Can the current economic crisis save captialism?

international | eu | opinion/analysis Wednesday September 28, 2011 19:45 by Paddy Hackett rasherrs at eircom dot net

The law of value

Printing money, currency devaluation, changing interest rates, debt accumulation and public works involve tinkering with circulation.Manipulating the circulation of capital constitutes a superficial remedy that,in the long run, solve nothing while making things worse. The appearances of capitalism (such as the circulation of capital) are mistaken for its essence. The market disguises the real nature of capitalism

The Euro Crisis
Paddy Hackett

The Euro crisis is a manifestation of the current global crisis. The latter is a crisis of profitability generated by the over-production of capital with respect to the existing rate of surplus value. The Euro crisis, a form of over-accumulation of debt by Eurozone countries, is a product of this profitability crisis. The profitability crisis, a manifestation of the law of the tendency of the general rate of profit to fall, is capitalism's periodic way of solving its fundamental problems.This law is the regulator of capitalist development. Without it capitalism would have collapsed long ago and ceased to exist. The law of the tendency of the rate of profit to fall is the central force that maintains capitalism in business. Ironically the bourgeoisie have sought to suppress and even eliminate it. Commentators like Constantin Gurdgiev claim that excess debt is the cause of the problem. Constantin claims that if total debt burden is reduced significantly then economic growth will recover. He, in effect, views excess debt as the source of the problem. He fails to see that excess debt rather than being the source of the problem is a manifestation of the crisis.There is excessive debt accumulation within the world capitalist system. This debt is excessive with respect to the the amount of surplus value being produced. Insufficient surplus value is being produced to allow for the excess debt dissolution. This accumulation of debt instead of promoting the development of the production process is in fact hindering it. Consequently if capitalism is not to self-destruct it must expunge this excess debt by means of enormous technological change. Growing investor distrust in the surplus debt based financial system is a symptom of this. Bear markets and trading volatility are some of the results of this. The over-accumulation of debt distorts and further obscures the real character of capitalism.

In other words the over-production of capital is producing a corresponding over-production of debt. At "the height" of this crisis, 2008, there was an overproduction of capital in the form of an overproduction of commodities (stockpiles of houses, household commodities, cars etc.) together with debt stockpiles. The over-production of debt is a device used by the capitalist class to obstruct the operation of the law of value in the form of the law of the tendency of the general rate of profit to fall. Up to a point debt creation acts as a counter-tendency to this law. The ruling class ironically attempt to prevent capitalism from regulating itself through periodic crises. But it turns into its opposite becoming increasingly an obstcle to the development of capitalism. The contradictions of capitalism now become so antagonistic that the debt mountain constitutes the polar opposite to the law of value. This expresses itself in the form of economic and even political crises. There are only two solutions to this contradiction: A reconstituted capitalism or social revolution.

To resolve the debt problem the rate of surplus value must be increased to such a degree that the amount of surplus value produced is large enough to allow this debt to be wiped out. To achieve this gargantuan task there has ultimately to be enormous technological change entailing a huge spike in the productivity of labour and consequently in the rate of surplus value. Such a revolution entails the meltdown of the production process. This means that "bubble" businesses dissolve leading to the centralisation of capital on an unprecedented scale. Successful capitalist producers are the entrepreneurs who introduce technological advances into the labour process in order in order to make themselves more competitive. This transformation from within capitalism must squeeze excess debt out of the system by eliminating the weaker capitalist enterprises including financial institutions that have, what I might call, a quasi-parasitic character. They are a past and present product of the "financialisation" of the growing contradictory nature of capitalist production. Many of these companies were sustainable because of continuous life-support from excessive credit expansion.

There must be increases in the worker's workload together with large scale cutbacks in public spending. Indeed the cutbacks in public spending are an added device by which many of the weaker businesses are forced out of the market. This,in itself, helps increase the technical composition of capital and thereby the organic composition.The result is an increase in the rate of surplus value and thereby the total surplus value produced.

It is the law of the tendency of the general rate of profit to fall that constitutes the principal underlying dynamic. It tends to effect a revolution in the forces of production. Competition is not the cause of changes in the conditions of production. Competition is the form by which the law of value asserts itself.

The problem is that the bourgeoisie have been endeavouring to neutralise the fall in total surplus value by the excessive expansion of debt. In this way it has succeedeed in sustaining businesses that would either have gone to the wall or never existed. This hinders the development of the forces of production by retarding the development of technology. Competition is the principal form by which this adjustement is achieved. By drowning the economy in debt competition is modified --even neutralised. This "artificial" neutralisation retards the capitalist competitive dynamic that leads to the further development of the productive forces. Consequently a caulron of inflationary bubbles are generated rendering prices higher than they would otherwise be.

