Yossi Schwartz, ISL the section of the RCIT in Israel/Occupied Palestine, 29.08.2022
When we speak on the crisis of capitalism, we should be clear that there is a periodical economic crisis and there is the general-historical crisis of the world capitalist system. The two crises are connected but are not the same.
Marx wrote that capitalism, driven by its three laws, accumulation of capital, concentration of capital and increasing misery of the working class and other popular classes would come to revolutionary crisis, paving the way for the transition to socialism. There are two basic ideas in Marx’s analysis:
1. Capitalist crisis is an expression of the underlying basic contradiction of capitalist society; the social character of production and the private character of appropriation and consequently the tendency of boundless, rapid expansion and overproduction on the one hand, and the limitations of consumption on the other hand.
2. The internal contradictions involved in the tendency of the rate of profit to fall, find expression in crises.
These two ideas are closely interconnected, they are not two alternative theories between which we have to choose, they are two aspects of one clear-cut economic theory. A theory of crisis, to be satisfactory, has to explain the trade cycle, the regular periodical alternation of booms and slumps, both the fact that for some time a relative equilibrium, a certain proportion between the various branches of production, between supply and demand, is established and the fact that this equilibrium cannot be maintained and breaks down suddenly and violently. Therefore, neither under consumption nor the anarchy of production in itself can be regarded as an explanation of the crisis. Under consumption and the anarchy of production are chronic facts in capitalist society while crises recur periodically. Thus, the economic crisis is the outcome of overproduction.
Capitalism is distinguished from all previous systems of production by the continuous, rapid growth in the productivity of labor which is reflected in the steady growth of the organic composition of capital, in the growing mass of “dead labor” put into motion by living labor.
The recurrence of economic crises every few years is an undisputed fact of capitalism, yet bourgeois economists explain each successive crisis as a singular event, usually attributed to the subjective feeling of insecurity by the population and/or of government wrong regulation of the economy, but not to the capitalist system. They accepted the dogma, first pronounced by J.B. Say and then adopted by Ricardo, that total demand always equals total supply, that production creates incomes equal to the values produced.
Marx replied to these priests of capital that the dual character of a commodity as use-value and value appearing in exchange, involves the possibility of crisis. The fact that commodities are useful, needed to satisfy human wants, does not guarantee that they are saleable at prices corresponding to their values and realizing the surplus value which alone makes production worthwhile from the point of view of a capitalist.
For Marxists, the tendency to crisis is inherent in capitalist accumulation, an expression of the fundamental contradictions of capitalism. Result of the law of the falling rate of profit and to the lack of planning leading to overproduction and thus to a crisis. In Chapter XIV of the 3rd Volume of Capital. Marx held that there is a general tendency for the rate of profit to fall because of the greater quantity of constant capital in production (plant, machinery, raw material, etc.) and the relative quantity of variable capital, i.e., that part spent on wages.
For the explanation of the crisis, it is obviously not essential that the rate of profit should actually fall from cycle to cycle; Marx was not dogmatic about this thesis. He wrote:
“The law therefore shows itself only as a tendency, whose effects become clearly marked only under certain conditions and in the course of long periods”[1] He also said: “And how does the bourgeoisie get over these crises? On the one hand, by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented” [2]
These days this tendency of the falling rate of profit is fully in operation and unlike the crisis of 2007-8 it operates in China as well.
When the capitalist system was operating on competition among small firms the periodical economic crisis removed the inefficient companies that wasted labor power. Even then an economic crisis occurred when capitalists were unable to sell their commodities without incurring substantial losses of profit.
These days the outlook has darkened significantly since April,” said Pierre-Olivier Gourinchas, IMF Economic Counsellor and Director of Research. “The world may soon be teetering on the edge of a global recession, only two years after the last one” [3]
The aim of capitalist production is not consumption as Adam Smith argued but the accumulation of capital through the production and appropriation of surplus value. The sale of commodities represents the reconversion of the capitalist’s expanded capital into the form of money with which to renew the process of capital accumulation. The process of accumulation of capital has led some countries to the level of imperialism. Imperialism is characterized as Lenin wrote in “imperialism the highest stage of capitalism” the deepest economic foundation of imperialism is monopoly. This is capitalist monopoly, i.e., “monopoly which has grown out of capitalism and which exists in the general environment of capitalism.” It is a stage of financial monopolies.
