The Crisis and Reformism

With the system’s profits declining, some corporations moved to take advantage of cheaper labour abroad, re-locating a great deal of their own industrial production. Other capitalists turned to speculative financial deals that boosted their income on paper without significantly expanding production or productivity. The long-term result of speculation and unprecedented state and corporate borrowing was the bubble of fictitious capital (as Marx termed it) which inevitably had to pop at some time or other. Working-class people have no cause to take joy in such an event. We have to prepare for the worse, which is no sustained capitalist recovery is possible without pay cuts and increased productivity.

Capitalism has historically made use of recessions to rescue profits—by pushing down workers’ wages and forcing weaker capitalists to sell their assets at bargain prices. When the bottom dropped out of the stock exchange in 2007, the capitalist class felt a paralysing shock. The working class may have lost confidence in the often unquestioned expertise of the financial advisers, but, more strikingly, the businessmen themselves suddenly became anxious to take political and economic direction from someone, somewhere, who somehow could save their system. The President and the Federal Reserve promised a “bail-out” but criticised Wall St for excessive speculation and extravagant bonuses. A large proportion of the capitalist class decided that Washington might be the savior, even if it meant submitting to new codes of “fair” business practices. Some capitalists, however, resent the interference of government in their businesses, fearing the thin edge of the wedge which may eventually impact upon their treatment of worker and profit margins. They decline to acknowledge that central government served the interests of capitalism by saving their system. The capitalists today have thousands of laws on paper regulating and legislating the operation of capitalism, but still the corporate corruption thrives and even worsens. This is because they have a greater law in command – the law of maximising profit – and it is under this law all of society is maintained.

Many describe the crisis in terms of workers suffering from low wages and austerity cuts on their benefits are unable to purchase the very goods they themselves have produced. This is called the “under-consumptionist” theory of crisis. This then leads to the advocacy of government policies to boost spending power of consumers.
Mary Lyn Cramer writes:
"Bourgeois theorists will insist that consumer demand of the working population is what drives Capitalist production. It is clear that many of these well intentioned spokespersons actually believe what they are saying...
If a feudal lord were to have told his serf, that the sole purpose of his exploitation was to enable his lord to provide the serf with the material goods necessary to maintain an acceptable level of poverty, the serf would have thought the lord insane. Likewise, if an African slave had been told by the American plantation owner that his enslavement and low standard of living was necessary so that the plantation could produce what the slave needed for survival, she would have thought her master crazy.
But for some reason, laborers exploited by Capitalists are suppose to believe that the accumulation of vast resources, enormous factories, state-of-the art ports, refineries, etc., etc., owned by the Capitalists are necessary for, and simply serve the purpose of producing what working people need to survive and maintain an acceptable standard of living. It is all done for us, and it all comes back to us working people. If that sounds absurd to you, maybe the following will more clearly reflect your reality:
Yes, under the Capitalist system of production and distribution, "consumer goods" sufficient for the the employed labor force to survive (at a more or less acceptable standard of living), is necessary. However, Capital expansion and production of real, material "producer goods"--- such as industrial machinery, factories, infrastructure, technology, planes, company limos, corporate cars, trucks, freight trains, ships, docks, commercial ports and transport of all kinds, along with the communications centers, security apparatus, administrative compounds, together with the pipelines, refineries, natural resources, raw materials and fuel to operate this enormous, global empire---make up the larger part of material production and privately-owned accumulated wealth in this nation and globally; and these tremendous means of production are neither consumed by nor owned by the workers who produce them. Under a system of Capitalist production, exploitation of a labor force that produces much more than it consumes is the essential source of real profits. It is production and expansion of the enormous, modern industrial Capitalist empire that is the aim of Capitalism (and all those who identify as successful competitive players in this deadly game), not increased consumption of goods and services for working people. The latter is the necessary "spin-off" so to speak, until those workers themselves are no longer deemed "necessary."

