We repost below the World Socialist Web Site statement published on wsws.org here on June 13, 2025
Damages are seen in a building after an explosion in a residence compound after Israel attacked Iran’s capital Tehran, Friday, June 13, 2025. (AP Photo/Vahid Salemi) [AP Photo]
On Thursday evening, under the cover of darkness, Israel launched a massive air and missile assault on Iran, striking air defenses, nuclear facilities, key military personnel and command centers.
At least 78 people were killed and over 300 injured in the largest attack on Iran since the Iran-Iraq War of the 1980s. Israel assassinated six nuclear scientists and 20 high-ranking military personnel, including the Chief of Staff of Iran’s military and the commander-in-chief of the Islamic Revolutionary Guard Corps.
The World Socialist Web Site unequivocally condemns Israel’s illegal and unprovoked assault on Iran as a brazen act of imperialist aggression. The increasingly unhinged Israeli regime—already carrying out a genocide against 2 million people in Gaza—has now deliberately provoked war with a country 10 times its size, threatening catastrophic consequences for the entire region.
Israel’s claim that it acted in “self-defense” against an alleged Iranian nuclear program is an absurd and transparent fraud. It is well known that Israel possesses nuclear weapons, acquired in violation of international law.
Prior to the assault, Iran was engaged in negotiations with the White House over its nuclear program. In the days leading up to the strike, every major imperialist government—including the United States—made statements saying they opposed an Israeli attack on Iran, calling instead for a negotiated settlement.
The United States even went so far as to announce a new round of talks with Iran on Sunday just hours before Israel, with US foreknowledge and complicity, began raining missiles down on Tehran. Within the span of 24 hours, the White House went from vocally proclaiming it opposed an Israeli attack on Iran to publicly gloating about it.
Asked by the Wall Street Journal Friday whether the US got a “heads-up” of the attacks, US President Donald Trump replied, “Heads-up? It wasn’t a heads-up. It was, we know what’s going on.”
In reality, the so-called “negotiations” were a treacherous charade, designed to provide Israel with the opportunity to kill Iran’s military leaders in their homes. Among those targeted and killed in Israel’s Thursday night attack was top Iranian nuclear negotiator Ali Shamkhani.
Citing US and Israeli officials, Axios reported Friday that “Trump and his aides were only pretending to oppose an Israeli attack in public—and didn’t express opposition in private. ‘We had a clear U.S. green light,’ one claimed. The goal, they say, was to convince Iran that no attack was imminent and make sure Iranians on Israel’s target list wouldn’t move to new locations.”
The fact that Iran allowed a significant portion of its leadership to be killed—apparently while they were in civilian dwellings vulnerable to missile strikes, even as the American press openly telegraphed an Israeli attack—is a devastating exposure of the Iranian regime’s strategic bankruptcy. The regime placed immense confidence in the good faith of the Trump administration. Ignoring and forgetting all that has happened, including Trump’s authorization of the murder of General Suleimani in January 2020, the Iranian leaders were convinced that the United States would restrain Israel while negotiations were pending. They fell for a simple trick, like a child taking candy from a stranger.
But there are politics behind the Iranian regime’s astonishing naivete. Terrified of its own working class, the Iranian capitalist elite is desperately seeking an agreement with the imperialist powers, who have demonstrated their full commitment to Iran’s destruction and subjugation.
Israel’s attack on Iran has also exposed where the European imperialist powers really stand, despite their recent criticisms of aspects of the Israeli genocide in Gaza. The German government announced that Netanyahu had informed Chancellor Merz of the planned assault. Both the French and German governments issued statements affirming Israel’s “right to defend itself” and condemning retaliatory strikes by Iran.
The attack on Iran is the direct outcome of the longstanding US-Israeli drive to create a “new Middle East” under imperialist domination, intensified in the wake of the events of October 7, 2023. It was made possible by the immense political, military and intelligence support Israel has received from the United States for decades, under both Democratic and Republican administrations.
