This blog
post is a reply to Paul Smith's letter in the
weekly worker
(19th July 2012). This follows a prolonged series of
letters between us that started after I took issue with some of the
points he made in an article -
The Politics Of Fear & Despair. Unfortunately, that discussion
has followed a well worn path. Paul makes a number of statements
about the global economy being in crisis, without producing any
actual data to back up that claim. Then, when I do provide data,
showing that no such decline is occurring, Paul, again without
providing any data to back up his claims, merely responds by saying
well the facts you have provided might mean something else.
I feel a bit
like Richard Dawkins in a discussion with an evangelical. The
problem with any such discussion is that it is always more difficult,
and more tedious, to prove your case, with resort to the facts, and to
present such a complete and indisputable set of facts, than it is for
someone, who simply bases their case on dogma, to simply reiterate
their articles of faith, and to question the data you have provided
without providing any data of their own to demonstrate that it is, in
fact wrong!
Replying to
Paul's latest letter adequately would have taken up more space than
could reasonably have been done in a letter, so I have agreed with
the comrades at the WW, instead to provide my response here, with a
letter to their paper, referencing it instead. In order to make the
whole debate intelligible without recourse to searching out and
reading all the preceding correspondence, I have tried here to
summarise the main points of the debate. I agree with Paul when he
says that it is important to have this debate, because the question
of whether Capitalism is in fact in decay, is important. What is
also important is the question of what consequences such decay have
for socialists and their strategy. I have, therefore, expanded that
discussion to look at what Trotsky had to say about the role of the
Long Wave, and its consequences for political action. In order that
this extended response is in more manageable pieces I have divided it
into three parts.
It is
important also for what the continual search for such crises, and
collapses, says about the mentality of the Left itself. As I have
stated before, the psychological roots of this kind of Catastrophism
are the same whether it is manifest in the form of religious
prophecies, predictions of Environmental Calamity, or Economic
Crisis. Psychologically it represents a sort of defeatism and
demoralisation. Those predicting, and in reality hoping for some
kind of catastrophe are really admitting that they have given up
trying to exert control, and have instead come to rely on some
external force coming to their rescue. For the religious it is the
Second Coming. For Environmentalists it is a combination of a hope
that predictions of some calamity will lead to people changing
behaviour, or in its worst form, seeing such a catastrophe as the
means by which industrial development etc. is brought to a halt.
For, the Left its a hope that such a catastrophe will lead to some
miraculous process whereby the working-class rise up, having become
class conscious, overthrow Capitalism and proceed to Socialism. It
is of course, absolute nonsense and nothing to do with Marxism.
The extent
that that is the case can be judged by the fact that such a collapse
is also looked forward to by those on the Far Right of various
stripes. UKIP are making the most of the current European Crisis to
argue for a return to Nationalism, and autarchy. The BNP are doing
the same, and see any serious collapse as precisely the conditions in
which in the past Fascism has prospered. The Anarcho-Capitalists
seek such a collapse because they see it as the means of destroying
“phoney Capitalism”, and bringing about a return to some kind of
18th Century economy based on a myriad of small,
essentially peasant owners. In reality, those on the Right have far
more reason to hope for such a collapse than the Left. Any
prolonged period of economic weakness will, as it has in the past,
act to weaken workers organisations further, weaken workers
solidarity and ability to resist, and promote all of the
individualist notions of a war of all against all, that such
conditions necessarily create, as well as bringing to the fore all of
those baser human instincts that go with it, and which are the
feeding ground for the Far Right. For all those reasons this debate
is important.
Paul Smith
says,
“Bough’s
science conforms to the inductive method. It relies on
generalisations from observable facts or data. These consist of
growth and trade statistics.”
My science
relies on the same method as Marx, which is to begin with the facts
and then try to analyse them honestly. By contrast, Paul's method is
to begin with a preconception based on faith, and then trying to use
any argument you can to deny the facts, without actually providing
any factual evidence yourself, to prove that those facts are invalid!
