The Fudget Fiddles while Capitalism Burns
The NACTS budget is really a fudget for trying to hide the growing weakness of NZ’s neo-colonial economy behind a veil of spin. The Key regime hopes to promote business confidence in a climate of falling profits by ‘tax cuts’ made possible by cuts to public spending on the ‘social wage’ and by ‘dividends’ created by privatising state assets and plundering public resources such as water and fisheries.
The NACTS cannot even pretend that NZ’s GDP growth is based on a return to profits in the private sector when the basis for growth is $30 billion in handouts to rebuild Christchurch and billions more to farmers to intensify dairying. Moreover the coming crash of the world economy must bring about a massive destruction of value in fixed assets and commodities as well as workers living standards before profits can recover
So the coming crash has nothing to do with ‘wrong’ policies that have shifted wealth from production of value to unproductive consumption (wrongly labelled ‘financialisation’ today) for the benefit of the ‘banksters’ and rentiers. These are the necessary effects of a deeper underlying cause of crisis which has to do with the failure of capitalist production to produce sufficient profits to justify investment in new production. The failure of profits drives money away from productive investment to speculation in already existing assets – land, gold, or any bet on financial ‘derivatives’ which looks like holding their ‘value’.
Do not mistake the current panicked rush to buy company ‘bonds’ that earn more than negative interest rates or betting on commodity ‘futures’ as the causes of the current economic stagnation. These are mere symptoms of hot money speculating on the latest bubble. While neoclassical economists including Keynesians share the assumption that the market can return to equilibrium (i.e. stability) Marxists see all these signs as a vindication of Marx’s theory of crisis which predicts growing chaos and disequilibrium until the capitalist system breaks down and is replaced by a socialist system.
Marx on Classical Political Economy
Marx developed his theory of crisis out of a critique of classical political economy of Smith and Ricardo. Capitalist growth resulted from the three ‘factors’ of the economy, land, labour and capital, each earning a ‘reward’ (rent, wages, profits) for its economic contribution. Each was seen as productive, because while labour was productive of value, both land and capital was necessary for its production.
Crises which interrupted the ‘equilibrium’ of these three ‘factors’ combining to ensure ‘fair shares’ resulted from ‘interference’ of one or more at the expense of the other(s). Since classical economics reflected the interests of capital, it was land and labour demanding excessive ‘shares’ that put pressure on the share of capital causing falling profits. Therefore, the classical explanation that crises of falling profits could be overcome by cutting the share of land (rent) and labour (wages) was no self-righting market solution, but actually a class struggle between the three classes over the share of value produced by wage labour.
Marx critiqued this theory as bourgeois ideology masking the actual social relations that determined the shares of these “revenue classes” based on the exploitation of wage labour. Wage labour could only be exploited because it was dispossessed of the ownership of land and capital allowing capitalists to treat labour-power as a commodity. The wage was the exchange value of the labour time necessary for labour-power to reproduce itself. But its use-value to the capitalist was that without land and capital, labour could be forced to work longer hours than necessary to create surplus-value out of which rent and profits could be expropriated. As proof he gave the example of Mr Peel who migrated to the Swan River (Western Australia) with money, machines and men. The men ‘shot through’ to the bush to carve out their own land as ‘independent’ owner-occupiers working for themselves, leaving him with two factors, land and capital, but not the vital one – labour-power. The result: Mr Peel could not become a capitalist and instead became a land agent and property speculator.
Marx continually warned that if the working class failed to break with bourgeois ideology it would continue to wage it’s “revenue class war” for ‘fair shares’ rather than overthrowing the ‘wage-system’ itself and with it the inherent inequality of capitalist production relations. (See Critique of the Gotha Program) But revolutionary consciousness did not fall from the sky. The rise of trades unions put limits on profits so that capitalists could not force up the rate of exploitation to overcome the TRPF caused by a relative rise in investment in machines that did not produce value. As a result surplus capital that could not be invested in production was exported from the imperialist countries to the colonial world to find cheap raw materials and labour as ‘counter-tendencies’ (CTs) to the TRPR.
By the early 20th century the failure of the market to prevent crises and restore equilibrium saw capitalism enter its full-on imperialist stage where capitalism relied increasingly on state backed global monopolies fusing productive and banking capital as ‘finance’ capital. This led to the rise of Labour and Social Democratic parties advocating that workers as the majority take control of the state to regulate the market and ensure ‘equal shares’ without the need to overthrow capitalism. It was no accident that these reformist parties emerging in the imperialist countries where a layer of privileged workers could benefit from the super-exploitation of colonial empires as reformist governments legislated for ‘fair shares’ in the colonial plunder. Lenin called these parties “social imperialist” because they paid for their ‘socialism’ a home by supporting imperialist super-exploitation abroad.
