May 2012        

Opinion

The failure of capitalist production

■ Part 2 of a response to the review by NC of The Failure of Capitalist Production by Andrew Kliman in the January issue of Socialist Voice. (Part 1 was published in April.)

4. The proletarianisation of peoples

One of the great myths is that “globalisation” is destroying the working class and making everyone into some kind of middle class. The artificial growth of a middle class has been shown to have been merely superficial and based on mounting debt and rising asset values.
     The reality is that, as the internationalisation of production has developed, and in particular the monopolisation of land, this has brought with it the proletarianisation of peoples. More and more peasants and subsistence farmers are driven off their land and forced into cities to work in factories. This also has damaging and negative consequences for the environment, in both rural and urban settings, and has led to the development of horrific slum dwellings around cities.
     In addition to this, as the monopolisation of production and retail outlets has progressed, the number of small businesses has also declined globally, being replaced with megastores and transnational companies. The number of small businesses closing during this crisis is evident.
     Equally, during a time of crisis, with little real avenue for investment, many companies pursue aggressive take-over strategies to reduce their competition and increase their market share. Often small businesses are absorbed by their larger competitors, again reducing the number of self-employed and increasing the wage class: workers.

5. The growing reserve army of labour

As the system expands into almost every corner of the earth, by open warfare at times, and the working class is expanded, so too is the number of global unemployed—the number of potential workers the system has at its disposal. Marx called this group of potential workers the reserve army of labour, and this has truly expanded as monopoly capitalism has grown.
     The proletarianisation of peoples and the defeat of the socialist economies have greatly expanded the number of potential workers, to 2.4 billion today, approximately 65 per cent of the potential global work force.
     Supply and demand in influencing the cost of labour (our wages) has an obvious and speedy impact, but the cheaper cost of maintaining a worker in southern parts of the globe is the main driving force behind this process. As production has become so internationalised, the speed at which it can seek out and move to the cheapest parts of the globe has increased. The ever-growing reserve army of cheap labour is part of a race to the bottom and of the assault on trade unions and working conditions in the West.
     The retreat of social democracy is less an ideological or policy retreat than a result of the fact that its material base—strong domestic industry in the central economies—has vanished as a result of the monopolisation and internationalisation processes and with it the leverage that workers in those countries could bring to bear on political economy.

6. The pauperisation of the working class in monopoly centres

This process of imposed division and competition between workers is leading to the pauperisation of the working class in the centres of monopoly capital and the gross exploitation and abuse of workers in the South.
     As major economic activities have moved away from the West, social democracy has withered. These economies have been forced to become more “open” to deal with the new speed and direction of capital in undermining the terms and conditions of employment.
     While real wages have largely stagnated, debt has driven consumption. Inflating asset values, such as houses and shares, have provided a false growth in consumption by working people in the West. This has been shattered by the burst of this latest speculative bubble.
     The extremely weak foundations that consumption was reliant upon have been exposed, and increasing “austerity,” to shore up finance capital, is only exacerbating the overproduction of real goods.

7. The role of debt

Credit, and its negative—debt—have always played a role in the capitalist production process. However, it is fair to say today that the role it plays now is far greater and more global in its effect on production and the usual cyclical functioning of the system.
     As capital concentrated, those accumulating it could more easily direct and control production to suit their needs through investment and ownership in companies. Equally, the amassing capital required ever more investment avenues. Monopoly production killed off many “real” investment opportunities, and the processes outlined above closed off avenues in reinvestment.
     For every extension of a loan, or every bet on a future price or event, debt within the system is created. Debt-based “products” became a significant source of investment and return, including the purchase of and speculation in government bonds and collateralised mortgage products.
     Banks created hundreds of debt-based androids that acted as investment avenues but also as security for further loans. This side of the accumulating process (M—M, in the terms used by Marx in Capital) created capital out of itself and with it volumes of personal, corporate and government debt in the system as debt became an asset and a source of further investment and growth.
     The scale of systemic reliance upon this system of M—M growth can be seen in the unusual length of the investors’ “strike” and the negligible effect of hundreds of billions in “quantitative easing.” During a recession, investors are afraid, and a hoarding of capital is not unusual. However, it would normally pick up after a number of “corrective measures” and as an appropriate avenue is found for it.
     Today this fear is still clear to see; and reading the pages of Bloomberg or listening to many of the speeches at Davos one can see that it is not going anywhere in the near future. The scale of debt in the system means that investors don’t know how to hedge their bets, as the likelihood of default is ever present and very real. With “sure things” having totally collapsed, investors don’t know where the next Lehman Brother or Irish economy is.
     Equally, any quantitative easing that has taken place has not created new jobs or oiled the wheels of production: instead it has been used by those same corporate hoarders to pay off some of their own debts.

