Under the direction of the US monopoly bourgeoisie, which had adopted the line of the neoliberals and monetarists of the Chicago School, the US Federal Reserve Board under Paul Volcker approached the problem of stagflation by pointing to "wage inflation" (the working class) and big government (social spending)as causes of the problem. Volcker applied the squeeze by tripling interest rates to the level of 19 percent.

In a parallel development, the World Bank was put under restraint from its avowed policy of Keynesian "development" lending to third world countries. The imperialists decried the huge debt and inability of the third world countries to repay these. After all, the World Bank had already accomplished the diversion of the domestic resources of these countries away from industrial development and towards costly infrastructure building and overproduction of raw materials. The new US thrust was to push trade liberalization under the GATT, to promote regional "free trade" agreements under US hegemony and eventually to make WTO the all-encompassing free trade institution and the more active partner of the IMF than the World Bank in a menage a trois.

By 1981, the ground had been laid for the US and Britain to make a major shift in economic policy from Keynesianism to neoliberalism. This was trumpeted as Reaganism and Thatcherism. It was an all-out attack on the working class and the trade union movement, and on the hard-won social rights of the proletariat and the people.

Growth with inflation under control was set as the objective. The "free market" was supposed to come into full play. Monetary policy was considered as the main instrument for regulating the economy, through control of interest rates and money supply by central banks independent of elected officials. Fiscal policy was biased towards tax cuts for the corporate benefit of the monopoly bourgeoisie on the ground of making more capital available to it for production and job generation. This was called Reaganomics or "supply-side" economics.

Neoliberalism misrepresents and slanders the proletariat, the creator of social wealth, as a parasite on the state. It obscures the cost-push inflationary effect of military spending and the real parasitism of the bureaucratic and coercive apparatuses of the monopoly bourgeoisie. The catchwords of liberalization, privatization and deregulation mean respectively the unbridled flow of imperialist investments and trade, the private appropriation of public assets and funds and the erosion of antitrust laws and removal of social regulations to protect labor, women, children, the aged and the environment.

Under the Reagan administration, US state monopoly capitalism meant pouring huge state resources into overpriced contracts with the military-industrial complex for high-tech weaponry. These did not solve but aggravated the problem of stagnation because they did not increase employment. The budgetary and trade deficits soared.

What actually financed the high-speed high-tech military spending and consumerism of the US was the flow of funds from abroad. This was a result of the "Volcker squeeze" which induced the major imperialist allies of the US to shift their money from their own homegrounds and from the third world to the US. Thus, the US became the biggest debtor in the world.

Throughout the 1980s, third world countries were devastated by the credit squeeze and the crisis of overproduction in raw materials, and they were ordered by the IMF to follow neoliberal prescriptions. Even the few East Asian countries, favored by continuing accommodation in the US market for their consumer manufactures and semimanufactures, were adversely affected by the debt squeeze.

China, recently integrated into the world capitalist system, eventually generated a crisis of overproduction in consumer manufactures and ultimately went into political turmoil. The Soviet-bloc countries, which had been earlier induced in the 1970s to import consumer goods and take loans from abroad, were also squeezed and became desperate for hard currency.

From 1989 to 1991, the touters of neoliberalism were beside themselves with glee when the revisionist rulers of the Soviet Union and Eastern Europe were casting away their socialist signboards and were openly privatizing public assets and wrecking their already decrepit industrial foundations. The imperialists and their hangers-on proclaimed the end of socialism and the superiority for all time of the "free market" over socialist centralized economic planning.

They obscured the fact that, after abandoning socialism, these countries had plunged from one level of economic and social degradation to another. They also obscured the fact that all imperialist countries were in recession during the 1989-91 period.

In confronting the problem of high US budgetary and trade deficits, the administration of Bush the elder raised taxes at the expense of the people and prated about conducting a trade offensive. But he could not stem the 1990-91 recession in the US and, as a result, lost his bid for reelection despite all the triumphalist propaganda about the "fall of socialism" and the war of aggression against Iraq.

Throughout the 1990s, the Clinton administration pushed further the neoliberal economic policy and laid the stress on US global control of information technology and financial services at the expense of US imperialist allies. In the latter part of the decade, the "new economy" came to be bandied about as an ever-growing economy with no or little inflation and as an economy driven by high technology. Claims were made that high technology guarantees continuous capital expansion and eliminates the cycle of boom and bust.

The real wage incomes and living standards of American workers have continuously gone down since 1973. What is considered as full employment (actually around 4 percent rate of unemployment) has actually involved the massacre of regular jobs and the replacement of these with insecure part-time jobs (so-called labor flexibility). Job security and other hard-won rights of the workers have been eliminated or eroded in a big way. To earn their subsistence, a great mass of American part-timers have to work more than 40 hours per week.