While accepting that capitalist social relations were here to stay, Keynes and his followers adapted neo-liberal economics to take advantage of the monopoly capitalist state. Keynes was responding to the capitalist transition from ‘competitive’ to ‘monopoly state’ capitalism. Far from interfering with market equilibrium and causing crises, capitalist states were now necessary to overcome crises. The market no longer determined prices based on market competition (or class struggle at the level of ‘revenue classes’) but monopolies based on giant global cartels backed by powerful imperialist states. By over-riding the market the state could theoretically prevent future crises and even turn war spending into public works!
Lenin as the leading Marxist of the day extrapolated Marx’s theory of crisis to explain that imperialism was necessary to overcome the limits of the national economy in countering the TRPF. The export of capital enabled firms to locate new sources of cheap resources and cheap labour to process them. As a result new sources of value from the colonies acted to counter the TRPF and postponing the demise of the capitalist system.
However imperialism could not overcome the inherent limits to capitalist growth. The ‘underdevelopment’ of the forces of production in the colonial and semi-colonial world based on the extraction of ‘absolute’ surplus value from cheap labour-power could not stop the decline in capitalism’s growth potential and re-emergence of the TRPF that would manifest itself in an increasingly destructive struggle between the imperialist powers to plunder the earth’s diminishing resources.
The destructive decline of global capitalism into world war and depression posed the need for socialist revolution for Lenin and Co. But Keynes and the social democrats (Fabians, Labourites and Stalinist economists like W.B. Sutch in NZ) regarded Bolshevism was a greater evil than unregulated capitalism. They proposed that the state reform the market by intervening to prevent crises and thus restore ‘fair shares’ along with capitalist stability.
Yet the recent history of the global economy since the Great Depression of the 1930s proves that it is not Keynesian policies of state intervention that overcame crisis but depression and world war. This is why Marxists refer to the ‘welfare’ state as the ‘warfare’ state. The post war boom was made possible by the massive destruction of old technology and workers living standards allowing the introduction of new technology increasing labour productivity (rate of exploitation) and restoring the conditions for profitable production, albeit temporarily. Thus the post-war boom was no more than a relatively brief period of real GDP growth before it once again faced the TRPF. By the late 1960s the boom gave way to stagflation as price inflation and wage inflation undermined real profits. Once more boosting consumption failed to restore investment in unprofitable production.
The proof that Keynesianism failed was recognised by the collapse of social democracy into neo-liberal economics marked by the destruction and restructuring of capital as the state attempted to restore the conditions for profitable production. In Aotearoa this was the basis of the “Rogernomic” counter-revolution by supply side monetarists who took over the Labour Party. In the US and Britain it was a similar counter-revolution the drove social democracy to the right opening the road to Reaganomics and Thatcherism then echoed by the Clinton and Blairite “third way” camp.
The recent history of capitalism has proven that Marx was right. The capitalist state cannot stop crises because it cannot control investment. The state is not class neutral sitting above the class struggle but the instrument of capitalist class rule. The flaw in Keynes is that no matter how much money the state prints, it will not be invested in production unless the rate of profit is restored. But the capitalist class will not forego its control over capital and the working class will not to accept a massive attack on wages, conditions and rights.
The end of the post-war boom and onset of neo-liberal counter-revolution proved that only depression and war works to restore capitalist production. The neo-liberal counter-revolution did activate CTs to the TRPF. Massive accumulated social wealth in state assets were devalued and privatised. Unions were smashed and wages and conditions driven down. The privatisation of state assets and cuts in social spending reduced taxation on profits. The restoration of capitalism in Russia and China returned these former bureaucratic workers states to the world economy and created new sources of surplus-value that allowed the rest of the world to survive the 2008 crisis.
But none of these CTs was sufficient to overcome the general law of the imperialist epoch – that capitalism can no longer develop the forces of production in general and must become increasingly destructive to survive. The crisis of overproduction of capital due to the TRPF that began in the 1980s has yet to be resolved. The excess capital that could not be profitably reinvested despite the various CTs mentioned, were diverted into financial speculation in existing assets. The Asian Crisis of ’98, the Dotcom crisis of 2000 and the GFC of 2008 all demonstrate that once created commodities that are bought and sold may increase many times in price but never in value. Money invested in speculation on existing values does not produce value or profits only asset bubbles. To restore profits all these bubbles must be burst.
If we look at China today we see a virtual laboratory test of Marx vs Keynes. China kept the world economy afloat since 2008 as the world’s most efficient producer of commodities. But it is now facing its own TRPF and rather than restructure or destroy non-performing firms and driving down wages and conditions, the state is using Keynesian spending to boost consumption. But all this has done is to create a debt mountain in China well in excess of the global subprime debt of 2008. The massive accumulated global debt of multi trillions has yet to be destroyed and continues to mount. That is why we are facing a cataclysmic terminal crisis that combines a new global depression with world war, exacerbated by climate catastrophe. Either capitalism must die, or we, as workers, and as humans, face extinction.
Never before has the need for the world’s workers to unite behind a program for socialist revolution been more urgent. Never before has the need to read and understand, and then act on Marx been so urgent. Never before has the need for a new world party of socialist revolution based on the method and program of the 1938 Transitional Program become so urgent. The cry of revolutionaries of “Socialism or death!” now becomes common sense.