Editorial
The Central Question: Who Should Pay and
Who Should Receive?
The financial crisis which began in 2007
and came to a head in October 2008 is now developing into a full-fledged
economic crisis. In December alone Canada lost 129,000 jobs, the vast majority
being full-time manufacturing jobs. In the same month the U.S. lost 598,000
jobs, while China lost 10 million jobs. There is a growing consensus that the
coming depression will rival that of the 1930s, while some economists are
predicting that it will be the most severe economic crisis in history. It will
certainly be the broadest crisis as it has already impacted heavily on every
country in the world, unlike the Great Depression of the 1930s which affected
mainly the industrialized countries.
After two and a half decades of
declining real wages and cutbacks to social spending in the name of
“competitiveness” and “fiscal responsibility”, the governments of the U.S.,
Canada and most European countries have found literally trillions of dollars to
hand over to bankrupt banks, insurance companies and large manufacturing
companies. These handouts are being made in the name of “stimulating” the
economy and lessening the impact of the crisis. However, nothing could be
further from the truth. Rather, the handouts are being made to save a handful
of super-rich capitalists from the ruin which is an inevitable consequence of
their own economic system.
A great cover-up is being perpetrated on
the people to hide the real source of the problem. Some, including U.S.
president Barack Obama, are blaming the “excessive greed” of a few financiers.
Others are blaming the deregulation of financial markets under presidents
Clinton and Bush. Social democrats and trade union leaders are demanding a
return to Keynesian economic policies, suggesting that straying from those
policies is the source of the problem. However, these are all lies to fool the
gullible.
Economic crises are not the result of
bad fiscal policies or poor economic planning. Nor can they be prevented by
good fiscal policies and wise economic planning. Economic crises are inherent
to the capitalist system and are caused by the underlying flaws in that system.
In particular, the cause of all capitalist economic crises are a combination of
the anarchy of capitalist production, the tendency for profit levels to decline
due to the increasing organic composition of capital and the tendency for the
richer to get richer while the poor get poorer. At best, fiscal measures can
delay the onset of a crisis, but the trade-off is that the crisis will be that
much more severe when it finally does arrive.
Anarchy of production refers to the fact
that, while production is highly planned at the level of individual plants and
corporations, there is no overall planning of production. Each capitalist
corporation plans its production in accordance with the prices and profits of
the preceding accounting period. Investment in new productive facilities flows
into those sectors that are most profitable, resulting eventually in an
overcapacity of productive capability and a glut of those commodities on the
market.
The tendency for profits to steadily
decline is based on the fact that labour is the only
source of surplus value and, therefore, the only source of capitalist profits.
However, competition is constantly driving capitalists to reduce their labour costs by increasing labour
productivity, primarily through investment in labour-replacing
technology. Profit is defined as net income divided by the total investment in
capital (buildings and machinery) and, in general, the dividend is increasing
faster than the nominator, resulting in declining rates of profit. This
tendency can be temporarily reversed through new methods of organizing work and
the opening of new fields of production, as well as through the destruction of
competing capitalists through war and, increasingly, through the use of the
state to forcibly transfer wealth from the poor to the rich. However, these
reversals are usually very temporary, typically lasting only a decade or so.
Then the inexorable decline in the rate of profit reasserts itself. The
policies of neo-liberalism which were adopted in the mid-1980s created a period
of rising rates of profit which lasted more or less from 1993 until 2007. As
soon as that trend ended and the rate of profit began to decline again, the
entire capitalist system went into crisis.
The third feature of capitalism – the
richer getting richer while the poor get poorer – is the most serious cause of
the crisis and the most difficult for the capitalist system to address. The
increasing concentration of wealth in the hands of a smaller and smaller
section of the population is a constant feature of capitalism which results in
a steadily shrinking market for commodities at the same time that productive
capacities are increasing. The shrinking of the market is offset to some extent
by the decline in prices of some commodities due to increasing productivity and
increasing competition. However, statistics show that real wages peaked around
1975 and have been in decline ever since. Both relative and absolute poverty
have increased steadily, especially since the adoption of neo-liberalism, which
is essentially a policy whereby the most powerful monopolies increase their
profits at the expense of everyone weaker than them – workers, peasants,
smaller capitalists and even smaller nations. However, this growing relative
and absolute impoverishment of the vast majority of the world’s people also has
a revolutionary aspect. Sooner or later people are going to say “Enough!” and
will begin looking for alternatives to capitalism.
The “solution” to the crisis being
proposed by the capitalists and their states is to take money from the people
and give it to the rich – the bankers, financiers and big manufacturing
capitalists. This is their answer to the question: “Who should pay and who
should receive?” If one understands the causes of capitalist crises, it is not
that difficult to figure out that this approach will not solve the problem.
Rather, it will merely make the crisis worse and prolong any recovery by
further impoverishing the people and further constricting the market for
commodities.
On the other hand, reversing the
equation has definite possibilities. There is, of course, an issue of fundamental
justice that those who caused the problem should pay for it, but more
importantly, making the rich pay for the crisis that their system has caused is
the only solution that makes economic sense. Making the rich pay means
transferring wealth from the rich to the workers and the poor. It means raising
wages, increasing spending on education, healthcare, social assistance and
other social programs. This is the only way to eliminate the mountains of
surplus commodities on the market and put all of the laid-off workers back to
work. It is the only viable way out of this crisis.