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, http://www.marxists.org/archive/marx/works/1894-c3/ch15.htm) 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, http://www.marxists.org/archive/marx/works/1894-c3/ch15.htm) 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. http://www.google.com/url?q=http%3A%2F%2Fsocialismiscrucial.files.wordpress.com%2F2013%2F08%2Fuk-debt.jpg&sa=D&sntz=1&usg=AFQjCNFxiv0oIittK6-hP5A1Ey7cg2wT6w With thanks and links and references to comrade Steve dobbs who blogs at http://wp.me/p2NvOP-36

Talking of under consumption

There is many theories for the causes of the current financial crisis we are living through and i have mentioned many myself on this blog. Is there one theory or many ? Its a interesting question and i’m currently lookingat all to see if any fit. One theory which is popular and is pushed by many is the theory of under consumption. This theory is a keynsian analysis of crisis and thus is a bourgeois theory i’m afraid. Unfortunatly even some Marxists stand by this theory and take it into the workers movement. In Karl Marx’s excellent work we can tell that marx many years ago dismissed this theory as a cause of crisis. Marx writes in volume 2 of theories of surplus value in reply to a question of under consumption of the mass’s being the cause of crisis. “The word over-production in itself leads to error. So long as the most urgent needs of a large part of society are not satisfied, or only the most immediate needs are satisfied, there can of course be absolutely no talk of an over-production of products— in the sense that the amount of products is excessive in relation to the need for them. On the contrary, it must be said that on the basis of capitalist production, there is constant under-production in this sense. The limits to production are set by the profit of the capitalist and in no way by the needs of the producers.” (p.527) “Defined more closely, this means nothing more than that too much has been produced for the purpose of enrichment, or that too great a part of the product is intended not for consumption as revenue, but for making more money (for accumulation): not to satisfy the personal needs of its owner, but to give him money, abstract social riches and capital, more power over the labour of others, i.e., to increase this power.” (ibid p.5 Overproduction happens because production is for profit In Mick brooks’s excellent piece on understanding the crisis he mentions under consumption as a theory i quote below “ Engels, in his chapter on ‘Production’ in Anti-Duhring, is a stern critic of Duhring’s under-consumptionist interpretation of capitalist crisis. He points out that the restricted consumption of the masses is a permanent feature of capitalism. “But unfortunately the under-consumption of the masses, the restriction of the consumption of the masses to what is necessary for their maintenance and reproduction, is not a new phenomenon. It has existed as long as there have been exploiting and exploited classes. Even in those periods of history when the situation of the masses was particularly favourable, as for example in England in the fifteenth century, they under-consumed. They were very far from having their own annual total product at their disposal to be consumed by them. Therefore, while under-consumptionism has been a constant feature in history for thousands of years, the general shrinkage of the market which breaks out in crises as a result of a surplus of production is a phenomenon only of the last fifty years;” (pp. 395-396). But if under-consumption (in the sense that the workers can’t buy back all the commodities they produce) is a permanent condition of capitalism, then how on earth does capitalism survive, let alone develop? What happens to this excess production (the surplus)? It is quite true that workers can’t buy all the value they produce. Surplus value ends up, of course, in the hands of the capitalist class. This is just another way of saying capitalism is a system where production is for profit. This under-consumption, this inability to realise commodities already produced is really only a potential problem. It would only be a real problem if all the capitalists were to instruct their workers to make workers’ wage goods. In that case the workers would be unable to buy those goods. But why should we assume that this will happen? The workers haven’t got the money to buy the goods, because the capitalists have kept some of it. That is their surplus value. What do the capitalists do with it? There are two possibilities: either they consume the entire surplus unproductively (very rare in practice). In this case the surplus is still spent. It is spent by the capitalists on themselves. The alternative is that the capitalists invest it. If they invest it, that also ‘solves’ the problem of under-consumption for the time being – because the surplus has now been spent on capital goods. Not all capitalists oversee the production of goods they expect to be sold to the workers. Iron and steel capitalists never sell their products to the masses (though, of course their output enters into consumer goods targeted at workers). They are producing capital goods and they know it. Other capitalists specialise in the production of ‘luxury’ goods for consumption by capitalists. Marxists call the products of this sector elements of uncapitalised surplus value. For both these