Socialist Studies Socialist Studies

The Capitalist SystemIs In Crisis

Is Capitalism in Crisis?

Capitalism is in political crisis. It is not socialists who are saying this but a long line of political and economic commentators. The background to this loss of nerve was the economic and financial crisis of 2007-2008 which undermined economics and its claim to understand the profit system.

In 2012 The FINANCIAL TIMES launched its “Capitalism in Crises” series and this pessimism has just carried on with economists like William Hutton (BRITISH CAPITALISM IS BROKEN) and Robert. B. Reich (SAVING CAPITALISM) writing articles and books on how to save capitalism through the enactment of this or that reform while warning that political consequences in doing nothing will be dire.

There is as slow but discernible disenchantment with the market to deliver prosperity for everyone. The economic crisis of 2007-2008 has led to austerity programmes being imposed on millions of workers, there have been a move towards very insecure part-time employment and the uncertainty of the so - called “gig-economy”, a difficulty by workers to combine in trade unions to improve pay and deteriorating working conditions. And it has also been said by some economists that children today will be worse off than their parents (Each Generation Will be better off? Think Again, GUARDIAN, 14th February 2016). The promise of capitalism to work in the interest of all society has proven to be an illusion.

Instead of believing that there is no alternative to capitalism some workers are now trying to find an alternative. And in all this questioning and discontent Marx is now being read again outside socialist circles. With economic liberalism just as discredited as Keynesianism and Monetarism the search for alternatives is now high on the agenda. And one alternative that has never been tried is socialism; the common ownership and democratic control of the means of production and distribution by all of society.

Trying to defend capitalism

So it is understandable that there is an attempt to salvage the reputation of capitalism and present it in a good light. A typical example is the article “The Left is deluded to think that the capitalist system is in crisis” (DAILY TELEGRAPH 17th August, 2017) written by the Tory MP, Kwasi Kwarteng.

Kwasi Kwarteng is a market fundamentalist with his head buried deep in the works of the Austrian economists, F.A. Hayek and Ludwig von Mises. He is also joint author with a group of Tories who told workers in Britain that they were lazy and unproductive. The book, BRITANNIA UNCHAINED - GLOBAL GROWTH AND PROSPERITY, said that workers in Britain were among "the worst idlers" in the world preferring a "lie-in to hard work", and that there should be labour market reforms to force workers to become more productive.

Nothing was said in the book about the real idlers to be found in capitalism; the capitalist class. Capitalist own the means of production and distrubution but do not work. Instead they live off the unearned income of rent, interst and profit. These idlers are passed over in silence by Mr Kwarteng.

Capitalism in Vietnam

To begin his defence of capitalism, Kwarteng points to Vietnam as a country with a high growth rate and a vibrant economy. He was told this by one of his constituents who had been out there on holiday and had been impressed by the number of shops and stalls selling commodities to visitors.

The reality is a vastly different and is kept well away from the tourists. Vietnam is a state capitalist dictatorship. There are no free trade unions, nor are any socialists living there permitted for form a socialist party and disseminate socialist ideas. Kwarteng might think that is a good thing, but he does not say.

What of the working class in Vietnam? Vietnam is a country where there are millions of low-wage factory workers. According to the NATION:

Poorly regulated Asian factories are rife with fire hazards, shaky buildings, and other workplace dangers … Nike employ some 333,000 Vietnamese workers, many of them migrants who reflect the country’s yawning rural-urban wealth divide, paying them roughly $132 per month”.

And the report went on to say:

According to a Workers Rights Consortium (WRC) all-day work shifts, forced labor and child labor are common in factories, which often supply major Western brands. Workers are beset by wage theft and gender and pregnancy discrimination. If they protest working conditions or organize independently of the state-controlled official union, they risk “firing, blacklisting, physical violence and imprisonment” ((July 1st 2015).

Workers in Vietnam, even under repressive conditions, still struggle for higher wages and better working conditions particularly when there is such deterioration in living standards that workers have to conserve energy due to inadequate food and malnutrition. And what are “foreign investors” doing? They are pressurising the Vietnamese government to break the strikes (STRIKE WAVE IN VIETNAM 2006-2011, Volume 45, 2015- Issue 1).

There might be a high rate of economic growth, investment from abroad and a “vibrant economy” in Vietnam but at what cost to the working class?

Capitalism in China

According to Kwarteng, “China has abandoned Marxism”. Rather than having abandoned “Marxism”, China’s historical development from the revolution in 1948 to today can be explained in Marxian terms.

