and, above all, reinforce the interests of workers in the development of industry.

The AFL has recognized the need of introducing the sliding scale of wages on the basis of a complete solidarity between labor’s interests and those of capital: Wages should vary in correspondence with the productivity of labor and profits. The theory of the solidarity of the interests of labor and capital is thus sealed in actual practice and we get a seeming “equality” of benefits from the national income. Such are the main economic forms of this new movement which must be carefully examined in order to be understood.

The AFL (whose leader was Gompers) has lost during these past few years a large part of its membership. It now, has no more than 2,800,000 members, which represent an insignificant fraction of the American proletariat when we take into consideration the fact that industry, commerce and agriculture in the United States employ at least 25,000,000 wage earners. But the AFL has no need of a larger membership. Its own official doctrine is that problems are not settled by mass struggle but by conciliation between labor and capital. To the extent that this idea has found its highest expression in the company unions, the trade unions can and must limit themselves to the organization of the aristocratic summits of the working class, who act in the name of the entire class.

Nor is collaboration limited to the industrial and financial fields (banks, insurance societies). It is transplanted lock, stock and barrel into the sphere of domestic and world politics. The AFL together with the new company unions, to which it is closely linked and on which it leans directly or indirectly, carry on an energetic fight against socialism, and generally against European revolutionary doctrines, among which it includes those of the Second International and of the Amsterdam International. The AFL adapts the Monroe Doctrine, “America for Americans,” in a new way by interpreting it as follows: “The European rabble can and will be instructed by us but they must keep their noses out of our affairs.” In this the AFL only echoes the bourgeoisie. Whereas formerly the latter declared: “America for Americans, Europe for Europeans”; today the Monroe Doctrine signifies a prohibition to others not to meddle with America’s affairs but in no wise prohibits America from interfering in the affairs of the rest of the world. America for Americans, and Europe too!

The AFL has recently created a pan-American Federation, that is, an organization extending to South America and preparing the way for North American imperialism in Latin America. Wall Street could not find a better political instrument. But at the same time this means that the struggle of the South American peoples against US imperialism that is crushing them will also be a struggle against the degenerating influence of the pan-American Federation.

The organization created by Gompers remains, as you know, outside the Amsterdam International. In the eyes of the AFL the latter is an organization of decadent Europe, an organization too much poisoned by revolutionary prejudices. The AFL remains outside Amsterdam just like American capitalism remains outside the League of Nations. But that does not prevent American capital from manipulating the strings of the League of Nations; nor the AFL from drawing behind it the reactionary bureaucracy of the Amsterdam International. Here too a perfect parallelism is to be observed between the operations of Coolidge and those of Gompers’ heirs. The AFL supported the Dawes Plan when American capital installed it. In all parts of the world it fights for the rights and pretensions of American imperialism and, consequently, first and foremost against the Soviet Republic.

This new conciliationism is of a much higher type than any seen before; it is conciliationism drawn to its ultimate logical conclusion, organically sealed by “inter-class” institutions like company unions, coalition banks and insurance societies; and this conciliationism has attained at one stroke American proportions. Large capitalist enterprises have been created which organize by contract factory committees on equal footing with the bosses, or along the lines of Lower and Upper Houses, etc. Conciliationism is standardized, mechanized and produced by large capitalist concerns. This is a purely American phenomenon – a sort of social conveyor line for the mass production of conciliationism by means of which the subjugation of the working class is automatically strengthened.

The Economic Power of the USA as the Basis of Conciliationism

One might ask why capital has need of this. The answer is obvious if one takes into account the actual power of American capital and the plans that it is capable of projecting. For American capital, the USA is no longer a shut-in field of action but a drill-ground for new operations on a gigantic scale. The American bourgeoisie must insure its security in this drill-ground by means of conciliationism in its most complete and perfected form, in order to be able to expand more securely abroad.

Another question arises: How is it possible to realize now in the second quarter of the twentieth century this standardized conciliationism in practice, after the imperialist slaughter in which the USA participated, and after the great experiences of the workers of all countries? The answer to this question is to be found in the power of American capital, to which nothing in the past can compare.

No few experiments have been made by the capitalist system in different countries of Europe and in different parts of the world. The whole history of mankind can be viewed as a tangled chain of attempts to create, remodel, improve, raise the social organization of labor: from patriarchy, through slavery to serfdom and, finally, capitalism. It is with capitalism that history has carried out the greatest number of experiments, first of all and in the most varied manner in Europe. But the most colossal and “successful” attempt appears on the North American continent. Just think of it: America was discovered near the close of the 15th century, after Europe had already passed through a rich history. During the 16th, 17th and even 18th centuries, and in large part throughout the 19th, the United States was a distant self-sufficient world, an immense, god-forsaken backwoods area nourished with the crumbs of European civilization. In this interim, a country of “unlimited possibilities” was taking shape and developing, for here nature had created all the conditions for a mighty economic expansion. Europe cast across the ocean wave upon wave of the most awakened and most tempered elements from among its population, elements best qualified for developing productive forces. All the European movements of religious-revolutionary as well as political-revolutionary character – what did all these signify? They signified the struggle of the most progressive elements, first of the petty bourgeoisie and then of the working class, against feudal and clerical rubbish which impeded the development of the productive forces. Everything that Europe cast out crossed the ocean. The flower of European nations, her most active elements, all those who wished to make their own way at any cost fell into an environment where this historic rubbish did not exist but where virgin nature with its inexhaustible abundance reigned. Such is the basis of America’s development, America’s technology, America’s wealth.

What inexhaustible nature lacked was – man. Dearest of all in the USA was labor power. Hence, the mechanization of labor. The principle of production by means of the conveyor line is not an accidental principle. It is an expression of the tendency to replace man by machines, multiplying labor power, bringing and carrying away, lowering and lifting by automatic means. All! this must be accomplished by a conveyor line and not by human backs. This is the principle of the conveyor system of production. Where was the elevator invented? In America, in order to dispense with a man bearing a sack of wheat on his back. And pipe lines? They were invented in the United States which has 100,000 kilometers of pipe lines, that is, conveyors for liquids. Finally, the conveyor line, which furnishes the transport within the factory and whose supreme model is the Ford organization, is known to the whole world.

America knows very little about apprenticeship; time is not wasted there on training apprentices because labor power is dear; apprenticeship is replaced through a subdivision of the labor process into infinitely small parts that require little or no training. And who brings together all the parts of the labor process? It is the endless belt, the conveyor line. And it also serves as the instructor. In a very short time a young peasant from southern Europe, the Balkans or the Ukraine is transformed into an industrial worker.

Serial production as well as standardization is bound to American technology: that is mass production. Goods and articles intended for the upper layers, adapted to individual tastes, etc., are manufactured much better in Europe. Fine cloth is furnished by England. Jewelry, gloves, cosmetics, etc., come from France. But when it is a question of mass production intended for a vast market, America is far superior to Europe. That is precisely why European socialism will learn technique at the American school.

Hoover, the most competent statesman in the economic field, is carrying on an intensive campaign for the standardization of manufactured goods. He has already concluded several score contracts with the biggest trusts for the production of standardized articles, among them the baby carriage and the casket. It turns out that an American is born standardized and dies standardized. I do not know how convenient this is, but it is at least 40 per cent cheaper.

The American population, thanks to immigration, numbers many more elements (45 per cent) fitted for work than the European population. First of all, the relation between the age groups is different. The whole nation is thereby rendered more productive. This higher coefficient of productivity is further multiplied by the greater output per worker. Because of mechanization and the more rational organization of the labor process, a miner in America extracts two and a half times more coal and ore than in Germany. The farmer produces twice that of Europe. We see what the results are.