This is also reflected by the position as advanced by Greg Sharzer:
“First, wages don't create all demand: they're just one way for capitalists to realize the capital invested in commodities (…) Most people encounter the market when they shop, so it seems natural to believe that capitalism exists to satisfy our consumer needs. But while the market in consumer goods is constantly on display, exploitation is hidden. Workers matter as workers, the source of surplus value: they're only able to receive and spend a wage if their employer makes a profit first. Moreover, capitalist production creates capital goods that only business buys: the machinery and building materials that go into factories, offices and other sites of exploitation. Capital has to consume materials at all stages of the production process. Machines increase production, making more machines necessary and increasing the importance of industries producing the means of production. There are huge areas of the economy off-limits to workers' spending power. (…) Even if localist missionaries convinced all workers that local consumption could change the world, workers could, at best, change the conditions of production for their own housing and durable goods, a small portion of the capital circuit.” (Greg Sharzer, "No Local. Why Small-Scale Alternatives Won’t Change the World".)

Marx pointed out in Volume 2 of Theories of Surplus Value:
“The word over-production in itself leads to error. So long as the most urgent needs of a large part of society are not satisfied, or only the most immediate needs are satisfied, there can of course be absolutely no talk of an over-production of products— in the sense that the amount of products is excessive in relation to the need for them. On the contrary, it must be said that on the basis of capitalist production, there is constant under-production in this sense. The limits to production are set by the profit of the capitalist and in no way by the needs of the producers. But over-production of products and over-production of commodities are two entirely different things."

Marx himself noticed:
“It is sheer tautology to say that crises are caused by the scarcity of effective consumption, or of effective consumers. The capitalist system does not know any other modes of consumption than effective ones, except that of sub forma pauperis or of the swindler. That commodities are unsaleable means only that no effective purchasers have been found for them, i.e., consumers (since commodities are bought in the final analysis for productive or individual consumption). But if one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and “simple” (!) common sense, such a period should rather remove the crisis. It appears, then, that capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis.”

The SPGB crisis position is based upon the "anarchy of production" which if you wish to take a swipe at them this can be simplistically described as "supply and demand" - producers not knowing that there is a buyer for their commodities until after they have been put on the market and giving rise to disproportionate growth. (This is, of course, not defence for some form of central planning!!)

 Economic crises are due to the basic features of the capitalist system. One feature is the anarchy of production. Businessmen decide what kind of things to produce and how many to produce either individually or in small groups. Production is not planned. Over time, disproportions between the activities of various firms and different industries eventually occur. The effect of this unplanned method of production under capitalism causes either too many products or too few products on the market. Disproportions in the economy affect the capitalists’ profits. When business do not make the expected level of profits, they shut down production. Shutdowns, order cancellations, and bankruptcies can cause a chain reaction leading to economic paralysis, which is called a crisis. Part of the chain reaction of the economic contraction is a falling level of working-class consumption. Another reaction is growing unemployment. However, it is the economic contraction which causes a decline in wages and working-class consumption and growing unemployment, not under-consumption by the working class that causes capitalist economic crises.

Again, why is the question important? For the reason that if an organisation supports the line that underconsumption is the reason for capitalist economic crises then there is no need for revolution. All the working class has to do to solve its problems is to demand some tax relief and extra spending on the part of the capitalist state. The under-consumptionist line channels the working class away from militant class struggle and into dead-end reformism. Struggle is confined to making appeals through the system to this or that politician.  The under-consumptionist line, helps the capitalists to foster reformist illusions in the working class.

 As long as the capitalists are in control, production is based on profits not social needs. The level of production allowed by the capitalists is determined by how much profit is to be made, not by the needs of the people who live under the capitalist system. If an employer determines that he can produce a smaller amount of some product and sell each item for a higher individual price, making higher profits, he will do so. No matter what the level of technology, how high the unemployment level, or how gorged the stocks of raw materials, the capitalist will sabotage production in order to make a higher profit.  Food, for example, from milk to wheat, are regulated to profits rather than social needs.

It is not an era of social reforms that we hope for, but for a great epoch of social revolution! Reformism is capitalist trickery used to keep the working class under wage slavery. Reformists maintain that we can arrive at “socialism” by winning reforms one after the other. What they don’t say is that whatever the employers has to give up with one hand after a hard struggle, they always take back with the other.

 Socialists make no compromises with the capitalist class but fight them relentlessly. But those on the Left reproach the Socialist Party and tell us “no idealism, comrades, the working class are not socialist – on the contrary, they are still dominated by bourgeois ideology, so let’s sit back and wait.” The Socialist Party does not hide its positions out of fear of cutting themselves off from workers  but rather carry out their educational work in order to persuade them. Reformism provides no ultimate solution to the problems of capitalism. Reformists, on the other hand, are people and people change all the time.