The inflation of income and assets in the hands of the monopoly bourgeoisie is unrestrained. The after-tax income of the richest one percent of the American population is equivalent to the income of the bottom 100 million people. US multinational corporations rake in huge profits and at the same time use colossal amounts of credit for mergers and speculation. Household credit has also ballooned both for consumption and for speculation, with more than 40 percent of households attracted to buying tech-stocks.

In the bursting of the tech-stock bubble from April 2000 to April 2001, some USD 4 trillion in stock-market value evaporated. The bursting of the bubble is the result of overinvestment and excess capacity in high-tech goods. When the crisis of overproduction hits, production is cut down and massive loss of jobs and savings follows. This is what is happening in the US.

The recessionary trend in the US has an adverse impact on all its imperialist allies and neocolonial client-states. The decrease of their exports to the US is already wreaking havoc to their economies. Upon further decline of the US economy, the Japanese and West European creditors of the US would tend to call back their money.

Capital flight from the US would be disastrous both for the US and the entire world capitalist system, if we consider that US imperialist allies have six trillion USD of investments in the US, against 2.5 trillion USD of US overseas investments. Such is the magnitude of US dependence on its imperialist allies for expanding the US economy and maintaining consumerism in the decade of the 1990s.

Here comes the younger Bush, who is inclined to revive Reaganomics by giving tax cuts to the US corporations and stimulating military production. To push his policy, he utters Cold War slogans, bombs Iraq without consulting his NATO allies, allows the Israeli Zionists to slaughter Palestinians, carries out acts of provocation against China, scoffs at South Korean leaders for the policy of détente with North Korea, and bullies major and minor US allies all over the world.

US economic policy shifts, like the major one from Keynesianism to neoliberalism, do not mean any fundamental change in the exploitative and aggressive character of US imperialist policy, and certainly do not mean that the US is able to escape the laws of motion of monopoly capitalism and the drive for more capital accumulation. The US imperialist hyperpower can shift one foot any time and still continue to oppress and exploit the people in every possible way at a given time.

Japan and the European Union have followed their leader in pursuing neoliberalism or "free market" globalization. But each has a way of pursuing its imperialist interests and adapting to its circumstances. So far, the common interest and alliance of the US, Japan and European Union still hold against the interest of the third world and former Soviet-bloc countries. But the relationship or balance of imperialist powers is subject to the economic crisis, domestic politics and the global struggle for economic territory.

The Japanese economy, the world’s second largest national economy, has been in a state of prolonged depression since the bursting of its real estate bubble in 1989. It continues to be depressed as a result of its overcapacity to produce cars, steel and consumer electronics. It is hard pressed by the excessive inventories of its overseas plants, South Korea’s overproduction and the US trade offensive.

In Asia and elsewhere in the world, Japan champions neoliberalism. But domestically, in addition to bringing down interest rates to zero or a fraction of one percent, it resorts to Keynesian pump-priming through public works in a futile attempt to revive the Japanese economy. It has financed private and public construction in Southeast Asia and China and has had no hope of recovering the loans since 1997.

Japanese banks are sinking in an ocean of bad debts as a result of excessive lending to ailing corporations. Japan has been pushed by US dictat to buy a huge amount of US securities. At the same time, the US has held back technology licensing agreements, unlike in the 1960s and 1970s. The real unemployment in Japan is the highest among the three global centers of capitalism.

In the European Union, the imperialist governments have adopted the line of "free market" globalization. Socialists, laborites, revisionists and greens in government adopt the so-called neoliberal reforms but try to sugarcoat these with such phrases as "the third way", the "middle course" or "reforms with a conscience". At any rate, they carry out an attack on the proletariat and the people and try to reduce or eliminate their hard-won rights.

The European Union and its main engine Germany (accounting for one-third of Euroeconomy) have been economically stagnant for a decade already. They have a conspicuously high rate of unemployment and suffer from a protracted crisis of overproduction. Higher US profit rates have caused a heavy outflow of capital from Europe to the US. Thus the value of the Euro has sunk.

Russia and Eastern Europe are wide open for exploitation by the European Union. But the Western imperialists prefer dumping surplus products, asset stripping and making spotty investments. The continuous debasement of the economies and the extreme rapacity of the new bourgeoisie in the former Soviet-bloc countries put a brake on the expansion of capital from the West.

All three global centers of capitalism, the US, Japan and the European Union are suffering more than ever before from the crisis of overproduction, as well as from a heavy overhang of fictitious capital and financial speculation. Right now, the average GDP growth rate of the OECD countries is falling to the level of 2 percent.

US GDP growth rate, which used to be above 4 percent in the last decade, is now fluctuating between 2 and 3 percent. That of the European Union is stagnating at 2.6 percent and that of Japan remains depressed at around 1 percent. Declared growth rates are dismal enough but they are more dismal in fact if we consider the bloat in these figures due to financial overvaluation and the most unproductive services.

