Global capitalism is currently in the grip of the most severe economic contraction
since the Great Depression of the 1930s. The ultimate depth and duration of the downturn
remain to be seen, but there are many indicators that point to a lengthy period of massive
unemployment in the imperialist camp and a steep fall in living standards in the so-called
developing countries.
The bourgeois press is relentless in seizing on even the smallest signs of possible
“recovery” to reassure consumers and investors that better days are just
around the corner. This paternalistic “optimism” recalls similar
prognostications following the 1929 Wall Street crash: “Depression has reached or
passed its bottom, [Assistant Secretary of Commerce Julius] Klein told the Detroit Board
of Commerce, although ‘we may bump along’ for a while in returning to higher
trade levels” (New York Times, 19 March 1931). The next month, in a major
speech approved by President Herbert Hoover, Klein’s boss, Secretary of Commerce
Robert P. Lamont, reiterated this upbeat projection:
“Declaring that after such industrial cataclysm, time and the slow
working of economic readjustments were necessary before the world could return to economic
health and vigor, Mr. Lamont said that there could be no doubt that many of these
necessary readjustments had been and are being made and that business even now was
responding sluggishly to the stimulus of these needed changes. He added that whatever were
the causes of our present difficulties, the corrective influences now had been at work for
many months.”
—New York Times, 30 April 1931
But Hoover’s stimulus failed to produce the anticipated “corrective
influences” and the depression dragged on for years, turning the 1930s into a lost
decade of unthinkable hardship for tens of millions of ordinary working people.
Today, parallels with the 1930s are becoming increasingly obvious:
“With the release of the jobs report on Friday, the broadest measure of
unemployment and underemployment tracked by the Labor Department has reached its highest
level in decades. If statistics went back so far, the measure would almost certainly be at
its highest level since the Great Depression.
“In all, more than one out of every six workers—17.5
percent—were unemployed or underemployed in October.”
· · ·
“Nearly 16 million people are now unemployed and more than seven million
jobs have been lost since late 2007.
“Officially, the Labor Department’s broad measure of unemployment
goes back only to 1994. But early this year, with the help of economists at the
department, The New York Times created a version that estimates it going back to
1970. If such a measure were available for the Depression, it probably would have exceeded
30 percent.”
—New York Times, 8 November 2009
The U.S. economy, which grew by 2.1 percent in 2007, stagnated in 2008 and shrank by
2.5 percent in 2009. The economies of the Eurozone and Japan also contracted, by 3.9 and
5.3 percent respectively (IMF, World Economic Outlook Update, January). Gross
fixed capital formation in the advanced industrial economies, which fell 2.1 percent in
2008, was projected to drop another 12.4 percent in 2009. Meanwhile government deficits
and levels of national debt have climbed sharply, particularly in the U.S. Some of this is
attributable to declining tax revenues as unemployment rises and incomes fall, but much of
it stems from the costs of the failed military adventures in Iraq and Afghanistan, and the
government bailout of Wall Street speculators that Neil M. Barofsky, inspector general for
the Troubled Asset Relief Program, estimates “could end up costing $3
trillion” (New York Times, 21 July 2009).
The effect of a prolonged downturn in a “globalized” economy, characterized
by fabulous wealth for a handful at the top and desperate poverty for billions at the
bottom, will inevitably magnify the already enormous disparities. For those in the
neocolonies struggling to eke out a living on a dollar or two a day, this crisis will
literally be a matter of life and death.
Capitalism & Economic Crisis
After the experience of the 1930s, bourgeois economists paid a good deal of attention
to the origins of capitalism’s inherent boom-bust tendency, but in recent decades
most considered that the problem of periodic crises had been solved. Paul Krugman, winner
of the 2008 Nobel Prize for Economics, recalled how a previous Nobel laureate declared
that the business cycle had been tamed:
“In 2003 Robert Lucas, a professor at the University of Chicago and
winner of the 1995 Nobel Memorial Prize in Economics, gave the presidential address at the
annual meetings of the American Economic Association. After explaining that macroeconomics
began as a response to the Great Depression, he declared that it was time for the field to
move on: the ‘central problem of depression-prevention,’ he declared,
‘has been solved, for all practical purposes.’”