The Pentagon and Israeli military have long planned and war-gamed an assault on Iran and its nuclear program—an attack that Trump has repeatedly vowed to authorize.
US imperialism has never accepted the outcome of the 1979 Iranian Revolution, which overthrew the dictatorship of Shah Mohammad Reza Pahlavi, a key American ally in the Middle East. Washington backed Iraq in its brutal war against Iran throughout the 1980s. Even as it turned on Iraq—waging war in 1990–91 and invading in 2003—the installation of a US-aligned regime in Tehran remained a central objective.
Today, Iran is grouped with Russia, China, and North Korea as a major obstacle to US global hegemony—one that Washington is determined to eliminate at any cost.
The ultimate aim of this assault is the imperialist domination of the Middle East—the world’s most important oil-exporting region and home to critical trade routes and strategic chokepoints, including the Persian Gulf. By subjugating Iran, a key ally of both Russia and China, the United States aims to strengthen its global position in preparation for direct confrontation with its principal strategic rivals.
History has shown that imperialist wars lead to unforeseen and catastrophic consequences. Just as the US invasion of Iraq unleashed a regional disaster, so too will Israel’s assault on Iran. The people of the Middle East will not remain passive as their countries are turned into battlegrounds for imperialist domination.
The international working class must respond by building a conscious movement against imperialist war and the capitalist system that gives rise to it.
The World Socialist Web Site calls for the defense of Iran from imperialist violence and subjugation. But this can not be waged through the support of any bourgeois government. It requires the independent mobilization of the working class of the Middle East and the whole world, in opposition to all ethnic, racial and religious divisions, on the basis of a revolutionary socialist program.
We re-post here the World Socialist Website perspective article published on June 01, 2025.
Palestinians after an Israeli air strike in the northern Gaza Strip [Photo by UN Photo/Shareef Sarhan / CC BY-NC-ND 2.0]
On Wednesday, 1,200 Israeli university academics and administrators issued an open letter protesting the “war crimes and even crimes against humanity” committed by the Israeli military in Gaza.
The letter—addressed to the Association of University Heads in Israel, the Board of Academic Public Colleges, the Israel Academy of Sciences and Humanities, and Academics for Israeli Democracy—is a reaction to the launching of “Operation Gideon’s Chariots” in March, which is employing the mass starvation of the Palestinian population in pursuit of what is now the open policy of the Israeli government: the ethnic cleansing of Gaza.
The statement declares:
Since Israel violated the ceasefire on March 18, almost 3,000 people have been killed in Gaza. The vast majority of them were civilians. Since the start of the war, at least 53,000 people have been killed in Gaza, including at least 15,000 children and at least 41 Israeli hostages. At the same time, many international bodies are warning of acute starvation—the result of intentional and openly declared Israeli government policy —as well as of the rendering of Gaza into an area unfit for human habitation. Israel continues to bomb hospitals, schools, and other institutions. Among the war’s declared goals, as defined in the orders for the current military operation “Gideon’s Chariots,” is the “concentration and displacement of the population.” This is a horrifying litany of war crimes and even crimes against humanity, all of our own doing.
As academics, we recognize our own role in these crimes. It is human societies, not governments alone, that commit crimes against humanity. Some do so by means of direct violence. Others do so by sanctioning the crimes and justifying them, before and after the fact, and by keeping quiet and silencing voices in the halls of learning. It is this bond of silence that allows clearly evident crimes to continue unabated without penetrating the barriers of recognition.
The letter signifies the emergence of public opposition within Israel to the war. It is not yet clear how broadbased this opposition is. Recently published polls indicated that there still remains widespread support for the regime’s onslaught against the Palestinians, which—if the polls are accurate—reflects the deep social disorientation produced by decades of reactionary Zionist policies and propaganda.
However, given the relentless barrage of lies to which Israelis are subjected, the fact that more than 1,000 academics have denounced the policies of the government as criminal is a significant development.