It was said of the ancient Athenians that they were free men because there were four slaves to each Athenian. Every inhabitant of the USA has fifty slaves, but mechanical ones. By calculating the available machine power and translating horse power into man power one will obtain this figure that every American citizen, including suckling babes, possesses fifty mechanical slaves. Obviously, this does not prevent American economy from resting on living slaves, that is, hired workers.

The annual national income of the USA amounts to 60 billion dollars. Annual savings, that is, the sum remaining after all obligations are paid, total between six and seven billion dollars. I speak only of the United States, i.e., the area so labelled in old textbooks. Actually, the USA is greater and richer. Canada, without offense to the British Crown, is an integral part of the United States. If you consult the Annual Report of the US Department of Commerce, you will discover that trade with Canada is entered under internal trade; and that Canada is politely and somewhat evasively referred to as the northern prolongation of the United States, without the blessing of the League of Nations. Besides, the latter was not evn consulted, and for good reason: there was no need here for this Zags [Soviet registry of civil acts of state, especially marriages]. The economic forces of attraction and repulsion are already operating almost automatically; English capital holds hardly 10 per cent of Canadian industry; American capital holds more than a third of it; and this proportion is steadily growing. English imports into Canada are valued at 160 millions while those of the USA are almost 600 million dollars. Twenty-five years ago English imports were five times those of the United States. Most Canadians consider themselves Americans, with the exception, ironically enough, of the French section of the population which considers itself profoundly English.

Australia is passing through the same process as Canada but at a slower tempo. Australia will take her stand alongside of the country whose navy will defend her against Japan and will perform this service most cheaply. In this competition victory is assured to the United States in the near future. At all events, should a war break out between the US and Great Britain, Canada, “the British Dominion,” would serve as one of the reservoirs of man power and food supplies for the US against England.

Such, in its main features, is the material power of the United States. It is this power that permits the American capitalists to follow the old practice of the British bourgeoisie: fatten the labor aristocracy in order to keep the proletariat shackled. They have entered into this practice to such a degree of perfection as the British bourgeoisie would never even have dared to consider.

The New Roles of America and Europe

These last years, the economic axis of the world has been radically displaced. The relations between the USA and Europe have become drastically altered. It is the result of the war. Naturally, this change was prepared long since: there were symptomatic indications of it, but it has become an accomplished fact only recently, and we are now trying to account for this gigantic shift that has taken place in mankind’s economic life and, consequently, in human culture. A German writer has recalled in this connection Goethe’s words describing the extraordinary impression made on contemporaries by the Copernican theory according to which not the sun revolves about the earth but, on the contrary, it is the earth, a modest and middle-sized planet, that revolves around the sun. There were many who refused to believe it. Their geocentric patriotism was outraged. The same is true now in regard to America. The European bourgeois does not want to believe that he has been shoved to the background, that it is the USA that rules the capitalist world.

I have already pointed out the natural and historic causes that have prepared this gigantic world shift of economic forces. But it required the war in order at a single blow to raise America, lower Europe and lay bare the abrupt shift of the world axis. The war, as an enterprise for the ruination and decadence of Europe, cost America around 25 billion dollars. If we recall that American banks now hold 60 billion dollars, that sum of 25 billion is relatively small. Furthermore, 10 billions went as a loan to Europe. With the unpaid interest these 10 billions have now become 12, and Europe is beginning to pay America for its own ruination.

Such is the mechanism whereby the United States was able to rise at one stroke above the whole world as the master of its destinies. This country with a population of 115 million has Europe entirely at her command, with the sole exception, of course, of the USSR. Our turn has not yet come and we know that it will not come. But leaving our country out of it, there still remain 345 million Europeans, that is, a population three times as large as that of the USA.

The new relation of roles of nations is determined by the new relation between their respective wealths. The estimates of the national wealth of the various countries are not very exact, but approximate figures will suffice. Let us take Europe and the USA as they were fifty years ago, at the time of the Franco-German war. The wealth of the United States was then estimated at 30 billion dollars, that of England at 40 billions, that of France at 33 billions, that of Germany at 38 billions. As is apparent, the difference) between the respective levels of these countries was not great. Each possessed from 30 to 40 billions, and of these four richest countries in the world it was the US that was the least rich. This was in 1872. But what is the situation now, half a century later? Today, Germany is poorer than in 1872 (36 billions); France is approximately twice as rich (68 billions); likewise England (89 billions); but the wealth of the US is estimated at 320 billion dollars. Thus, of the European countries which I cited, one has regressed to its former level, two others have doubled their wealth, and the United States has become 11 times wealthier. That is why in expending 15 billions for the ruin of Europe, the United States has completely achieved its purpose.

Before the war America was Europe’s debtor. The latter served as the principal factory and the principal depot for world commodities. Moreover Europe, above all England, was the central banker of the world. All these three leading roles now belong to the United States. Europe has been relegated to the background. The US is the principal factory, the principal depot and the central bank of the world.

Gold, we know, plays a certain role in capitalist society. Lenin wrote that under the regime of socialism gold would be used as building material for certain public places. But this will be under socialism. Under capitalism there is nothing more important than a bank vault filled with gold. How do matters stand on this score in America? Before the war, the American gold reserve, if I am not mistaken, amounted to 0.9 billions; on January 1, 1925 it rose to 4½ billions, which represents one-half of the total world reserve; today this proportion is not less than 60 per cent.

Now, what was happening to Europe while America was concentrating in her hands 60 per cent of the world’s gold? Europe was declining. It had been plunged into war because European capitalism was suffocating within the narrow framework of the national states. Capitalism tried to extend these limits, to create for itself a larger arena and in this the wildest pressure was exerted by the more progressive German capitalism which set the “organization of Europe” as its aim. But what was the outcome of the war? The Treaty of Versailles has created in Europe about 17 additional, independent new states and territories. Europe has added 7,000 kilometers of new frontiers, customs barriers and, on each side of these new customs barriers, a corresponding number of fortifications and armies. Europe now has one million more soldiers than before the war. To arrive at such achievements Europe destroyed an enormous mass of material values, devastated and impoverished herself.

But that is not all. In return for all her misfortunes, her economic ruin, her new and senseless customs barriers that disorganize commerce, her new frontiers and armies; for her dismemberment, ruination and decadence, for the war and the peace of Versailles, Europe must pay to the US the interest on her war debts.

Europe is impoverished. The quantity of raw materials that she works up is 10 per cent lower than it was before the war. The specific weight of Europe in world economy has diminished by many times. The sole stable thing in present-day Europe is – unemployment. And curiously enough, in their search for avenues of escape, bourgeois economists have exhumed from the archives the most reactionary theories from the epoch of primitive accumulation. They see remedies for unemployment in Malthusianism and emigration. During the period of its expansion, triumphant capitalism had no need for these theories. But now that it has reached decay, senility and arterio-sclerosis, it becomes childish in the realm of ideas and returns to the old witch-doctor remedies.

The Imperialistic Expansion of the United States

From the power of the United States and the weakening of Europe flows the inevitability of a new division of world forces, spheres of influence and world markets. America must expand while Europe is forced to contract. In precisely this consists the resultant of the basic economic processes that are taking place in the capitalist world. The US reaches out into all world channels and everywhere takes the offensive. She operates in a strictly “pacifist” manner, that is, without the use of armed force as yet, “without effusion of blood” as the Holy Inquisition said when burning heretics alive. She expands peaceably because her adversaries, grinding their teeth, are retreating step by step, before this new power, not daring to risk an open clash. That is the basis of the “pacifist” policy of the United States. Her principal weapon now is: finance capital backed by its billions of gold reserve. This is a terrible and overwhelming force in relation to all parts of the world and particularly in relation to devastated and impoverished Europe. To grant or to refuse loans to this or that European country is, in many cases, to decide the fate not only of the political party in power but of the bourgeois regime itself. Up to the present time, the US has invested 10 billion dollars in the economy of other countries. Of these 10 billions, two have been granted to Europe in addition to the ten billions formerly supplied for its devastation. Now, as we know, the loans are granted in order to “restore” Europe. Devastation, then restoration: these two aims complement each other, while the interest on the sums appropriated for both keep flowing into the same reservoir. The US has invested the most capital in Latin America which, from the economic standpoint, is becoming more and more a dominion of North America. After South America, Canada is the country which has obtained the most credits; then comes Europe. The other parts of the world have received much less.