· · ·
“Lucas wasn’t alone in claiming that depression-prevention was a
solved problem. A year later Ben Bernanke, a former Princeton professor [who currently
chairs the U.S. Federal Reserve]…gave a remarkably upbeat speech titled ‘The
Great Moderation,’ in which he argued, much as Lucas had, that modern macroeconomic
policy had solved the problem of the business cycle….
“Looking back from only a few years later…these optimistic
pronouncements sound almost incredibly smug.”
—The Return of Depression Economics and the Crisis of
2008
Liberals like Krugman trace the origin of the current difficulties of international
capitalism to the dismantling of the regulatory framework established in the United States
in the 1930s. This explanation comes with easily identifiable “bad guys”
(Bernie Madoff and the unindicted crooks running Goldman Sachs et al) as well as a
ready-made solution—to simply reverse the “neoliberal” measures
introduced by Ronald Reagan, Margaret Thatcher and their counterparts. But the present
crisis is not simply a matter of bad policies pursued by short-sighted politicians. The
union-bashing, deregulatory program of the neoliberals was itself a response to the
stagnation of the major capitalist economies in the mid-1970s that followed two decades of
relatively high growth rates and rising living standards.
The Great Depression, which had been triggered by the bursting of a U.S. stock-market
bubble, was only overcome through the massive devastation of World War II—a
cataclysm that killed some 70 million people and shattered the economies of much of the
advanced capitalist world. This unprecedented social catastrophe resulted in a marked
leftward shift of the entire political terrain, particularly in continental Europe, where
most of the traditional ruling elites were discredited by their collaboration with the
Nazis. Soviet-style “socialism” was seen as an appealing alternative by
millions of workers in Western Europe and beyond. The physical destruction of most of
Europe’s and Japan’s industrial plant required massive capital investments
(often financed by U.S. “reconstruction” money), which, combined with pent-up
demand from the depression and wartime austerity, produced conditions for robust growth.
The triumphant American bourgeoisie sought to secure its position at home with a postwar
“labor accord” that entrenched a viciously anti-communist trade-union
bureaucracy, while conceding significant improvements in wages, living standards and
social services (see “American Labor Besieged,” 1917 No. 19). In
Europe, the generally more combative workers’ movement was also able to wrest
concessions from their rulers.
Between 1950 and 1973, gross domestic product (GDP) in the countries of the
Organization for Economic Cooperation and Development grew by an average of 4.3 percent
annually. During this period most bourgeois economists agreed that a Keynesian
“mixed economy” could ensure continual expansion with only relatively mild
cyclical fluctuations. Most mainstream observers attributed the global recession of
1974-75, which shattered this comfortable illusion, to a combination of a spike in crude
oil prices and a “wage-price spiral” caused by excessively powerful unions. In
fact, this conjunctural crisis was a manifestation of a deeper structural decline in the
profit rate beginning in the 1960s. The response of leading sections of international
capital was to rip up the “postwar consensus” and return to a more
bare-knuckled, old-fashioned brand of capitalist rule.
Reagan’s successful smashing of the air traffic controllers’ union in 1981
and Thatcher’s victory over the British miners a few years later marked important
victories for the capitalists’ campaign to increase profits at the expense of wages
and social entitlements. In the U.S., the workday was lengthened, wages driven down and
many workers compelled to take on multiple jobs to make ends meet. In the imperialist
heartlands, deindustrialization increased the pool of unemployed workers and undermined
the unions, as corporations shifted production to “newly industrializing”
areas in Latin America and East Asia where wages were lower. At the same time,
manufacturers were investing heavily in robotics and computerization and introducing
“lean production” techniques in a bid to raise productivity.
