August 2011        

Social democracy and the crisis

Part 2

■ This is the second part of the review of Tom McDonnell’s discussion paper for TASC, “The Debt and Banking Crisis: Progressive Approaches for Europe and Ireland.” The first part was published in the July issue.

The absence of class from this analysis is striking. The failure to understand the class nature of the crisis and of all social and economic life is especially evident in two respects: all the solutions are based on a reformed, fairer, better capitalism; and the EU and ECB are viewed as essentially neutral institutions, which can be made into benign instruments.
     Marxism tells us that both these positions are ideologically uninformed and untenable.
     While capitalism can be forced to make concessions that can improve the conditions and material well-being of working people, capitalism is a class system that organises the economy and society in a way that systematically benefits the capitalist class (and its fellow-travellers) at the expense of those who create all the wealth in society: workers. In capitalism, the wealth that workers create will always be expropriated by capitalists, and workers will always live poorer, less realised lives.
     Not only are the gains made by social democracy insufficient to achieve even an approximation of real equality and to allow anything approaching full human development but any gains made are continuously under threat as capitalism wages class struggle in pursuit of its own interests.
     The reversal of many of these gains during the present crisis is instructive: the attacks on wages, working conditions, the minimum wage, social welfare, pensions, JLCs and REAs, public services and much more are part of the class struggle waged by capitalism against working people.
     While capitalist ideology insists that these things are necessary to restore the economy in the interests of society as a whole, we know this is simply not so. Recent figures for the Irish economy have measured the wealth produced in 2010 at over €30,000 per every man, woman, and child in the country. This is enough wealth to meet both the socialised private debt and the sovereign debt (whether this debt should be paid is an entirely different question) and provide a good standard of living and decent society for all. It is only because the class interests of capitalism override the interests of workers and the common good that this does not come to pass. Social democracy does not understand the class nature of capitalism and, instead, seeks a solution within it.
     Looking to the EU and euro zone for redemption is another of the illusions of the TASC paper and of social democracy. Marxists must be careful not to indulge in magical thinking or to fetishise institutions and formations such as the EU, the ECB, and the euro zone. The social democrats, the Trotskyist left and the communists all have different approaches to the EU and its institutions. The social democrats believe the EU as it exists is democratic and progressive, and that the struggle for correct policies within it can deliver a fairer and better society for all. Perhaps; but it will be a society riddled with inequalities that oppresses the majority of people and hinders human development.
     The Trotskyists believe that the EU can be democratised and converted into an instrument of revolution through class struggle. While the objective is more advanced, this position is less realistic than the social-democratic one. The institutions of the EU are instruments of imperialism and cannot simply be captured and turned into revolutionary ones. Much like the institutions of liberal democracy, the institutions of the EU are undemocratic and cannot be democratised: they can never be vehicles for people with which to exercise real democratic control over society and economy and must be replaced with new institutions.
     While Marxism recognises this, there is also a tendency among some communists to regard the institutions of the EU as somehow uniquely pernicious and irreformable. This is a mistake. No amount of reform will make the imperialist institutions of the EU vehicles for revolution, and no number of democrats in liberal-democratic parliaments will make them democratic. Opposing the EU as an instrument of imperialism does not mean that we support the national parliaments as vehicles for democracy. Neither will provide an alternative to capitalism.
     The TASC paper never comes to terms with the nature of the crisis. It sees no alternative to capitalism as a system—instead, it seeks to make it better and fairer, and to regulate it to prevent future crises. Marxists understand the crisis as systemic, an inevitable consequence of the way capitalism organises the economy, and resolvable, ultimately, only by the transformation of capitalism.
     The crisis stems from the problem of over-production in capitalism, which it has never been able to address other than through temporary solutions (including bubbles) and periodic crises. Because capitalists expropriate a part of the wealth that workers produce and workers are not paid the full value of what they produce, in the long run there is never enough demand in capitalism for the goods that are (or could be) produced. (Marx also believed that the irrationality of the market as a means of allocating resources contributed to over-production.)
     Of course demand, which involves the ability to be able to pay for something in the market, is not the same as need, and much human need goes unmet at the same time as capitalism cannot create enough demand to meet its capacity for production. This is one of the more appalling contradictions of capitalism.
     The problem of over-production results in an over-accumulation of capital. Surplus capital is accumulated because it is no longer profitable to invest it in production. (Marx also attached importance to factors such as the declining rate of profit.) This capital seeks other outlets; hence the various bubbles that we have witnessed in recent decades—but, while a bubble can postpone the moment of crisis, it cannot prevent it.
     Financialisation, where more and more capital is diverted from production to finance, has also shaped the current crisis and created new bubbles—in particular, it has allowed unprecedented speculation in financial “products,” a reckless form of gambling that lays claim to increasing shares of the wealth that is created by workers in production, now and in the future.
     Because social democracy does not understand the class nature of the crisis, it continues to look within capitalism for solutions. It might seem that the social-democratic approach recommended in the TASC paper is a good response to the crisis: after all, investment can create demand through the provision of jobs and the purchase of capital goods and raw materials, and the central problem is over-production and insufficient demand. But the crisis is systemic to capitalism: it is the very structure of capitalism that is the cause of the crisis. Simply investing in capitalist production, albeit a fairer and better capitalism, will inevitably lead back to the same place in the future. The only long-term answer capitalism has is to strip out as much production as possible and write off as much capital as is necessary, and start again from a lower level. From here, it is possible to grow and expand again until the next crisis.
     This is where the TASC paper will lead us. This is all that social democracy can promise. But it is capitalism that is to blame, and socialism is the answer. The replacement of capitalism with a system of production, distribution and consumption that is human-oriented, geared to meeting human need and that allows all people to lead fully realised human lives is the only solution. Marx called that human society communism.
[CF]

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