THE twelfth Congress of the New Communist Party of Britain meets at a time of deepening capitalist crisis and imperialist war. The developments since 1997 emphasise the terminal character of the world capitalist system. The crises which unfolded in Asia and Latin America are a continuation of the struggle between  the US, Japan and the European Union (EU) over who will dominate the world. This imperialist rivalry has gone on for over a century and resulted in war and oppression at the expense of the working class of the developed countries and the peoples of the of the developing countries.

The effects of the world crisis are uneven and the responses of the ruling classes and their representative bodies to protect their own wealth and power  have led to a degree of temporary recovery, as measured by their own economic criteria and has seen the US increasingly taking on the role of the "economy of last resort".

The chief symptoms of the changes that have marked the period from July 1997 have been in South East Asia, Russia and Latin America, particularly in Brazil. The causes of the crisis in all these economies can all be traced to the basic contradictions in the capitalist system. The consequences have affected the more developed economies to the extent that not only has forecast world economic growth been significantly slowed and trade growth reduced by half from eight to four per cent but serious flaws have been found in the financial and banking system, as witnessed by the collapse of Japanese banks and the bail-out of the  highly leverage hedge fund Long Term Credit Management.

Unstable currencies, affecting even the US dollar and very high interest rates in the crisis economies have been a factor in preventing quick recovery in the countries worst hit. In their quest to increase their capital during the boom phase of the cycle, the capitalists, unable to invest capital profitably in  more productive capacity, pour funds into the stock markets and into real estate, bidding prices up to unsustainable levels or if they still can't find profitable outlets at home send their capital abroad. Thus capital prowls the world, looking for the next big thing. A few years ago it was Latin America, especially Mexico, then Mexico crashed and it became Asia's turn, Asia then collapsed with the distinct possibility of a total collapse in Brazil and Russia.

This flight of capital began a process of steep devaluations in the countries immediately concerned and competitive devaluations in numerous other countries in a frantic effort to retain export levels and increase trade with a view to offsetting the fall in demand in the home economies. In contrast to the shortage of capital in many developing countries, there is a glut of capital in the major imperialist countries whose owners are seeking profitable outlets to invest in. This is a major reason for the previous government's privatisation of former nationalised industries, the refusal of the present Labour government to renationalise them and the continuing efforts to privatise services such as the prison service, some police operations and to make further encroachments on the Royal Mint, Post Office, and the health and education sectors. This desperate search for profitable outlets is also a factor in the rise of housing prices and the purchase of housing to rent out.

Extending back further in time and concurrently with this, the leaders of the developed countries, through the Organisation for Economic Co-operation and Development (OECD), in alliance with the most powerful transnational corporations (TNCs) , have striven through Multilateral Agreement on Investment (MAI) to tighten their grip on the economies of all countries, in particular those of the developing countries.

The terms of MAI, now in abeyance but not abandoned, were meant to ensure investment rights for foreign capital that would have overridden the basic laws of all countries. It shows that the monopoly capitalist organisations are now seeking to divest themselves of any restriction by capitalist states. The ambitious character of the proposed agreement eventually ensured that it became unacceptable to many countries. It is, nonetheless, a warning to the world's working class of the future agenda of the world monopoly capitalism. It is driven by its quest for ever greater profits in pursuit of monopoly capitalism's basic raison d'être  the accumulation of capital as an end to maintain its competitiveness.

The battleground for foisting the provisions of the draft MAI has now moved to the World Trade Organisations (WTO). Imperialism will now attempt to ensure that the terms of the MAI will be realised through the WTO.

The ever increasing accumulation of capital from the exploitation of the working class throughout the world has not resulted and will not result in benefits for working people. The disparity between the aggregate values of the products produced and the aggregate purchasing power in the market to buy them is constantly widening as the rate of exploitation increases.

The more specific localised crises in the capitalist world economy have occurred at its weakest points and although the effects on the strongest economies of the developed countries can easily be discerned, their huge reserve resources, both in terms of organisation, administration and in economic values and capital, enable them to stave off, at least for the time being, a full-scale world recession. This underlines the fact that it is imperative for the world capitalist system that economic growth is sustained at its current average level in the coming period if a world-wide slump is to be avoided.

