Friday, 2 August 2013

Marxist crisis theory, does it matter?

I’d argue it does very much. To have an understanding on crisis and the reasons why and how they occur under capitalism and why the system is riddled with contradictions and crisis is key to understanding the world we live in in 2013. In 2007/08 many so called economists were caught off guard when the economic crisis or what it has now been dubbed the great recession hit. Why was this? Well many economists are pro capitalist and do not understand the labour theory of value but also they were taken in by the system thinking that the boom times could keep on rolling and rolling indefinitely. As Marxists we know capitalism is a system which serves rich elite who control and own the means of production for profits sake. The recent economic crisis and persistent recession are bringing out new interest in Marx’s writings. We are in danger of Marx being reduced to a figurehead Who can be used by anyone to mean anything, as members of the “Marx industry” use his name to promote their own theories even when the result is to make Marx’s own theory disappear from view? Marx’s works can be difficult to understand today, when we have little context for the milieu in which he was writing, yet once understood, they illuminate capitalism and what must be changed in order to replace it with a new human society, as no other thinker’s writings can do. We want young people and new people looking for revolutionary ideas to be able to learn and evaluate Marx’s theories for ourselves, not to be misinformed by “Marxists” who are promoting their own theories as superior to his. Many economists including many Marxists point to one of the contradictions of capitalism at present of the huge hordes of money many capitalists are sitting on. This is indeed interesting and has puzzled me for a very long time. Until I myself read Marx and tried to get my head around how this could be. As comrade Bruce Wallace points out on his excellent blog “By 2020 (seven years!) The capitalists will have $900 trillion of financial assets worldwide, compared to $90 trillion of GDP. Yes that’s right they are in massive debt but will have assets ten times the size of world economic output! How can this be possible? Some Marxists suggests that the capitalists have loads of capital (awash in profits, drowning in capital and other aquatic metaphors) and won’t invest because there is no demand. Yes this is the stock Keynesian bourgeois economist’s explanation of crisis. However we have a problem? How is it possible to be in massive debt but to be awash in assets at the same time? Well it isn’t. The projected $900 trillion in assets isn’t real! This represents the massive fictitious capital that has swollen and will continue to swell through the proliferation of financial instruments such as credit default swaps and other exotic financial trickery. In reality things aren’t so rosy. The US capitalists for example are in massive debt and any assets need to be balanced against that. Market Watch reported in August 2010 (which is a bit dated but trends have continued since then) ”According to the Federal Reserve, nonfinancial firms borrowed another $289 billion in the first quarter, taking their total domestic debts to $7.2 trillion, the highest level ever. That’s up by $1.1 trillion since the first quarter of 2007; it’s twice the level seen in the late 1990s”. So is it any wonder I’m starting to question and wonder just a little bit about our own economic analysis of the socialist party and the CWI. As Michael Roberts a Marxist economist who I’ve been following of late who I find has an interesting take on the global financial situation says in a recent blogpost “In my view, we are now in a Long Depression, centred in the advanced capitalist economies but also affecting the emerging capitalist economies. The latter do better because they still have ample supplies of cheap labour available to exploit (well, at least some larger emerging economies do). So absolute surplus value can be increased without Marx's law of profitability applying too strongly. What do I mean by that? Well, capitalists are permanently engaged in the search for value, or more specifically, surplus value. They can get that globally by drawing more of the population into capitalist production. The big issue is how much longer capitalism can continue to appropriate value from human labour power when the workforce globally can no longer expand sufficiently. Ironically, the UK's right-wing City paper City Am put it from the perspective of capital: "People, not commodities, land or even capital, are the ultimate resource of an economy, as the US academic Julian Simon famously put it. Without talented, motivated, skilled and educated individuals, nothing is possible; capital itself is a product of labour. Human ingenuity is able to overcome everything. Malthusians who dream of a shrinking population and who reflexively believe that every country is over-populated are wrong. This is always a lesson that nations suffering from shrinking populations relearn at great cost: all the productivity growth in the world is rarely enough to compensate for the psychological and actual effect of a declining population." More important, more people mean more potential value to be appropriated by capital. But getting more value and surplus value through extending the size of the workforce is increasingly difficult or even impossible in many advanced capitalist economies. Instead, in these economies, capitalists must try and raise surplus value though the intensity of work and through more mechanisation and technology that saves labour i.e. relative surplus value. But that, as Marx explained, brings into operation the law of the tendency of the rate of profit to fall and the ultimate barrier to further accumulation and growth in value (see my post on “ Understanding crisis is crucial to have a chance in understanding the tight turns and longer term trends in capitalism and when the opportunities are best for the workers to go on the offensive. Right now workers are very much on the back foot defending their gains. As capitalism continues to struggle to improve the rate of profit more workers will be encourage into fighting back. Understanding crisis as a Marxist is crucial and taking a serious approach to the study of Marx’s work is the first step towards that. With thanks to my comrade Bruce Wallace and his excellent blog at

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