Socialist Studies Socialist Studies

Socialist Party of Great Britain - Capitalism In Crisis - The Economic Depression Deepens.

World Depression

Nobody knows how deep the present depression will go, how far it will spread and how long it will last, but there are plenty of ominous signs that it will surpass the depression of the early 1990s when unemployment passed over 3 million. At first all eyes were on the US with its mortgage defaults and toxic debts, then it became apparent that economic and financial conditions were rapidly worsening in Britain and Europe, and banks had to underwrite billions of dollars of losses.

By December 2008 it was all doom and gloom:

"The World Bank has forecast a significant decline in global economic growth in 2009 for both developed and emerging countries" (BBC NEWS 8.12.08)

"France will enter recession in 2009, according to Insee, the country's national statistics agency. The agency says the French economy has shrunk by 0.8% in the last three months of 2008 and will contract by another 0.4% in the first quarter of 2009" (BBC NEWS 18.12.08).

"Japan's government has forecast that the country's economy will have zero growth in the year ending March 2010. It is the first projection of no growth from the world's second largest economy in seven years" (BBC NEWS 19.12.08).

"At least 600,000 jobs could go in the UK in 2009, according to a report by a personnel managers' professional body. The Chartered Institute of Personnel and Development says even those who escape redundancy face pay freezes. It says that while total unemployment will not hit three million, the time between New Year and Easter will be the worst for job losses since 1991" (BBC NEWS 28.12.08)

The Failure of Governments

The Labour Government, through the Prime Minister’s New Year speech, tried desperately to stimulate optimism. Gordon Brown declared the working class should adopt the "war time spirit of the blitz" and keep a stiff upper lip. This is from the same Prime Minister who when Chancellor of the Exchequer incompetently sold off billions of pounds of gold at a loss, and went on to boast that there was to be no more "boom and bust". Then he said that British capitalism was well positioned to weather the storm of the global crisis. Then it was to be a short depression with growth back by the middle of 2009. No one believed him.

In January of this year (2009) Gordon Brown held a "jobs summit", where he pledged to act "to protect jobs" but, on the very day he announced this "pledge", 3000 job losses were announced (INDEPENDENT 13. 01.08). Brown’s own Chancellor let the cat out of the bag by stating it was going to be the worst economic crisis for sixty years.

Brown believed that his actions had saved capitalism but his fiscal stimulus through reduction in VAT and billions of pounds injected into the economy has clearly not worked. In all probability, he will lose the next election with the Labour Government again leaving office with more workers unemployed than when they first came into power.

What about the Bank of England who had been credited with having its finger on the pulse of the economy? The Bank of England was caught napping.

"The Bank of England did not understand the severity of economic problems before the current financial crisis, its deputy governor says. Sir John Gieve told the BBC that the Bank knew "crazy borrowing" was taking place and the price of houses and other assets was rising unsustainably. But the Bank thought this problem was less serious than it turned out to be" (BBC NEWS 22nd December 2008)

The Bank of England had bragged for a decade or more that it pulled the levers of the economy and enjoyed "control" over the interest rate mechanism thereby ensuring stable and continued growth. The Bank was wrong. Its economic policy is now in tatters.

The reality is that capitalism goes its own way. The employers have laid off hundreds of thousands of workers because at present level of commodity selling prices and costs of production (including wages), they cannot make a profit.

The result; 2500 workers at JCB, for example, were forced in December 2008 to take pay cuts of about £50 a week to stem the redundancies from 500 to 178. A month later 300 workers at JCB were made redundant with production severely curtailed. Ironically, no one knows if the pain and sacrifice of the workforce at JCB has been matched by the owners, the wealthy Bramford family. Sir Anthony Bramford topped the competition amongst construction tycoons in the SUNDAY TIMES Rich List (April 2008), finishing at 34, with an estimated wealth of £1,950m.

Elsewhere workers have also had to take pay cuts to stave off redundancies (EVENING STANDARD 30.12.2008). Socialists do not see Sir Anthony Bramford and his class having to endure Gordon Brown’s "war-time spirit". Most of the people killed by the Luftwaffe were members of the working class.

Capitalism is Behaving Normally

If capitalists, like the Bramfords saw the prospect of a profit, they would re-engage workers tomorrow and take out of moth-ball industrial plants and materials to start up production again. Capitalists not governments know when it will be the right economic conditions to invest in commodity production again. The crisis and subsequent depression sets the conditions for new investment opportunities in areas where competitors have been removed through bankruptcy or acquisition, un-sold stock of other capitalists have been bought at a discount and find markets, labour-power is cheaper to buy and so-on.