China, under Mao, went through a phase of primitive capitalism with the state largely controlling industry and agriculture, what socialists would call “state capitalism”. However this primitive capitalism could be developed by the state only so far and following Deng Xiaoping’s economic reforms in the 1980s, a more market orientated economy began to take shape, particularly the move of the peasantry into the cities to provide a vast pool of cheap and exploitable labour.

Another series of economic reforms took place in the 1990’s with the Chinese economy becoming fully integrated into the institutions of the world economy. This historical process from a primitive to an advanced had nothing to do with the abandonment of “Marxism”, as Kwarteng misleadingly believes. In fact, it has everything to do with a country moving from feudalism to capitalism and then catching up with the more advanced capitalist countries on the world market.

It would be useful if workers did read Marx. They would soon realise that they were exploited just as ruthlessly as workers elsewhere in the world while the Chinese state is nothing more than a capitalist state of repression.

In China, as with every other capitalist country in the world; the potential for the working class to establish socialism is still there.

Capitalism and Poverty

In his attempt to put capitalism in a good light, Kwarteng writes:

Capitalism has taken 1 billion people out of poverty; between 1990 and 2010, the number of people in extreme poverty fell by half as a share of the total population in developing countries from 43 to 21 per cent – a reduction of almost one billion people”.

It is all smoke and mirrors. In an article in HUMAN SPHERE by Martin Kirk and Jason Hickel published on the 20th March 2017, we are told that the figures used by the likes of the Gates Foundation are spurious. World poverty has not been cut by half as they claim. They all use outdated figures based on a $1.25 a day poverty line. Always be sceptical of statistics, where they come from and what they are being used for.

The authors of the report state:

A more accurate poverty line is $5 per day, which, even the U.N. Agency for Trade and Development suggests this is the bare minimum necessary for people to get adequate food to eat and to stand a chance of reaching normal life expectancy. Global poverty measured at this level hasn’t been falling. In fact, it has been increasing – dramatically – over the past 25 years. Today, more than 4 billion people live below this minimum threshold. That’s nearly two-thirds of the world’s population. The Gates’ would be wise to reflect on this fact, for it is a clear sign that the development industry is failing at its main objectives”.

Even the World Bank – hardly a socialist organisation - has been forced to revise its figures on absolute poverty.

A similar argument was put by the Institute of Economic Affairs (IEA) in the 1950s against, what they erroneously believed, was Marx’s theory of “The immiserisation of the working class”, in an attempt to show capitalism in a good light. The IEA claimed that, following the industrial revolution, wages steadily increased during the 19th century. They left out of the equation both the impact of the trade cycle and the growth of the trade unions.

Now trade unions are less effective than they once were, wages and salaries have gone up very little in what is supposed to be a booming economy. To get by, most households have to receive two incomes. Child poverty is increasing. Government workers have been forced to take a 1 percent pay increase but inflation is running at 2.5 percent while millions of workers have to have more than one job or persist in the gig economy. TheY found housing is precarious and homelessness is on the rise too.

Socialists argue that poverty is caused by the working class’s inability to produce and distribute goods and services in common and under democratic control. Only the establishment of socialism can get rid of this very real poverty along with the absolute poverty currently suffered by four billion people in the world today. Capitalism is the problem not part of the solution. The capitalist class, philanthropic or not, are also part of the problem not the solution.

Capitalism and Prosperity

Kwarteng believes capitalism “Capitalism creates conditions of prosperity”. In one respect he is right. Capitalism creates the condition for prosperity for the capitalist class to live a life of privilege.

The world’s eight richest billionaires control the same wealth between them as the poorest half of the globe’s population, according to Oxfam (GUARDIAN 16th January 2017).

The question Kwarteng does not ask is who created all this prosperity. He would not like the answer. It is the working class who he and his chums ridiculed as “idlers”.

And it was Marx who showed in Capital who this exploitation of the working class took place.

Capitalists and workers meet on apparent equal terms on the labour market and the workers sell their labour power, or ability to work to the capitalist.

The capitalist pays the worker according to the value of labour power. The value of labour power is determined like any other commodity by the amount of socially necessary labour embodied in the commodity, labour power.

The value of labour power is the amount of socially necessary labour embodied in the range of commodities the workers must consume to reproduce themselves and their families.

The capitalist pays according to the exchange value, but obtains the use value of the labour power.

Marx showed that the commodity, labour power generates in excess of its own value. Say, it takes 6 hours out of seven hours for the worker to reproduce his value he still has to work an extra hour for free creating what Marx called “surplus value”. This is the source of the capitalist’s profit and creates the conditions of prosperity for the capitalist class.