The letter is a devastating indictment not only of Netanyahu’s government but of its international backers in Washington, London, Berlin and other capitals, who have denounced criticisms of Israel’s genocide in Gaza as a form of “antisemitism.” The New York Times and other major imperialist media outlets have not reported on the letter, despite prominent coverage in Haaretz and Al Jazeera.
The letter contrasts the vocal role that Israeli universities played in the 2023 mass protests against the Netanyahu government’s attempt to suppress the judiciary with their relative silence on the ongoing genocide. It declares:
Israeli higher education institutions play a central role in the struggle against the judicial overhaul. It is precisely against this backdrop that their silence in the face of the killing, starvation, and destruction in Gaza, and in the face of the complete elimination of the educational system there, its people, and its structures, is so striking.
There are other signs of growing opposition in Israel to the Gaza genocide. The publication of the letter followed demonstrations Tuesday at universities throughout Israel, where students and lecturers protested the ongoing genocide in Gaza. “This is the first action against the ongoing denial and the silent support for crimes being committed in our name,” the organizers told Haaretz. At Tel Aviv University, students and lecturers protesting the genocide were assaulted by campus police officers.
One of the organizers of the protest told Haaretz, “There’s a sense of a breakthrough, that from now on, it won’t be possible to hold back.” She added, “There’s a whole community living under a kind of censorship, feeling stifled, with a scream lodged in their throats. The message we got from the students is clear: they need us to stop staying silent.”
Ayelet Ben-Yishai, a professor at the University of Haifa, told Al Jazeera that for some participants, the decision to publicly oppose the genocide was in response to “the breaking of the ceasefire in March. That was a watershed moment for many, plus witnessing the starvation we’ve been forcing on Gaza ever since then.”
The group organizing the publication of the letter is known as the “Black Flag Action Network.” Professor On Barak of Tel Aviv University told Haaretz that the group’s name is a reference to the term “coined by [then Jerusalem Magistrate Court] Judge Benjamin Halevy following the 1956 Kafr Qasim massacre, in which 48 innocent Palestinians were killed by the Israeli Border Police.” Judge Halevy wrote in his ruling, “The hallmark of manifest illegality is that it must wave like a black flag over the given order, a warning that says: ‘forbidden!’ Not formal illegality … but rather, the clear and obvious violation of law.”
Barak added, “The widespread indifference [toward Gazans] among many Israelis is the result of an intensive dehumanization campaign that must be actively resisted.”
Professor Yael Hashiloni-Dolev of Ben-Gurion University of the Negev told Haaretz, “Anyone with even a shred of responsibility or humanity can no longer buy into the propaganda. We must recognize that war crimes and crimes against humanity are openly being committed in Gaza. We’re in the midst of a moral collapse.”
Al Jazeera noted that “the academics’ letter is unique in that it places Palestinian suffering at the heart of its objections to the war.”
Professor Ben-Yishai told Al Jazeera, “we wanted to make Palestinian suffering central. We wanted to say that we stand alongside and in solidarity with Palestinians. This was also about taking responsibility for what we are doing in Gaza and opening people’s eyes to it.”
The letter appeals to “all the people of this land, Palestinians and Jews.” It declares, “For the sake of the lives of innocents and the safety of all the people of this land, Palestinians and Jews; for the sake of the return of the hostages; if we do not call to halt the war immediately, history will not forgive us.”
The letter has the character of a moral appeal. Its authors do not address the fundamental historical and political issues that underlie the genocide. But however deeply felt the outrage against the war, the development of an effective opposition to the regime requires a break with the ideology and policies of Zionism. The genocidal character of this war is the culmination of the policies based on the reactionary political foundations upon which the “Jewish state” was erected in 1948.
The opposition of Jewish and Arab socialists, and the Trotskyist Fourth International, to the formation of the Zionist state in 1948 has been vindicated.
The authors of the letter state that “It is our duty to save what can still be saved of this land’s future.” The phrasing leads one to hope that the reference to “this land” rather than to Israel indicates a growing awareness that the existence of the Israeli state, based on the expropriation and annihilation of the Palestinian people, forecloses any future other than one that perpetuates mass murder.