At any rate, the leading imperialist countries are far better off than the countries that they dominate in the former Soviet-bloc and third world countries. They have profited from the export of surplus goods and surplus capital and have accelerated the concentration and centralization of capital in their hands. More than 85 percent of the world’s foreign direct investments are concentrated on them and tend to be centralized in the US. The top 20 percent of the world’s population monopolize 82 percent of global export trade, while the bottom 20 percent have only one percent share of the market.

Debt service payments of poor debtor countries exceed the amount of current profits on direct investments and new supplies. Capital flight, as during the financial meltdowns in Mexico in 1995, Southeast Asia in 1997 and Brazil and Russia in 1998, has been mainly in the direction of US. In recent years, the US gained 300 to 400 billion dollars a year from these capital flights.

But the devastation of the economies of the dominated countries recoil and impact on the imperialist countries in terms of market constriction and further aggravation of the crisis of overproduction and the financial crisis. Even the few economies that attained newly-industrialized status in the 1970s are now in a dismal situation. South Korea, the most industrialized and strongest among them, has gone awry precisely because its companies have overborrowed from the banks, overexpanded its capacity to produce export manufactures and contributed to the global crisis of overproduction.

The integration of China into the world capitalist system in the 1980s was touted as the signal event for making East Asia and the entire Asia-Pacific region the strongest growth area for capitalism during the rest of the 20^th century and onward to the 21^st century. But in fact, China’s production and export of low value-added manufactures (garments, consumer electronics, toys, leather products and the like) have aggravated the global overproduction in this type of products and squeezed the Southeast Asian "tigers" of the past.

China itself has destroyed its agricultural commune system and undermined its own industrial foundation, with the ruling comprador big bourgeoisie overconcentrating on seacoast sweatshops, private construction and the overconsumption of luxury goods imported for the benefit of a few. Thus, in 1989, the aggrieved masses rose up in protest in more than 80 cities. Social discontent seethes in urban and rural areas. The entry of China into the WTO will mean the further dismantling of its state-owned industries.

It is important to characterize correctly the socioeconomic and political crisis that caused the disintegration of the Soviet Union, the fall of revisionist regimes in Russia and Eastern Europe and the turmoil in China in the period of 1989 to 1991. The crisis in these parts of the world was part of the general crisis of the world capitalist system because earlier they had become part of that system.

State monopoly capitalism, masquerading as socialism, is a tool of the new bourgeoisie for accumulating private capital until this is ready to cast away the socialist disguises and openly privatize the means of production. The frenzy for undisguised capitalism has meant ultimately the destruction of the industrial foundation previously established under socialism. The process of destruction is presided over by the traditional imperialist banks and firms.

The new ruling bourgeoisie in former socialist countries takes the character of the comprador big bourgeoisie as it favors the importation of surplus goods and surplus capital from the imperialist countries. Since the disintegration of the Soviet Union, Russia has lost its comprehensive industrial foundation and has become more dependent than ever on the export of oil, gas and other raw materials and on foreign credit to run the economy, enrich the ruling class and finance its overconsumption.

The ranks of oppressed and exploited peoples and nations have expanded, with those of former socialist countries joining those of the third world. All of them are crushed by the mounting burden of foreign debt. Most of the poor and backward countries are agrarian and have been reeling from overproduction of raw materials since the late 1970s.

In these parts of the world are the 1.5 billion people who survive on less than one US dollar per day and the 3 billion who subsist on two dollars per day. In the very few countries that produce and export some basic manufactures and low value-added semimanufactures, the workers, including children, toil in sweatshops of subcontractors, or in their own urban slum or rural dwellings. They work more than 14 hours per day just to earn anywhere from 1 to 2 US dollars.

The gap between the poorest 20 percent of the world’s population and the richest 20 percent has increased from 30 times in 1960 to 78 times in 1995. The wealth of the world’s 225 richest individuals is equal to the annual income of the poorest 47 percent of the entire world’s population. The three richest individuals have assets larger than the combined gross domestic product of the 48 least developed countries.

In the economic policy shift from Keynesianism to neoliberalism, the imperialist-dominated states are required to sell out their national patrimony and economic sovereignty and submit themselves to IMF structural adjustment and austerity programs. The imperialists dictate upon them to give up aspirations for industrial development and to liberalize investments and trade under the WTO.

The debt-stricken client states are required to follow the line of "free market" globalization or else suffer being deprived of new loans, supplies and access to the world market and face the prospects of social and political turmoil and barefaced imperialist intervention and aggression. They are also told to concentrate on collecting tax revenues and giving priority to debt service. They are told that stabilization funds from the IMF and concessional official lending from the World Bank are dwindling, and that they must go to the foreign private banks for credit and finally, that they must attract foreign direct investment by all means.