Economic Crises

Kwarteng chides socialists for believing that the economic crisis of 2007-20 had dealt capitalism a mortal blow and he points out that capitalism is booming again. However, it was Marx who stated that there was “no permanent economic crisis” (THEORIES OF SURPLUS VALUE, Part II) p 269). In fact Marx noted that:

…capitalist production moves through certain periodical cycles. It moves through a state of quiescence, growing animation, prosperity, overtrade, crisis and stagnation” (wage Price and Profit in SELECTED WORKS, p 440).

Economic crises and depressions are just two points on the trade cycle. They occur, not because of problems with capitalism or those who have to administer it, but because they are necessary. Inefficient businesses are bankrupted and unprofitable labour is made redundant.

The Austrian economist, Joseph Schumpeter, called it “creative destruction”, but the destruction is hardly “creative” for unemployed workers, their families and the struggle to make a living. And the trade cycle can rip communities apart leaving two or three generations of workers struggling to find work. Divorce, suicide, drugs, crime and mental health problems are all social consequences of economic crises and trade depressions.

Marx placed periodic crises in the correct context. He wrote:

…the contradictions in this capitalist mode of production consists precisely in its tendency towards the absolute development of productive forces that come into continuous conflict with the specific conditions of production in which capital moves, and can alone move” (CAPITAL VOLUMEe 111, Chapter 6, page 366, Penguin, 1991).

Nationalisation and Capitalism

Socialists would agree with Mr Kwarteng that wide-spread nationalisation and the “command economy” associated with the Soviet Union is history. However nationalisation or state capitalism has nothing to do with socialism. Nor has a “command economy”. And socialism has nothing to do with running a nation.

In fact, it was a Tory government in 1844 that was going to nationalise the railways. And the Tory Party had no issue with nationalisation where it broke up monopolies or was useful for security; that is until the economic Liberal Margaret Thatcher came to power with the belief that every solution was a market solution.

The Socialist Party of Great Britain never joined in with the Labour Party campaign for nationalisation. We never advocated, defended or supported nationalisation. Nationalisation is State-capitalism. There is no difference between nationalisation and private capitalism except that the ownership and control is vested in the government appointed Board, instead of a company board of directors. Nothing has changed. The aim of both forms of capitalism is the same, to make profit by the exploitation of the working class.

And as for the working class employed within the nationalised industries not only were they exploited by producing more social wealth than they were paid in wages and salaries (the creation of surplus value, as Marx put it), but they had to organise themselves in trade unions, struggle for higher wages and better working conditions and force to use the strike weapon against determined employers.

There will be no buying or selling within Socialism and there will be no production for sale. Production will be solely and directly for use.

Marx and Engels on Capitalism

According to Kwarteng, Marx and Engels praised capitalism in the COMMUNIST MANIFESTO writing:

… accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals”.

However Marx and Engels went on to say:

The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property “ (page.66 THE COMMUNIST MANIFESTO AND THE LAST HUNDRED YEARS, Socialist Party of Great Britain, 1948, page. 66)

And

The advance of industry, whose involuntary promoter is the bourgeoisie replaces the isolation of the labourers, due to competition, by their revolutionary combination, due to association. The development of Modern Industry, therefore, cuts from under its feet the very foundations on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own gravediggers” (p. 71 and 72)

Capitalism did once have a progressive stage but, as Marx and Engels acknowledged. However, capitalism also was structured by contradictions and conflicts expressing itself in periodic economic crises and the class struggle. Capitalism had become a fetter on the forces of production, including social labour.

Capitalism has developed techniques of production potentially capable of conditions of abundance; it has developed the working class throughout the world to the point that workers now run capitalism from top to bottom, and it has created a global communication network. However, capitalism prevents production and distrubution from being used to create abundance of goods and services and in meeting all human needs.

Commodity production and exchange for profit and the interest of the capitalist class prevent the potential in the forces of production of being realised. And that is why socialism is necessary. Socialism would release the productive forces from the chains imposed by the capitalist relations of production.

Did Marx Get It all Wrong?

Kwarteng believes Marx got it all wrong. He says:

Marx thought the workers would rise and revolt at the inequalities produced by the free market. He got things completely wrong. Capitalism adapted and thrived in the 20th century, by providing a welfare state and decent public services. It was Marxism that proved to be pernicious and obsolete”.

Marx was no clairvoyant. He could not see the future where governments would enact reforms necessary to the profit system like the 1870 Education Act or saving money on the cost of the Poor law by the implementation of the Old Age Pensions Act in 1908. Even the so-called Welfare State was set-up to rationalise previous piece-meal measures and to ensure a healthy and more productive and cheaper work-force for employers to exploit.