Ten billions is a very small sum for so powerful a country as the United States, but this sum is rapidly increasing and to understand this process it is most important to take into account its tempo. During the seven years following the war, the US invested abroad around six billion dollars; nearly half of this sum has been supplied these last two years; in 1925 the investments have been much greater than in 1924.

On the eve of the war, the US still needed foreign capital, received this capital from Europe and placed it in industry.

The growth of American industrial power led at a certain stage to the rapid formation of finance capital ... Once begun, this process proceeds with ever greater acceleration. What two or three years ago was still in the field of conjecture is now taking place before our eyes. But this is only the beginning. The campaign of American finance capital for the conquest of the world will actually begin only tomorrow.

An extremely significant fact: in the course of the past year, American capital has more and more abandoned governmental loans in favor of industrial loans. The meaning of this is clear enough. “We have given you the opportunity of reestablishing the national currency in Germany and in England; we will consent to do it in France on such and such conditions, but for us this is only a means to an end. And our end is to lay our hands on your economy.”

I have recently read in Der Tag, organ of German metallurgy, an article entitled, Dawes or Dillon. Dillion is one of those new condottieri whom American finance sends for the conquest of Europe. England gave birth to Cecil Rhodes, its last colonial adventurer on the grand scale, who established a new country in South Africa. Such figures are now being born in America, not for South Africa but for Central Europe. Dillon’s task is to buy up German metallurgy at a low price. He has collected only 50 million dollars for this purpose – Europe is not now selling herself dearly – and, with these 50 million dollars in his pocket, he is not deterred by such European barriers as the frontiers of Germany, France and Luxembourg. He must combine coal and metal; he wishes to create a centralized European trust; he does not bother with political geography – I even believe that he is ignorant of it. What does it matter? Fifty million dollars in present-day Europe is worth more than any kind of geography. His intention, as I said, is to group in a single trust the metallurgy of Central Europe, then to oppose it to the American steel trust, whose king is Gary. Europe’s “defending herself” against the American steel trust comes down in action to this, that two American octopuses fight each other in order to unite at a given moment for a more planful exploitation of Europe. That is precisely why the organ of German metallury weighs the alternative: “Dawes or Dillon.” The choice is limited, there is no third. Dawes is a creditor armed from tip to toe. With him there is little else to do than to submit. But Dillon is in some ways an old lady’s companion. To be sure, of a very special type, but, who knows, perhaps he will not strangle us ... The article ends with this remarkable sentence: “Dillon or Dawes, that is the most important question for Germany in 1926.”

The Americans have already secured, by purchasing stock, control of the so-called “D banks,” the four most important banks of Germany. The German oil industry is obviously hanging on the tails of American Standard Oil. The zinc mines, formerly the property of a German firm, have passed into Harriman’s hands who obtained thereby the monopoly control of crude zinc on the world market.

American capital does business wholesale and retail. In Poland, the American-Swedish match trust is taking its first preparatory measures. In Italy they go further. The contracts which American firms sign with Italy are very interesting. Italy is given charge, so to speak, of managing the Near East market. The US will supply semi-finished articles to Italy in order that the latter may adapt them to the taste of the Oriental consumer. America hasn’t the time to bother with details. She furnishes standardized products. And the omnipotent trans-Atlantic business man comes to the artisan of the Appenines and says to him: “Here is all that you need, but paint it up and polish it up to the taste of the Asiatics.”

France has not yet come to this. She is still obstinate and resists. But she will give in. She will have to stabilize her currency, that is, put her head in the American noose. Each State awaits its turn at Uncle Sam’s counter.

How much have the Americans spent to secure such a situation? A very small sum. Investments abroad, without counting the war debts, come to 10 billions. Europe has received all in all 2½ billions, and America is already beginning to treat her as a conquered country. American investments in European economy represents only a hundredth, and even less, of the total wealth of Europe. When a scale is swinging, only a slight tap of the finger is necessary to tip it to one side. The Americans have given this tap of the little finger, and they are already masters. Europe lacks the necessary capital for the work of restoration and the necessary circulating capital for the part of her economy already restored. She has buildings and equipment worth hundreds of millions but lacks ten millions to set the machine going. The American arrives, gives the ten millions and lays down his conditions. He is the master, he issues the orders.

I have received an extremely interesting article on one of those new Cecil Rhodes that America is now giving birth to and whose names we are obliged to learn. It is not very pleasant, but it can’t be helped. We have learned quite well the name of Dawes. Dawes is not worth a pin’s head, but all Europe can do nothing against him. Tomorrow, we will learn the name of Dillon or that of Max Winkler, vice-president of the “Financial Service Company.” Gobbling up everything within reach on the globe, that is called financial service. Max Winkler speaks of financial service in poetical language, even biblical poetry:

“We occupy ourselves,” he says, “with financing governments, local and municipal authorities, and private corporations. American money permitted the restoration of Japan, after the earthquake; American funds permitted the defeat of Germany and Austria-Hungary and have played a very Important role in the raising up of those countries.”

First you destroy, then you restore. And for both operations you collect an honest fee. Only the earthquake in Japan manifestly took place without the intervention of American capital. But listen to the following:

“We grant loans to Dutch colonies and to Australia, to the government and cities of Argentina, to South African mining industries, to the nitrate producers of Chile, to the coffee planters of Brazil, to the producers of tobacco and cotton in Columbia. We give money to Peru for the realization of sanitary projects; we give some to the Danish banks, to the Swedish manufacturers, to the hydro-electric stations of Norway, to the Finnish banks, to the factories of mechanical construction of Czechoslovakia, to the railroads of Yugoslavia, to the public utilities of Italy, to the Spanish telephone companies.”

You may like it or not, but this has a genuine ring. This rings with the sound of those 60 billion dollars that are now in American banks. We will have to hear this symphony again in the approaching historic period.

Shortly after the war, when the League of Nations was in the process of establishing itself, and pacifists of all European countries were lying each in his own tongue, an English economist George Paish, presumably a man of the best intentions, proposed the floating of a loan to the League of Nations for the pacification and reconstruction of all mankind. He estimated that 35 billion dollars were needed for this worthy enterprise and proposed that the US subscribe 15 billions, England five billions, and other countries the remaining 15 billions. According to this splendid plan, the US had to provide nearly half of this great loan, and as the remaining shares would be divided among a great number of states, the US would obtain the controlling share. This all-saving loan did not materialize, but what is happening at the present time is by and large a more effective realization of this same plan. The US progressively gobbles up the shares which will give her control of the human race. Assuredly, a great undertaking. But a risky one. The Americans will not be long in convincing themselves of it.

Pacifism and Muddleheads

Before continuing, I must dispel a certain confusion. The world processes under study are developing with such rapidity and on such a scale that our minds can only with great difficulty grasp, comprehend and assimilate them. It is not surprising that there has recently appeared a lively discussion on this subject in the international press, proletarian and bourgeois. In Germany various volumes have been published, devoted especially to the role of the US vis-à-vis Balkanized Europe. In the international controversy that has arisen over this question, reference was made to a report delivered by me from this platform two years ago. I have in my hand an American labor review that I recently opened at precisely the page devoted to the relations between America and Europe, and my eyes fell by chance on a reference to “rations.” Naturally, that interested me; I read the article, and here, comrades, is what, to my great astonishment, I learned:

“Trotsky is of the opinion that we have entered into the period of pacific Anglo-American relations; the influence of Anglo-American relations (according to Trotsky) will contribute more to the consolidation than to the decomposition of world capitalism.”

