Friday, August 12, 2011

Even Nouriel Roubini Agrees -- Marx Was Right About Capitalism

[Via dKos poster goinsouth]

Actually, even the Kochs agree.

Perpend: From -- the "Crisis of Capitalism"

Crisis of Capitalism

The word “crisis”, used in reference to the economic system, may be in connection with (i) a conjunctural crisis, (ii) the cyclical crisis or “business cycle”, or (iii) the historic crisis of capitalism.

A conjunctural crisis can only be discussed in connection with the specific conditions involved in the given case, and generalisation is impossible. For example, such crises can be caused by defeat in war, or by being overtaken economically by a rival power, or as a result of a weak or incompetent government, or as a result of the loss of the natural conditions for production, such as where the environment has been destroyed by industry.

It is, however, particularly the cyclical and historical crises of capitalism which have absorbed the attention of Marx and other revolutionaries over a long period of time, and have been the subject of important theoretical debate down the years.

In the opening chapters of Capital Marx explains why cyclical crises are characteristic of capitalism:

“If the interval in time between the two complementary phases of the complete metamorphosis of a commodity become too great, if the split between the sale and the purchase become too pronounced, the intimate connection between them, their oneness, asserts itself by producing - a crisis. The antithesis, use-value and value; the contradictions that private labour is bound to manifest itself as direct social labour, that a particularised concrete kind of labour has to pass for abstract human labour; the contradiction between the personification of objects and the representation of persons by things; all these antitheses and contradictions, which are immanent in commodities, assert themselves, and develop their modes of motion, in the antithetical phases of the metamorphosis of a commodity. These modes therefore imply the possibility, and no more than the possibility, of crises. The conversion of this mere possibility into a reality is the result of a long series of relations ..” [Capital, Volume I, Chapter 3]

and in one of the last fragments of Volume III:

“... production relations are converted into entities and rendered independent in relation to the agents of production, ... the interrelations, due to the world-market, its conjunctures, movements of market-prices, periods of credit, industrial and commercial cycles, alternations of prosperity and crisis, appear to them as overwhelming natural laws that irresistibly enforce their will over them, and confront them as blind necessity. ...” [Capital, Volume III, Chapter 48]

It is also said that capitalism is in permanent crisis, as capitalism is constantly transforming the labour process and revolutionising the relations of production, driven by the unresolvable contradiction between capital and labour. Or, to put it another way, capitalism is unsustainable development by its very nature.

crisis of capitalism, cyclical

The cyclical crisis of capitalism, or “business cycle” is the oscillation between boom and slump, between inflation and recession, which runs through the capitalist economy roughly every ten years.

The business cycle arises from the “distance” that opens up between the production and the consumption of a commodity, bridged by debt, and the huge mass of fictitious capital which builds up on the basis of the credit system. As this mass of paper value and speculative capital grows, the system becomes more and more unstable, the recession more devastating. Tweeking the interest rates and money supply to stave of this crisis is like driving a Formula One racing car; the central bankers of the capitalist powers are very skilled at the art, but the task of avoiding a crash gets harder and harder and fictitious capital circulates around the world in greater and greater masses.

crisis of capitalism, historic

The historic crisis of capitalism is the tendency, played out over decades and centuries, for life under capitalism to become more and more untenable, and for the social forces opposing capitalism to gradually build up.

One of the central concerns of Marx, in his study of the capitalist mode of production, was to identify and understand its inner contradictions, the source of the historic crisis which would eventually create conditions for its overthrow and replacement by a more humane and rational system of production. Marx did not come to a definitive answer on this question, and nor could he, for the answer to this question must be the work of all of humanity, not one person. Nevertheless, the search for the essential contradictions within the capitalist mode of production is a theme underlying all of Marx’s work, and he identified a number of contradictions and distinct visions of the historic crisis of capitalism.

These include: (i) the tendency of the rate of profit to fall, (ii) the concentration of capital, (iii) the growth of the proletariat; given the falling rate of profit, an historic crisis may be manifested as (iv) a crisis of realisation (underconsumption); Lenin added to these (v) war and revolution (imperialism), and in the post World War Two period, by extension of Marx’s analysis of the cyclical crisis of capitalism, we should add (vi) a catastrophic collapse of credit.

(i) the tendency of the rate of profit to fall

The tendency of the rate of profit to fall is a theory put forward by Marx to the effect that the rate of profit enjoyed by capitalists will get smaller and smaller over time. This is because capitalists use more and more developed materials and machinery in their production as the labour process becomes more and more socialised over time, and use smaller and smaller amounts of wage-labour per unit output. Thus, the “value added” is necessarily smaller in each stage of the process of production, since it is only labour-power which adds value, not machinery or materials.

(ii) the concentration of capital (or elimination of small capital)

The concentration of capital is the historical tendency for capital to be gravitate into fewer and fewer hands, or as the saying goes – “the rich get richer and the poor get poorer”.

Left to itself, this process would bring about a situation where a handful of immensely rich capitalists would find themselves contronted by a vast mass of proletarians with nothing in between. Consequently, capitalists governments have long had “anti-trust” laws to protect capitalism from itself. Likewise, the US, Japan and Europe use tariffs and subsidies to protect small farmers even though cheaper food could be imported from overseas.

(iii) the growth of the proletariat

As capitalism grows, not only are there more and more workers, but the workers are increasingly involved in organising and managing every aspect of social life; increasingly, the capitalists and their hangers-on are redundant, and there is nothing to stop the workers taking over.

