Special Issue Number 3: Price : $2.50 June 1998
The New Economics, Asia, USA & The International Currency Crisis

A BRIEF PRIMER ON NEW FEATURES OF THE WORLD ECONOMY . . . .  . . . . . . . . . . . 1-6
PAUL ROBESON ON THE SOVIET UNION AND STALIN . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7
THE CANADIAN ECONOMY . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-11
HOW 3% OF CANADIANS - THE RULING CLASS LIVE. . . . . . . . . . .. . . . . . . . . . . . . . . .11-12
Address & Correspondence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .12


As the money supply expands, inflation of prices follows. Capitalist propaganda publicly blame "high wages" for inflation. But economists see a rising money supply as the cause of inflation. David Hume said: "At first, no alteration is perceived; by degrees the price rises, first of one commodity, then of another; till the whole at last reaches as just proportion with the quantity of specie (ie. money) which is in the Kingdom" (1). So "monetarists" are right - but they cannot thereby stabilise capitalism’s crisis. Nor can Keynesian economists, although they did prolong its survival till now. Why are they both helpless?

The Keynesian View Versus the Monetarist View

After the First World War and the Bolshevik victory, the British economist Lord Keynes saved capitalism from the threat posed by the spectre of unemployment. Of course as Marx pointed out, the "reserve army of unemployment", is a deliberate poly of capitalists to keep wages low. This is especially important when profit margins are falling. However unemployment should not get so large, from the point of view of the capitalist, that it provokes class organisation with the potential for rebellion. But how? He argued that "laissez-faire" capitalism led to stagnation in manufacturing industry and mass unemployment, and he proposed government’s ‘reflate’ - by injecting money to maintain industry. Industry then could employ workers for a salary, so they could buy goods, averting an "under-consumption" slump. After the "Great Depression", capitalist governments in Metropolitan countries adopted his views. His policies helped to "stabilise capitalism", by minimising unemployment. But they also led to rising price levels - inflation. But if prices for commodities rise, the prices for the commodity of money also rise. This means that the value of currency falls, so money is cheaper. This all makes the industrialist happy, as it is cheaper to borrow money at lower interest rates, as the money supply is high. But this does not suit financial or money capitalists. Financial institutions, obtain their profit by lending or investing money in return for interest or dividends. Monetarists therefore argued that the state should restrict itself to "law and order", and restrict other state expenditures (eg. social services), that "unprofitable enterprises" (eg health services) should go bankrupt, and that the interest rates should be kept relatively high to restrict borrowing and ‘lavish’ expenditure. Both Keynesians and Monetarists try to maximise the profits of capital. But as indicated above, Keynesian policies serves the interests of industrial capital, while Monetarism serves the interests of finance. But, capitalism cannot for long, avoid both the Scylla of inflation, and the Charybdis of unemployment and stagnation. Why? Because capitalism is in a crisis, whatever it does is wrong!

Why Monetarism Cannot Easily Control The Money Supply

Monetarists wish to control the money supply. However, notions of "What Is Money?" have become different under new technology. Older simple measures of money - the total supply of notes, coins and money deposits in circulation ("broad money" M3); or even more complex totals of circulating money taking into account Central Bank reserves (M, M0 and M2) became insufficient. Why? The Central Bankers and Governments were always one step behind the speculative creations of the individual financiers, which "create" New Forms of Money. In The Bank of England Quarterly Bulletin 21(2) July 1981; it was estimated that by 1974, there had been a doubling of the sum of world current account balances, after the Oil Prices Rise of 1973-4 (2). Oil prices gave huge surplus profits for the oil companies. This influx of cash was recycled into international banking into the Eurodollar market, as Petrodollars. Making the total amount even greater, was a phenomenal increase in the speed of money circulation. The laws of money supply, show a relationship between the available money supply, the demand for it, and the velocity of circulation. This is shown by the Quantity Theory of Money Equation (3).

"MV = PY".

Here Money (M), when multiplied by its velocity (V), gives us national income in current prices (PY)." The fast recirculation of the pool of money from the Middle East, drastically cut the circulation time of money. The money supply therefore went up. Money now flows around the world in search of more; driven by the Croesus like financiers.

