160. The escalating conflict between Trotskyism and revisionism unfolded against a backdrop of global economic and political instability. Nowhere was the gulf separating the SLL from the Pabloites more evident than in its ability to pierce the contradictory appearance of the post-war boom and foresee the systemic crisis that was to grip world capitalism between 1968 and 1975.

161. The SLL explained that the emergence of the “dollar crisis” at the end of the 1960s exposed the basic contradiction at the heart of the Bretton Woods arrangements—between the global expansion of production, trade and investment, and currency systems still grounded on the national state. For a time, the overwhelming economic superiority of the US had been able to overcome this contradiction, with the dollar functioning as the global currency. But with its world position deteriorating due to the growing challenge from its competitors, the US faced a chronic balance of payments deficit. It was this economic crisis that lay behind US imperialism’s war against Vietnam, and which was the driving force behind the development of major class battles. The building of revolutionary parties had to be based on this understanding. A statement of January 1, 1968, stressed:

“The present stage of the crisis cannot be reduced merely to ‘economic’ factors. The offensive of the working class throughout Europe and North America is now the decisive factor standing in the way of the capitalist class as it attempts to find some temporary way out of its world crisis.”^[1]

162. This statement anticipated the most explosive developments since the end of the Second World War. In country after country, the interaction of economic contradictions with working class struggles produced political upheavals, and a significant growth of left-wing and socialist movements. At the start of 1968, the US suffered a severe military and political setback in Vietnam, while the assassination of Martin Luther King in April led to ghetto uprisings. The outbreak of the French General Strike in May placed the seizure of power by the working class on the agenda. It was the Stalinist French Communist Party that was to come to the rescue of President Charles de Gaulle and the capitalist state.

163. Repeated efforts to overcome the dollar crisis failed, and on August 15, 1971, US President Richard Nixon took the dollar off the gold standard, destroying the underpinnings of the post-war system. In October 1973, war broke out in the Middle East, leading to a quadrupling of oil prices by the Organisation of Petroleum Exporting Countries (OPEC) and triggering the worst recession since the Great Depression. In April 1974, the fascist dictatorship of Salazar in Portugal collapsed, followed in July by the fall of the Greek military junta. In August, US President Richard Nixon was forced to resign rather than be impeached as a result of the Watergate scandal and the exposure of illegal military actions ordered by his administration in Cambodia. In April 1975, Vietnamese Liberation Forces entered Saigon in their final defeat of US operations in Indo-China.

164. The ability of the bourgeoisie to survive this challenge to its rule was only made possible by the treachery of the Stalinists and social democrats, in which the Pabloites played a vital auxiliary role. The LSSP’s entry into the Bandaranaike government in Ceylon would prove to be only the most infamous manifestation of Pabloite opportunism during this period.