I have not at all relied on generalisations from observable data,
but have provided extensive data on both a global and national basis
showing that not only is Capital not in decline, but is growing at a
very rapid pace. Moreover, that pace measured by global GDP, by the
growth of trade, by the growth in the global labour force by around a
third in the last decade, by the growth in capital accumulation, and
by the extent of new technological developments, has markedly
increased in the last ten years, indicating the power of the current
Long Wave Boom. Paul does not actually provide any evidence to back
up his argument that the massive growth in output is not really an
indication of vibrancy, he is content to simply try to find some
possible explanation for the facts not fitting his religious belief.
Let us look
at the actual economic data I have presented that Paul refuses to
accept proves that, not only is Capitalism not in decline, but Global
Capitalism is experiencing the most powerful Long Wave Boom in its
history.
- Of all the goods and services produced in Man's entire history, almost 25% have been produced in the last ten years alone!
- From 1999 on, Commodity Markets turned sharply upwards, as demand for all raw materials, and foodstuff increased sharply as the new Long Wave Boom began. It has seen steady increases in the prices of Copper, Oil, Corn and almost every other commodity, as global demand, fuelled by rising economic activity in China, and other BRIC economies, as well as the rising demand of millions of new consumers in those economies rose sharply
The extent of the new Boom starting from 1999 can be seen in the change in the figures for world trade. Between 1980 and 1990 global trade rose from around $4,000 billion to around $6,000 billion, remaining flat until around 1994 (i.e. 50% rise in 14 years). Between 1994 and 2000 it rose from around $6,000 billion to $12,000 billion (i.e. 100% rise in 6 years). But, the sharpest rise has most notably been since 2002 where it rose from around $12,000 billion to around $28,000 billion by 2007 133% rise in just 5 years!). (Source: WTO Thomson Datastream)
- In 2007, Bridgewater Associates in its comprehensive survey found that for the first time since 1969, not one single economy in the world was in recession.
- It was not just the BRIC economies that were experiencing rapid growth like China's growth of around 10-12%. On the back of its demand for food and raw materials, economies in Latin America were growing rapidly, and for the first time economies in Africa and Central Asia were beginning to grow rapidly too. Azerbaijan grew at around 26% as did Angola, whereas Mauritania grew at around 18%.
- Even after the Financial Meltdown of 2008 caused western economies to freeze, the economy in China continued to grow at around 8-10%, and many of the other BRIC economies, as well as the economies in Latin America and Africa, and Central Asia, providing them with foodstuffs and raw materials continued to grow strongly too.
- Those economies that adopted Keynesian stimulus measures quickly recovered from the Financial Meltdown, as the Banks were nationalised, and liquidity put into the system. The US at one point was growing at an annualised rate of 5%. It is still growing at around 2% p,a, The UK was growing at around 2.5% p.a. before the Liberal-Tories crashed the economy with their Austerian economic madness. Even with the Eurozone Debt Crisis, the Eurozone, and the EU as a whole has largely not fallen back into recession. Some of its economies have grown rapidly.
- Until recently, Germany was growing at around 3% p.a., whilst Sweden was growing even faster.
- World GDP has risen from around $41 trillion in 2000, to around $70 trillion in 2011.
- According to the ILO, the world labour force has grown by around a third in the last ten years. The number of workers employed in industry has risen by around 30% or about 150 million workers, the number employed in services has risen by 35%.
Despite all
of this data, Paul believes that any increase in economic activity is
really just a mirage, which can be accounted for by the growth of
Financial Services or other unproductive activity!
He then
says,
“As far
as I know, there is no statistical evidence that can distinguish
between growth rates and capital accumulation.”
I find that
an astonishing comment for anyone who considers themselves an
Economist to make. If Paul is so ignorant of basic economic data,
its no wonder he relies on his faith, and repeating ideas put forward
by Lenin 90 years ago (which were wrong even then). The
World Bank
amongst others produce lots of such freely available
data. Its website provides the data on Fixed Capital Formation, for
instance, a standard measure used by economists to gauge capital
accumulation. It shows that FCF rose from around $7 Trillion in
2002, to $14 Trillion in 2010. That is, not only did World Output
double in the last decade, but Capital Accumulation also doubled.