Petrodollars are not the only new form of money. "Paper money" was already rare in finance, and not often physically seen, while being traded with fixed interest rates. But now many new money instruments make mere money even rarer: eg. Floating-rate notes allow a variable interest rate dependent upon the market; London Interbank Offered Rate (LIBOR) allow fluctuating interest rates; Certificates of Deposit (CD’s) issued by banks; Revolving Underwriting Facility (RUF) allow a company medium term funds at short term rates by commercial papers, etc (4). Then there are various trades on "futures" or "options" for the future. These are shares based on prices in the commodities (including money) in future. This made a fixed interest rate redundant. Even the technology of trading has undergone a revolution. In 1971 a central computer recorded all deals prices and trading information in the USA, called NASDQ, increasing share volumes by more than 16 times. By 1985, NASDAQ’s volume of share trading (over 16 billion shares valued $200 billion) made it the third largest stock exchange in the world, smaller only than those of New York and Tokyo. " (5).

All these innovations, made the control of the money supply, impossible for one Central Bank. Hence the frequent meetings of the "G7" central bankers. Even then, in October 1986, the Bank of England's Governor, Robin Leigh-Pemberton drew the conclusion that monetary targets were useless and asked whether it was worth doing. (6). And workers world wide who experience high rates of unemployment, know that capitalists have failed to regulate the economies in favour of the working class.

Other Options To limit Money Supply

Even Milton Friedman, the guru of monetarism recognised that it was possible to control the money supply by several means:"Direct control of the monetary base is an alternative to fiscal policy and interest rates as a means of controlling monetary growth." (7). Given the ever new forms of money supply, Governments resorted to two other approaches: Firstly a "fiscal", one of severe reductions in public spending, eroding state welfare schemes etc; whilst increasing indirect taxation. But indirect taxation affects mainly the working class, whose largest expenditure is on items for immediate consumption (food clothes housing etc) which are taxed at the point of purchase. Often direct taxes at the high end are reduced, Governments arguing a false theory of "Supply side" economics : to "encourage business to invest", to supposedly allow riches to "trickle down". Secondly, they manipulated interest rates, to restrain growth of the money supply by making it expensive to borrow. On the other hand this also makes it profitable for financiers who have a lot of free money to pour money into a country (8).

What determines the rate of exchange of money -a commodity- in a competitive market?

International trade for money and its exchange rates is based on the same laws as for any other commodity. It is supply and demand, which causes the rate of exchange to fluctuate around its value. If there is a shortage of cloth, those who wish to obtain it offer more than its value in order to get some for themselves. On the other hand if there is a glut of cloth, those who wish to dispose of it offer to do so at less than its value in order to not to have it left on their hands. However if the rate of exchange of cloth is above its value as a result of shortage, the production of the cloth yields exceptionably high returns, so that more people go in for weaving it, the production of cloth increases and its rate of exchange goes down towards its value. The reverse process operates if the rate of exchange of cloth is below its value as a result of supply exceeding "demand"; the production of this commodity yields exceptionally low returns, so that less is woven and the rate of exchange rises towards its value. Thus in a competitive market, there is a tendency for the rate of exchange of each commodity to correspond in the long term to its value.

The currency of one state is exchanged for that of another through what is called the foreign exchange market. If an American Corporation wishes to buy British goods or invest in a British firm it must sell dollars to buy pounds. If a British company wishes to buy American goods or invest in an American firm it must sell pounds to buy dollars. The rate at which one currency exchanges for another is determined by the market forces of supply and demand. If more pounds are being sold for dollars than pounds are being brought for dollars, then the rate of exchange will fall.

Because the money rates simply reflect international demand for a currency, they also reflect the underlying strength of the economy. This is usually well known by international speculators. Thus the fact that the value of the Canadian dollar has fallen from par to about $0.65, represents the decline in overall profitability of Canadian industry. International traders in the exchange markets are well aware of the underlying "Fundamentals", of the economies in whose currency they trade.

Bretton Woods and After

But superimposed on the law of supply and demand, political attempts are often made to gain control over competitor capitalist countries. The Bretton Woods Agreement (1944) performed this trick for the USA, when the USA could impose its will on the other capitalist countries, due to its Lend Lease Agreements in the war time period. This agreement set fixed rates for currencies and they were set with the dollar as the standard. The competitor countries of Germany, and France recognised this was a great advantage to the USA, and much later on, they were able to end to Bretton Woods, and gained control thereby of their own economy from 1973 on. But as soon as Bretton Woods was dropped, exchange rates were no longer fixed and became more volatile depending upon the perceptions of the market place, and the wish of large trading blocks to make a profit.

Hence the George Soros manipulations of the British pound and the Malaysian rupiah. The same developments of a rapid "hot money" global circulation around the world, make interest rates, also a difficult instrument to control an individual country’s money supply. For example, the Eurocurrency market was deregulated, which allowed even more rapid flows of money. However, despite this, profits of capital increased, and so other countries also deregulated their banking systems and control of currency exchange. This has had the effect of again increasing the amount of money flowing around the world in search of a good profit.