These social were not “produced by the free market” but by the needs of capitalism and profitability. Now thousands of people are forced to use food banks, the ill and the disabled have had benefits cut and schools forced to ask parents to contribute for books and other school materials. Ninety people per month die after being declared fit for work by the DWP and losing their benefits (GUARDIAN 27th August 2017). According to the TUC, five million workers, in fear of their jobs, give the equivalent of a day’s worth of free overtime to their employers every week (INDEPENDENT, 25th January 2017).

As for “decent public services” when was the last time Mr Kwarteng had to use public transport in the rush-hour or wait at A&E on a Saturday night? When did a capitalist last use a bus in the suburbs? They are usually full of children, the elderly and those who cannot afford a car. The working class throughout the 20th century never enjoyed good public services only second best.

Now the capitalist class cannot afford the welfare state any more. For the last decades reforms have been enacted to make cuts, get rid of services, and to reduce the cost of government going to health and social security. The welfare state is constantly clashing with the profit motive and the burden of taxation which is borne by the capitalist class.

As for the elderly, the future looks bleak. Around 1.86 million people over 50 in England already have unmet care needs - an increase of 7% since the financial crash in 2007 - 2008 (SKY NEWS, 12 December 2015). And those with private pensions have problems too. According to the Daily Telegraph: “A mix of record low interest rates, stagnant wages and rising inflation has left retirees 46pc worse off than those who retired before the crisis” (DAILY TELEGRAPH, 19 August 2017).

And what is this “Marxism” which is “pernicious and obsolete”? If he is talking about the ideas and belief of Lenin then he might have a point. Leninism is obsolete. However Marx scientific understanding of capitalism laid out in CAPITAL and other works, has never been bettered.

Reading Marx and Becoming Socialists

So what of Kwarteng’s conclusion that people should ignore Marx and have nothing to do with socialism? Socialists would say that capitalism is in political crisis when a Tory MP has to call out capitalism by name and to refer to it as a social system. It immediately places capitalism in a historical context with a beginning and a potential end with the establishment of socialism.

For decades apologists for the profit system would not use the word “capitalism” in their propaganda, using instead such anodyne words as “The open society” of the “Free Market”. Yet they have now been put on the back foot by having to refer to capitalism by name and set it in a historical context as opposed to something that is outside of history. If you locate capitalism historically you cannot say there cannot be an alternative to the market, to buying and selling and to class exploitation.

In human history, as Marx showed, social systems come and go. It might end, as Marx and Engels considered in the COMMUNIST MANIFESTO, all end with the destruction of the contending classes. Or lead to Barbarism, as Rosa Luxemburg once believed. Or worse still, for capitalism to carry on from one economic crisis and war to the next. There is still the possibility of environmental and nuclear catastrophe. And then there is the rise of nationalism – economic nationalism – with its racism, hatred, and divisive politics of playing one group of workers off against another.

However, the optimistic view is that workers will one day act as “class-in-itself” and replace capitalism with socialism as a solution to the problems the working class face on a daily basis: a society guided by the Marxian principle: “from each according to ability to each according to need”. This leads on to the really important question: Why should workers become socialists?

The reaction of many workers to this question will be to dismiss it as being no concern of theirs. Workers think that they have to be employed, to keep their job and try to get more pay as and when conditions permit. They are mistaken. What happens to a particular company depends on its ability to sell its commodities at a profit, which in turn depends on what happens in the economy as a whole - that is in capitalism.

Some workers recognise that there are problems within the company that employ them and organise into trade unions. Socialists see this as an important step because it means workers ee that they have class interest distinct, separate and opposite to the class that employ them. Socialists urge workers, in their own class interest, to take the further step of replacing capitalism with socialism.

Socialism can only be established world-wide by a socialist majority democratically taking political action within a socialist party. The aim of a socialist political party is the establishment of socialism through the vote and the capture of the machinery of government, including the armed forces.

In line with this revolutionary socialist process, the objective for the working class involves not only the dispossession of the owning class, but the ending of production for sale. It was put by Marx and Engels in The COMMUNIST MANIFESTO as "the abolition of buying and selling". Engels said: "With the seizure of the means of production by society, production of commodities is done away with" (SOCIALISM: UTOPIAN AND SCIENTIFIC). Marx also showed that historically, in all forms of society, the way in which the products of industry are divided among the different class is determined by the existing mode of production itself.

In socialist society therefore, with production directly and solely for use and the consequent disappearance of the money system, the wages system and incomes from the ownership of property, all will have free access to what has been produced: a society of caring, generosity, tolerance and co-operation.

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