The only viable future is one that achieves the revolutionary dissolution of the existing Zionist state and the unification of the Palestinian and Jewish working class in a socialist republic.
Front from left to right: Markus Söder (CSU), Friedrich Merz (CDU) and Lars Klingbeil (SPD) present the coalition agreement [AP Photo/Ebrahim Noroozi]
On Tuesday afternoon, Friedrich Merz (CDU) was elected in the second round of voting and subsequently appointed as the new German Chancellor by President Frank-Walter Steinmeier (SPD).
Merz had initially failed in the first ballot—a unique occurrence in German post-war history. With 621 MPs present, Merz was six votes short of the required majority of 316 votes to become Chancellor: 310 MPs voted for him, 307 against him, there were three abstentions, and one vote was invalid. Nine MPs did not take part in the vote.
Merz’s unexpected non-election had caused feverish nervousness in all Bundestag parties. In the end, the Bundestag parties agreed to schedule a second round of voting on the same day.
Shortly before the vote, the notoriously right-wing CDU/CSU parliamentary group leader Jens Spahn announced that a new ballot would be held with the agreement of the CDU/CSU, SPD, Green and Left Party parliamentary groups. The whole of Europe, perhaps even the whole world, was watching this election. He then thanked everyone who had made a second round of voting possible so quickly.
The role of the Left Party and the Greens as essentially right-wing parties of the state could not be clearer: in the face of a looming political crisis in Berlin, they played a key role in installing Merz and paving the way for his extreme right-wing government.
The Merz government heralds a new stage in the rightward evolution of the ruling class. It is undoubtedly the most reactionary and anti-working class government since the fall of the Nazi regime 80 years ago. Its central aim is to remove the last restraints imposed on German militarism as a result of its unprecedented crimes in the Second World War. With the adoption of war credits amounting to €1 trillion on March 18, the Bundestag has already paved the way for a massive military build-up.
The coalition government of the CDU/Christian Social Union (CSU) and the Social Democrats (SPD) will not only rearm like Hitler. It will organise a historic onslaught on social spending to finance rearmament and establish a police state to enforce it against the enormous opposition among the population. Domestically, it will also adopt the refugee policy of the fascist Alternative for Germany (AfD) and help the fascists’ nationalistically charged “cultural policy” achieve a breakthrough.
Leading members of the government, such as Interior Minister Alexander Dobrindt and State Secretary for Culture Wolfram Weimer, are politically far to the right and could easily be members of the AfD. Chancellor Merz himself embodies the interests of the financial oligarchy like no other. For four years, he headed the German branch of BlackRock, the world’s largest asset manager.
The SPD, which was founded more than 150 years ago under the banner of Marxism, is now the organiser of this shift to the right as a right-wing state party. Yesterday, it announced that Boris Pistorius (SPD) will remain Minister of Defense under Merz. Pistorius personifies the “new era” in foreign policy ushered in by SPD Chancellor Olaf Scholz, who received a farewell at a militaristic spectacle on Monday evening. Pistorius has set himself the goal of making Germany “fit for war” again and preparing it for a direct war against the nuclear-armed power Russia.
Party leader Lars Klingbeil takes over as Vice-Chancellor and Finance Minister. In this role, he will ensure that the costs of horrendous military spending and escalating global trade wars are borne by the working population. He will work closely with the new SPD Labor Minister Bärbel Bas, who, as a nominal “party leftist,” will push through the brutal cuts in close cooperation with the trade unions.