Not bad, is it? MacDonald could hardly improve on it. And further:

“The old theory of Trotsky of Europe being put on rations [Why old? It is hardly two years old. – L.T.] and made a Dominion of America was linked to this appreciation of Anglo-American relations.” And so forth and so on. (J. Lovestone, Workers’ Monthly, November 1925.)

On reading these lines, so great was my astonishment that for three minutes I rubbed my eyes. Where and when have I said that England and America maintained pacific relations and that, owing to this, they were going to regenerate European capitalism and not cause its decomposition? Generally speaking, if any communist past the Pioneer age said this or something similar, one would simply have to expel him from communist ranks. Naturally, after having read these absurdities attributed to me, I re-read what I had occasion to say on that subject from this platform. If I now refer back to the speech I made two years ago, it is not to explain to Lovestone and his like that if one wishes to write on any subject – whether in English or French, in Europe or in America – one must know what he is writing about and where he is leading the reader. No, I do so because the way in which the question was then posed by me still holds good today. That is why I must read you several excerpts from my speech:

“What does American capital want? What does it seek?” I asked two years ago. And I replied:

“It seeks, we are told, stability. It wishes to re-establish the European market. It wishes to make Europe solvent. To what extent and how? Under its hegemony. What does that mean? That Europe will be permitted to rise again, but only within well-defined limits; that restricted sectors of the world market will be reserved for her. American capital now dominates; it commands the diplomats. It is likewise preparing to give orders to the European banks and trusts, to the entire European bourgeoisie.”

Two, years ago I said, “It commands the diplomats (in Versailles, in Washington) and is preparing to give orders to the banks and trusts.” Today I say: “It already gives orders to the banks and trusts of various European states and it is preparing to give orders to the banks and trusts of the other European states.”

I continue the citation: “It will divide the market into sectors, it will regulate the activity of European financiers and manufacturers. If one wishes to answer clearly and succinctly the question what American capital wants, one would say: It wishes to put capitalist Europe on rations.” I did not say that it has put Europe on rations or that it will put her on rations but that it wishes to do so. That is what I said two years ago.

Lovestone claims that I spoke of the “pacific collaboration” of England and America. Let us refer to the minutes where the speech is recorded.

“It is not only a question of Germany and France; it is also a question of Great Britain. She too will have to prepare to submit to the same fate ... It is often said, to be sure, that America now walks along with England, that an Anglo-Saxon bloc has been formed; one speaks of Anglo-Saxon capital, of Anglo-Saxon politics ... But to speak in this way is to show one’s lack of understanding of the situation. The main world antagonism proceeds along the line of the interests of the United States and Great Britain. That is what the future will show more and more clearly ... Why? Because England is still, after the United States, the richest and most powerful country. It is the principal rival, the main obstacle.”

I developed this same idea somewhat more forcefully in the Manifesto of the Fifth World Congress of the Communist International, but I will not weary you with texts. Let me cite again from my speech that which pertains to the “pacific” relations established by America:

“This American ‘pacifist’ program of putting the whole world under her control is not at all a program of peace; on the contrary, it is pregnant with wars and with the greatest revolutionary convulsions. It is not very likely that the bourgeoisie of all countries will consent to be shoved into the background, to become vassals of America without at least trying to resist. The contradictions are too great, the appetites are too monstrous, the urge to preserve old rulership is too great, the habits of world domination are too powerful in England. Military conflicts are inevitable. The era of ‘pacifist’ Americanism that seems to be opening up at this time is only a preparation for new wars of unprecedented scope and unimaginable monstrosity.”

That is what I said two years ago about “pacific” relations.

Finally, this is what I said from this platform concerning the cessation of European contradictions owing to America’s influence:

“It is absolutely incontestable that those contradictions which prepared the imperialist war and turned it loose on Europe ten years ago, those contradictions aggravated by the war and diplomatically sealed by the Versailles Treaty, continue to exist like open wounds and have been intensified by the subsequent development of the class struggle in Europe. And the United States will run up against these contradictions in all their acuteness.”

Two years have passed. Comrade Lovestone is perhaps a good critic, as good as those about whom the Russian proverb says that they point a finger at the sky and always hit the bull’s eye. But time is a still better critic.

Let me conclude with the advice that Engels once offered to one Stibelling, also an American: “When one wishes to occupy oneself with scientific problems, it is necessary first of all to read books as the author wrote them, and especially not read into them what does not exist.” These words of old man Engels are excellent and they are good not only for America but for the entire five continents.

(The second half of this speech will appear next month.)

Part 2

EDITOR’S NOTE: Last month we published the first section of a speech delivered by Leon Trotsky on February 15, 1926; this is the second and concluding section. Most noteworthy in this section is Trotsky’s confident prediction that the British bourgeoisie would be confronted by a major struggle when the miners’ contracts expired; two and a halt months later his prediction came true when the miners’ fight led to the British General Strike of May 1926. Trotsky’s forecast was based on his fundamental analysis of the relations between Europe and America, which was hemming in the already-too-narrow base of European capitalism and thus driving Europe toward socialist revolution. Both economic developments and the workers’ struggles In the ensuing years verified Trotsky’s prognosis. But the false policies of Stalinism, already in control of the Soviet Union and the Comintern at the time of this speech, saved European capitalism. This speech was, indeed, one of the last to a Soviet workers’ audience which Trotsky was permitted to make; already he was being prevented from telling the workers what the Left Opposition stood for in its struggle against Stalinism. The next year Trotsky was expelled from the Communist Party by Stalin, and then exiled to Alma-Ata.

American Pacifism in Practice

Time is the best critic in all questions. Let us see then just what the American methods of peaceful penetration looked like in action during these last years. A mere tally of the most important facts will show us that American “pacifism” has triumphed all along the line; but it has triumphed as a noiseless (as yet) method of imperialist plunder and of half-masked preparations for the greatest of conflicts.

The most graphic expression and exposure of the essence of American “pacifism” was supplied by the 1922 Washington Conference. In 1919-20 many people, and I among them, asked themselves: What will happen in 1922-23 when through her ship-building program the US is assured of naval equality with Great Britain? England, the little island, had maintained her domination through the superiority of her fleet over the combined fleets of any other two countries. Would she abandon this superiority without a fight? There were many who, like myself, considered that in 1922-23 a war between England and America, with the participation of Japan, was not excluded. But what happened instead? In place of war came purest “pacifism.” The US invited England to Washington and said: “Please take rations. There will be 5 units for me, 5 for you, Japan 3, France 3.” There is a naval program! And England accepted.

What is this? This is “pacifism.” But it is pacifism of a sort that imposes its will by dint of monstrous economic superiority and prepares “peacefully” military superiority in the next historical period.

And what of the Dawes plan? While Poincare, after seizing the Ruhr basin, bustled about in Central Europe with his kindergarten plans, the Americans surveyed the scene with field glasses from their point of vantage, and waited. And when the falling franc and other unpleasant things compelled Poincare to beat a retreat, the American arrived with a plan for the pacification of Europe. He bought the right to supervise Germany for 800 million marks, half of which, furthermore, was supplied by England. And for this bargain price of a few million dollars Wall Street placed its Controller astride the neck of the German people. “Pacifism”? You cannot wriggle out of this pacifist strangler’s noose.