To deter ‘loose’ spending, the monetarist raises interest rates; and this raises financiers profits. But this upsets the industrialist and may set off the down turn in investment. However, it may also drag money into the country by foreign investors, which sometimes offsets the effect of diminished investment by domestic capital. But this "magnet" for foreign capital has three unpredictable effects. Firstly, there is a volatility to investment. Higher interest rates will draw money from foreign investors. This will tend to counteract the "money famine" identified by Marx. This is in general, favourable for the capitalist class of the country to which foreign capital is attracted. However, to keep the investor's money, that country needs to yield for the foreign investor a better rate of profit than elsewhere. If other foreign countries raise their interest rates, they will entice the investor away from where they are currently investing. Furthermore, the currency being traded is ultimately backed by the real resources of the country. So the investor weighs the realism with which the price of the currency is set. If the interest rates are high enough, even despite an apparent lack of relation to the industrial and productive base; this may keep the investor in that currency. But at the slightest hint of political trouble reflecting the real status of that country, the money will fly. This very unpredictability leads to a major difficulty in financial planning, and accentuates the volatility of investment.

Secondly, let us assume that the country is itself only raising interest rates in order to keep the inflation rate down by driving down the money supply. In this case, the country will not be able to be in control of the money supply, since the higher it raises its interest rates to deter the circulation of money, the more foreign monies will flow in. This is in general a net unfavourable effect of money to the capitalist class of the country to which foreign capital is invested.

But the final effect will be that as the value of the currency goes up, as money pour in, the price of that country's exports are made higher and thus less competitive; and the country's foreign competitors made cheaper and therefore more competitive. This will tend to cut the country's exports and increase the amount of foreign imports into the country. This of course upsets the industrial capitalist class - in general of that country.

So Yet Another Scylla and Charybdis for the Capitalists. Either monies flow out of the country because interest rates are too low, and possibly the speculators become aware that the currency is rated too high. This leads to money famine. Or, the interest rates are high to deter private spending and keep the 'corset ' around the money supply. But this high interest rate is like a magnet and sucks in cash/money stocks around the world. At certain times, either one of the two risks outlined are slightly more preferable than the other, to the capitalist class . The behaviour of the money markets is reminiscent of Marx's observation that there is often a shortage of cash/money just at the very time and place it is most needed : "The quantity of circulating medium is reduced precisely at a time when the largest quantity is most needed." (9).

Contradictions within the capitalist class

The two primary different ways for capitalists to make a profit - Either lending money or by manufacturing which requiring factories built by the loan of money, is the real reason why different brands of capitalists favour either Keynesian or monetarism. There has been a change in the nature of the alliance between the wings of capital within one nation. Lenin had identified that :

"Imperialism marked by ..the merging or coalescence of banking with industry." (10).

But Lenin also emphasised that, despite merging of bank and industrial capital in imperialism, this stage brings about an increasing separation between industry and its main sources of financial investment, and an increasing dependence of the former upon the latter : "Generally speaking, under capitalism.. money capital is separate from industrial or productive capital; the rentier living entirely on income obtained from money capital is separated from the entrepreneur.. Imperialism, or the rule of finance capital, is the highest stage of capitalism in which this separation reaches vast proportions. The supremacy of finance capitals over all other forms of capital means the rule of the rentier and of the financial oligarchy." (11). In the same work, Lenin drew attention to "the extraordinary growth of .. the category of bondholders (rentiers).. who take no part in production, whose profession is idleness". (11).

However, nowadays the Banks are not the prime source of finance for capitalist industry. In Britain for example, banks ( mainly merchant banks ) own only 0.3% ..of company shares (12). Furthermore, banks in Britain provide only 6% of the external funding of industry in the form of loans and these have been traditionally short term loans to provide working (as opposed to investment) capital. (13). Industry is now itself financing much of its own investments. The huge multi-nationals have such currency reserves that they have eroded the power of the banks to some extent :

"In the first quarter of 1992, Corporate America generated a financial surplus of $109.6 billion (US ) ..Today's huge surpluses stem from the fact that corporate cash flows - in industries like pharmaceutical, software and computers - exceed internal requirements to finance capital spending on inventory etc.. the shift to surplus is driving interest rates lower.. Gone are the days when the US sector was a net user of the personal saver's savings.. The corporate sector is driving the US economy to a degree unthinkable in the old economy. Conventional wisdom that the economy is driven by consumer spending is no longer as true as it once was." (14).