Lenin observed in this book that capitalist nations had avoided this crisis by expanding the pool of workers they exploited. Capitalism, he argued, “had escaped its three laws of motion through overseas imperialism. The acquisition of colonies had enabled the capitalist economies to dispose of their unconsumed goods, to acquire cheap resources, and to vent their surplus capital.”
The second essential feature of capitalism Lenin pointed out is that “monopolies have stimulated the seizure of the most important sources of raw materials, especially for the basic and most highly cartelized industries in capitalist society: the coal and iron industries. The monopoly of the most important sources of raw materials has enormously increased the power of big capital, and has sharpened the antagonism between cartelized and non-cartelized industry“
Thirdly Lenin wrote in this book “Monopoly has sprung from the banks. The banks have developed from modest middleman enterprises into the monopolists of finance capital“
Fourthly, “Monopoly has grown out of colonial policy. To the numerous “old” motives of colonial policy, finance capital has added the struggle for the sources of raw materials, for the export of capital, for spheres of influence, i.e., for spheres for profitable deals, concessions, monopoly profits and so on.”
This is no more developing capitalism but a parasitic decaying capitalism.
Monopoly capitalism is an obstacle to the further growth of the means of production. “Nevertheless, like all monopoly, it inevitably engenders a tendency of stagnation and decay. Since monopoly prices are established, even temporarily, the motive cause of technical and, consequently, of all other progress disappears to a certain extent and, further, the economic possibility arises of deliberately retarding technical progress” [4]
“We now have to examine yet another significant aspect of imperialism to which most of the discussions on the subject usually attach insufficient importance. One of the shortcomings of the Marxist Hilferding is that on this point he has taken a step backward compared with the non-Marxist Hobson. I refer to parasitism, which is characteristic of imperialism” … The income of the rentiers is five times greater than the income obtained from the foreign trade of the biggest “trading” country in the world! This is the essence of imperialism and imperialist parasitism” [5]
There are periods even in the age of imperialism that the rate of profit rises. Joseph M. Gillman in his analysis during the economic boom after WWII when the imperialists built the destroyed means of production observed the events in America and reached the conclusion that while the rate of profit was falling it is now rising. He wrote: “Whereas for the years, before about World War I the historical statistics seem fully to support these theories of Marx, after that war the series studied appear generally to behave in contradiction to the Marxist expectations” [6]
According to the priests of capitalism, in a recession, we can expect a fall in the inflation rate due to lower demand and lower economic activity. Thus, according to them, the low rate of inflation in times of economic crisis is the result of the following factors: Firms have unsold goods. Therefore, they try discounting goods to get rid of their excess stock, Lower wage growth. As unemployment rises and there is more competition for job vacancies, it is harder for workers to bargain for higher wages. Unemployment reduces wage inflation, which has a prominent impact on headline inflation and results in lower commodity prices. A global recession reduces demand for commodities and therefore reduces the price of commodities – leading to lower cost-push inflation. The prices of houses tend to fall due to lower demand.
But what happens when the robbery of the semi-colonies is not sufficient to keep the high profit as it is happening these days? The capitalist will try to force the working class and the other popular classes to absorb the crisis by among other things inflation which will open much sharper class struggle. What we have is unemployment, high inflation, high prices of houses, a high rate of mortgage that shows that the so-called capitalist science of economy is a nonsense poor ideology.
Add to this the crisis of ecology, the plagues and the use of the Covid 19 for the capitalist counter revolutionary policy, the growing tension between the two imperialist camps the Western imperialists on one side and Russia and China on the other and what we have is the economic crisis within the general crisis of capitalism.
General crisis of capitalism is not a final crisis of capitalism as the Stalinist claimed between 1928 to the middle 1930s capitalism survived WWII and even had a boom after the war. A boom that buried for some years Marx theory of the historical crisis of capitalism. Now is the time to use this term once again.
We can learn some lessons from the decay and fall of the Roman empire and the feudal system.
The fall of the Roman Empire
In the first century AD Rome reached its highest stage. Then it declined and rotted for three centuries. Some bourgeois historians claim that Rome fell because of the barbarians (Visigoths, Ostrogoths, Vandals, Huns, Franks, and Alans) in the words of Andre Piganiol: “Roman civilization did not die a natural death. It was murdered” [7] Others claim that it failed because of the corrupted and even insane rulers.