The neocolonial puppet regimes are actually vulnerable to the wrath of the people because they are culpable for extreme exploitation of the people, corruption and repressiveness. The bureaucrat capitalists augment their theft of domestic public funds by taking foreign commercial loans and making the state ultimately responsible for these.

In the most revolting way, neoliberalism has pushed the harshest measures for exploiting and oppressing the people. It dictates upon the neocolonial puppet states to undertake liberalization, privatization and deregulation and under pain of punishment for disobedience to avoid even only pretenses at industrial development and land reform. But as these states grow more exploitative, corrupt and repressive, they become hated by the people and become vulnerable to overthrow.

In line with the nakedly rapacious character of "free market" globalization, the US and its imperialist allies are building up their high-tech war machines at higher public cost. Using the flags of the UN and the NATO and under the pretext of peacekeeping and humanitarianism, they have grown increasingly aggressive. The political and military strategy of the US is to put its own client states under duress by the threat of declaring them rogue states, depriving them of foreign loans and supplies, or by destroying their fixed structures through precision bombing with long distance high-tech weapons.

Contrary to expectations that the end of the Cold War would bring about peace, the imperialist powers have launched the most brazen wars of aggression, like those against Iraq and against former Yugoslavia in the 1990s. War has come to Europe as in Bosnia, Chechnya and Kosovo. Also in many other parts of the world, especially in the least developed countries, the conflicts among reactionaries have become more violent as a consequence of socioeconomic collapses and austerity policy resulting from the depredations of US neoliberal policy.

Germany has been allowed to deploy its troops and fire its guns overseas and is expected to increase its military role. The NATO has been expanded to the borders of Russia. The social and economic weakness of Russia is an open invitation to the stronger imperialist powers to undertake joint or separate marauding actions within Russia and its vicinity.

Japan is also being encouraged by the US to rearm itself and become more aggressive militarily, especially in Asia. The US-Japan Security Treaty, the "new security guidelines" and an array of bilateral military access or visiting agreements of the US with puppet states in East Asia are meant to contain China and North Korea. At the same time, the US tries to engage these countries economically and subvert them politically.

The US prefers to undertake jointly with its imperialist allies acts of economic pressure and aggression against countries that assert their national sovereignty and territorial integrity, and against revolutionary movements. But it tends to undertake unilateral acts of aggression as conflicts of economic and political interests arise among the imperialist powers and it fails to get the prompt collaboration of its imperialist allies.

So far, the imperialist powers seem to be able to keep their alliance in order to control other countries and exploit entire nations and peoples. But as the crisis of the world capitalist system worsens, domestic political forces within imperialist countries can push each of them to adopt conflicting policies. Certain states assertive of their national independence and their people’s social aspirations can also take initiative to take advantage of the growing contradictions among the imperialist powers.

Except for a few, notably Britain, the sidekick and cheerleader of US imperialism, West European countries are wary over the growing unilateral acts of aggression of the US, its consistent attempts to block fuel pipelines to Western Europe and its provocative scheme to build missile defense systems.

The Russian comprador big bourgeoisie wants Russia to be a strategic partner of both the US and the European Union. But the US is bent on pushing further the socioeconomic deterioration of Russia as the way for degrading its scientific and technological capabilities and neutralizing its nuclear and other sophisticated weaponry. Russia has undergone massive de-industrialization, sinking far below economic levels in the period of Brezhnev and then Gorbachov. More than 40 percent of its population now live below the poverty line. In desperation, it is marketing both conventional and highly developed weapons.

The Chinese comprador bourgeoisie likewise wants China to be a strategic partner of the US and other imperialist powers. But the US bullies China over the issue of Taiwan in the yin and yang of containment and engagement. To teach China a lesson for assisting Yugoslavia, as well as to demonstrate the precision of its cruise missiles, the US deliberately targeted the Chinese embassy in Belgrade. Now, the new Bush administration is pursuing a policy of making East Asia the priority area for its military buildup and is undertaking provocative acts against China, despite heavy US involvement in the turmoil in Eastern Europe, Central Asia and the Middle East.

As the US overplays its imperialist arrogance and its attempts to swing the US public into supporting further US military buildup, China and Russia tend to draw closer together in their own strategic partnership and seek deals with the monopoly bourgeoisie of Japan and Western Europe. As the most aggressive imperialist power today, the US is stirring up the conditions for war.

Most important of all, the proletariat and the people cannot accept the depredations of "free market" globalization and the new world disorder as their permanent fate. As the crisis of the world capitalist system worsens, they are encouraged to wage anti-imperialist struggles for national liberation, democracy and socialism. They can rely mainly on their own revolutionary strength and at the same time avail of the support of anti-imperialist governments and the growing contradictions among the imperialist powers.