After the Roman Empire collapsed, it took centuries for the feudal system to establish itself in Europe and regain what had been lost in the collapse of the Roman Empire, because slave society did not generate any class capable of overthrowing the old system and rebuilding society anew. Capitalism however, not only creates the proletariat, but organises and educates the proletariat for the task of destroying capitalism itself.

This conception of the crisis of capitalism is most clearly expressed in the Communist Manifesto:

“We see then: the means of production and of exchange, on whose foundation the bourgeoisie built itself up, were generated in feudal society. At a certain stage in the development of these means of production and of exchange, the conditions under which feudal society produced and exchanged, the feudal organisation of agriculture and manufacturing industry, in one word, the feudal relations of property became no longer compatible with the already developed productive forces; they became so many fetters. They had to be burst asunder; they were burst asunder.

“Into their place stepped free competition, accompanied by a social and political constitution adapted in it, and the economic and political sway of the bourgeois class.

“A similar movement is going on before our own eyes. Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. For many a decade past, the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule. It is enough to mention the commercial crises that, by their periodical return, put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity - the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed. And why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand, by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.

“The weapons with which the bourgeoisie felled feudalism to the ground are now turned against the bourgeoisie itself.

“But not only has the bourgeoisie forged the weapons that bring death to itself; it has also called into existence the men who are to wield those weapons - the modern working class - the proletarians.

“In proportion as the bourgeoisie, i.e., capital, is developed, in the same proportion is the proletariat, the modern working class, developed - a class of labourers, who live only so long as they find work, and who find work only so long as their labour increases capital. These labourers, who must sell themselves piecemeal, are a commodity, like every other article of commerce, and are consequently exposed to all the vicissitudes of competition, to all the fluctuations of the market.” [Communist Manifesto, Chapter 1]

and Marx and Engels conclude:

“The essential conditions for the existence and for the sway of the bourgeois class is the formation and augmentation of capital; the condition for capital is wage labour. Wage labour rests exclusively on competition between the labourers. The advance of industry, whose involuntary promoter is the bourgeoisie, replaces the isolation of the labourers, due to competition, by the revolutionary combination, due to association. The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.” [Communist Manifesto, Chapter 1]

As a result of the conditions of postmodern capitalism, every worker today is as much as organiser of production as a producer as such. Never has capital been as unnecessary as it is today.

The Marxist perspective should be contrasted with conception of capitalism as a system which necessarily leads simply to universal immiseration and pauperism, with growing unemployment as a result of mechanisation and automation. As most clearly expressed in the Communist Manifesto, Marx saw capitalism as a system which would revolutionise the world, and foremost among its achievements was the creation of the proletariat: “its own grave-diggers”.

“The slave frees himself when, of all the relations of private property, he abolishes only the relation of slavery and thereby becomes a proletarian; the proletarian can free himself only by abolishing private property in general.” [Engels, Principles of Communism]

(iv) crisis of realisation “stagflation”

“Contradiction in the capitalist mode of production: the labourers as buyers of commodities are important for the market. But as sellers of their own commodity – labour-power – capitalist society tends to keep them down to the minimum price.

“Further contradiction: the periods in which capitalist production exerts all its forces regularly turn out to be periods of over-production, because production potentials can never be utilised to such an extent that more value may not only be produced but also realised; but the sale of commodities, the realisation of commodity-capital and thus of surplus-value, is limited, not by the consumer requirements of society in general, but by the consumer requirements of a society in which the vast majority are always poor and must always remain poor.” [Capital, Volume II, Chapter 16]

(v) imperialismepoch of wars and revolution

Imperialism is the specific stage in the development of capitalism beginning roughly from the beginning of the 20th century, characterised by the dominance of finance capital over industrial capital and by inter-imperialist wars over markets, sources of raw materials and cheap labour.

In Marx’s day, capitalism was still in its phase of expansion, spreading from Europe to the rest of the world, conquering new markets and finding new sources of raw materials and cheap labour. Although large cartels had grown up and banks grown to significant proportions, industry was still the dominant sector of capital.

By the turn of the century, there was no more room for expansion for any capitalist in search of new markets or resources, except at the expense of competing colonial powers. In those days, colonialists jealously guarded their exclusive right to exploitation of their own colonies, and the exhaustion of new opportunities meant war between the imperialist powers and every time the balance of power changed for one or another reason, a new war would have to be launched for a redivision of the markets.

The new epoch which opened up under these conditions is called Imperialism. See Lenin’s Imperialism – the latest stage of development of capitalism for the first comprehensive analysis of the nature of imperialism. As an epoch of wars and revolution, imperialism now expresses a new form of the crisis of capitalism:– “Mutually Assured Destruction”.

Many people argue that sometime in the last few decades a new phase in the development of capitalism – beyond Imperialism – has begun; the fact that there is only one dominant imperialist power, the collapse of the USSR, the rise of communications and information technology, the services sector and “knowledge work” are cited as the basis for such theories.

(vi) catastrophic collapse of credit

A catastrophic collapse of credit is an event, like the Wall Street Crash of 1929, when a tidal wave of bankruptcies sweeps across the world, throwing millions out of work and paralysing production.

The post-War boom from 1945 – 1968 was the longest boom in history, and was based on the accumulation of vast amounts of fictitious capital. This accumulation of fictitious capital now continues on a greater scale than ever before with 98% of financial transactions on the world market not including any actual good or service.

Many people believe that the kind of analysis Marx makes of the cyclic crisis of capitalism, just as it led to the Great Depression of 1929-39, could lead to another catastrophic collapse, and that such a crisis would be of such a scope that it would take on the character of an historic crisis and stimulate not just a New Deal, but provide the social impetus for the overthrow of capitalism and reconstruction on the basis of new social relations of production.

Well, surprise, surprise.

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