But these aspects rested on the decline of Rome’s economy. The Roman ruling class reached the limit of getting new slaves, the peasants who joined the legions lost their lands to the rich Romans and did not feel any loyalty to Rome but only to their commanders. Another factor was the loss of arable land. The growth of the Roman Empire coincided with the environmental prosperity of the Mediterranean basin from the 3rd century BC until the middle of the 2nd century AD. This period of suitable environmental conditions is called the “Roman Climate Optimum”, which led to population growth and economic prosperity. The environmental conditions started to deteriorate around 150 AD. The climate became cold and dry, which had adverse effects on agriculture. During the 3rd century, and until the 6th century, a combination of severe inflation, barbarian invasions, debasement of the currency, civil wars, and destruction of farms, crops and cities all forced administrators to get more taxes from people. That, in turn, put a lot of strain on people who couldn’t produce crops due to those problems.
In addition, available workers grew scarce, so taxes had to be reduced, which resulted in economic problems. Depleted soil due to over-cultivation, inequality between the rich and the poor, detachment of local elites from public life, and economic recession as a result of overreliance on slave labor. In addition, the population suffered from the plague of The Antonine also known as the Plague of Galen (after the doctor who described it), decimated the Roman Empire. It was brought to Rome by armies returning from western Asia, causing fevers, skin sores, diarrhea and sore throats.
The End of the Feudal System
The Dark Ages were a time of chaos and lawlessness, as various warlords sought to fill the power vacuum left by the collapse of the Roman Empire. Barbarians roamed the countryside, pillaging as they pleased. Castles provided a powerful defense and a pillar of stability that the people could rally around. The price was their freedom. The plight of the peasant was to toil away in the dirt, only for the lord to take a portion of his produce and provide nothing in exchange except the promise of protection.
What Caused the Downfall of Feudalism?
For all its flaws, feudalism was the system that brought Europe out of the Dark Ages and into something approaching order. The rebellion of the nobility in the 13th century against the king led to the Magna Carta that limited the power of the king. Another important element was the crusade that brought to Europe new technologies and products from the Arab East. The growth of the bourgeoisie was riding on the back of the rebellious peasants, results of the feudal relationship of production that blocked the road to capitalism, and wars like the 100 years’ war. In 1346, the ninth year of the Hundred Year’s War between England and France, King Edward III’s forces faced a much larger French army. However, the English had a new weapon: the longbow. The bubonic plague known as the black death, tore through the continent, inflicting unprecedented death and suffering. Such a cataclysm was bound to shake European civilization to its very foundations. The plague inflicted a terrible toll on the populations of Asia and Europe. China’s population was reduced by nearly half between 1200 and 1393, probably because of the plague and famine. Some historians estimate that 24 million Europeans died of the plague—about a third of the population. The deaths of so many people speeded changes in Europe’s economic and social structure, which were already in stagnation and which contributed to the decline of feudalism. Trade and commerce slowed almost to a halt during the plague years. As Europe began to recover, the economy needed to be rebuilt. But it wouldn’t be rebuilt in the same way, with feudal lords holding most of the power. After the plague, there was a shift in power from nobles to the bourgeois. In addition, many peasants and some serfs abandoned feudal manors and moved to towns and cities, seeking better opportunities. This led to a weakening of the manor system and a loss of power for feudal lords. The general crisis of the feudal system led to the democratic bourgeois’ revolutions.
The general-historical crisis of the capitalist system began in WWI that was an expression of the rebellion of the forces of production against the capitalist-imperialist relations of production. We are more than a century later in history and unless the working class and the popular classes will kill the imperialist system it will kill many of us.
Rosa Luxemburg was wrong when she said “socialism or barbarism as happened in Rome”, because WWIII is likely to kill humanity unless we will kill the imperialist system.
Endnotes:
[1] Capital, Vol.III, Chap.14
[2] The communist manifesto
[3] https://news.un.org/en/story/2022/07/1123342
[4] Lenin imperialism the highest stage of capitalism
[5] Ibid
[6] Joseph M. Gillman: The Falling Rate of Profit (Cameron Associates) New York, 1958
[7] Histoire de Rome (1934)