A key component of what became known as “neoliberalism” involved trade
agreements aimed at eliminating tariff protection for domestic producers, particularly in
“developing” (i.e., neocolonial) countries, and removing restrictions on
capital mobility across national borders. While free-market apologists hailed the shift of
manufacturing to the Third World as evidence that capital was leveling the international
playing field, the reality was rather different. Thomas Pogge of Yale University found
that whereas per capita income in countries making up the richest 10 percent of the
world’s population was 60 times greater than that of the poorest 10 percent in 1980,
it had increased to 122 times by 2005. To illustrate the grotesque inequalities of global
capitalism, Pogge calculated that “Doubling the wealth of all in the bottom four
quintiles would still take just 15.3 percent of the wealth of the top 1 percent”
(Dissent, Winter 2008).
The Reagan/Thatcher neoliberal program also involved large-scale deregulation of
finance, transport and communications to unleash the “creative power” of
market competition and open up new avenues for profitable investment. The deregulation of
the banking system in the U.S., which set a pattern for the rest of the
“developed” countries, had unintended consequences. In 2005, Harry Shutt,
formerly of the Economist Intelligence Unit, observed that by permitting financial
institutions to issue virtually unlimited credit, state authorities were, in effect,
ceding to them the power to create money:
“For, by giving private enterprise, particularly in the financial
sector, increased license to create and allocate credit while yet maintaining an implicit
or explicit guarantee that the state would underwrite any major losses, the authorities
were giving a powerful incentive to irresponsible, or even criminal,
behaviour….Moreover, in a climate of intensifying stagnation, where corporate
profitability was ever harder to sustain at minimum acceptable levels, the temptation for
corporate managers not merely to allocate funds to excessively risky investment but to
resort to outright fraud became increasingly irresistible.”
—The Decline of Capitalism
‘Neoliberal’ Bubble Bursts
Neoliberalism produced a major upward redistribution of wealth. Between 1974 and 2004,
the median annual income of American men in their thirties fell from $40,000 to $35,000 a
year in constant dollars, while “CEO pay increased to 262 times the average
worker’s pay in 2005 from 35 times in 1978” (Associated Press, 25 May 2007).
At the same time, the capitalists reduced systemic overhead costs by slashing government
social spending and cutting corporate taxes:
“Over the three decades from 1972 to 2001, the wages and salaries of
even those Americans at the 90th percentile (those doing better than 90 percent
of their fellow citizens) experienced income gains of only 1 percent a year on average.
Those at the 99.9th percentile saw their income rise by 181 percent over these
years (to an income averaging almost $1.7 million). Those at the 99.99th
percentile had income growth of 497 percent.”
—Monthly Review, June 2007
The fall in real wages and deregulation of banking, transportation and communications
produced a partial restoration of profitability (see Fred Moseley, “The United
States Economy at the Turn of the Century: Entering a New Era of Prosperity?”),
though GDP growth and capital accumulation rates remained lower than in the 1950s and
early 1960s. Big capital increasingly turned to financial speculation in search of higher
returns. This pushed up nominal profit rates during the 1990s and 2000s but, as has become
evident, much of this was fictitious.
The expansion of the financial bubble was presided over by Federal Reserve Chairman
Alan Greenspan, a disciple of Ayn Rand and Milton Friedman (high priest of the
“Chicago School” of free-market theology). During Greenspan’s tenure at
the Fed (from 1987 to 2005) total public and private debt in the U.S. soared, from roughly
$20 to $50 trillion, while the financial sector’s share of gross profits quadrupled
from 10 percent in the early 1980s to 40 percent in 2006 (see Robert Chernomas, “The
Economic Crisis: Class Warfare from Reagan to Obama,” in Bankruptcies and
Bailouts). This was paralleled by a shift in the ratio of U.S. GDP to total financial
assets (including bank deposits, stocks, bonds and other securities), from 1:4 to 1:10 in
the same period. A similar process was underway internationally. In 1980, total global
financial assets were valued at 119 percent of total production; by 2007 this had tripled
to 356 percent. Mitsubishi Securities estimated the size of the global “real
economy” in 2008 to be $48.1 trillion, compared to a global financial economy
(stocks, securities and deposits) of $151.8 trillion.