sections of the capitalist class their customers are exclusively other capitalists. The demand for capital goods, for workers’ consumption and for luxury goods is provided by the incomes of the classes generated in the production process, and by the investment decisions of the capitalist class. Of course how much you ‘need’ is determined under capitalism by how much money you’ve got. We expect the relevant sort of goods in roughly the right proportions to meet this purchasing power to be provided by the usual operation of the market. Capitalists in search of profit try to produce commodities aimed at meeting a need. (Actually capitalists produce nothing. Workers produce commodities under the instruction of capitalists. Please accept this as shorthand.) If nobody wants the good, nobody will buy it and the capitalist will make a loss. And purchasing power is derived from the revenues from capitalist production. (Getting the proportions of the material elements of production right is a real problem in an unplanned system..) There is no reason at all, at this level of analysis, why all these products cannot be sold to people (workers and capitalists) who have the money to pay for them. We should no more automatically expect capitalism to produce too many workers’ consumption goods than too many luxury goods or too many capital goods. So there is sufficient purchasing power in the economy to buy all that is produced. And the goods should be in place to satisfy this purchasing power. There seems to be no over-production/under-consumption problem, since markets exist for the surplus. There is always someone out there to buy these products and someone else to sell them. The cause of capitalist crisis must be sought elsewhere. If the crisis were really caused by the ‘restricted consumption of the masses’ we would expect it to be manifested by an over-production of consumer goods relative to capital goods. In fact this is by no means the usual case in actual capitalist crises. Most crises have actually begun in the capital goods sector. If the crisis were caused by under-consumption we would expect the workers to suddenly cease providing an adequate market for the capitalists, so triggering the crisis. Actually workers’ consumption usually falls as they are laid off as a result of the crisis, further shrinking markets. Their restricted consumption is thus a symptom of the crisis, not its cause. If capitalists generally accumulate a great part of their surplus, then we can expect the capital goods sector to grow relative to consumer goods in the economy. But the effect of this accumulation of capital is to make the workers more productive and therefore make the problem of over-production potentially more severe in the future” Marx indeed was quite fierce in his ideas that under consumption was not the cause of crisis but a result if you like. In Capital Volume II, Marx pointed out that towards the end of the boom, as it was on the point of toppling over to bust when there was relatively full employment, was the time when workers were likely to make gains in real wages and increase their share of national income. “It is a pure tautology to say that crises are provoked by the lack of effective demand or effective consumption…If an attempt is made to give this tautology the semblance of greater profundity that the working class receives too small a portion of its own product and that the evil would be remedied if it received a bigger share if its wages rose, we need only note that crises are always prepared by a period in which wages generally increase and the working class does receive a greater share in the part of the annual product destined for consumption.” (p. 48 Marx was clear that the most important law of political economy is the Law of the tendancy of the rate of profit to fall. This was backed up twice in two places it was that important marx felt.  Marx made this statement twice, in the Grundrisse  written in 1857-8: and in almost exactly the same words in the 1861-3 economic manuscripts (Collected Works Volume 33, p.104): “This law, and it is the most important law of political economy, is that the rate of profit has a tendency to fall with the progress of capitalist production. Some say this is a tendancy and only a tendancy but Marx took a different view to how we see tendancies today For those that the law is simply a tendency, suggesting that it doesn’t matter. “It is a tendency and not a law, as Marx emphasised,” in the section Tendency always applies that for Marx all economic laws take the form of a tendencyFor Marx a tendency has the meaning of a force at work, not a statistical trend. For instance: “Such a general rate of surplus-value — viewed as a tendency, like all other economic laws — has been assumed by us for the sake of theoretical simplification.” (Capital Volume III p.275) with thanks and references Mick Brooks http://www.karlmarx.net/marx-crisis-theory/marxisttheoryofcrisispartone Karl Marx capital volume 2 and 3 Karl Marx theories of surplus value volume 2

The long term view of capitalist development or degeneration