Socialists are not surprised at the economic turmoil. Capitalism is behaving normally, going through its phases of expansion, boom, crisis and stagnation just as Marx described over 150 years ago.

Marx castigated the superficiality of economists for taking as the cause of economic crisis mere symptoms of the crisis. On credit, for example, he wrote:

"the superficiality of Political Economy shows itself in the fact that it looks upon the expansion and contraction of credit, which is a mere symptom of periodic changes of the industrial cycle, as their cause" (MARX CAPITAL VOLUME I, Chap 25, p. 786).

Production, circulation, exchange, finance and credit are what Marx called "moments" of the capitalist production process which forms a unity. But the whole process of capital accumulation is shot through with violent contradictions. He declared that capitalist production and exchange for profit was a highly unstable system, and had the propensity everywhere to go horribly wrong.

"this (the capitalist process) is so complicated that it offers ever so many occasions for running abnormally" (CAPITAL VOLUME II CHAPTER XXI, Accumulation and Reproduction on an Extended Scale, p. 500).

Capitalism Fails the Working Class

Mass unemployment is just one of the social consequences when capitalism fails the working class. Over 20 million workers are currently unemployed in the EU (EUROSTAT December 2008). In the US both the number of unemployed persons (10.3 million) and the unemployment rate (7 per cent) continued to increase in November (US DEPARTMENT OF LABOR, December 2008). In December, the US experienced one of the highest rates of unemployment since 1945.

We no longer read about the US model of capitalism being the one the rest of the world should emulate. There is now no "Japanese Miracle", "German Miracle" or "Dutch Miracle" as all of these economies slide into depression. Economic liberalism is now a failed policy to join other failed economic policies like monetarism and Keynesianism, and an earlier version of economic liberalism found in the pre-Depression days of the 1920s.

There is now a serious problem with China’s "economic miracle" with subsequent bankruptcies and unemployment. More than 65,000 Chinese factories have gone bankrupt in 2008. Fears over job losses have triggered several outbursts of unrest by workers in recent weeks (CNN 10.12.08). Many workers who came into the cities from the countryside during the 1990s are now returning to their villages (EVENING STANDARD 12. 01.08).

The effect of China’s slowdown has meant steel production being curtailed in Australia with the loss of hundreds of jobs. The reduction in steel demand by Chinese factories has hit Australian producers including Rio Tinto and BHP Billiton, as they sell to the largest of the Chinese mills, four of whom have plans to cut production by anywhere between 10 and 20 per cent for the last quarter. The Australian government is considering nationalizing Oz Minerals, Australia’s third largest mining company (INDEPENDENT 13.01.08)

It may be hard to accept but it is nevertheless true that there are no economic policies by governments or central banks to prevent capitalism from behaving in accordance with its own economic laws.

What of the defenders of capitalism?

In an article "We’re at a turning point for capitalism", Sean O’Grady said that "Capitalism is going to spread the pain very evenly and very unfairly" in 2009.

O’Grady is worried that workers will look for alternatives to the profit system.

"An economic system is only as good as it delivers. Nothing is immutable. As in the 1930s, if free trade-free enterprise is seen to fail, then people will look for alternatives…".

He then asks rhetorically

"..we hear very little from the anti-capitalists now, when we might like to hear their critique" (INDEPENDENT 31.12.08).

Well, the critique of capitalism is not new. Marx showed in CAPITAL that capitalism can never be run in the interest of the working class majority. Since Marx, Socialists have built on his criticism of capitalism and SOCIALIST STUDIES, produced by the reconstituted Socialist Party of Great Britain, has consistently shown the consequence for workers in giving their support for a social system which cannot deliver except for those who own the means of production.

Socialists do not offer an "anti-capitalist" critique but offer a principled set of reasons why workers should consciously and politically organise to replace the profit system with common ownership and democratic control of the means of production by all of society. War, exploitation, unemployment, poverty and social alienation - all flow from commodity production and exchange for profit. And although our web site exists putting the Socialist case against capitalism, Sean O’Grady cannot read our critique of capitalism in the media because the owners of the INDEPENDENT as with other owners do not give Socialist access to publish article or broadcast on television and radio our Socialist case.

War, exploitation, unemployment, poverty and social alienation - all flow from commodity production and exchange for profit. Socialists do not offer an "anti-capitalist" critique but offer a principled set of reasons why workers should consciously and politically organise to replace the profit system with common ownership and democratic control of the means of production by all of society.

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