The internationalization of financial speculation, which allowed highly-leveraged
institutions to make risky bets in overseas markets, ensured that a major problem anywhere
in the system would quickly become a problem everywhere. This became evident as American
real-estate values began to sour and a chaotic chain reaction rocked global credit markets
in 2008. In the U.S., home mortgages had been pooled and “securitized” for
decades without problems. Investors bought shares of the total payments from long-term
“prime” mortgages issued to borrowers with substantial equity in their
properties and sufficient income to make the payments. Defaults were unusual, so these
investments were generally considered safe. This changed with the introduction of
“collateralized debt obligations” (CDOs) in the 1990s, which expanded the
mortgage pool beyond—and eventually far beyond—prime mortgages.
Millions of working people lured by the banks into taking out these
“subprime” mortgages did so in an attempt to maintain their living standards
in the face of falling real wages. To offset concerns about higher risks, the CDOs were
tiered—with “senior” shareholders entitled to get paid before others.
This was sufficient for the rating agencies to grade them as “triple-A” on the
grounds that even if many borrowers defaulted there would still be enough cash flow to
cover the “seniors.” The triple-A rating in turn attracted pension funds and
other institutional investors looking for better rates of return than government or
corporate bonds offered. To meet the increased demand, those packaging the CDOs simply
ventured deeper into subprime territory.
Illusions that CDOs, “credit default swaps” and other high-return
“derivative” investments could somehow indefinitely defy gravity did not
survive the bursting of the speculative housing bubble in the U.S. The macro irrationality
generated by the innovations of Wall Street’s “financial engineering”
was of no concern to most of the participants so long as their portfolios continued to
grow, as BusinessWeek’s Paul M. Barrett observed:
“It’s rational for a mortgage company to loan $500,000 to a
borrower who can’t pay back the money if the lender can immediately sell the loan to
a Wall Street investment bank. It’s also rational for the investment bank to bundle
a bunch of risky home loans and resell them—for a tidy profit, of course—to
hedge funds as a bond. Such bonds, known as mortgage-backed securities, were attractive to
hedge funds and other investors because they paid relatively high interest. Sure, the
bonds were risky (remember that the home buyers never really should have qualified as
borrowers in the first place), but many investors bought a form of insurance against the
bonds’ defaulting. The sellers of this insurance, called credit default swaps,
assumed they’d be able to collect premiums and never have to pay out very much
because real estate prices would keep rising forever—so those original dubious
borrowers would be able to refinance their unrealistic loans. Everyone felt especially
rational about all of this because prestigious credit-rating agencies issued
triple-A stamps of approval for the exotic, high-interest securities. Never mind that
the rating agencies were paid—i.e., bought off—by the very investment banks
peddling the mortgage-backed securities.”
—New York Times Book Review, 15 November
2009
The rapid deflation of the American real-estate market produced a panic which, in
September 2008, brought the entire financial system to the brink of collapse. To avert a
total meltdown, the U.S. government agreed to cover the liabilities of institutions deemed
“too big to fail.” While the con artists running Ponzi schemes had their
losses made good with hundreds of billions of dollars from the public coffers, millions of
their victims watched as their mortgages went “underwater” (the market price
of their houses shrinking beneath the amount still owed).
The bailout of the financial racketeers in the U.S. (paralleled by similar
interventions in other rich countries) provides an object lesson in the realities of class
politics. This has not been entirely lost on the public, which is deeply disturbed that
the architects of the disastrous collapse not only escaped any consequences, but are now
collecting new windfall profits for supposedly helping to clean up the mess they made.