The strategic centre of the world economy is without question the United States. Its vast stock of accumulated capital and its huge market for consumer goods and services, together with the role it plays as a recipient of foreign investment, makes it the engine of the economy of the whole world.
The common fallacy among the apologists of capitalism is that the boom-bust behaviour of the system has been tamed. They claim this is shown by the seven year crisis-free, uninterrupted low-inflation growth of the US economy. The British social-democrats project this theory when they claim they are establishing sound economic fundamentals in the British economy.

In this situation sound economic practice for the monopoly capitalist means maintaining low growth, low inflation GDP by the close monitoring of fiscal policy. Interest rates are adjusted up and down depending on the speed of growth of the economy. High interest rates inhibit economic growth by retarding investment in the wealth-creating economy which increases unemployment and bumps down wage levels by discouraging wage demand.

High  interest rates result in reduced economic growth and high unemployment which leads to a low rate of inflation. For the working class everywhere this means continuing insecurity through fear of, or actual unemployment, minimum or reduced real wages for the individual worker, and a low-level of aggregate wages, thus the variable element of capital (wages)is greatly reduced whilst the constant element of capital (instruments of labour and technological processes) increases significantly through the increased investment in new technology which then leads to a further increase in the ratio of constant capital to variable capital (organic composition of capital) and a reduction in the rate of profit and an increase in the rate of exploitation and rate of capital accumulation. Ever-increasing rates of exploitation are synonymous with the increased rate of capital accumulation.

The increased rate of exploitation exacerbates the effects of the basic contradiction of capitalism and guarantees in the long term, its deepening, though uneven, development of its general crisis.

There are some apparent contradictions in the economies of the developed countries, including the United States and Britain. Unemployment levels have been reduced from their previous higher levels  by the so-called de-regulation of the labour market. This, however, has been done by substituting  the better paid jobs which had generally better working conditions by low waged insecure jobs. The cost of labour or aggregate wage bills have therefore been kept at a low level without recourse to negative economic growth.

Low public spending involving a low social wage and low public service wages is part of their strategy. There is a systematic long term plan aimed at reducing the state's involvement in the provision of the social wage while transferring the responsibility to the individual.

An example is the promotion of private pension schemes, which put added investment capital into private hands and are a significant source of profit,  creating ever greater accumulation of capital in the hands of the capitalists with which to bolster the system. This is part of the drive towards the total privatisation of the economy.

Promoting private pension schemes is an essential part of the theory that market forces must be given maximum free rein. In essence it means that economic values previously devoted to the working class are now being transferred to capital and to the increased capital accumulation needed by the monopoly capitalist to compete in the increasingly fierce struggle for the relatively shrinking markets.

The boom and bust cycles have a tendency to be smoothed down based on the relative strength of the labour movement. Workers are, by and large, able to resist wage cuts and can continue to obtain wage increases despite business slow downs. The automatic stabilisers, notably social insurance payments and progressive income tax which go towards funding state welfare, tend to dampen down cyclical fluctuations. None of these were yielded out of the wisdom of the capitalists, but rather as reluctant concessions to the increased organised strength and struggles of workers and other anti-monopoly forces. As has already been demonstrated, the capitalists are always seeking ways to whittle down or do away with these concessions and put the main burden of income tax payments on wage and salary workers.

All this comprises a mortal crisis of world capitalism which cannot be resolved except with the demise of the system. Attempts to suppress one aspect of this general crisis, when successful, lead only to more severe eruption of another aspect.