These divisions between the wings of capital are recognised overtly by the business community. Thus when the U.S. Democrats resisted a monetary policy, they preferred to have their own representative, an industrialist Mr.G.William Millar at the Federal Reserve Board, who was :

"Seen by many .. as being too closely tied to President Carter and insufficiently attuned to the needs of the financial sector, was replaced by Paul Volcker. As the Wall Street Journal later reported it : ' Wall Street shoved Volcker down Carter’s throat." (15). In fact the relation between the profits of the financial capitalist class, and the industrial capitalist class are inversely related.

Interim Conclusions:

As workers see from their daily lives, both monetarist views and Keynesian views have failed to prevent widespread unemployment, the flight of capital from their countries, and an acceptable living standards. The more far sighted of the bourgeois economist have understood that a more dialectical approach to the economy is needed (16). They argue that linear modelling of the economy is not enough, and introduce the notion of qualitative change into a stable setting - a profoundly dialectical notion. Of course they do not state this as their goal continues to be to stabilise capitalism world wide. But only the abolition of capitalist "anarchy of production" (Omerod calls upon so called "chaos"theory, avoiding this famous Marxist phrase) can eliminate unemployment and the constat fluctuation of the marketplace. Only socialist production, with collectively owned means of production and production for socially determined good rather than profit can eliminate these problems.

This is an updated precis of "Money, Free Trade, Protectionism & Crisis in Capital"; Alliance October 1992; (59 pp; $5.00) Obtainable from CCS.


1. David Hume, In Smith D. "The rise and fall of monetarism." Middlesex, 1987. p.5.

2. Cited by R.T.Naylor, Dominion of Debt, Montreal, 1985, p.184.

3. D.Smith : "The Rise and Fall of Monetarism." Middlesex,1987 p.6.

4. Hamilton A; The Financial Revolution, Harmondsworth, 1986. p. 66.

5.Hamilton Ibid, p.41-43

6.Cited in D.Smith, Ibid. p. 128

7. D. Smith, Ibid, p. 95

8. Hamilton Ibid, p.20, 232.

9. Karl Marx Capital Vol III, Moscow; 1977; p.555.

10. V.I.Lenin, "Imperialism the highest stage of capitalism."; Chapter 3.

11. V.I.Lenin, op cit.

12. Data from "Stock Exchange Official Year Book: 1984-85"; London; 1985. p. 969.

13. G.Ingham, "Capitalism Divided", Basingstoke, UK.1984. p.67-8.

14. Globe And Mail, Business News. p.B26, Sep 22,1992.

15. G.Epstein, 'Federal Reserve Behaviour & limits of monetary policy in current economic crisis. '; "The Imperiled Economy. Book One", New York; 1987; p. 250.

16.9. See :"The Death of Economics", Paul Omerod, London; 1994)


Paul Robeson on the Soviet Union and Stalin

What follows below are excerpts from a tribute by Paul Robeson to Joseph Stalin upon Stalin's death on March 5, 1953. This is in commemoration of the 100th anniversary of Paul Robeson's birth on April 9, 1898.

There is no richer store of human experience than the folk tales, folk poems and songs of a people. In many, the heroes are always fully recognizable humans, only larger and more embracing in dimension. So it is with the Russian, Chinese. and the African folk-lore. In 1937, a highly expectant audience of Moscow citizens, workers, artists, youth, farmers from surrounding towns crowded the

Bolshoi Theatre. They awaited a performance by the Uzbek National Theatre, headed by the

highly gifted Tamara Khanum. The orchestra was a large one with instruments ancient

and modern. How exciting would be the blending of the music of the rich culture of Moussorgsky, Tchaikovsky, Prokofiev, Shostakovich, Khrennikov, Glinka with that of the beautiful music of the

Uzbecks, stemming from an old and proud civilization.

Suddenly everyone stood began to applaud to cheer and to smile. The children waved. In a box to the right smiling and applauding the audience as well as the artists on the stage stood the great Stalin. I remember the tears began to quietly flow. and I too smiled and waved. Here was clearly a man who seemed to embrace all. So kindly I can never forget that warm feeling of kindliness and also a feeling of sureness. Here was one who was wise and good the world and especially the socialist world was fortunate indeed to have his daily guidance. I lifted high my son Pauli to wave to this world leader, and his leader. For Paul. Jr. had entered school in Moscow, in the land of the Soviets.