The coalition agreement signed yesterday reflects the reactionary personnel of the new government. The focus is on war policy and the comprehensive militarisation of society. The following goals, among others, are mentioned:
Dominance over Europe and a role for German imperialism as a world power
In the coalition agreement, the CDU/CSU and SPD define the entire globe as a zone of influence for German imperialism. According to the agreement, the German government is striving for an Africa policy that “does justice to the strategic importance of Africa,” declares that the “Indo-Pacific region” is “of elementary interest” and announces that it intends to “continue to show a presence in the region.” The “expansion of strategic partnerships with the countries of Latin America and the Caribbean” is also “of particular importance.” Overall, the aim is to “intensify bilateral relations with the countries of the Global South and expand them into a global network.”
As in the past, this global power politics means German support for genocide and war. The coalition declares the “security of Israel” to be a “fundamental German national security interest”—in the midst of the genocide committed by the far-right Netanyahu regime against the Palestinian population. At the same time, it assures the Islamist forces in Syria of support “in the stabilisation and economic reconstruction of the country”—in order to gain geopolitical influence and deport refugees.
With regard to the war against Russia, the coalition agreement announces that “military, civilian and political support for Ukraine will be substantially strengthened and reliably continued together with partners.” Germany must “for the first time since the end of the Second World War … be in a position to guarantee its own security to a much greater extent.” Germany will assume “a leading role” in the further development of the Common Security and Defense Policy (CSDP).
Militarisation of schools and universities
“We are anchoring our Bundeswehr [Armed Forces] even more firmly in public life and are committed to strengthening the role of youth officers, who fulfil an important educational mission in schools,” it says on page 130 in the section on “Defence policy.” It continues: “We are committed to dismantling obstacles that impede dual-use research or civil-military research cooperation, for example.” We will “eliminate the deficit that exists in Germany in the area of strategic security research and advocate its promotion in the sense of a networked understanding of security.”
Reintroduction of compulsory military service
“We are creating a new, attractive military service that is initially based on voluntary service,” explain the coalition partners. The design of this service will be based on “the criteria of attractiveness, meaningfulness and contribution to the ability to grow.” In doing so, “the Swedish military service model” is being used as a guide and “the conditions for military registration and monitoring will be created this year.”
Development of a war economy and massive armaments industry
The planning and procurement system will be “reformed” and “new implementation paths” will be enforced for major projects and future technologies. In particular, “future technologies for the Bundeswehr” are to be promoted, including “satellite systems, artificial intelligence, unmanned (also combat-capable) systems, electronic warfare, cyber, software-defined defence and cloud applications as well as hypersonic systems.” This requires “simplified access and increased exchange with research institutions, the academic sector, start-ups and industry.”
The “special infrastructure fund” of €500 billion is also designed to prepare for war. “We are simplifying the definition of requirements and approval for military construction projects and creating exemptions in construction, environmental and public procurement law as well as in the protection and dedication of military land with a Federal Armed Forces Infrastructure Acceleration Act,” it says on page 132. The “concerns and infrastructure measures for overall defence” are to be “established as an overriding public interest and prioritised in implementation over other state tasks.”
The historic rearmament and war policy will be financed by equally historic attacks on the working class. “We will make a considerable contribution to consolidation in this legislative period,” it says in the section on “budget consolidation.” The agreement only mentions a few specific measures—such as cutting citizens’ benefits—but the role model is clear: the US, where the Trump regime is ruthlessly cutting social spending in the interests of the financial oligarchy and destroying all existing social rights.
The deeply anti-worker policy of the new federal government is based on the support of all Bundestag (Federal Parliament) parties. The Greens provided the CDU/CSU and SPD with the necessary two-thirds majority in the Bundestag to pass the war credits. The Left Party backed it in the Bundesrat (Federal Council). And the trade unions are also firmly on the side of the government. They reaffirmed their loyalty to the rearmament course and worked systematically in recent weeks to isolate the wage struggles at the post office, in the public sector and at the Berlin Transport Company, and to prevent a joint all-out strike by the working class.
The broad support for militarism and social spending cuts by all Bundestag parties and trade unions shows that the struggle against fascism, war and social inequality can only be waged through the independent mobilisation of the working class. In its statement on the formation of the government, the Socialist Equality Party (SGP) therefore called for “the establishment of rank-and-file committees in workplaces and neighbourhoods that will allow workers to take the fight against mass redundancies and wage cuts into their own hands and combine it with the fight against war.”