The ultimate consequence of the oversupply of debt is a interruption of the organic composition of capital. As debt accumulates and total surplus value production is held back a situation is reached whereby the conditions for dissolving the accumulating debt is diminished. The upshot is a growing debt mountain only dissolvable by the most radical means. The capitalist class is facing precisely this situation now. Consequently the solution to the debt crisis is not simply a matter of manipulating excess debt through it redistribution and restructuring.

Currently the debt problem is being tackled by manipulating the circulation process as opposed to the production process. This mistakenly suggests that the source of the problem is located in the circulation sphere. Movements are afoot to restructure banking and the financial system generally. Banks, interest rates, some money forms, money printing and taxes are forms that function within the circulation process of capital. They have nothing directly to do with the regulation of the global process of production. The relationship between circulation and production is of a reified nature. Furthermore under conditions of debt mountains production and circulation tend to become increasingly divorced from each other. This brings about an unexpected interruption in the process of reproduction of capital. The result: economic and political crises.

The circulation of debt cannot solve capitalist crises. This is because the problem is located within the heart of capitalism itself -the process of production. Consequently the source of the solution is contained within the production process. The illusion that the crisis can be solved by the circulation of debt just means that the solution is mistakenly seen to be located within the process of circulation as opposed to the process of production. But the circulation process is the form by which exchange-value in the form of capital is circulated. Plans to solve the euro crisis through tinkering with the circulation process are doomed to failure because circulation in contrast to production cannot generate value. Playing about with debt within the process of circulation can add nothing to value since, as I indicated, value cannot be generated by the circulation of capital.

Most political interests, including much of mainstream marxism leninism, advocate solutions from within the circulation process. Much of mainstream marxism calls for increased public spending as a way of inflating demand and thereby dissolving the crisis. But this fetishisation of spending, an under-consumptionist economic philosophy, is a utopian demand. It mistakenly suggests that capitalism can be saved from itself by increased spending. This means that no capitalist crisis is ever possible since increases in demand through increased public spending can sort the problem out. This notion is a Keynesian prescription. Ironically this then means that capitalism is not obsolescent since there are no destructive tendencies within it. Such utopian reformism by much of marxism-leninism constitutes an abject apology for capitalism. Much of mainstream marxism and bourgeois politics share a fundamental commonality: serving the interests of capitalism.

These marxist-leninist apologists for capitalism fail to explain where all this increased public spending is to come from. It cannot be just sucked out of the thumb of Zeus. Arbitrarily increased public spending can only mean the use of debt to get rid of debt. This misconception highlightsprecisely why capitalism is besieged by debt crisis. This form of marxism-leninism is nothing less than a form of mysticism involving a superstitious belief in the capitalist state.

It is this very remedy that has been the source of the problem --eliminating the debt crisis by further attempting to increase and redistribute debt. The advocacy of such false solutions highlights an essential ignorance of the nature of capitalist relations. Even if these conditions are realised by the bourgeoisie global economic crises will eventually break out again. Capitalism, especially in its later stages, has an inherent tendency to periodically produce economic crises.

Ultimately capitalist economic crises can only be permanently eliminated by the replacement of capitalism with communism. This entails the abolition of the production process as a valorisation process. Consequently the law of value, a socio-historical law, ceases to exist. In the final analysis communist (not Stalinist) society is the only authentic solution to the problem of economic crises.

Printing money, currency devaluation, changing interest rates, debt accumulation and public works involve tinkering with circulation.Manipulating the circulation of capital constitutes a superficial remedy that,in the long run, solve nothing while making things worse. The appearances of capitalism (such as the circulation of capital) are mistaken for its essence. The market disguises the real nature of capitalism.

Bourgeois experts inform us that the debt crisis can be solved if we use this or that method. Yet none of these offerings directly locate the source of the problem -the production of commodity capital itself. There are almost as many economists as there are proposed bourgeois solutions. Proposed solutions can include fiscal change; monetary reform; banking reform and budgetary change. The current capitalist slow-down is a result not of the inaccessibility of credit but of the falling rate of profit. It is the falling rate of profit that has led to the drying up of credit. The lack of banking activity is not the cause of the crisis.Instead it is the crisis that is the cause of banking activity. The result of the problem is ironically viewed by its apologists as its cause.

Finally given that the source of the contradiction lies within the capitalist production process it is nevertheless the case that modifications to aspects of the circulation can play a subordinate role in the solution to the problem of declining profitability. However the solution is principally found within valorisation itself.