The wonderful performance began, unfolding new delights at every turn ensemble and individual, vocal and orchestral, classic and folk-dancing of amazing originality. Could it be possible that a few years before in 1900 in 1915 these people had been semi-serfs their cultural expression

forbidden. their rich heritage almost lost under czarist oppression's heel? So here one witnessed in the field of the arts a culture national in form, socialist in content... I was later to travel to see with my own eyes what could happen to so- called backward peoples. In the West (in England, in Belgium, France, Portugal, Holland) the Africans, the Indians (East and West), many of the Asian peoples were considered so backward that centuries, perhaps, would have to pass before these so-called 'colonials' could become a part of modern society.

But in the Soviet Union, Yakuts, Nenetses, Kirgiz, Tadzhiks had respect and were helped to advance with unbelievable rapidity in this socialist land. No empty promises, such as coloured folk continuously hear in the United States, but deeds. For example, the transforming of the desert in

Uzbekistan into blooming acres of cotton. And an old friend of mine, Mr. Golden, trained

under Carver at Tuskegee, played a prominent role in cotton production. In 1949, I saw his daughter, now grown and in the university a proud Soviet citizen. They have sung sing now and will sing his praise in song and story. "Slava slava slava Stalin - Glory to Stalin." Forever will his name be honoured and beloved in all lands.

In all spheres of modern life the influence of Stalin reaches wide and deep. From his last simply written but vastly discerning and comprehensive document, back through the years, his contributions to the science of our world society remain invaluable. One reverently speaks of Marx, Engels, Lenin and Stalin the shapers of humanity's richest present and future. Yes, through his deep humanity, by his wise understanding, he leaves us a rich and monumental heritage. Most importantly he has charted the direction of our present and future struggles. He has pointed the way to peace to friendly co-existence to the exchange of mutual scientific and cultural contributions to the end of war and destruction.

How consistently, how patiently, he laboured for peace and ever increasing abundance, with

what deep kindliness and wisdom. He leaves tens of millions all over the earth bowed in heart-aching grief. But, as he well knew, the struggle continues. So, inspired by his noble example, let us lift our heads slowly but proudly high and march forward in the fight for peace for a rich and rewarding life for all.

In the inspired words of Lewis Allan, our progressive lyricist

'To you Beloved Comrade, we make this solemn vow

The fight will go on the fight will still go on.

Sleep well, Beloved Comrade, our work will just begin.

The fight will go on till we win until we win.'



That there has been a major economic and financial crisis, in the so called "tigers" of Asian economies is beyond doubt: "Since the beginning of June 1997, stock markets have fallen in dollar terms by 89% in Indonesia, 75 % in South Korea, 73% in Malaysia, 71% in Thailand, 57% int eh Philippines and 47% in Hong Kong." (1). It started as a banking crisis : "Since Asia’s economic and financial crisis started a bank lending bubble, it is not surprise that is had an traumatic impact on the regional banking scene." (2).

There is no doubt that the Asian crisis was precipitated by the Western banks and major metropolitan capitalist governments. As the editorial of the Conservative "Financial Times" of Britain put it : "Outside sources of finance, particularly banks- bear heavy responsibility for the Asian financial crisis. On this the Bank for International Settlements (BIS) has a grim story to tell.. In the five most affected Asian economies net interbank lending, plus lending to non-banks, ran at an annual rate of $22 bn between the last quarter of 1996 & the third quarter of 1997. Then in the fourth quarter the inflow suddenly turned into an outflow of $32 bn.... governments notably South Korea and Thailand - guaranteed the liabilities of their banks. It was also plausible to assume they could be persuaded, or forced to help re-pay debts owned by non-banks; and that they would obtain foreign currency needed to meet many liabilities.." (3). (The BIS is the exclusive Club of all of the Central banks). This shows that the direct cause was a sudden call for payment of loan debts to these countries. This is not just a British financial view, but the Wall Street Journal agrees in an article entitled : "Dollarization As A cure For Ailing Economies" (4). This article firstly states baldly:

"Bankers aren’t as dumb as they are made to look when an entire region in this case East and Southwest Asia goes sour. Loans are their business.."

It then goes on to explain that the desire to transfer more securely the whole area into the USA dollar area of control underlies the deliberate destruction of millions of working peoples lives :

"The systemic illness that hit the banks and the peoples of the region had a single primary cause, currency devaluation. The old devaluation remedy prescribed by International Monetary Fund country doctors proved lethal for the Tigers. International banks lend mostly US dollars, of rete si the reason that most of the world’s surplus wealth is denominated in dollars. The Asians had borrowed dollars heavily to finance their rapid growth. When devaluations of their local currencies got out of control, the cost of paying dollar debts shot up." (4).