The statement continues:
We counterpose the international unity of the workers to the growth of nationalism, trade war and rearmament. The war can only be stopped and social and democratic rights can only be defended if capitalism itself is abolished and replaced by a socialist society in which people’s needs, not profit interests, take centre stage. The big banks and corporations must be expropriated and placed under democratic control.
This article was originally published in the World Socialist Web Site Here
The US federal debt [Photo: Federal Reserve Economic Database]
On Saturday, May 3, the International Committee of the Fourth International (ICFI) and the World Socialist Web Site (WSWS.org) held the annual International Online May Day Rally. The event took place at a critical juncture in international geopolitics, which determines life-and-death questions of the working class—who, in recent weeks and months, have demonstrated growing militancy in their struggles against the capitalist establishment. WSWS posted both the video and text of the opening speech delivered by WSWS International Editorial Board chairman David North today (May 05). We are reposting the video here and we invite the workers, youth, intellectuals and all those who want to defeat austerity, fascism, dictatorship, genocide, war and social retrogression to seriously study this speech and the other speeches, and resolutely decide to join the international Trotskyist movement and build the ICFI as the only revolutionary leadership of the international working class to fight for world socialism.
At first, it was just a quiet murmur in relatively isolated sections of the financial press. Today, however, the voices are growing louder: the US dollar could lose its role as the world’s global currency amid the breakdown of all the arrangements and mechanisms of the post-war period under the impact of the US economic war against the world initiated by President Trump.
A street money exchanger poses for a photo without showing his face as he counts U.S. dollars at Ferdowsi square, Tehran’s go-to venue for foreign currency exchange, in downtown Tehran, Iran, Saturday, April 5, 2025. [AP Photo/Vahid Salemi]
This week, the Financial Times (FT) ran a major article under the headline “Is the world losing faith in the almighty US dollar?” The answer was that it is.
The concern has been sparked by an unusual development in financial markets. Under “normal” conditions, financial disturbances bring about a rise in the dollar’s value as investors seek a safe haven and move to acquire US Treasury bonds.
But since so-called “liberation day,” when Trump unveiled his “reciprocal tariffs,” there has been a move out of US government debt, and the value of the dollar has fallen. The price of gold, a real store of value, as opposed to debt and credit, continues to reach record highs.
There was a slowing of this movement when Trump announced a 90-day pause on the reciprocal tariffs, which range between 30 and 50 percent for a wide range of countries, to allow for negotiations. But the question remains: What happens after the pause ends?
Whatever the immediate answer, one thing is certain: There will be no return to the status quo ante, with Trump warning that nobody “gets off the hook.” This week, talks took place between the administration and Japan in Washington. The Japanese trade representative returned home empty-handed.
The implications of the new situation were underscored in a comment by a leading FT columnist, Rana Foroohar, entitled “America the Unstable.”
Foroohar began by saying that her “takeaway” from the tariff chaos and fallout was that America, under Trump, has become an “emerging market.”
In previous periods of political and economic stress, US equities and the currency rose because of the “haven status” of the dollar.
“It didn’t seem to matter that all the things that had bolstered American companies from low rates to financial engineering to globalization itself were tapped out. US asset markets seemed impervious to the notion of the dollar-doomsday scenario that would send both the currency and asset prices tumbling. Trump has finally ended America’s exorbitant privilege.”
She concluded by saying that previously she would have ruled out the possibility that America could become the epicenter of an emerging market-style debt crisis, but “not anymore.”
Trump’s measures—the tariff hikes that will slow the economy and proposed tax cuts for corporations—will add trillions of dollars to what is increasingly being characterized as an “unsustainable” debt mountain, currently at $36 trillion and rising.
In a report issued earlier this month, George Saravelos, global head of foreign exchange research at Deutsche Bank, summed up the growing outlook in leading global financial circles.