And what of the stabilization of currency? Fluctuation of currency in Europe discomfits the American. He is discomfited because this allows Europe to export cheaply. The American needs a stable currency both for collecting regular interest payments on his loans as well as for preserving financial order in general. How can one invest his capital in Europe otherwise? And so the American compelled the Germans to introduce a stable currency; he forced the English, too, by granting them a loan of 300 million dollars for this purpose; Lloyd George recently said: “The pound sterling now looks the dollar right in the face.” Lloyd George is a cocky old codger. If the pound can look the dollar right in the face, it is because this proud pound sterling has 300 million dollars propping up its spine.

And what of France? The French bourgeoisie is in dread of the transition to a stabilized currency. This is a very painful operation. Says the American: You won’t get a loan on any other terms; do as you like. The American insists that France disarm in order to be able to pay her debts. Pure pacifism, disarmament, stabilization of currency – one could hardly improve on this. America prepares “peacefully” to bring France to her knees.

With England the question of gold parity and of debts has already been settled. The English, if I am not mistaken, are henceforth to pay the US around 330 million rubles a year. England has, in her turn, settled the question of the Italian debt, of which she will receive but an insignificant part. France is the principal debtor of England and America, but has paid nothing thus far. However, she will have to pay unless events of an entirely different order – not financial but revolutionary – intervene to cancel all the old debts. Germany makes payments to France and England who demand payment of debts even of us. What then is the over-all picture of Europe?

The English bourgeoisie collects or is getting ready to collect her loans in dribs and drabs from the whole of Europe in order then to transmit these collected sums plus an increment added by herself across the Atlantic to Uncle Sam. What office does Mr. Baldwin or King George hold today? Merely that of chief tax collector for America in a province called Europe. The task of this agent is to squeeze out the arrears from the peoples of Europe and ship them to the US The organization is, as you observe, perfectly pacifist, peaceful. Under the system of American loan-rationing are organized the financial interrelations of the European peoples, supervised by the most punctual of taxpayers, Great Britain, who for this receives the title of Chief Tax Collector. The European policy of America rests wholly on this: Germany, pay France; Italy pay England; France, pay England; Russia, Germany, Italy, France and England, pay me, America. This hierarchy of indebtedness constitutes one of the pillars of American pacifism.

The world struggle for oil between England and America has already led to revolutionary shocks and military clashes in Mexico, Turkey, Persia. But tomorrow’s newspapers will perhaps inform us that England and America have arrived at a peaceful collaboration in the domain of oil. What will this mean? It will mean an oil conference in Washington. In other words, England will be invited to take a more modest ration of oil. Consequently, 14-carat pacifism, again.

In another field, that of struggle for markets, there also obtains up to a certain time and point a “peaceful” regulation. One German writer, former minister of I forget just which government – former ministers are plentiful in Germany – Baron Reibnitz has the following to say on the struggle for markets between England and America: England, you know, can avoid war provided she refrains, in favor of the USA., from any pretensions in Canada, in South America, in the Pacific and on the eastern coast of Asia and in Australia: “there will then remain for her the other fields outside Europe.” I can’t quite make out just what will remain for England after that. But the alternative is correctly posed: either resort to war or “pacifistically” sink to a meager ration.

And here is the latest chapter, a completely new one: it concerns foreign raw materials – a chapter interesting in the highest degree. The United States, you see, lacks many things of which others have no lack. In this connection American newspapers have published a map showing the distribution of raw materials over the whole globe. They now talk and think in terms of whole continents. The European pygmies get exercized over Albania, Bulgaria, corridors of one sort or another, and wretched strips of land. Americans think in terms of continents: it simplifies the study of geography, and, what is most important, provides ample room for robbery. And so, American newspapers have published a map of the world with ten black spots on it, the ten major deficiencies of the US economy in raw materials: rubber, coffee, nitrates, tin, potash, sisal and other less important raw materials. It appears that all these raw materials are monopolized (horror of horrors!) not by the US but by other countries. Rubber, about 70 per cent of the world output, comes from tropical islands belonging to England, while America, by the way, consumes 70 per cent of the world production for automobile tires and other requirements. Coffee comes from Brazil. Chile, financed by the English, furnishes the nitrates. And so forth and so on. Mr. Churchill, who does not cede to Lloyd George in cockiness, resolved to recover the sums paid out to America for the debts by raising the price of rubber. And Hoover, director of American trade, has computed with the aid of a calculating machine that in a single year, 1925, the US paid the English for rubber a sum of 600 to 700 million dollars over and above an “honest” price. That’s what he said. Hoover knows very well how to distinguish between honest and dishonest prices: that’s his job. As soon as the American newspapers learned about this, they raised an incredible hue and cry. I cite one quotation from The Evening Post:

“What good are all these Locarnos and Genevas, these leagues and protocols, these disarmament conferences and economic conferences, if a powerful group of nations intentionally isolates America?”

You must picture to yourselves this poor America who is being isolated and exploited on all sides. Rubber, coffee, tin, nitrates, sisal for ropes, potash – everything has been grabbed up and monopolized, so that an honorable American billionaire is no longer able to drive his automobile, nor drink enough coffee, nor get rope good enough to hang himself, nor even obtain a tin bullet with which to blow out his brains. The situation is really intolerable: exploitation on all sides! It is enough to make a man lie down alive in a “standardized” casket! Mr. Hoover wrote an article precisely in this connection – and what an article! It consists exclusively of questions – 29 by count – each sounds better than the one before. As you might well have gathered, the barbs of all these questions are aimed at England. Is it a nice thing to soak people over and above an honest price? And if it isn’t nice, isn’t it bound to introduce irritation into relations between one nation and another? And if it is bound to introduce irritation, isn’t the government bound to intervene? And if a self-respecting government intervenes, mightn’t grave consequences ensue? One English newspaper, less polite but more candid than the rest, wrote on this score that one fool can ask so many questions that a hundred wise men cannot answer. With this the patriotic newspaper unburdened itself. In the first place, I do not dare admit that a fool occupies so responsible a position. And even if that were the case ... comrades, it is not an admission on my part but merely a logical premise. I say, even if this were so, Hoover is nonetheless at the head of the colossal apparatus of American capitalism and consequently has no need for intelligence since the whole bourgeois “machine” does his thinking for him. And, at all events, after Hoover’s 29 questions, each of which came like a pistol shot under Mr. Baldwin’s very ears, rubber immediately became cheaper. And this fact illuminates the world situation far better than would scores of statistics. Such, comrades, is American pacifism in practice.

No Avenue of Escape for European Capitalism

It is to this United States, who brooks no obstacle on her path, who views each rise in prices of raw materials she lacks as a malicious assault upon her inalienable right to exploit the whole world – it is to this new America, wildly on the offensive, that dismembered, divided Europe finds itself counterposed – a Europe, poorer than before the war, with the framework of its markets still more restricted, loaded with debts, torn by antagonisms and crushed by bloated militarism.

During the period of reconstruction there was no lack of illusions among bourgeois and Social Democratic economists and politicians concerning the possibilty of Europe’s regeneration. European industry, first in France and then in Germany, picked up quite rapidly at certain moments after the war. This is hardly surprising; in the first place, the normal demand was regenerated, even if not to full proportions, because of the exhaustion of all previous stocks. There was nothing left. Furthermore, France remained with vast devastated areas which constituted an auxiliary market. So long as the most pressing needs of these war-stripped and devastated markets were being supplied, industry was able to operate at a healthy pace, giving rise to great hopes and great illusions. Now, so far as the essence of the matter is concerned, the balance sheet of these illusions has been drawn even by the more alert bourgeois economists. There is no avenue of escape for European capitalism.

The unexampled economic superiority of the US even independently of a conscious policy on the part of the American bourgeoisie, will no longer permit European capitalism to raise itself. American capitalism, in driving Europe more and more into a blind alley, will automatically drive her onto the road of revolution. In this is the most important key to the world situation.