The volume of this West to East banking trade should not be under-estimated :

"Almost every bank in the industry reported vast increases in currency revenues last year.. Most banks made a killing out of the Asian crisis which lasted much of the second half of 1997.. Later this year the BIS publishes its triennial report on the size of the foreign exchange market. Almost certainly it will announce a leap in volume from the %1200 bn a day recorded in 1995. The world’s biggest market is getting bigger." (6).

It is blithely suggested that this crisis was almost accidental, and the result of ‘stupidity’ and ‘oversight’! Even various Keynesian Solutions (ie Governmental or central regulation - anathema to Free Marketeers!) - are proposed to limit "free market"-ism! : ‘To bring banks to the table a "unilateral stay of payments" could well by helpful. To achieve this, internal financial institutions should lend even to countries in default as long as they have acceptable policies." (2). Other suggestions insist that the IMF should be even more regulatory than it is now (5). But to believe the thrust of these reports, is to accept that the Western Banks did not "realise" what they were doing. This is naive in the extreme.

Who has gained so much from all of this terrible playing with people’s lives?

Obviously, all this has made :"The split between the world’s successful and troubled economies wider than it has ever been?" (1). What - apart from the intense misery in the poorer countries of the workers and peasants - has been the net results of the crisis? "It has been the "strengthening of US economic system". As Alan Greenspan, Chairman of the US Federal Reserve says : "The current economic performance of the US with its combination of strong growth and low inflation is as impressive as any I have witnessed in my near half century of daily observation of the American economy." (1).

Why is this so beneficial for the USA? Because there is a flight of currency into the dollar.

"What is happening is a global flight by nervous investors into for what is, at least today, perceived as quality into dollars, into the stock markets of North America and Europe and into bonds issued by industrial countries." (1).

The real reasons for the Financial crisis certainly include :

1)The desire of all of the Western powers to break into the closed markets and sheltered financial institutions of some of these countries. In a FT leader entitled revealingly, "Far Sighted Vultures" it says : "The effect of a financial crisis is to sort out the corporate sheep from the goats. In an Asian country it also subverts long standing protectionist barriers. Over-investment and excessive debt have together about what years of international trace negotiations failed to achieve: a genuine loosening of tightly controlled ownership structure. This finally provided an opening for foreign buyers... The Asian countries pay a high penalty. They are being forced to sell cheaply at a time that is not of their choosing." (7).

2) To effectively take over the export markets of these countries by destroying their productive capacity.

As the Asian economies are driven into recession, they are forced to lay off workers from their industries and market shares for these goods will revert to the capitalist countries of the metropolitan countries. This becomes all important.

3) The desire of the USA to "dollarize" the market place.

In fact the "Dollarization" of various economies is exactly what the USA wants :

"The simplest preventive for devaluative shocks is Dollarization. If a currency is permanently fixed to the dollar no shock can occur. Hong Kong and Argentina which have such currencies have ridden out the currency storms of the `90's relatively unscathed... The federal Reserve estimated in 1996 that 60% of all dollars in circulation are overseas." (4).

This is important to emphasis now for the USA, because of the impending European Monetary Union which will create the single currency for Europe called the euro. As the article in the Financial Times, "Rival For Dollar’s Crown" indicates, this has the potential for making the "euro.. The currency of choice in international financial transactions. (8).

USA Saves the Yen - Why?

If the above picture is true, then it could be argued, why did the USA save the plunging yen? There are four reasons for this. One is that the USA has achieved tis goal with respect to the Japanese market of forcing an entry into the previously highly protected market there. As the Japanese Prime Minister Hashimoto said : "To spark a rebound.. I will.. Write off bad loans, achieve growth driven by domestic demand, open Japanese markets further and promote deregulation" (9).

Secondly the every increasing inter-dependency of the world’s markets led to a situation where the continuing fall of the Yen was potentially dangerous to setting off a world wide recession :

"The surprise intervention by the USA and Japan to support the yen in foreign exchange... marks an open admission by the authorities in both countries of the risk to world economic stability from Japan’s deepening recession."(10).

Thirdly the falling yen, meant that US exports were now much more expansive and so the export trade of the USA began to fall :"The US trade deficit rose 9.5% in April to a record $14.46 billion as the effects of the Asian economic crisis started to take a heavy toll on US exports, the US Commerce Department said (9).

Finally the Chinese threated to devalue the renminbi.This would have created even more difficulty for US and Western exports. In fact despite the surface cheer, the USA economy is not as good as it might appear. US corporate profits have fallen for two quarters. The trade deficit sets new records with each month.. The USA is losing manufacturing jobs. Stock prices have soared far beyond any normal relationship to profits... On April 22 the Financial Times warned against the "the US stock market bubble" (11).

