Socialist Party of Great Britain - Capitalism In Crisis - The Continued World Trade Depression.
The global economic depression continues. The Free Market policies of George Osborne, the Chancellor of the Exchequer, flounder with continued low growth and high unemployment. His critics call upon him to produce a “Plan B” but nobody can agree what a “Plan B” would look like given the failure of the economic policies associated with Gordon Brown’s Labour Government.
In the United States, President Obama’s Keynesian policies are also proving equally ineffectual with a debt crisis forcing cuts in government spending and where 13.9 million workers are unemployed, some 9.1% of the workforce. The economies of most European Union countries are also in a mess with over 22.5 million workers unemployed in the EC alone – about 1 in ten workers (EUROSTAT June 2011).
In an article “Whatever Osborne believes, we will spend years in the doldrums”, Jeremy Warner, an economic commentator, says that government policies are not working “…normal market economics (is) apparently incapable of providing answers” (DIALY TELEGRAPH 3rd August 2011).
Of course “normal market economics” is ineffectual. Economists just do not understand the capitalist system they inhabit. They believe that capitalism is what happens on Wall Street or in the smart offices of merchant bankers, currency speculators and hedge fund managers.
The graveyard of political economy is full of failed economic theories. And one market economic theory which has been well and truly killed off has been the belief that economic crises are caused by an overall shortage of purchasing power.
Some writers, including Major Douglas (author of SOCIAL CREDIT published in 1924) and J.M. Keynes (THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY 1936), have argued that there is an overall shortage of purchasing power in capitalist society and that this is the cause of crises and depressions. Douglas proposed that the government should distribute to the population a cash “national dividend” to correct the supposed shortage.
Keynes maintained that this overall shortage of purchasing power made it impossible to sell all the products of industry in the home market, hence the pressure to sell abroad. And that if home demand is increased by the adoption of his proposals pressure to export would disappear and thus remove a major cause of war.
Of course the poor lack purchasing power, but the poor and rich combined always have the purchasing power to buy all the products of industry which Marx showed in his schemes of simple and extended reproduction in the second volume of CAPITAL (see chapters 20 and 21 Penguin ed. 1996).
However, it must be remembered that capitalist production produces only for profit and the amount of commodities produced at any given time do not correspond with the real needs of the working class rationed, as they are, by the wages system.
The failure of some commodities of industry to find buyers, which produces a crisis, is not due to any overall shortage of purchasing power but it is due to the failure of capitalists to exercise their power to purchase commodities at a crucial time.
Marx dealt with it in his answer to the economist J. B. Say
J. B. Say argued that a serious depression should not take place because “every seller brings a buyer to market”: by which he meant that every producer of commodities who sells his products then has the cash with which he can at once buy other products and so keep industry busy.
Marx discussed Say’s argument in CAPITAL VOL. 1, Chapter III, section 2. He accepted Say’s argument with, however, one qualification. He agreed that the sellers have the cash with which they can go at once out and buy some other commodity, but he pointed out that “no one is forthwith to purchase because he has just sold”.
He may choose not to do so and if the interval of time between the sale and the purchase is too great, the result is “a crisis”.
The question to be answered then is why this failure to buy commodities takes place.
Say has disregarded the fact that part of capitalist expenditure which is investment (as distinct from the capitalists’ purchase of necessities and luxuries for personal consumption) has as its sole purpose making a profit, and if there is no prospect that a profit can be made the capitalist refrains from buying although he has the means to buy.
When the 1979 depression began the electrical company G.E.C. had what the Media called a “cash mountain” of £1500 million. Instead of using it to produce more electrical goods G.E.C. preferred to lend it to banks and the government (some cash was returned to shareholders).
Later on, in 1984, when unemployment was 3,200,000, other companies found themselves in a similar position. The DAILY MAIL (30th Oct. 1984) reported “Companies have never had so much cash”, and the FINANCIAL TIMES (10th Nov, 1984) said “Many companies are brim-full of cash they can hardly find any use for”.
In the present economic depression, where, in the US, President Obama is using Keynesianism to stimulate the economy without any success, Corporations are taking advantage of record-low interest rates by issuing bonds. Instead of investing this cash in their business, or using it to hire new workers, they are holding it as insurance in case the economy continues in depression.
According to the ABOUT.COM GUIDE (August 9th 2010), companies in the US were sitting on $8.4 trillion in cash in March 2010 about 7% of assets – the highest level since 1963. Banks were making record profits from issuing the bonds, while holding back on loans to small businesses and individual borrowers as they are in Britain. This is not unusual. Banks are not charities but lend capital for interest to borrowers they believe will pay them back. If banks do not view the economic conditions as favourable to lending money to businesses then they will use it for other purposes or hoard it. And there is nothing governments can do.
The same applies to the capitalist class. Using their surplus cash to provide jobs for the unemployed is not what the capitalists are in business to do and so the unemployed rate in the United State remains around the 9.1% level despite the US government’s so-called stimulus policy. When the economic conditions improve and there are prospects of making a profit, companies will be only too willing to invest.
What workers have to recognise is that the trade cycle with its periodic periods of high unemployment is a fact of life under capitalism. Politicians can no more anticipate an economic crisis than they can produce economic policies to eradicate the subsequent trade depression. The cycle takes its course even though it means social distress, discomfort and pain. It is far better for the working class to act in its own interest and consciously and politically replace capitalism with Socialism.
Object and Declaration of Principles
The establishment of a system of society based upon the common ownership and democratic control of the means and instruments for producing and distributing wealth by and in the interest of the whole community.
Declaration of Principles
THE SOCIALIST PARTY OF GREAT BRITAIN HOLDS:
1. That society as at present constituted is based upon the ownership of the means of living (ie land, factories, railways, etc.) by the capitalist or master class, and the consequent enslavement of the working class, by whose labour alone wealth is produced.
2. That in society, therefore, there is an antagonism of interests, manifesting itself as a class struggle, between those who possess but do not produce and those who produce but do not possess.
3.That this antagonism can be abolished only by the emancipation of the working class from the domination of the master class, by the conversion into common property of society of the means of production and distribution, and their democratic control by the whole people.
4. That as in the order of social evolution the working class is the last class to achieve its freedom, the emancipation of the working class will involve the emancipation of all mankind without distinction of race or sex.
5. That this emancipation must be the work of the working class itself.
6. That as the machinery of government, including the armed forces of the nation, exists only to conserve the monopoly by the capitalist class of the wealth taken from the workers, the working class must organise consciously and politically for the conquest of the powers of government, national and local, in order that this machinery, including these forces, may be converted from an instrument of oppression into the agent of emancipation and the overthrow of privilege, aristocratic and plutocratic.
7. That as all political parties are but the expression of class interests, and as the interest of the working class is diametrically opposed to the interests of all sections of the master class, the party seeking working class emancipation must be hostile to every other party.
8. The Socialist Party of Great Britain, therefore, enters the field of political action determined to wage war against all other political parties, whether alleged labour or avowedly capitalist, and calls upon the members of the working class of this country to muster under its banner to the end that a speedy termination may be wrought to the system which deprives them of the fruits of their labour, and that poverty may give place to comfort, privilege to equality, and slavery to freedom.