October 2012        

Understanding the crisis and putting the system on trial

This is part 1 of a three-part article. The remaining parts will be published in November and December.

Earlier in the year a number of articles in Socialist Voice sought to explain the structural causes of the present economic crisis and to identify some of the dominant characteristics of the monopoly capitalist system of production as it is today. (See “The failure of capitalist production (review)” by NC, January 2012; “Opinion: Understanding the crisis” by NL, April 2012; “Opinion: The failure of capitalist production” by NL, May 2012; and “Explaining the crisis: A response” by NC, June 2012.)

     These articles bring to the fore the contradictions within the system that create economic crisis and also some of the features that create mass human misery. They seek to explain crisis as rooted in the internal process of capital accumulation and reproduction and not in the superficial establishment explanations of human failings.
     Crises are not caused by greed (though that is rampant); crises are not caused by timid regulators or corrupt politicians (though they are many); crises are not caused by too much state expenditure: crises are constant and recurring features of capitalism, arising from the internal working of the economic system at both the productive and the fictitious level.
     The articles by NC show crisis within capitalism as rooted in the declining rate of profit resulting from the competitive need of businesses to invest more and more in technology in order to produce faster and more cheaply than their rivals. This, however, has the adverse effect of reducing the amount of labour involved in the process, which ultimately is the source of profit, consequently leading to a tendency in the rate of profit to decline, resulting in turn in periods of stagnation, overproduction, lay-offs, and crisis, in order for the process to begin again.
     Crises, therefore, are cyclical and re-occur. This is evidenced in many works, including Andrew Kliman’s book The Failure of Capitalist Production (which NC reviews), but can also be seen generally in the declining growth in GDP, the constant level of mass unemployment, and declining interest rates (for if interest rates were higher than the rate of profit in production, why would anyone with capital invest in production?).
     Kliman identifies as one of the reasons for the severity of the present crisis the fact that over recent decades the state and other institutions have actively interfered to stave off crisis. These actions, commonly known as neo-liberalism, have included a massive reduction in tax on profits, which, while not increasing the rate of profit, has in fact increased the private accumulation of capital through increased take-home profits.
     This avoidance of massive crisis prevented the necessary destruction of capital and assets that would be required to re-start the growth process. That is why the crisis today, which has been building over recent decades, is so severe.
     In my article I tried to identify the contemporary features of the system (which I do not believe NC denies)—financialisation, intense monopolisation, internationalised production, increased proletarianisation, increased unemployment and pauperisation, increased indebtedness and speculative bubbles—and to describe how they have contributed to the depth of the crisis today, making it distinct from previous ones and preventing growth arising from so-called traditional systemic responses, such as increased exploitation of labour.
     Though these earlier articles seemed to oppose each other—indeed one was explicit in suggesting that they couldn’t be reconciled—there is a crisis theory within the communist movement internationally that does seem to explain crisis in a way that recognises cyclical crisis occurring from the shift in capital investment away from labour and into machinery, resulting in a general decline in the rate of profit, and the increased contradictions of the strongest tendencies within monopoly capitalism—monopolisation and concentration of wealth—leaving the system in a continuous state of crisis but not always a downturn: a general crisis of capitalism.

The general crisis of capitalism

The theory of the general crisis of capitalism developed both Marx’s and Lenin’s analysis of the contradictions and tendencies within the system. It did not replace their earlier findings, nor did it seek to suggest that cyclical crisis and recoveries would not occur and recur. In fact it was explicit in saying that this did not mean that capitalism was on the brink of collapse.
The characterization of the general crisis of capitalism given in the documents of CPSU [Communist Party of the Soviet Union] congresses and the theoretical documents of the world communist movement is by no means irrevocably bound to a particular “set” of symptoms. It is a flexible description reflecting the contradictory, multifaceted, and changing quality of the collapse of the capitalist system . . . The development of the general crisis is not linear, nor can it be said to intensify steadily from year to year. It is an uneven, extremely complex process, and, as Lenin predicted, it passes through “prolonged and arduous stages” . . .
     In addition to long-term tendencies toward the intensification of the internal contradictions of capitalism, the general crisis of capitalism includes short-term processes—for example, rapid inflation, severe balance of payments problems in various countries, or sociopolitical outbursts . . . As long as capitalism is not brought down by a socialist revolution, it will adapt to changing conditions. The specific characteristics of modern capitalism can, to a considerable extent, be explained by the fact that it has adapted to the new world situation. However, adaptation to new circumstances does not mean the stabilization of capitalism as a system . . .
—M. S. Dragilev, The Great Soviet Encyclopaedia (3rd edition, 1970–79).
     The theory of the general crisis of capitalism was suggesting, correctly, that the tendencies identified by Marx and Lenin had developed. Monopolisation was far greater. Finance capital played a more significant and destabilising role. National economies were more integrated, meaning that crisis spread more quickly.
     Capitalism reacted to each crisis by shifting more investment to technology so as to increase exploitation; further concentrations of production occurred through mergers, seeking profit-creating opportunities where previous avenues were shut off; and this all required a more complete understanding of systemic crisis.
     Formulated during the 1920s, the concept of the general crisis of capitalism was adopted by the 6th Congress of the Communist International in 1929, which stated:
Experience throughout the post-war historical period has shown that the stabilisation achieved by the repression of the working class and the systematic depression of its standard of living can be only a partial, transient and decaying stabilisation . . . The spasmodic and feverish development of technique [technology], bordering in some countries on a new technical revolution, the accelerated process of concentration and centralisation of capital, the formation of giant trusts and of “national” and “international” monopolies, the merging of trusts with the State power and the growth of world capitalist economy cannot, however, eliminate the general crisis of the capitalist system . . .
     This very technical progress and rationalisation of industry, the reverse side of which is the closing down and liquidation of numerous enterprises, the restriction of production, and the ruthless and destructive exploitation of labour power, leads to chronic unemployment on a scale never before experienced. The absolute deterioration of the conditions of the working class becomes a fact even in certain highly developed capitalist countries. The growing competition between imperialist countries, the constant menace of war and the growing intensity of class conflicts prepare the ground for a new and higher stage of development of the general crisis of capitalism and of the world proletarian revolution . . .
     The revolutionary crisis is inexorably maturing in the very centres of imperialism; the capitalist offensive against the working class, the attack upon the workers’ standard of living, upon their organisations and their political rights, with the growth of white terror, rouses increasing resistance on the part of the broad masses of the proletariat and intensifies the class struggle between the working class and trustified capital . . .
     The bourgeoisie resorts either to the method of Fascism or to the method of coalition with social democracy according to the changes in the political situation; while social democracy itself often plays a Fascist role in periods when the situation is critical for capitalism.—Programme of the Communist International, 1929.

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