Skip to content

World Perspectives 1977

Marxist Perspectives · 1977-07-16

Core Argument

Ted Grant’s central thesis is that the post-war economic upswing — the longest and most powerful in capitalist history — has exhausted itself, and that the world has entered a qualitatively new period of short, shallow booms punctuated by increasingly severe slumps. This is not merely a cyclical downturn but the opening of an epoch of organic crisis, in which the productive forces can no longer be contained within the confines of the national state and private ownership. Grant argues that the very factors which produced the boom — the accumulation of fictitious capital, the intensification of the world division of labour, the expansion of credit — have prepared the ground for social convulsions across all three spheres of the world economy: the imperialist heartlands, the ex-colonial world, and the Stalinist states. The bourgeoisie has lost the capacity to manage the system through Keynesian demand management; inflation and stagnation now coexist, and the ruling classes can only respond by attacking living standards. The coming period, Grant insists, will pose the question of revolutionary leadership with an urgency not seen since the 1930s.

Theoretical Grounding

The analysis is rooted in the classical Marxist tradition, drawing directly on Marx’s reproduction schemes (Department I and Department II) and the law of the tendency of the rate of profit to fall. Grant deploys the latter not as a mechanical prediction but as an explanatory framework: the decline in the rate of profit in West Germany from 6 per cent to 4.1 per cent between the early 1960s and the mid-1970s is presented as the material basis for the collapse of investment and the turn to austerity. The concept of fictitious capital — Marx’s term for financial claims unbacked by real value — is used to explain the explosion of inflation and the instability of the Euro-dollar market, which Grant describes as “unbattened-down lumber on a ship” in a period of economic storms.

The argument also draws on Trotsky’s theory of the combined and uneven development of the world economy, particularly in its account of the growing disparity between the imperialist powers (the “strong” and “weak” capitalist states) and between the developed and under-developed worlds. The analysis of the Stalinist states as “totalitarian proletarian Bonapartist” systems, and the insistence that the productive forces have become a fetter on development there too, is a direct continuation of Trotsky’s analysis in The Revolution Betrayed and the Transitional Programme.

Grant situates himself explicitly within the tradition of the early Communist International. The article is a restatement of the perspective that the period of relative capitalist stabilisation is over and that a revolutionary epoch is opening — a perspective Trotsky defended against the Stalinist theory of “socialism in one country” and against reformist illusions in the managed capitalism of the post-war settlement.

Conjunctural Relevance

The article was written in mid-1977, in the immediate aftermath of the first simultaneous world slump since 1945 (1974–75). Grant points to concrete data: world trade growth had fallen from 12.5 per cent per annum to 5 per cent; industrial capacity utilisation stood at only 80 per cent across the major economies; inflation ranged from 4–6 per cent in West Germany to 20–30 per cent in Britain and Italy. Investment in West Germany had fallen from DM 35.5 billion in 1970 to DM 26.5 billion in 1976, with investment per employee dropping from DM 4,280 to DM 3,685.

The article references the summit of the seven major capitalist powers in May 1977, which failed to coordinate a response. Grant quotes Japanese Prime Minister Fukuda’s brutal remark — “What would be the point of making the strong weak, by reducing them to the level of the weaker powers?” — as evidence that the ruling classes were abandoning any pretence of international solidarity and were instead prepared to sacrifice weaker economies to preserve their own positions.

Grant predicts a new slump beginning in the United States by late 1977 or 1978, and notes that even as capitalist governments preach austerity, they are preparing to “reach for the dope syringe” of reflation at the first sign of a break. This is not presented as a contradiction but as the logic of a system that can neither live with inflation nor without it. The article also notes the staggering scale of arms expenditure — £1,000,000,000,000 every six and a half years — as a form of fictitious capital that imposes crippling burdens while failing to resolve the underlying crisis of overaccumulation.

Where the Argument Continues

This article is the first in a series of “World Perspectives” documents produced by the Marxist tendency (the Militant tendency, later the Committee for a Workers’ International). The argument is continued directly in World Perspectives 1979, which is referenced at the end of this article and which examines the further development of the crisis, including the second oil shock and the onset of the Volcker shock in the United States. Later documents in the series — World Perspectives 1982, World Perspectives 1987, and subsequent iterations — track the evolution of the crisis through the debt crisis of the 1980s, the collapse of the Stalinist states, and the neoliberal offensive.

The theoretical framework developed here is elaborated in Ted Grant’s The Unbroken Thread, a collection of writings that traces the Marxist analysis of the post-war economy from the 1940s through to the 1990s. The argument about the exhaustion of Keynesianism and the return of classical crisis tendencies is also taken up in numerous articles on marxist.com, particularly those dealing with the 2008 crash and the subsequent period of stagnation.

Connections

  • Trotsky, The Transitional Programme (1938): The founding document of the Fourth International, which predicted that the productive forces had become a fetter on the national state and private property, and that a new revolutionary epoch was opening. Grant is explicitly updating this perspective for the post-war period.
  • Trotsky, The Revolution Betrayed (1936): The source of the analysis of the Stalinist bureaucracy as a parasitic caste whose rule has become a fetter on the development of the productive forces.
  • Marx, Capital Volume II: The reproduction schemes (Department I and Department II) that Grant uses to explain the interdependence of investment and consumption.
  • Marx, Capital Volume III: The law of the tendency of the rate of profit to fall and the analysis of fictitious capital.
  • Ernest Mandel, Late Capitalism (1972): A contemporaneous Marxist analysis of the post-war boom and its limits, though Mandel’s periodisation and political conclusions differ from Grant’s.
  • Against the Stream, episodes on the 1974–75 recession and the crisis of Keynesianism: These episodes provide further empirical detail and political analysis of the period covered in this article.

Key Quotes

  1. “All the factors making for an unprecedented boom were the same factors preparing the way for economic and social catastrophes and upheavals.”

  2. “The slump of 1974/5 was the first serious world check to the development of productive forces since the early post-war period, although the fall in production was not high in comparison with the inter-war period.”

  3. “The whole system of capitalism, where every factor interacts on every other factor, requires rising production, investment and an increased market in a spiral. In the end through credits this would exceed the limits of the capitalist system and lead to bust. But without a real boom the limits would be reached even sooner!”

  4. “The relative development of the productive forces by the bourgeoisie for a period of a quarter of a century or so, also gave relative stability to the main capitalist countries in the period since the post-war years.”

  5. “In a period of economic storms [Euro-dollars] act like unbattened-down lumber on a ship, which causes holes in the hull and sides as it moves from one side to another with the waves.”

  6. “The new epoch which began in 1974 of short booms followed by slumps is an epoch of storm and stress.”