This is revealed most graphically and incontestably in England’s situation. England’s trans-oceanic exports are cut into by America, Canada, Japan, and by the industrial development of her own colonies. Suffice it to point out that on the textile market of India, a British colony, Japan is squeezing out England. And on the European market, every increase of sales of English merchandise cuts into the sales of Germany, France and vice versa. Most often it is vice versa. The exports of Germany and France hit those of Great Britain. The European market is not expanding. Within its narrow limits, shifts occur now to one side, now to another. To hope that the situation will change radically in favor of Europe is to hope for miracles. Just as under the conditions of the domestic market, the bigger and more advanced enterprise is assured victory over the small or backward enterprise, so, in the conditions of the world market, the victory of the US over Europe, that is, first and foremost over England, is inevitable.

In 1925 England’s imports and exports reached respectively 111 per cent and 76 per cent of their pre-war levels. This implies an adverse trade balance of unprecedented proportions. The reduction in exports signifies an industrial crisis which strikes not at the secondary but at the basic branches of industry: coal, steel, ship-building, woolens, etc. Temporary and even considerable improvements are possible and even inevitable, but the basic line of decline is predetermined.

One becomes filled with justifiable contempt for the “statesmen” of England who have retained all their old conformities so incompatible with the new conditions and who lack the most elementary understanding of the world situation and the inevitable consequences inherent in it. The reigning English politicians, Baldwin and Churchill, have recently favored us again with their candor. At the end of last year Churchill announced that he had twelve reasons (yes, he said that) for being in an optimistic mood. In the first place, a stabilized national currency. The English economist Keynes has called Churchill’s attention to the fact that this stabilization meant a minimum reduction of 10 per cent in the prices of merchandise exported, and consequently a corresponding increase in the adverse trade balance. The second reason for being optimistic was the excellent price of rubber. Sad to say, Mr. Hoover’s 29 questions have considerably reduced the rubberized optimism of Churchill. Thirdly, there was the decrease in the number of strikes. But let us wait on this score until the end of April when the collective contract of the miners comes up for consideration. Fourth reason for optimism – Locarno. From one hour to the next, there is no improvement. The Anglo-French conflict far from diminishing has intensified since Locarno. As touches Locarno let us wait, too; one counts one’s chickens when they are hatched. We refrain from enumerating the remaining reasons for optimism; on Wall Street the price they fetch is still dropping. It is interesting to note that The Times of London published an editorial on this same subject entitled: Two Rays of Hope. The Times is more modest than Churchill; it has not twelve but only two rays of hope, and these too are x-rays, that is, rather problematical rays.

To the professional light-mindedness of Churchill one can counterpose the more serious opinions of the Americans who make an appraisal of British economy from their own standpoint, and also the opinion of British industrialists themselves. Upon returning from Europe, Klein, the director of the US Department of Commerce, made a report to industrialists which, notwithstanding its purely conventional tone of reassurance, lets the truth break through.

“From the economic point of view,” he said, “the only gloomy spot, [abstraction evidently made from the situation of France and Italy as well as the relatively slow restoration of Germany] – the only gloomy spot, I say, is the United Kingdom. It seems to me that England is in a doubtful commercial position. I would not want to be too pessimistic because England is our best customer but a number of factors are developing in that country, which, it seems to me, must give rise to serious consideration. There exist In England formidable taxes, the reason for which, according to certain people, must b found in our thirst for money, not to say more. Still it is not entirely correct ... The stock of tools of the coal industry is the same as a few dozen years ago, with the result that the cost of manual labor per ton is three or four times more than in the United States.”

And so forth and so on in the same vein.

Now, here is another comment. J. Harvey, American ex-ambassador in Europe, considered by the English as a “friend and well-wisher,” which is in a sense true for he speaks as a rule sentimentally of the need of coming to England’s aidthis same J. Harvey recently published an article entitled: The End of England (the title alone is priceless!), in which he comes to the conclusion that “English production has had its day. Hereafter the lot of England is to be an intermediate agent.” That is to say, the sales clerk and bank teller of the United States. Such is the conclusion of a friend and wellwisher.

Let us now see what George Hunter, a great English shipbuilder, whose note to the government made a stir in the entire British press, has to say:

“Has the Government” [and the government, after all, is Churchill with his 12 reasons for optimism], he says, “a clear idea of the disastrous condition of English industry? Does it know that this condition, far from improving, is worsening progressively? The number of our unemployed and of our partial unemployed represents at the minimum 12.5 per cent of the employed workers. Our trade balance is unfavorable. Our railroads and a large part of our industrial enterprises pay dividends out of their reserves or pay none at all. If that continues it is bankruptcy and ruin. There is no improvement In prospect.”

The coal industry is the keystone of English capitalism. At present it is completely dependent upon government subsidies. “We can,” says Hunter, “subsidize the coal industry as much as we like; that will not prevent our industry generally to wane.” But if subsidies stop, English industrialists could not continue to pay the wages they now pay; and that would provoke, beginning with the next First of May, a grandiose economic conflict. It is not hard to imagine what would be implied by a strike embracing not less than a million miners, backed, according to all indications by approximately a million railwaymen and transport workers. England would enter into a period of greatest economic shocks. One must either continue to grant ruinous and hopeless subsidies, or resign oneself to a profound social conflict.

Churchill has twelve reasons for optimism, but the social statistics of England testify that the number of employed workers is decreasing, that the number of miners is decreasing, but that there is an increase in the number of restaurant employees, cabaret personnel and elements of the lumpenproletarian type. At the expense of producers the number of lackeys increases, and, by the way, these figures do not include the political lackeys and ministers who with servility implore the generosity of Americans.

Let us once again counterpose America and England. In America there is a growing aristocracy of labor which aids in the establishment of company unions; while in England, fallen from her supremacy of yesterday, there grow layers of lumpen. proletariat below. Revealed best of all in this juxtaposition and counterposition is the displacement of the world economic axis. And this displacement will continue to operate until the class axis of society is itself displaced, that is, until the proletarian revolution.

Mr. Baldwin of course demurs to this. Though Mr. Baldwin carries more weight than Churchill, he understands as little. At a gathering of industrialists, he outlined a means of getting out of the predicament – a Conservative Prime Minister always has patent remedies for all ailments. “It sometimes seems to me,” he said “that some of us have slept for at least six or seven years.” Much longer! Mr. Baldwin himself has been asleep for at least fifty years, while others stayed up. “We will do well,” continued the Prime Minister, “to be guided by the progress realized during this period by the United States.” It would indeed take a bit of trying to be guided by the “progress” of the United States. In that country they dispose of a national wealth of 320 billions, 60 billions in the banks, an annual accumulation of 7 billion, while in England there is a deficit. Let us be guided a little! Let us try!

“The two parties [capitalists and workers],” continues Baldwin, “can learn much more at the school of the United States than in the study of the situation in Moscow.”

Mr. Baldwin should refrain from spitting into the Moscow well. We could teach him a few things. We know how to orient ourselves among facts, analyze world economy, forecast a thing or two, in particular the decline of capitalist England. But Mr. Baldwin cannot do it.

Churchill, the Finance Minister, also referred to Moscow. Without it, you can’t make a good speech nowadays. Churchill, you see, had read that morning a horrible speech by Mr. Tomsky, who is not a member of the House of Lords. He happens to be, as Mr. Churchill truthfully asserts, a man who occupies an extremely important post in the Soviet Republic. Mr. Tomsky did not spend his youth at Oxford or at Cambridge with Mr. Churchill but in the Boutirky Prison, here at Moscow. Nevertheless Mr. Churchill is obliged to speak of Mr. Tomsky. And, it must be admitted, he does not speak very kindly about Mr. Tomsky’s speech at the conference of trade unions at Scarborough. Mr. Tomsky did indeed make a speech there, and apparently not a bad one, judging from the impression it made on Mr. Churchill. The latter cited extracts from the speech which he characterized as “ramblings of a barbarian.”