In November 2008, Timothy Geithner, who is currently U.S. secretary of the treasury but
was then heading the Federal Reserve Bank of New York, decided to bail out American
International Group (AIG). AIG got into trouble when it was unable to cover credit default
swaps it had issued to Goldman Sachs and various other high rollers to insure them against
losses on CDOs involving subprime mortgages. Robert Scheer, a former reporter for the
Los Angeles Times, observed:
“Now Geithner’s Treasury concedes that AIG ‘should never
have been allowed to escape tough, consolidated supervision.’ But none of
AIG’s scams were regulated, nor were any of the others at the center of the larger
financial debacle, because of laws pushed through Congress by Geithner’s boss,
Lawrence Summers, when they both were in the Clinton administration. Specifically, they
prevented regulation of those opaque CDOs and CDSs [credit default swaps] that would come
to derail the world’s economy.
“As the inspector general’s report stated: ‘In 2000, the
[Clinton administration-backed] Commodity Futures Modernization Act (CFMA)…barred
the regulation of credit default swaps and other derivatives.’ Why did the financial
geniuses of the Clinton administration seek to prevent that obviously needed regulation?
Because the Clintonistas believed the Wall Street guys knew what they were
doing….
“Sounds nonsensical today: The inspector general’s report notes
that AIG, because of the deregulatory law that Summers and Geithner pushed through, was
‘able to sell swaps on $72 billion worth of CDOs to counterparties without holding
reserves that a regulated insurance company would be required to maintain.’ But why,
then, is Summers once again running the show with Geithner when both have made careers of
exhibiting total contempt for the public interest?”
—www.truthdig.com, 25 November 2009
Scheer and other liberals call for increased government supervision and a return to the
policies enacted under Franklin Delano Roosevelt. But FDR was responding to a powerful
labor movement and growing leftist sentiment in favor of a radical overhaul of the entire
social system. After decades of capitulation by the leaders of the unions in the U.S. and
other advanced capitalist countries, the workers’ movement is not seen as capable of
threatening the interests of the ruling elites. So instead of a policy of populist
concessions, the Obama administration, which is willing to spend trillions of dollars
bailing out the Wall Street speculators, is issuing dark warnings of “hard
choices” ahead because “the country must live within its means.”
Even during the post-war “boom” years, a significant percentage of the
population in the richest countries was condemned to chronic poverty. Today, the vast
majority is facing the prospect of sharply declining living standards as jobs disappear
and wages fall. Pensions, social security, unemployment insurance and what remains of
gains won through hard class struggle in the past are coming under increasing
pressure.
Marxism, Capitalism & Socialism
Marxism offers much more than a moral critique of the irrationality of capitalism. In
the Communist Manifesto, Karl Marx and Frederick Engels referred to “crises
that by their periodical return put the existence of the entire bourgeois society on its
trial, each time more threateningly.” In the third volume of Capital, Marx
analyzed how such events result from the inner dynamics of capital accumulation, which
create a tendency for the rate of profit to fall, and observed that during crises
“production comes to a standstill not at the point where needs are satisfied, but
rather where the production and realization of profit impose this.”
Financial meltdowns, recessions and depressions must be understood in relation to the
economic structure and development of capitalist production. Under capitalism,
value (represented by money) is created at the point of production by “living
labor,” i.e., the activity of human beings producing commodities. By setting in
motion the means of production, workers conserve and transfer the pre-existing value of
“constant capital” (raw materials, machinery, etc.) to the final product. But
their labor also creates two streams of new value: “variable capital,” which
is equivalent to their wages (i.e., the money with which the capitalist purchases the
unique commodity known as “labor power”) and “surplus value,” from
which all profits, interest and ground rents ultimately derive.
