Saturday, 29 May 2010

The return Of Illiterate Economics - Part 3 - The Economics of Class Struggle

Put in clear class terms, the Capitalists are not prepared to finance an increase in society’s (mainly workers) aggregate demand by tax deductions from their profits, (which they could have achieved by simply agreeing to an across the board rise in wages) in order to revive the system, because they see no prospect of a sustainable revival creating the conditions out of which such a reduction in profits would be worthwhile. There are too many of the same products to be sold (and usually other newer, lower-cost producers producing them) too much competition between the sellers to enable them to make sufficient profits. One or both of two things they see as needing to happen. Firstly, less competition, which means some of their competitors have to disappear. Secondly, other products have to be available for them to produce, and sell, for which, as yet, there is no or little competition. In the meantime, in order to ensure that its not them that goes to the wall the order of the day is to cut their costs, mainly wages, even though, overall, the consequence of that is to reduce aggregate demand further, and worsen the immediate situation.

The prolonged crisis deals with the first, as businesses collapse or get restructured. Innovation deals with the second. Innovation takes two forms. Firstly, businesses, seeking to gain competitive advantage, to cut their costs and raise profits, without new investment, look to new methods and procedures, for example, the introduction of Fordism and Taylorism in the 1920’s, the introduction of Japanese style Quality Circles of the 1980’s, that was part of the “After Japan” project. Similarly, keen not to invest in additional productive equipment until they see signs of sustained recovery, businesses seek to replace existing equipment when it wears out with more efficient equipment. Some of the new procedures, such as mass production, in the 1920’s, or robotisation and CAD/CAM in the 1980’s, spur the development of new base technologies that themselves form the basis not just of new investment goods, but of mass produced consumer goods too. The same electric motors that powered assembly line conveyor belts, powered similar belts on washing machines, dryers, vacuum cleaners and a myriad other consumer products. The microchips that enabled the assembly line robots of the 1980’s to work, and the development of computer software languages and interfaces, that replaced clunky punch card systems and teletype machines, that enabled a thousand CAD/CAM systems to operate also facilitated the first personal computers to be introduced, and led to the development of thousands more consumer goods applications of the micro-chip – a process that is only just beginning.

This is what characterises investment during the Long Wave downturn, periodic, cautious investment in new productive methods and technologies, and small scale tentative steps by venture Capital into new types of consumer goods. Both act as a means of raising the Rate of Profit. It’s also why during such periods it is new geographical areas that can lead the way. Almost every Long Wave downturn has seen the emergence of new locations, new economies that are able to leap-frog, established areas, and form the most dynamic economies of the new upturn.

The introduction of more efficient methods, and new types of machine, acts to raise labour productivity, and the Rate of Surplus Value, without any large rise in the organic composition of Capital. New types of product both tend to have a low organic composition of Capital – they require a high relative proportion of skilled labour to Constant Capital – and to face less competition. This again acts to raise the rate of profit.

At the conjuncture, at the end of the Boom and onset of the downturn, demand for Labour has reached a peak. Workers have had 20-30 years in which to gain strength and confidence. They have rebuilt basic organisation, selected new leaders. At each such conjuncture of the Long Wave we have seen that, as employers feel the need to impose harsher conditions, workers are prepared to fight – Chartism, Paris Commune, Russian Revolution are the clearest examples. But, each is followed by a period of retrenchment. As the post-war Long Wave began to come to a close, in the late 60’s, the bosses’ attempts to throw the burden on to workers was strongly resisted. France in May ’68, the Prague Spring of the same year are graphic examples. In Britain, workers struggled against attempts to impose anti-union laws, and similar struggles took place across Europe and North America. As the boom ended in 1974, the struggles became more intense, more of a class wide rather than sectional nature. Miners strikes in the US saw gunfights as mine owners brought in hired goons as strike-breakers. In Britain, the question of power itself was posed, as Heath’s Government, in an attempt to beat the Miners, called an election on the basis of “Who Rules?”

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