Conclusion: The strike against the Asian markets was part of the increasingly intense re-division of the world’s markets. It represents the pre-emptive strike of the USA imperialist against the new potential enhanced rivalry of the European Common Market. As this shows, only newly industrialised countries who wish to preserve their own ‘independence’ from the large power blocks of capitalist, have ever more limited space to manoeuvre. Only the socialist revolution in those countries, can preserve their ability to use their economies for the benefit of their own peoples. In the USA, the renewed growth following the computer and information revolution - is now almost over. Again, the peoples of the USA can only win a satisfactory life by achieving the socialist revolution.


1. FT June 13th/14th; 1998 M.Wolf; p.6.

2. FT Survey "Asian Financial Markets" 27.4.98; p. 27.

3. FT; 10th June 1998; Leader "The Banks in East Asia."

4. Wall St Journal 9.6.98 p.A19.

5. FT Survey "Asian Financial Markets". 27.4.98; p.27.

6. FT Survey :Foreign Exchange: 5.06.98; (p. i).

7. Leader "Far Sighted Vultures"; June 13th/14th Leader FT; p.6.

8. "Rival for Dollars Crown" W.Muchau; In FT FT Survey :Foreign Exchange: 5.06.98; (p. iv)

9. M.Suzman, P. Montagnon & M.Nakamoto; Asian Crisis starts to take a heavy toll on US exports; FT 19.6.98; p.1.

10. P.Montagnon Big Change of Heart prompts US Internention; FT; 18.6.98.p. 4.

11. The Nation, New York 29.6.98. Editorial.


In Canada the current government is very proud to have "wiped out our deficit". We will leave aside whether it is really "our deficit" - since it was a capitalist deficit. But let us proceed to examine what the government is going to do with this?

The Bottom Line

In an article entitled "Canadians wages fall in 15 years" the Financial Times (UK) points out :

"Canadians are making less money than they did 15 years ago and average incomes fell 6 % between 1990 & 1995.... economic growth over r the last two decades has not lifted the incomes of ordinary Canadians." ( FT: E.Alden 13.5.98' p.4). The article’s punch line is that :

"Earnings have plunged over the last three decades and only a substantial increase in governmental income support prevented a larger drop in total income." (Ibid). It is clear that there has been a major drop in relatively well paid :"primary resource and blue collar manufacturing jobs...The major reason appears to be that Canada’s economic growth lagged behind its main competitors, while productivity fell well behind that in the USA" (Ibid). The Stats Canada survey (Globe & Mail [G&M]; 13.5.98; J.Gadd) reports that even if you are not in that lowest fraction things are tough for ordinary workers : " the national average per capitalist income of $25,196 was almost identical to that in 1985"; and that the cause was :

"the vigorous attacks on inflation and deficits by governments along with widespread corporate restructuring."

Things were especially bad for visible minority and aboriginal people. Quebec has the five most poor cities in Canada followed by the sixth, Toronto.

For the Poor It Gets Poorer

As the Globe admitted, food banks are "Not filling the hunger gap" (G.Abbate Food Banks Not Filling Hunger Gap: Study" G &M; 13.4.98). One in five of the parent users of food banks say that their children still go hungry at least twice a week. Each month 13,000 people use the food banks in the Greater Toronto area. Since the best chance for the poor is a job, things are bleak. The Canadian Conic on Social Development in a new study on the poor state :"The market place cannot generate enough well paying jobs for the poor" (G&M B.Little; 24.3.98). Without Government transfers (ie Unemployment Insurance and welfare) Canada would have had 1,557,000 families below the Official poverty line - or 22.8% of all families. (B.Little, G&M 24.3.98). In another, although older analysis - if the income of the poorest fifth of the population in 1993, is taken away from the buffer of UI etc; and market income was $925 in 1993; or down from $2230 in 1990 (a drop of 59%). (See B.Little "How the earnings of the poor have collapsed" G&M; 12.2.96.).

So What Do "The Pundits-The Wise-Our Rulers"- Want to do with Our Current "Surplus?"