 As rate of profit has reduced in the production of manufactured goods, an ever greater proportion of the values traded are now in the financial sphere - derivatives. While asset inflation has increased in the equity markets that funded the real wealth-creating economy in the recent period, it has increased much more in the financial economy. The financial derivatives market only significantly started to develop in 1972, its aggregate size in 1986 was $1.1 trillion, $10.2 trillion in 1990 $55.7 trillion in 1995 and was estimated to be $100 trillion in 1997. It should be pointed out that the replacement value of derivatives - the measure of the commitment of financial capital to a derivatives position - is between 2.5 per cent and four per cent of the aggregate size, for example in 1997 the commitment of finance capital on the estimated $100 trillion worth of derivatives would at four per cent have been $4 trillion, is still more than the total capitalisation of the top 30 banks and security houses. Many organisations in entering the derivatives market will use leveraged capital, the use of borrowed funds, to gain a proportionately greater interest in some financial asset.

Trading in financial derivatives can be undertaken using many different strategies such as short selling or holding long positions. Organisations when short selling will commit to supply at a future date, securities which are not currently owned. In a market where prices are declining, short selling will enable the securities to be purchased at a lower price than the agreed selling price, thus yielding a profit. Long positions are where organisations have an abnormally large holding or exposure in particular securities or currencies.

Large funds of capital are deployed in the process of accumulating finance capital and in that of manipulating debt. Huge hedge funds are functioning to provide highly leveraged investment funds taking long or short  positions and often exit positions abruptly, sometimes affecting price trends and market sentiments. Even debt is a financial derivative where credit instruments such as loans and bonds are traded in credit markets. Nor is this on the periphery of the system but involves banks, TNCs, national governments and local governments..

Since 1993 there have been at least 10 separate failures due to trading in derivatives that have involved losses of more than a billion US dollars each, of these 10 failures which include local governments, national governments, manufacturers and banks. In the early 1990s Procter and Gamble the soap manufacturers managed to lose $157 billion on a deal involving $200 billion based on the tracking on US government bonds. During the present crisis a special consortium was organised involving billions of dollars in a rescue operation to save one of the hedge funds based in the US and to help stabilise the stock market. This consortium involved 14 banks and shows the difficulties now faced by which many financial institutions are large enough, should they fail, to corrupt the whole financial system and need the combined weight of a number of others to bail them out.

Financial derivatives are a necessary feature in a world economy that is substantially run on debt. In all countries debt-financing of many kinds is the norm taking the form of budget deficits, national debt, trade imbalance, current accumulated deficit, personal sector debt and corporate debt. High levels of interest are charged on this debt increasing constantly the stock of finance capital in the system and it is highly profitable for the investors in these funds.

Since 1945 monopoly capitalism has encouraged the development of a vast network of agencies designed to impose co-operation between capitalist states, particularly those of the leading industrialised states. There is now a great disquiet within ruling class circles, at the efficiency of these agencies  the World Bank, International Monetary Fund (IMF), OECD, the Group of seven conferences and many others, because the sophisticated strategies adopted by governments have failed to stave off the ultimate  deep crisis of the system. Large packets of economic aid have been deployed into the crisis countries of south-east Asia and Latin America. There are increased western efforts to reduce -- rather than cancel across the board -- the developing countries' debt.  Thiis reflects a part of the concern to prevent social and political turmoil which acts against, or makes untenable, the "free market" pillaging of those countries' resources and wealth. Large sums of aid are being held in readiness to assist Russia when a plausible plan for reviving its economy can be devised. None of this has so far been successful in bringing lasting economic stability to these countries.

Re-organisation of the IMF, but also of the financial system in its entirety, is now suggested as a means of bringing discipline and greater co-ordination among the financial monopolies, to control the export of capital throughout the world. None of these will avail to bring in order and collective responsibility into a system that is based essentially on individual self-interest.

One of the most notable signs of the potential for chaos and disorder can be seen in the challenge that for some time has existed to capitalist state power by the big international monopolies. This is an example of the contradiction in two of the main aspects of monopoly capitalism, the state and the big economic monopolies each are essential to the other yet challenge each other. The harnessing of these monopolies to a new system of discipline is now a chief pre-occupation of capitalist states. Where, previously, and today still, the state has been the instrument for the continuous development of these monopolies' using the principle of the utmost freedom of the market forces and ultimately of coercion of all opposing factors, while not desirous of eliminating them, they now seek to limit the powers of the state. At this stage in the evolution of capitalism it can be seen that this is an insoluble contradiction.