The dynamics of capitalist competition compel each enterprise to seek to maximize
profits by underselling its competitors and enlarging its market share. To this end,
capitalists attempt to gain an advantage by lowering production costs through
technological improvements that raise labor productivity. To remain competitive, rival
firms are forced to introduce similar technology, thus negating the initial advantage of
the original innovators. The net effect is to increase the total constant capital invested
while reducing the proportional weight of labor inputs—thereby raising what Marx
referred to as the “organic composition of capital” (the ratio of constant
capital to variable capital plus surplus value). A rise in the organic composition is
associated with increasing productivity, but also with a long-term decline in the average
rate of profit, i.e., the return on total capital outlay.
The rate of profit is the basic regulator of economic life under capitalism, and its
upper limit is set by the ratio of surplus value to the constant capital stock. The
fundamental contradiction of “free-market” economics is that the sole source
of the surplus value from which profit derives (living labor) is systematically displaced
from the production process by capitalists compelled by competition (and the basic
antagonism between bosses and workers) to reduce costs by introducing labor-saving
technology. This increases the rate of exploitation (i.e., the ratio of surplus value to
variable capital) but tends to depress the average rate of profit over time. To be sure,
there are counter-tendencies that slow the decline, and the process is periodically
interrupted by the destruction of a portion of constant capital during crises and wars.
Yet in the long run no countervailing force is sufficient to negate the tendency of
surplus value to decline in relation to the stock of constant capital.
Marx’s observation that “[t]he true barrier to capitalist
production is capital itself” refers to the fact that the tendency of the
rate of profit to fall is embedded in the very structure of capitalism. Empirical analysis
of the performance of major capitalist economies in recent decades tends to conform to
Marx’s projections, as Murray E.G. Smith outlined in a talk reprinted in
1917 No. 31. Smith’s conclusions are paralleled in broadly similar studies
produced by Gérard Duménil and Dominique Lévy, Fred Moseley, Anwar
Shaikh and Ahmet Tonak. The current crisis is a violent reassertion of the capitalist law
of value, i.e., the relatively depressed real profit rate has pulled back down to
earth a nominally higher profit rate artificially inflated by dividends on fictitious
(unproductive) capital.
The basic irrationality of capitalism makes both economic and political crises
inevitable. There is already evidence of rising bitterness with the
“free-market” economy. A 9 November 2009 BBC poll commissioned on the occasion
of the 20th anniversary of the fall of the Berlin Wall found “widespread
dissatisfaction with free-market capitalism.” Only “11% of those questioned
across 27 countries said that it was working well” whereas “23% of those who
responded…feel it is fatally flawed. That is the view of 43% in France, 38% in
Mexico and 35% in Brazil.” These numbers, already high, are likely to go up if the
economic situation continues to deteriorate.
Yet disenchantment will not automatically translate into increased support for a
socialist alternative. With protectionism and xenophobia on the rise, immigrants, refugees
and migrant laborers in the advanced countries are being scapegoated for the
system’s failures. This underscores the burning necessity of mobilizing the
workers’ movement to crush the nuclei of fascist formations like the British
National Party and abort their efforts to direct popular distress into attacks on the
organized labor movement and the oppressed (see 1917 No. 31).
In the early years of the 20th century, and again in the 1930s, attempts by
each of the major capitalist powers to solve their economic problems at the expense of
their rivals produced trade wars, economic blockades and eventually world wars. The first
great inter-imperialist conflict created the preconditions for the successful
workers’ revolution in Russia in 1917. Krugman, whose breadth of vision
distinguishes him from many of his liberal colleagues, is well aware that the
counterrevolutionary destruction of the degenerated Soviet workers’ state in 1991
was a decisive factor in shaping the world we live in today:
“This is a book about economics; but economics inevitably takes place in
a political context, and one cannot understand the world as it appeared a few years ago
without considering the fundamental political fact of the 1990s: the collapse of
socialism, not merely as a ruling ideology, but as an idea with the power to move
men’s minds.”