“I estimate,’ he said, “that in this country we are capable of managing our own affairs without unwarrantable interference from outside.” Mr. Churchill is a very proud man but he is wrong. His patron Baldwin says that one must learn at the school of the United States.

“We do not want to have a freshly laid crocodile egg for breakfast,” continues Mr. Churchill. It is Tomsky, it seems, who laid a crocodile egg in England. Mr. Churchill does not like it; he prefers the politics of the ostrich that hides its head in the sand, and, as you know, both the ostrich and the crocodile propagate themselves in the self-same tropical colonies of England. Then Mr. Churchill gets really cocky: “I am not afraid of the Bolshevik revolution in this country. I do not criticize personalities.” And so forth and so on. That does not prevent him from delivering a wild speech against Tomsky. So he is afraid, after all. He does not criticize the personality of Tomsky. God forbid, he merely calls him a crocodile.

“Great Britain is not Russia.” Very true. “What use is there in introducing to the English workers the dull doctrine of Karl Marx and in making them sing out of tune the Internationale?” It is true that the English workers sometimes sing the Internationale off key, with music supplied by MacDonald, but they will learn to sing it without any false notes precisely from Moscow. In our opinion, despite all the 12 reasons for optimism, the economic situation of England brings nearer that hour when the English working class will sing the Internationale at the top of their voices. Prepare your ear drums, Mr. Churchill!

As touches Germany and France, I shall limit myself to brief remarks.

The day before yesterday I received from one of our engineers, who made a tour of the German factories where our orders are being filled, a letter in which he characterized the situation in these terms: “As an engineer, I became very depressed. Industry here is declining for lack of market, and no number of American loans will provide this market.” The number of unemployed in Germany has passed the two million mark. Owing to the rationalization of production, skilled workers comprise about three-fourths of the total unemployed. Germany has gone through a crisis of inflation and then through a crisis of deflation; now a boom ought to start but instead there is a terrible collapse – over two million are without employment. And the most onerous consequences of the Dawes regime for Germany are still to come.

In France, industry made a significant step forward after the war This deceived many people and gave birth to the illusions of “reconstruction.” As a matter of fact, France has been living beyond her means; her industry picked up on the basis of a temporary internal market (devastated regions) and, in addition, at the expense of the whole country (depreciation of the franc). Now the hour of payment has come. America says: “Disarm, retrench, tighten your belt, go over to a stable currency.” A stable currency means the reduction of production and exports; it means unemployment, deportation of foreign-born proletarians, lowering the wages of the French workers. The period of inflation ruined the petty bourgeoisie; the period of deflation will spur the proletariat to action. The French government dares not even approach the solution of the financial question. Finance ministers succeed one another every two months and continue to print fraudulent banknotes. This is the sole means at their disposal for the regulation of the country’s economic life. In Hungary, Admiral Horthy, believing that there was nothing complicated about this art, began to counterfeit French notes, not with an eye to sustaining the Republic but rather in order to restore the monarchy. Republican France refused to tolerate this monarchist competition and proceeded to make arrests in Hungary, but, aside from this, very little has been done to restore French currency. France is heading toward an economic and political crisis.

In these conditions, i.e., against the background of a disintegrating Europe, the League of Nations wants to convene two conferences this year: one on disarmament, the other on the economic regeneration of Europe. Let us, however, not hurry to reserve our seats. The preparations for these conferences are proceeding with extreme slowness, encountering contradictions of interests at every step.

As touches the preparation of the disarmament conference, of exceptional interest is a semi-official article recently published in an English review and eloquently signed “Augur.” Everything points to the fact that this Augur has close ties with the Ministry of Foreign Affairs and is generally well acquainted with what goes on behind the scenes. Under the banner of preparing the disarmament conference the British Augur threatens us “with measures which will not be pacific measures.” This amounts to a direct threat of war. Who is threatening? England, who is losing her foreign markets; England, where unemployment prevails; England, where the lumpenproletariat is growing; England, who has only a single optimist left, Winston Churchill – this England is threatening us with war in the present situation. Why? Under what pretext? Is it not because she wants to take it out on somebody else because of the affronts dealt her by America? As for us, we do not want war. But if the British ruling classes wish to accelerate the birth pangs, if history wishes to deprive them of their reason before depriving them of power, it must, precisely now, push them over the steep slope of war. There will be incalculable suffering. But should the criminal madmen let loose a new war on Europe, those who will emerge victorious will not be Baldwin, nor Churchill, nor their American masters, but the revolutionary proletariat of Europe.

Has Capitalism Outlived Itself?

In conclusion, let me pose a question which, it seems to me, flows from the very essence of my report. This question is: Has capitalism outlived itself? Or to put it differently: Is capitalism still capable of developing the productive forces on a world scale and of heading mankind forward? This is a fundamental question. It is of decisive significance for the proletariat of Europe, for the oppressed peoples of the Orient, for the entire world, and, first and foremost, for the destiny of the Soviet Union. If it turned out that capitalism is still capable of fulfilling a progressive historical mission, of increasing the wealth of the peoples, of making their labor more productive, that would signify that we, the Communist Party of the USSR, were premature in singing its De profundis; in other words, it would signify that we took power too soon to try to build socialism. Because, as Marx explained, no social system disappears before exhausting all the possibilities latent in it. Confronted with the new economic situation unfolding before us at present, with the ascendancy of America over all capitalist mankind and the radical shift in the correlation of economic forces, we must pose anew this question: Has capitalism outlived itself? Or has it still before it a perspective of progressive work?

For Europe, as I have tried to show, the question is definitively decided in the negative. Europe, after the war, fell into a far worse situation than before the war. But the war itself was not an accidental phenomenon. It was the blind revolt of the productive forces against capitalist forms, including those of the national state. The productive forces created by capitalism could no longer be contained within the framework of the social forms of capitalism, including the framework of national states. Hence the war. What has the war brought Europe? A situation ten times worse than before: the same capitalist social forms, but more reactionary; the same tariff walls but more rigid; the same frontiers but narrower; the same armies but more numerous; an increased indebtedness; a more restricted market. Such is the general situation in Europe. If today England rises a little, it is at the expense of Germany; tomorrow it will be Germany’s turn to rise at the expense of England. If you find a surplus in the trade balance of one country, you must seek for a corresponding deficit in the trade balance of another country. World development – principally the development of the US – has driven Europe into this blind alley. America is today the basic force of the capitalist world, and the character of that force automatically predetermines the inextricable position of Europe within the framework of the capitalist regime. European capitalism has become reactionary in the absolute sense of the term; that is, not only is it unable to lead the nations forward, but it is even incapable of maintaining for them living standards long ago attained. Precisely this constitutes the economic basis of the present revolutionary epoch. Political ebbs and flows unfold on this basis without in any way altering it.