There is much talk in the financial press and among economists of the risk that the major capitalist economies could be slipping back into recession. Economic data for the US and Europe are indicating a significant slowdown in economic growth and a weak recovery in employment and investment. Is this just a temporary blip or does it represent a significant downturn? I would like to answer that by returning to the long view. The long view I’d describe is Karl Marx’s law of the tendancy of the rate of profit to fall which I believe is the underlying cause of the capitalist crisis and indeed is the cause of most if not all crisis’s and is Marx’s 3rd law of capialistmotion which we must look at to understand the changes in capitalism and how we stand today. Just taking the post-war period, there was a Golden Age of profitability from 1946 to 1965 when the rate of profit (ROP) was high and even rising. During this period, economic recessions were few and relatively shallow. Then there was a period of crisis when profitability fell steadily until it reached a nadir in 1982. During this period, economic recessions were more frequent, violent and deep i.e. 1969-70, 1974-5 (the first simultaneous post-war economic recession) and 1980-2 (the deepest recession since the 1930s). After 1982 there was a recovery in profitability right up to 1997. This was the period of so-called neoliberalism that many have argued constitutes a completely new structure of capitalism based on ‘financialisation’ and neoliberal policies of privatisation and weakening of the labour movement (see my comrade Steve Dobson’s excellent post “neo liberalism a new stage of capitalism” a http://socialismiscrucial.wordpress.com/2013/07/25/neoliberalism-a-new-stage-of-capitalism/ There was only one significant economic slump in 1990-1. What next? Once the ROP starts falling, it takes a few years before an economy moves into recession. The ROP has usually been falling for three to four years before that happens. On that basis, the US economy will not drop into a new recession until about 2014 onwards. The debate continues among Marxist economists, but if the underlying cause of capitalist crisis is a falling ROP, then a new slump is unlikely to develop until 2014. But it confirms that even the Great Recession of 2008-9 was not big enough to restore a sustained rise in the ROP. That is because it has not destroyed enough value in accumulated capital or in the excessive build-up of debt (fictitious capital) before 2007. More destruction of value is necessary to do that. That there is still much fictitious capital in the system is revealed by the value of the stock market relative to a measure of the real value of the companies the stock prices represent. James Tobin, the leftist economist, developed a measure to tell if the stock market was overvalued or not and whether it would be heading down. It is called Tobin’s Q, measuring the stock market’s value against the replacement value of all the assets of the companies in a stock market index –for the US S&P-500 stock index (the top 500 companies It is difficult to fully predict how the economies of the world will develop by focusing on Marx’s works in volume 3 of capital and especially the chapters on the law of the tendency of the rate of profit to fall are crucial to understanding crisis I feel. I am studying all sorts of facts and figures trying to get to grips with crisis and Marx understands there are many views out there with lots of figures which prove something different. We must be careful to pay attention to all sides of the debate and be sure to uphold the law of Marx who was sure of the cause of capitalist crisis’s despite not finishing volume 3 all his work was there if not published it was in draft form ready for Engel’s to publish and edit and place in order the content was always there. Marx didn’t call this law the most important in political economy for no reason at all. Let’s get with the programme and take up Marx’s ideas again and apply them to 2013.

Reclaiming Marx the need for a debate on the current capitalist crisis

I am increasingly hoping we get a debate on the current cause for the capitalist crisis. I think within the CWI the debate is needed as there is some confusion over how we understand the current crisis. There has been a statement put out late last week in regards to Bruce Wallace of the Scottish section of the CWI. I’ve been told this statements puts the record straight I think it does anything but that. The statement is full of inaccuracies and smears on comrade Bruce sadly. The CWI seem to want to have the debate on the cause of the crisis but on their terms and seem confident they have the right ideas which I am still unconvinced of. My regional full timer the other day tried to explain the CWI’s position and what they see as the cause but I was left feeling less than convinced by the ideas I was being told. In the CWI statement they statee : ‘’We are confident that a calm and thorough debate will show that the political approach of the CWI leadership is correct on these issues. And that the position of Bruce Wallace is a one-sided, dogmatic interpretation of Marxism and is therefore false.’’ If the CWI are so confident I am not sure still till this day why Bruce has been banned from attending the CWI school this summer in Belgium. He wished to debate the crisis and for me someone who attended last years school I would have thought this would be a excellent opportunity to debate the ideas of marx and if we have the right analysis or not. I see no problem withallowing Bruce to go and debating with others there. Even the sects have picked up on this debate now in the weekly worker the CPGB line up with the CWI in attacking Bruce sadly. Bruce explains what debate should be all about here “‘’Debate is a method of interactive and representational argument. Debate is a broader form of argument than deductive reasoning, which only examines whether a conclusion is a consequence of premises, and factual argument, which only examines what is or isn’t the case, or rhetoric, which is a technique of persuasion. Though logical consistency, factual accuracy and some degree of emotional appeal to the audience are important elements of the art of persuasion, in debating, one side often prevails over the other side by presenting a superior “context” and/or framework of the issue, which is far more subtle and strategic. The outcome of a debate depends upon consensus or some formal way of reaching a resolution, rather than the objective facts as such. In a formal debating contest, there are rules for participants to discuss and decide on differences, within a framework defining how they will interact. Debating is commonly carried out in many assemblies of various types to discuss matters and to make resolutions about action to be taken, often by a vote. Deliberative bodies such as parliaments, legislative assemblies, and meetings of all sorts engage in debates.’’ This form of debate is more in keeping with bourgeois notions of democracy. In the Marxist movement the actual method of reaching correct conclusions in relation to the waging of the class war is ‘’polemic’’. Polemic is different from debate as it is a clash of completely opposed ideas. A polemic is a contentious argument that is intended to establish the truth of a specific understanding and the falsity of the contrary position. Polemics are mostly seen in arguments about very controversial topics. The art or practice of such argumentation is called polemics. A person who often writes polemics, or who speaks polemically, is a polemicist or a polemic. The word is derived from the Greek πολεμικός (polemikos), meaning “warlike, hostile”, which comes from πόλεμος (polemos), “war”.” I would like to see this debate properly take place comrades have told me there are more important things to focus on but what could be more important than understanding the current crisis and knowing how to react best to it ? I think many have criticised Bruce and his blog for its so called tone and having a go at other comrades in the party whilst I can understand Bruce’s frustration in the lack of a debate it hink talking on the tone and his so called behaviour is a red herring and miss’s the politics which is what this has got to be allabout. I’ve never met Bruce but I’ve never had a problem with him personally I find him a well read good thinking Marxist who has stayed loay l to the CWI. I think we should value good well read Marxists like Bruce who can offer us insight into marx and help others learn in the process. I certainly don’t think his tone is rude or anything like that it’s a question of how you interpret his blog I find it a mine of information and I’ve learnt much from it already. The CWI accuse Bruce of a one sided dogmatic approach but this is the same approach of Marx so I am not sure what they mean by that Bruce is simply returning marx from the grave to help us today with the current crisis and to help us understand the system in which to over throw it. Marx didn’t call the law for the tendancy for the rate of profit to fall the most important political economic law for nothing I think we should take marx’s works very seriously afterall we claim marx to be right so lets look again at his works especially capital. ‘’This law, and it is the most important law of political economy, is that the rate of profit has a tendency to fall with the progress of capitalist production.’’ Grundrisse The MOST IMPORTANT LAW! ‘’So where does this tendency for the general rate of profit to fall come from? Before this question is answered, one may point out that it has caused a great deal of anxiety to bourgeois political economy. The whole of the Ricardian and Malthusian school is a cry of woe over the day of judgement this process would inevitably bring about, since capitalist production is the production of profit, hence loses its stimulus, the soul which animates it, with the fall in this profit.’’ Grundrisse Comrades must have the right to raise disagreements at anytime the party itself doesn’t have the right to say when is right and when isn’t to raise concerns. Surely the summer when there is traditionally a quieter time could be a good opportunity to discuss this and the nature of the capitalist crisis. Those who have confidence in their ideas surely have nothing to fear lets have this debate out in the open for all members to learn from. ‘’It is ridiculous to say that Bruce Wallace must first raise such a debate in the Scottish Section before it can be discussed elsewhere. This is not a Scottish issue, it’s an International issue of our analysis of the current crisis and where it is sorely lacking in Marxist terms. We should, as an organisation internationally welcome the discussion and grow from it, rather than dodging the issue and hoping it will go away. If we cannot discuss Marxist analysis of the economic crisis openly and confidently before the membership and the wider working class then frankly what can we do?’’ With thanks to bruce Wallace and his excellent blog which you can read at http://69.195.124.91/~brucieba/