· · ·
“For the first time since 1917, then, we live in a world in which
property rights and free markets are viewed as fundamental principles, not grudging
expedients; where the unpleasant aspects of a market system—inequality,
unemployment, injustice—are accepted as facts of life. As in the Victorian era,
capitalism is secure…because nobody has a plausible alternative.
“This situation will not last forever. Surely there will be other
ideologies, other dreams; and they will emerge sooner rather than later if the current
economic crisis persists and deepens.”
—op. cit.
There will inevitably be revolts against a system characterized by “inequality,
unemployment, injustice,” where factories are closed, production cut back and the
lives of billions shattered. The pathology of capitalism is also apparent in the wholesale
degradation of the natural environment upon which all life depends. Croplands are turned
into deserts, tropical rainforests are clear cut, marine life is wiped out by factory
fishing, the ozone layer is severely depleted and climate change threatens massive
destruction. All of this is the direct result of the pursuit of maximum profit—a
single metric that assigns no particular value to clean air and water and regards human
health and well-being as “externalities.”
Krugman and his fellow bourgeois ideologues are not entirely wrong to talk of
“the collapse of socialism.” In organizational terms, the socialist movement
is weaker today than it has been for a century and a half. Moreover much of what passes
for the “far left” no longer even pretends to uphold the tradition represented
by the giants of revolutionary socialism (see our article on France’s “Nouveau
Parti anticapitaliste” elsewhere in this issue). Yet capitalism’s defenders
engage in wishful thinking to imagine that a future mass turn toward finding a plausible
alternative to capitalism will not arrive at the need to “expropriate the
expropriators.” A modern economy can only transcend the anarchic chaos of capitalism
through through reorganizing production on a collectivized, i.e., socialist, basis. Only
socialism offers a realistic plan for employing the enormous technological capacity
developed under capitalism to ensure a secure, comfortable and sustainable material
existence for all.
The first step on the road to the socialist future is a revolution to uproot global
capitalism and establish the direct rule of the working class and the oppressed. This in
turn requires the forging of a revolutionary party committed to the political program
elaborated by Marx, Lenin and Trotsky. There is no other way for humanity to escape the
madhouse of capitalism.
Karl Marx on Capitalist Crises
Since capital’s purpose is not the satisfaction of needs but the
production of profit, and since it attains this purpose only by methods that determine the
mass of production by reference exclusively to the yardstick of production, and not the
reverse, there must be a constant tension between the restricted dimensions of consumption
on the capitalist basis, and a production that is constantly striving to overcome these
immanent barriers.
· · ·
It is not that too much wealth is produced. But from time to time, too much
wealth is produced in its capitalist, antagonistic forms.
The barriers to the capitalist mode of production show themselves as
follows:
(1) in the way that the development of labour productivity involves a law, in
the form of the falling rate of profit, that at a certain point confronts this development
itself in a most hostile way and has constantly to be overcome by way of
crises;
(2) in the way that it is the appropriation of unpaid labour, and the
proportion between this unpaid labour and objectified labour in general—to put it in
capitalist terms, profit and the proportion between this profit and the capital applied,
i.e. a certain rate of profit—it is this that determines the expansion or
contraction of production, instead of the proportion between production and social needs,
the needs of socially developed human beings. Barriers to production, therefore, arise
already at a level of expansion which appears completely inadequate from the other
standpoint. Production comes to a standstill not at the point where needs are satisfied,
but rather where the production and realization of profit impose this.
If the rate of profit falls, on the one hand we see exertions by capital, in
that the individual capitalist drives down the individual value of his own particular
commodities below their average social value, by using better methods, etc., and thus
makes a surplus profit at the given market price; on the other hand we have swindling and
general promotion of swindling, through desperate attempts in the way of new methods of
production, new capital investments and new adventures, to secure some kind of extra
profit, which will be independent of the general average and superior to it.
—Excerpted from Capital Vol. 3, Chapter
15