This surplus of the national economy was generated as we have seen above in a ruthless suppression of living standards. Have The "rulers’ then some wish to reward The workers? Hell no. The options they are pursuing are to cut taxes - which means effectively a return to "trickle down economics" (See First article this issue); and to relieve the richest. Secondly they are likely to cut UI more. As the Editorial of the Globe quaintly says : "For the unemployed and those on low incomes, incentive to work need to be improved.. This points to the need for significant cuts to both UI and Canadian Provincial Taxes." (G&M 6.6.98; p.D6). This in spite of The above data on the effects of the safety net. As Stats Canada reported by end 1997 the accumulated surplus in The UI account is now some 14 billion, making this a definite target (G&M Business E.Greenspon; 27.5.98). Whichever route the Government takes, what it will not do is set out to restore to Canadians, the living standards and relative security of the previous 15 years. As always changes in the USA will surely affect the Canadian scene. Since pressure is mounting on Clinton to make generous tax cuts in the USA, likely similar events will occur in Canada (G&M J.Simpson, 29.5.98).

USA and Canada

We have above (article on Asian Crisis) pointed out that the USA faces some real problems in its economy. However it is fair to say that the USA got a new lease on life in the late 1980's and early 1990's as the computer and information technology rescued it from its industrial decline. It was (until the last two months when the yen crisis hit) - running a surplus of an estimated 1.5 trillion (G.Simpson G&M 29.5.98). The fact that this estimate of The 28th May was reversed so quickly as we report in the Asian Crisis article (see reference # 11 ), shows the fragility of the USA. Nonetheless, as compared to Canada The situation is more robust there. This sends tremors into Canada. Because the unemployment rate in Canada is 4 points higher than in the USA, and the stronger US dollar is making imported good into Canada expensive. As Simpson points out :"A low Canadian dollar is especially bad news for the low-income Canadians because they spend more of their budgets on food, some of which is imported." (G&M; "Whooshing sound South of the border bad news for Canada"; G&M 28.5.98).

But Why IS The Canadian Dollar Low?

Since the main trade partner of Canada is the USA, any export related earnings of Canada are intimately related to its export volumes to the USA. Thus a low Canadian dollar helps Canadian manufacturing and natural resource exporters as it makes their exports cheaper for USA importers. As Simpson notes :

"The dirty secret of Canada’s’s improved trade performance especially Canada’s $40 billion (US) trade surplus with the US is that the surplus had been built on the sands of the lower dollar. The dollar’s slide has made up for both the elimination of such tariff protection as remained at the time of The Canada -US Free Trade agreement and the failure of the Canadian firms to become substantially more competitive. Imagine how much worse Canada’s’s trade numbers and overall economic situation would be if the dollar had not declined from about 82 cents at the time of the free trade deal to 68 or 69 cents today." (Simpson May 28th 1998; G&M)


Canada is well and truly in bed with the USA following NAFTA. Not surprisingly then a continued loss of jobs South of The border will continue. In the meantime, the Canadian dollar will fall lower in order to "shore up" what exports can be mustered. In the shadows, The poor get poorer, and the working class is steadily more impoverished. That is why a Marxist-Leninist party of the working class is urgently needed.
HOW THE TOP 3% LIVE - CANADA’S RICH: 1. MANULIFE BOSS LEADS PACK WITH 2.2 MILLION INCENTIVE BONUS. From John Partridge, Business news, Globe & Mail June 3, 1998.

1. The four big mutual life insurers disclosed top executives salaries. Manulife Insurance Boss Dominic D’Allesandro made $2.2 million last year; & he has a further $1 million bonus given meeting targets. His salary went up 40% from 1996, excluding bonus. Manulife has assets of $50 billion. Manulife’s profit climbed 49% in 1997 to $743 million. Mr D’Allessandro’s pay ranked him 44th on a Report in Business list of 100 of Canada’s best paid CEO’s for 1997 (published April 1998). Mr Charles Baillie at Toronto Dominion Bank gets $2.7 million & $4.2 million for Matthew Barrett of Bank Of Montreal. Comment : Mr D’Allessandro (poor chap) is in sore need of tax relief. Obviously he will be relieved at the new measures of tax cuts that are likely to come soon. He might wish to look at item 3 below, in case he needs another ‘business’ home as an extra write off.


2. Bombardier; Pratt & Whitney Slush - Government "Loans" not Re-Paid. Financial Times : "Government Groups Fail to Repay $2 billion in loans" 5.6.98 Giant aerospace & technology industries have failed to repay more than $2 billion in loans. Documents :"Detail a pattern of non-compliance by some companies which received repayable government contributions over 15 years under a disbanded programme to support defence related industries. These documents show that only 4% of all these loans have been paid." Comment : When capitalists state Canadian industries are less productive than other countries, they aim at workers - implying they do not work hard enough. They never say this about the bosses! When ordinary Canadians do not pay tax - they are financially penalized. Will profits of Bombardier be touched? We doubt it - unless it is from pockets of workers.

3. A Small Home For the "Average" Canadian :

G&M 20.6.98


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