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Saturday, 24 August 2013

Why the underconsumptionists appear to be winning the argument

This is the perception anyway. The underconsumptionist argument detailed by myself and Bruce and Steve Dobbs in various blogs in the last few months has detailed how they as revolutionaries try to explain the crisis. It is clear that this is a popular and highly thought of position certainly within the trade unions anyway. This is a worry and not just for Marxists. If the trade union movement or the labour movement believe in reforming capitalism and that it is simply a lack of demand that is hampering the capitalist mode of production from investing then we are indeed in a very very bad place indeed. I do believe the under consumption position is so wide spread is because it is easy. It is easy to understand and then consider yourself a Marxist if you get it which frankly isn’t hard. You don’t need to read Marx or Lenin or any Marxist economist if you believe that there is no such thing as a falling rate of profit or if you do and just consider it maybe as part of a multi causal cause of a crisis under capitalism then you nod to yourself and carry on This was in fact my position for a long time and due to me not critically thinking and not questioning the position and the economic analysis of my own party I just took this explanation as read. I have now met a fantastic group of Marxists and have now started to root out the causes of capitalist crisis and Marx himself provided us with a brilliant and well thought out explanation and it is an amazement that more Marxists do not and refuse to take this up. I do wonder why. Maybe the implications of what Marx says is too much for some and the status quo is something however much some may detest it maybe just too great to get rid of all together ? But as I say holding a under consumptions view on the cause of the crisis and all crisis's is a quite simple and yet it is not a view that is helpful to the labour movement. Under consumptionism which in affect is a Keynesian idea and as a result is a bourgeois idea and even Keynes was not on the side of the workers so why some bring this into the labour movement I have no idea. Maybe they fear the socialist revolution more than the capitalists themselves? As I say this is an easy position to get to grips with all be it not a Marxist position at all as I shall explain. “For Marxists, capitalism goes into economic slump because profitability drops so much that the mass of profit starts to fall. This leads to capitalists stopping investment in real production. If credit is provided, investors use their money to invest in other assets that are not productive like property or speculating in shares. Thus this capital becomes fictitious. It will not stop the eventual slump but merely delay it. Once enough capital value (of money, labour and plant) is destroyed and profitability is restored, those capitalists that are left will start to invest again and the ‘liquidity trap’ will end. Just as huge dollops of credit will not stop a slump under capitalism; neither will huge dollops of credit revive capitalism, if profitability is not right.... Slumps cannot be avoided under capitalism, because they are necessary to restore profitability when it gets too low.” The laws of motion that Marx identified in the capitalist mode of production, including the Law of the Tendency of the Rate of Profit to Fall (LTRPF), are responsible for booms and slumps and crises. Quite often you will get arguments like this below on the left and must be taken to task as Steve Dobbs a fine comrade and a comrade I have huge respect for has done in his blogs repeatably . “The reality is the capitalist system has reached its limits. In the past, it was able to develop the productive forces at a colossal pace. The recent period of globalization and intensification of world trade reflects the latest efforts of the system to overcome its contradictions. Credit was used to extend the market beyond the limits of capitalism but this has now reached its limits..... While corporations are flush with cash, they are not prepared to invest given the lack of markets but without investment there can be no recovery. This, in turn, adds to a collapse in demand. It is a vicious circle.” The capitalist system has reached an impasse. Sound familiar? It gets better: “Marx analysed capitalism long ago. He explained the contradictions of a system based upon the drive for profit. The capitalists employ workers in order to squeeze surplus value from their labour. This surplus value is then reinvested by the capitalists to make more money which serves to develop the productive forces. However, the barrier to capitalism is capital itself. The outpouring of commodities seeking new markets reaches a crescendo at the height of the boom. However, there comes a point where the limits of the market come into collision with the unlimited production of commodities. This leads to an inevitable crisis of over-production, as witnessed in 2008-9. Everything comes to a complete standstill. The capitalist system is paralyzed, not because people do not want things, but because of a shortage of effective demand, i.e. money to buy the products.” So now the problem is the limits of the market – there is not enough demand for all these commodities produced, so there is overproduction of commodities. This is nonsense. Workers can never afford to buy back the goods they produce, so how can this be a cause of crisis? Overproduction is never in relation to consumer demand, as I explained previously. “A fall in the rate of profit and accelerated accumulation are different expressions of the same process only in so far as both reflect the development of productiveness.... Those economists, therefore, who, like Ricardo, regard the capitalist mode of production as absolute, feel at this point that it creates a barrier itself, and for this reason attribute the barrier to Nature (in the theory of rent), not to production. But the main thing about their horror of the falling rate of profit is the feeling that capitalist production meets in the development of its productive forces a barrier which has nothing to do with the production of wealth as such; and this peculiar barrier testifies to the limitations and to the merely historical, transitory character of the capitalist mode of production; testifies that for the production of wealth, it is not an absolute mode, moreover, that at a certain stage it rather conflicts with its further development.” (Marx, Capital vol 3, Chapter 15, As Marx states, the capitalist mode of production becomes the barrier to itself because of the falling rate of profit, which means that capital can no longer accumulate at the same pace. This is rooted in production, not the market. In fact, Marx explicitly cites the falling rate of profit as the underlying cause of over-production and crises: “On the other hand, the rate of self-expansion of the total capital, or the rate of profit, being the goad of capitalist production (just as self-expansion of capital is its only purpose), its fall checks the formation of new independent capitals and thus appears as a threat to the development of the capitalist production process. It [the falling rate of profit] breeds over-production, speculation, crises, and surplus-capital alongside surplus-population.” (Marx, Capital vol 3, Chapter 15, Clearly, having large amounts of debt in itself does not cause crisis. Remember, the highest percentage of debt to GDP, 250%, the British government had was after WW2, but it was able to pay off most of the debt over the proceeding decades on the basis of the high rate of profit. With thanks and links and references to comrade Steve dobbs who blogs at

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