December 2012        

Understanding the crisis, and putting the system on trial

Part 3

■ The first two parts of this article were published in the October and November issues. This is the concluding part.

About the same time that the theory of the general crisis of capitalism was being developed by the communist movement, and monopoly contradictions after the First World War were developing towards the great depression and fascism, a Soviet economist, Nikolai Kondratyev, researched and put forward an analysis of the cycles of capitalism that saw new contradictions emerge following the “resolution” of the preceding crisis and that developed the next one.
Every new phase of the cycle is predetermined with the accumulation of factors of the preceding phase, and every new cycle is following the preceding one as naturally as one phase of each cycle after another. However, it has to be understood that every new cycle emerges in new particular historical conditions, on a new level of development of productive forces, and therefore is not a simple reiteration of the preceding cycle.
      Kondratyev saw the capitalist economic cycle as containing a period of expansion culminating in a peak, followed by a recession, a stagnant plateau, and then a secondary recession or depression. These cycles would last fifty or sixty years, and he identified three such cycles, importantly identifying the Great Depression in a report he wrote in 1926, only three years before the crash.
ExpansionRecessionPlateauDepression
1784–18001800–18161816–18351835–1844
1845–18581859–18641864–18741875–1896
1896–19071907–19201920–19291929–1949
      For Marxist economists in the vein of Kondratyev, a fourth cycle began with a period of expansion after the Second World War, lasting until the early 1970s, when a recession period kicked in, until the early 80s, when stagnation and a plateau took over.
      In some ways the depression period was artificially kept from view or delayed by what is commonly called neo-liberalism but essentially by state interference in the economy to prop up profit-creation. But despite this, the rate of return on capital has declined significantly over the last few decades, prompting a drastic drop in interest rates to try to stimulate investment, resulting in a flood of capital into speculative bubbles and financialisation.
      This state interference, and the high degree of monopolisation of power, has prevented the naturally occurring destruction of capital that came towards the end of previous cycles and that provided the opportunity for the rate of profit to recover.
      As the article by NC in Socialist Voice points out, Andrew Kliman has produced extensive quality research on this prevention of the destruction of capital and how this has played a significant role in creating the crisis and deepening it.
      Both the general crisis of capitalism and Kondratyev cycles as explanatory theories are extremely powerful, and the latest research and analysis must be used to build on these. Economic crisis, political crisis, democratic deficit, crisis of education and culture, identity crisis, social problems—all form part of what is the general crisis of capitalism and are evidently part of the system today.

Improving our understanding of the crisis

We must continue striving to achieve a better understanding of how the system operates today and how in essence we cannot deal with individual aspects of the crisis without challenging the system in its entirety.
      The democratic deficit cannot be seriously overcome without democratising the economy. The environmental destruction of the planet cannot be reversed without a planned and controlled economy. Social problems, drugs and alcohol abuse won’t be eradicated without full employment and community control over people’s future. They are all interrelated and interlinked, and so is the struggle to understand and to overcome the system that creates and sustains them.
      In trying to achieve this understanding, a number of things are becoming clear:
• Crises are a cyclical part of the system that occur periodically.
• The tendency is for the rate of profit to decline, but the state acts to counter this tendency.
• Capital flew to areas such as finance, where a better return could be made.
• Capital floods areas of return, resulting in bubbles.
• Debt—personal, company, and state—is used to mask fundamental weaknesses and to absorb excess capital.
• A number of factors—including military contracts, privatisation, and financial innovation—deferred the crisis.
• Monopolisation and the concentration of economic and political power in the hands of fewer people and entities has prevented the “normal” destruction of capital that facilitates a return to growth.
• Through the internationalisation of production and technological improvements, excess capacity exists in the production of goods, meaning that the system operates on the verge of over-production.
• Alongside the continual concentration of wealth in fewer and fewer hands, economic growth has been virtually stagnant in the system’s mature economies.
• Fictitious capital—a paper claim to profit yet to be produced—has grown far out of step with real capital but has become increasingly entangled with the real economy through debt and financial innovations.
      The reality of the system today is of one in deep crisis, a system that relies on the state to transfer the crisis to working people while it tries to work out a new set of solutions—or contradictions—to temporarily return the system to growth.
      Over the years Socialist Voice has been to the fore in exposing this process. In essence it has put the system on trial and month by month has explained economic, political and social problems as stemming from the capitalist system that determines human relations.
      This must be the basis on which an economy for the common good is fought for and an alternative presented to workers.
[NL]

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