But what about America? So far as America is concerned the picture seems to be quite different. And Asia? After all, it is impossible to leave Asia out of the calculation. Asia and Africa represent 55 per cent of the earth’s surface and 60 per cent of the world’s population. They certainly merit a special and extended examination; but this lies outside the scope of the present report. From everything that has been said, however, it is clear that the struggle between America and Europe is above all a struggle for Asia. How then do matters stand? Is capitalism still capable of fulfilling a progressive mission in America? Has it such a mission to perform in Asia and Africa? In Asia, capitalist, development has taken only its first major steps; while in Africa, the new relations penetrate the body of the continent itself only from the periphery. Just what are the perspectives here? The conclusion seems to be the following: capitalism has outlived itself in Europe; in America it still advances the productive forces, while in Asia and Africa it has before it a vast virgin field of activity for many decades if not centuries. Is that really the case? Were it so, comrades, it would mean that capitalism has not yet exhausted its mission on a world scale. But we live under the conditions of world economy. And it is just this that determines the fate of capitalism-for all the continents. Capitalism cannot have an isolated development in Asia, independent of what takes place in Europe or in America. The time of provincial economic processes has passed beyond recall. American capitalism is far stronger and stabler than European capitalism; it can look to the future with far greater assurance. But American capitalism is no longer self-sufficing. It cannot maintain itself on an internal equilibrium. It needs a world equilibrium. Europe depends more and more on America, but this also means that America is becoming increasingly dependent upon Europe. Seven billions are accumulated annually in America. What to do with them? If simply put in a vault, they, as dead capital, would drag down the profit level in the country. All capital demands interest. Where could the available funds be placed? Within the country itself? But there is no need of them, they are superfluous, the internal market is supersaturated. An outlet must be found abroad. One begins to lend to other countries, to invest in foreign industries. But what to do with the interest, which returns, after all, to America? It must either again be placed abroad, if it happens to be gold, or else European commodities must be imported. But these commodities will tend to undermine American industry whose enormous production already requires outlets abroad. Such is the contradiction: they must either import gold of which there is already a surplus, or import commodities to the detriment of the entire national industry. Gold “inflation” (permit me to call it that) is just as dangerous for economy in its own way as currency inflation. One can die not only of anemia but also of plethora. If there is too great a quantity of gold, no new revenues can be derived from it, the interest on capital is lowered and thereby the further expansion of production made inexpedient and even irrational. To produce and to export for the sake of locking up one’s gold in cellars is equivalent to throwing one’s goods into the sea. Consequently, as time goes on, America’s need to expand grows greater and greater; that is, she must invest her surplus resources in Latin America, Europe, Asia, Australia, Africa. The more this happens, all the more does the economy of Europe and other parts of the world become integrated with that of the United States.

In military art there is a saying that whoever moves into the enemy’s rear in order to cut off, is often cut off himself. In economy something analogous takes place: the more the United States puts the whole world under its dependence, all the more does it become dependent upon the whole world, with all its contradictions and threatening upheavals. Already today, revolution in Europe means convulsions in Wall Street; tomorrow, when the investments of American capital in European economy have increased, it will mean a profound upheaval.

And what of the national-revolutionary movement in Asia? Here the same mutual dependence exists. The development of capitalism in Asia inevitably implies the growth of the national-revolutionary movement, which comes into an ever more hostile clash with foreign capital, the bearer of imperialism. We observe how the development of capitalism in China which takes place with the assistance and under the pressure of imperialist colonizers leads to revolutionary struggle and upheavals.

I spoke previously of the power of the US vis-à-vis weakened Europe and the economically backward colonial peoples. But precisely in this power of the United States is its Achilles’ heel; in this power lies its growing dependence upon countries and continents economically and politically unstable. The US is compelled to base its power on an unstable Europe, that is, on tomorrow’s revolutions of Europe and on the national-revolutionary movement of Asia and Africa. It is impermissible to look upon Europe as an independent entity. But America, too, is no longer a self-sufficing whole. In order to maintain its internal equilibrium the United States requires a larger and larger outlet abroad; but its outlet abroad introduces into its economic order more and more elements of European and Asiatic disorder. Under these conditions a victorious revolution in Europe and in Asia would inevitably inaugurate a revolutionary epoch in the United States. And we need not doubt that once the revolution in the US has begun, it will develop with a truly American speed. That is what follows from an evaluation of the world situation as a whole.

From what has been said it also follows that America stands second in the line of revolutionary development. First in line are Europe and the Orient. Europe’s transition to socialism must be conceived precisely with the following as a prospect: against capitalist America and against its powerful opposition. It certainly would be more advantageous to begin the socialization of the means of production with the richest country, the United States, and then extend this process to the rest of the world. But our own experience has shown us that it is impossible arbitrarily to fix the order in which revolutions will occur. We in an economically weaker and backward country turned out to be the first called upon to make the proletarian revolution. It is now the turn of the other European countries. America will not permit capitalist Europe to rise again. Therein is the revolutionary meaning of American capitalist power. Whatever political fluctuations Europe may undergo, her economic impasse remains throughout the fundamental factor. And this factor, a year sooner or later, will impel the proletariat onto the revolutionary road.

Will the European working class be able to hold power and build a socialist economy without America and against America? This question is closely bound up with the question of colonies. The capitalist economy of Europe and especially that of England is intimately linked with colonial possessions, which supply foodstuffs as well as the indispensable raw materials for industry. Left by itself, that is, cut off from the external world, the population of England would be condemned to economic and physical death within a very brief period. The industry of all Europe. depends, in a large measure, on ties with America and the colonies. But the European proletariat, after wresting power from the bourgeoisie, will make it its first business to help the oppressed colonial peoples break their colonial chains. In these conditions will the European proletariat be able to hold out and build a socialist economy?

We, the peoples of Czarist Russia, were able to hold out during the years of the blockade and Civil War. We endured poverty, famine, epidemics – but we held out. Our backwardness proved temporarily to be also our advantage. The revolution held out by relying primarily on its rear, the gigantic peasantry. Starved and ravaged by epidemics the revolution held out. Industrialized Europe, and particularly England – that is something else again. There cannot even be talk of a partitioned Europe being able, even under the dictatorship of the proletariat, to hold out economically so long as it remains dismembered. The proletarian revolution signifies the unification of Europe. Bourgeois economists, pacifists, business sharpers, daydreamers and mere bourgeois babblers are not averse nowadays to talk about a United States of Europe. But that task is beyond the strength of the European bourgeoisie which is utterly corroded by contradictions. Europe can be unified only by the victorious European proletariat. No matter where the revolution may first break out, and no matter what the tempo of its development may be, the economic unification of Europe is the first indispensable condition for its socialist reconstruction. Back in 1923 the Communist International proclaimed that it is necessary to drive out those who have partitioned Europe, take power in partitioned Europe in order to unify it, in order to create the Socialist United States of Europe.

Revolutionary Europe will clear a road for herself to raw materials, to food products; she will know how to get help from the peasantry. We ourselves have grown sufficiently strong to be able to extend some help to revolutionary Europe during the most difficult months. Over and above this, we will provide for Europe an excellent bridge to Asia. Proletarian England, shoulder to shoulder with the peoples of India, will insure the independence of that country. But this does not mean that England will lose the possibility of a close economic collaboration with India. Free India will have need of European technology and cuture; Europe will have need of the products of India. The Soviet United States of Europe, together with our Soviet Union, will serve as the mightiest of magnets for the peoples of Asia, who will gravitate toward the establishment of the closest economic and political ties with proletarian Europe. If proletarian England loses India as a colony, then she will gain in her a companion in the European-Asiatic Federation of peoples. The mighty bloc of peoples of Europe and Asia will be impregnable and, above all, invulnerable against the power of the United States. We do not for a moment minimize this power. In our revolutionary perspectives we proceed with a clear understanding of facts as they are. Much more, we consider that the power of the United States – such is the dialectic – is now the greatest lever of the European revolution. We do not close our eyes to the fact that, politically and militarily, this lever will be turned against the European revolution when it breaks out. We know that when its own skin is at stake, American capitalism will unleash the fiercest energy in the struggle. It is quite possible that all that books and our own experience have taught us about the fight of the privileged classes for their domination will pale before the violence that American capital will try to inflict upon revolutionary Europe. But unified Europe, in revolutionary collaboration with the peoples of Asia, will prove infinitely more powerful than the United States. Through the Soviet Union, the toilers of Europe and Asia will be indissolubly linked. In alliance with the insurgent Orient, the European revolutionary proletariat will wrest from American capital the control of world economy and will lay the foundations for the Federation of Socialist Peoples of the whole earth.