8. Speculation and bubbles

While the processes described above have concentrated ever more capital in fewer controlling hands, growth in monopoly centres, such as the United States, Britain, and Europe, would have been negligible over the last couple of decades had it not been for speculation-led financial growth in a series of bubbles.
     In the German economy, the driving engine in the European Union, growth never reached more than 4 per cent but was more often 1 or 2 per cent (and this is including finance-led growth). In Ireland, if one knocks off the 25 per cent or so of GNP attributable to the property bubble each year of the so-called Celtic Tiger, our economic growth was more of a mirage than a miracle. Even recently published reports show that the economy is still stagnant; the only small bit of growth is in foreign monopolies.
     Mergers and acquisitions, commodity bubbles and futures speculation, energy and “dot-com” bubbles, sovereign debt and currency speculation, property and mortgage bubbles (and throw in some legal, and illegal, money-laundering)—these have provided the system with its major source of growth, investment, and creation of new capital through profits.
     Speculation is different from investment; it is different from the run-of-the-mill extension of credit to a business or company. In a capitalist sense, investment follows an analysis of the company or product and a belief in its ultimate success. That is to say, the investor has “bought in” to the product. Speculation is less thorough. Little analysis is done, or no thorough analysis can be done, as it may be a blind bet on a future event.
     The nature of speculation leads to bubbles, as a spike or inflation in asset prices resulting from the investment of capital attracts more capital, leading to further inflation and consequently to a bubble. While this does provide an avenue for a “quick fix” for capital to invest in and get a return, providing growth in the system, it is quickly flooded with all that other capital seeking an investment opportunity. What may have begun as a spike in valuation grows into a bubble and ends with no soft landing but with an explosive burst.

A system in deep and lasting crisis

The phenomena described above are all dominant features of capitalism today, and they cannot be undone. This is the situation from which any capitalist recovery must come, or from which any transformation to socialism will be born.
     These features, and the extent to which they have developed, are what make the present crisis distinctly different from previous recessions, in a number of ways.
     1. The crisis is universal. It is not confined to one area of the accumulation process. It is not merely a banking or finance crisis. It is not merely a crisis of under-consumption. It is not merely a crisis of over-production of houses or over-investment in energy.
     2. The crisis is global. It is not just in one area or in one hemisphere. The United States, the European Union, Japan and the global South are all affected.
     3. The crisis appears to be continuous or permanent. Rather than being a two-year or three-year “downturn” with a gradual recovery, this is now the fifth year of the crisis, and there are few signs of a recovery.
     This is what makes the crisis truly systemic and structural. This is what makes this crisis different from previous ones. The result of this crisis, and any so-called solutions to this crisis, will deepen the contradictions and accentuate these features even more.
     Wealth is already being concentrated even further. Production is monopolised even further, with mergers and acquisitions being used as an investment avenue for the abundance of capital in the system. Production is moving to ever-cheaper parts of the globe, reducing the cost of production to maximise profits out of a contracting customer base. The global number of unemployed is increasing, and the impoverishment of working people in the West will further reduce consumption for goods but also lead to the further indebtedness of both individuals and countries.
     Without a massive destruction of capital, the stagnation and contradictions that were only superficially covered up by finance-led growth will lie exposed for some time, wreaking hardship and misery on the vast majority while benefiting only a few.
     The structure of monopoly capitalism, and the proliferation of nuclear weapons, with monopoly rivalry and the control of monopolies through shares that are dominated by a few hedge funds and finance companies, may well prevent the global destruction of asset value on the scale that Kliman suggests, leaving us with the understanding that this is not a normal cyclical crisis or recession but one whose features are so accentuated, structural and systemic, and with contradictions so great, that it may well constitute a phase of capitalism in aggressive decay.
[NL]

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