“Despite President Trump’s reversal on tariffs, the damage to the USD has been done,” he wrote in a report. “The market is reassessing the structural attractiveness of the dollar as the world’s reserve currency and is undergoing a process of de-dollarization.”
However, the crisis is not merely a product of Trump’s actions. It has been long in the making—the outcome of a protracted decline in the economic position of the US.
Trump, as is now openly acknowledged, has taken an axe to the economic, trade, and financial mechanisms set in place after World War II, considering that they have contributed decisively to the weakening of the US.
Of course, Trump, for whom, like Henry Ford, “history is bunk,” never explains why they were put in place and why the US played the leading role in their establishment. It was very much, to invoke the phrase he so often uses in his rampages, due to concerns with “national security.”
The purpose of the post-war measures was to prevent the return to the conditions that had prevailed in the period between the wars, grounded not least on the understanding that this would lead to revolutionary struggles by the working class in the major capitalist countries, including in the US, which had seen enormous eruptions of class battles in the latter years of the 1930s.
The post-war economic order rested on three pillars—the establishment of the US dollar, backed by gold as the international currency, the reduction of tariffs and promotion of free trade to prevent the emergence of the trade and currency wars that had proved so disastrous in the 1930s, and the reconstruction of war-torn Europe under the Marshall Plan. All three were based on the strength and industrial power of the US economy.
Contrary to the claims of various bourgeois economists and not a few self-styled Marxists that the post-war economic capitalism boom which followed had refuted the Marxist analysis of the historically inevitable economic breakdown of the capitalist system, the post-war framework did not overcome its fundamental contradictions—above all, that between the world market and its division into rival nation-states and great powers.
And within the space of 25 years—a short period of time from the standpoint of history—these contradictions emerged. On August 15, 1971, President Nixon, in the face of a growing balance on trade and balance of payments deficit in the US, removed the gold backing from the US dollar—unilaterally abrogating the Bretton Woods Agreement of 1944.
It was a sign that the power of American capitalism, the basis of the post-war order, was starting to markedly weaken.
The scrapping of the Bretton Woods system ushered in a new global financial system. In the 1950s and 1960s, currencies had exchanged at fixed rates. Maintenance of those fixed rates and the prevention of currency wars required that finance and investment flows were subject to tight regulation.
But with the ending of the dollar-gold connection, currencies started to float freely, which meant that capital and financial controls had to be increasingly scrapped. A new international economic order developed based on credit creation and the free flow of money around the world.
The US dollar continued to function as the basis of the international financial system, but it underwent a major transformation. It was now a fiat currency, no longer backed by gold, that is, real value, but solely by the American state. A new global monetary order emerged.
As the FT article noted: “Despite Nixon’s severing the dollar’s link to gold in 1971, the greenback has remained at the center of the monetary universe. In fact, thanks to the dollar’s importance in the expanding and increasingly interconnected global financial system, its importance has only grown. Far from eroding the dollar’s importance, the Nixon shock entrenched it in many ways.”
The freeing of the dollar from the restrictions due to its being tied to gold and the concomitant government regulations aimed at maintaining a fixed exchange system unleashed finance from the constraints imposed on it under the previous regime, opening up vast new avenues for profit accumulation.
Increasingly, above all in the US economy, this gave rise to what has been called financialization, the accumulation of profit via speculative and parasitic methods.
The more these methods developed, the more regulations on finance capital introduced in response to the crisis of the 1930s were scrapped, culminating in the repeal of the last remaining piece of Depression-era legislation, the Glass-Steagall Act, by the Clinton administration in 1999.
In 1991, the liquidation of the Soviet Union by the Stalinist bureaucracy, coupled with the restoration of capitalism in China and the junking of national development policies by the bourgeois national regimes in the former colonies, opened up new profit opportunities through the globalization of production.
Eager to grasp them, the US called for the entry of China into the new world order. The Clinton administration pushed for its admission to the World Trade Organization, which was subsequently ratified by the US under the presidency of George W. Bush.