Paul has
tried to claim that the growth in output has been all down to the
growth of Financial Services, though, of course, he has provided not
one single piece of actual data to back up this assertion. The data
on FCF shows this to be false. The data on growth in goods and
services shows it to be false, and what is more the growth in the
number of additional industrial workers (up 30% or around 150 million
workers) shows it to be false. The only figure in this respect that
Paul has given is the growth in the value of derivatives. But, these
do not figure in the calculation of trade or GDP figures. The only
aspect of this that would so figure, is the earnings of Financial
Institutions involved in the trade.
He says,
“I
contend that growth rates do not distinguish between prices and
value.”
But,
according to Marx from the perspective of Capital in General, prices
equate to values! He continues that the data “show nothing of
growth in productivity or in job creation.” But, I have
provided the data showing that the global working class grew by
around a third in the last decade, or around 500 million workers, a
fact he seems to have completely ignored. The majority of that
growth has been in developing economies, precisely where the majority
of industrial production has been concentrated, whereas it is in
developed economies like the UK and US, where Financial Services are
located. And, of course, during that period we have also seen a
considerable growth in productivity as a consequence of the
introduction of computers, robots etc. The combination of rapidly
rising productivity, and of rapid growth of the labour force, is
itself a powerful indication of the extent of growth, and of Capital
Accumulation.
Paul
continues,
“He
seems to be unaware that rapid growth can be an expression of
decline.”
Ask those
tens of millions of workers in China, or India who have been “rescued
from the idiocy of rural life”, and have seen their living
standards rise dramatically whether this rapid growth looks like
decline to them! Of course, other than referring to a rather tenuous
link with the expansion of a star before it goes into supernova, he
provides no explanation of what he means by this claim. The only
basis of it in Marx, is his statements about how a crisis of
overproduction arises. But, there is no indication that there is any
such crisis of overproduction. As Engels recognised towards the end
of his life, the establishment of large Trusts and Monopolies had
removed the element of planlessness within Capitalism. The linking
of those Trusts and Monopolies to a large interventionist Capitalist
State, has further removed the element of planlessness. Crises of
overproduction today manifest themselves not in the way they did in
Marx's time, but by Capital running up against the limits of
consumption. That is, Monopolistic Competition drives large firms to
seek to win market share by continually improving quality, and
reducing costs of production through innovation. Continual
reductions in costs, bring about continual reduction in Exchange
Value. Meanwhile, workers consumption needs are increasingly
satisfied for the range of available Use Values. That is
particularly true of the period of Fordism that accompanies the last
Long Wave Boom, whereby large firms operated on a basis of “mutuality
agreements” with Trades Unions, providing annual rises in real
wages linked to even larger rises in productivity.
In order to
sell these Use Values, firms are forced to reduce prices to levels
that do not ensure the reproduction of the Capital consumed in their
production. Monopolies, slow down, and then cease large scale
investment, and during periods of more serious downturn, actually
reduce their Capital, sacking workers and so on, which acts to
further reduce Aggregate Demand, adding a further downward twist to
the spiral. Only when a new Long Wave Boom starts to form, and new
types of Use Values are developed to be sold, at a profit, which
provide an outlet for capital investment, does it become possible to
begin increasing Capital Accumulation at a rate that creates the
conditions for sustained growth. Given that what we see at the
moment is vast new ranges of Use Values being produced, and even more
on the horizon to be produced (3D TV's, whole new ranges of
medicines, biotechnology etc.); given that we see rates of profit,
both at a global, and enterprise level continuing to rise, from
already high levels; given that we see Capital with no shortage of
profitable productive outlets either at an industry or at a
geographical level; given that we see technological developments on
such a scale as to ensure that not only is there an increasing number
of new products to be produced, but also the potential for massively
increasing productivity; given that Capital Accumulation in fixed
capital formation is increasing; given that Global GDP is growing;
and given that global trade flows are increasing it is clear that
there is no such problem of production exceeding potential
consumption.
In fact, a
look at the rapidly growing levels of consumption in China and
elsewhere indicates how far from the truth that is.
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