Tuesday, April 08, 2014

The Consequence of Crises


Historians used to refer to the 1870s as the "Great Depression" before the 1930s slump stole the name and in 2008 it became the “Great Recession”. The history of capitalism has been characterized by what is commonly called the "boom-bust cycle". In every boom, promises are made by economists and politicians that depressions are now "a thing of the past" and that capitalism has entered a new era of prosperity. But every boom so far has turned out to be just as temporary as the previous one. Sooner or later, every boom has collapsed into yet another recession. The Great Depression of the 1930s is only vaguely remembered and then recalled as an act of God, from which no relevant conclusions can be drawn. Already a false narrative is being created in relation to the latest “Great Recession” and its history re-written.

One reason for the inevitable but always impatiently waited recovery is many of the insolvent companies are taken over by larger, surviving companies. The purchase price the surviving company must pay for the assets of the bankrupt company is much lower than the capital originally invested in those assets. As a result, the same physical assets, capable of producing just as much profit, now require a much smaller investment of capital. In other words, the potential rate of profit is increased for the surviving companies. Of course, the bankruptcy of capitalist firms is also the cause of much of the misery suffered by the working population during a depression, the lay-offs and the pay-cuts. And those too contribute to the recovery of profits. Yet another tool for the employer is the introduction of new technology to increase productivity. Sometimes workers output is increased simply by demanding more and harder work, such as unpaid overtime, and  in the case of office workers, using the internet and mobile phones at home. Pay can be cut only so much, the pace of work can be increased only so much, before these actions begin to cause a reaction—the resistance of the working population so there is another strategy of the capitalist class to reduce labour costs -  relocation or sub-contracting to a low-wage country with less worker protection in the form of health and safety legislation (or weak environmental laws.)

 Keynesians say the solution to the problem of depression is whenever capital investment slows down, the government should take up the slack by increasing its own spending. However, as Paul Mattick pointed out a long time ago, government spending is financed by taxing or borrowing income produced in the capitalist sector. Therefore, an increase in government spending generally requires that a greater portion of the total surplus-value be taxed or borrowed by the government. A correspondingly smaller portion of the total surplus-value is available for investment as capital. As a result, the increase in government spending further aggravates the shortage of surplus-value, which caused the decline in capital investment in the first place, and ultimately leads to a further decline in investment.

The negative effect that increased government spending has on capital investment is being emphasized forever quoting the National Debt figures, who instead  suggest cuts in government spending as a stimulus to investment, that is slashing public welfare budgets. However, these conservative economists forget the reason why government spending has increased in recent years—to offset a prior decline in investment. Therefore, cuts in government spending will most likely bring, not a revival of capital investment, but rather, a sharp rise in unemployment, not to mention the inflationary side-effect. Austerity proposes to reduce government spending by eliminating those social programs which are supposed to contribute to the education, housing, medical care, or survival of the impoverished. There is only one way the system can improve this situation. That is to raise profits by lowering labor costs. If it could do this, it would be able to expand profitably without raising prices. And it could regain international markets, both by the direct savings on labor costs and by modernizing the antiquated industrial plant with the proceeds. Such a strategy is of course nothing new.

Only a minority of workers are unionized and the unions themselves vary greatly with respect to their bargaining power and the character of their bureaucracies. Nearly all exclude effective control on the part of their membership. Everything is left to the officials, just as politics is left to the wealthy elite. Sometimes, the union officers may change but the system remains the same.

 People can vote in general election , and those who vote—often  less than half of those eligible —can exchange a Democratic administration and presidency for Republican, a Tory politician for Labour Party one, or whatever the respective parties are in the predominant two-party systems of most countries and in doing so, they can exchange one set of people for another, equally determined to maintain the capitalist system which, in turn, determines the range of their own policies. Thus, although big business always dominates everywhere. The specific interests of the big corporations determine the destiny of the system as a whole. The state is the state of the corporations and depends on the health and wealth of their profitability. Those in  government , or holding public office, need not be pressured by the big corporations to do their bidding; they do so on their own accord. Moreover, the personnel of state and capital are interchangeable; corporation managers enter government service, while state officials move into the management of corporations, by the aptly named "revolving-door". Big Business dominates the political apparatus  and cannot be dislodged short of destroying the capitalist system itself.  It continues to dress its mercenary rule in democratic garb although it is increasing. lt transparent that political parties are bought and paid for. Democracy begins and ends with the ballot-box but  also  involving free speech, free assembly, and freedom of the media and they are not made use of in opposition to the capitalist system, anything contrary to accepted wisdom receives no audience. The systematic manipulation of "public opinion" is used as an instrument of class rule and the specific interests of the ruling class must be made to appear as the general interest,  the means of persuasion—the academic think tanks of the  university system that are sponsored by so-called philanthropic endowments, the press, radio, and television and increasingly even the supposed free internet and social media, cater exclusively to the needs of the capitalist system. For sure, the intellectuals and commentators may differ in some of their answers and vary their wares to suit their market but all ultimately serve the same purpose, namely, ideological support of the status quo. Politics is  a business albeit a competitive business where the ravings of one tries to outbid the rantings of another in a spectacle of inane verbiage or meaningless soundbites. A corrupt government is replaced by another corrupt government. Incredulously,  people continue to believe in this system of social control as preferable to any other, and express their patriotism in its defence.

There is now a  general optimism created by the “anti-capitalist” movement, engendered by the designers of  the various "post-capitalism" models which do represent expressions of a deep discontent, no matter how vaguely defined. However, newly-arising popular movements may very well sidetrack the aspirations of the working class into channels of activity that defeat their own purpose and which erroneously founded on the potentially totalitarian principle of to "each according to his work" disguised as co-operative and worker-owned enterprise, or calling for a more strongly regulated economy that still incongruously protects private property rights.

On the world stage so long as their investments are not endangered, the form of government which protects them is quite immaterial, and this indifference allows for adherence to the principle of non-intervention in the affairs of other nations. It is not the desire for a "democratic world" which moves the policy-makers, but merely the need for governments—dictatorial or not—that will protect capital investments and allow for international trade favorable to international capital. In such cases governments may take measures detrimental to capital or grows unstable enough to jeopardize profits it becomes necessary to install more malleable ones. Covert and overt intervention will replace governments with another regime, in order to secure both the specific commercial interests and if deemed necessary directly intervene in another country’s internal affairs. Even without this military big-stick,  client nations through their financial dependence on the capital market, just as the peonage of the landless peasant can be maintained by keeping him perpetually in debt to the landlord, are forced to submit to Western hegemony through their indebtedness to international  banks and the International Monetary Fund (IMF) or the European Central Bank (ECB). Loans are denied unless they submit to a program of "austerity" designed to increase, with the profitability of capital, their ability to honor their financial obligations. Economic budgetary "discipline" is imposed upon debtor nations such as Greece or Portugal or Ireland in order to maintain, or restore, their credit-worthiness. Of course, this is just "good business", even though it may result in great social distress and  unrest. Enforced "austerity" turns into general misery.

Those of us who are revolutionary optimists see within the rising resistance of workers at the grassroots,  new forms of organized activity more in keeping with their real needs. The apparent tranquility of working class is steadily being undermined and the attempts to contain it rests upon shifting sand. The previous gradual character of the economic decline of workers, almost indiscernible to the “middle” class relying on their credit cards and mortgage equity partly explained the apparent apathy despite the continuing reduction of their incomes but now they do not see themselves in an enviable cocoon where their own living conditions are outside the increasing misery. Austerity cuts are being imposed upon all workers and to effectively resist, all workers must come together to fight back. 

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