The US saw the cheaper labor of China as a profit gold mine and that within the new order, China would remain subordinate to it. But the capitalist economy has its own relentless logic, which operates behind the back of imperialist leaders, no matter how powerful.
The Chinese capitalist oligarchy, now confronted with the transformation of the country from a nation of peasants to one with hundreds of millions of workers, as well as an aspiring middle class, recognized it had to move up the value chain.
It could not simply function as the supplier of cheap consumer goods but had to expand production into more sophisticated commodities based on advanced technology if it was to sustain economic growth and maintain what it called “social stability.”
However, this development has posed an existential challenge to US hegemony. This was recognized by the Obama administration in 2011 when it launched its pivot to Asia. His trade representative Michael Froman wrote an article in Foreign Affairs in 2014 recognizing the weakened position of the US and that the global trading system had to be “revitalized” to allow it to play the leading role.
Such efforts, however, came to naught as the balance of trade and payments continued to widen. And the US government debt has continued to escalate at what is acknowledged as an “unsustainable” rate.
The US has only been able to continue on the debt path because of the dollar’s role as the global reserve currency. So long as investors, domestic and international, as well as other governments, kept money flowing into the debt market, the US imperialist state, with its vast military spending, has been able to continue to function.
Back in 2023, CNN and News commentator Fareed Zakaria set out this relationship.
“America’s politicians have gotten used to spending seemingly without any concerns about deficits—public debt has risen almost fivefold from roughly $6.5 trillion 20 years ago to $31.5 trillion today. The Fed has solved a series of financial crashes by massively expanding its balance sheet twelvefold, from around $730 billion 20 years ago to about $8.7 trillion today. All of this only works because of the dollar’s unique status. If that wanes, America will face a reckoning like none before.”
In the face of this crisis the view is being advanced in some circles that whatever the dollar’s travails, it will continue to operate as the world currency.
The FT article on the dollar crisis cites the remarks of Mark Sobel, a former Treasury official and now US chair of OMFIF, a financial think tank.
“The dollar’s dominance will remain in place for the foreseeable future because there are no viable alternatives,” he said. “I question whether Europe can get its act together, and China is not opening its capital account soon. So what’s the alternative? There just isn’t one.”
Sobel’s assertions about the inability of Europe and China to provide as alternative to the dollar are no doubt true.
But his analysis is incomplete because it is based on a faulty logic which ignores the lessons of historical experience. It rests on the assumption that since global trade and finance requires an international currency, the dollar must therefore continue to play that role because there is nothing to replace it.
However, the logic of the present situation is neither that the dollar’s role can continue nor that another national currency will replace it. Rather, it is that the world economy will increasingly fracture into rival trading, financial and currency blocs—a conflict of each against all—as it did between the two world wars with all the disastrous consequences that produced.
For all their irrationality and outright madness there is a logic to Trump’s policies. Every statement and executive order he imposes is justified on the basis of national security—that the present economic order has undermined the military capacity of the United States to fight wars, and this must be rectified at all costs.
The crisis of the dollar therefore signifies that the conditions for a new world war are rapidly developing in which for the US, China—the existential threat to its hegemony—is the chief target.
With tariffs set at 145 percent, and still more hikes to come, and restrictions imposed on the export of high-tech goods to China, the US has imposed a virtual economic blockade against Beijing. How long before that leads to outright military conflict? History suggests sooner rather than later.
The ruling classes in the US and internationally have no solution to the crisis of the capitalist system over which they preside. Everywhere their response to the breakdown is economic warfare, increased military spending and the evisceration of democratic rights through the imposition of fascist and authoritarian regimes.
The international working class is the sole social force which has the capacity to resolve the historic crisis of the capitalist system, exemplified so sharply in the crisis of the dollar, in a progressive manner. But for that power to be actualised it must take up and fight for the perspective of socialist revolution.
This article was originally published in the World Socialist Web Site on 18 April 2025 Here
