Wednesday, 12 August 2015

Desperation All Round

Everywhere you look there are signs of desperation. You can imagine frantic conversation going on in the Chinese Politburo, as they devalue the Yuan for the second day in succession, where they are saying, “Oh please, don't let this be a Chinese 2008", as they watch trillions of dollars continuing to be wiped off Chinese shares.

You can see the same thing with the desperate hopes of western speculators that the Federal Reserve will not raise official interest rates, in September, and thereby spark a selloff in bonds, equities and property. Every bit of bad news is seized upon with glee, by such speculators, who see in it, not some bad news for real people, but rather the potential that it will be an excuse not to raise rates, and thereby the potential for the prices of their fictitious capital to be propped up for a while longer.

Members of the Chinese Politburo and bureaucracy are no doubt motivated by the fact of their own large-scale ownership of bonds and shares, whose prices have been bloated out of all proportion by the money printing and easy credit introduced by the government. In my first book, I pointed out that China was one potential spark for the next crisis, not just because of the inevitability of another, worse, global financial crisis, but also because China is rather like Britain in the 19th century. It is the workshop of the world, whose economy has grown massively on that basis. The biggest overproduction crises of the 19th century arose during periods of prolonged boom and expansion, precisely because it is during those times that, productive-capital is swept up in a mania of investment, without consideration for whether markets can absorb what is then produced. That is made worse, when an economy like Britain, then, and China today, has kept demand afloat by providing cheap credit to global consumers.

China faces the potential of a severe crisis of overproduction, as I wrote there. In other words, not just a financial crisis, but a real economic crisis. China, unlike Britain, in the 19th century, has an advantage because, as Michael Roberts recently pointed out, in an excellent article in the Weekly Worker, a large portion of the Chinese economy continues to be in state hands, and subject to control by the government. In part, however, the current problem arises, because the government has failed over the last decade, to shift the structure of the economy away from being an investment led, export oriented economy, to one where the domestic market plays a larger role. It needed to reduce domestic savings and increase consumption, one means of which would have been to create a welfare state, to remove the need for individuals to save to cover the risks of life that face them. Instead, those excess savings have gone into blowing up bubbles in property, bonds, and shares. If they continue to burst, the Chinese authorities face considerable social unrest.

The same applies with all the financial pundits and investment managers invited to give their views to TV. Rising interest rates will quickly vaporise the fictitious capital, and wealth that exists as nothing more than worthless scraps of paper, for all these people. That is why they are so desperate to avoid such rising rates at all costs, and become frantic each time the possibility raises its head.

But, there are other signs of desperation. There was the desperation, for example, of conservatives across Europe, at the prospect that Syriza might offer an alternative view to a world where the interests of this fictitious capital dominate; a world instead, where wealth is seen, not in terms of the prices to be paid for worthless bits of paper, but in terms of the need and ability to engage in the production of goods and services that people need, especially when so many people, who could be engaged in such activity, are consigned to unemployment.

The conservatives, throughout Europe, were so desperate to prevent such a view being adopted, that they were prepared to destroy the EU itself, by their actions, rather than allow it to spread. Yet, despite that, the simple logic of the view has spread across Europe, for the simple reason, as Marx said, 150 years ago, it makes no sense at all, even in capitalist terms, to destroy vast swathes of real wealth, of real productive potential, simply to defend the notional prices of wothless bits of paper, in the hands of a tiny minority.

It is a view that is behind the rise of Syriza in Greece, Podemos in Spain, but also of Jeremy Corbyn in Britain, and that brings with it its own manifestation of desperation. On the one hand, there is the desperation of the Blairites and Tory media, who simply cannot understand, or relate to, the world they are living in. That is reflected in the fact that Corbyn stands in relation to them as does Obi Wan Kanobi to Darth Vader. Each time they attempt to strike him down, he becomes stronger than they can believe.

On the other hand, it is reflected in the desperation of all the sectarians and trolls, who, for the last few years have lived on the idea that Labour was finished, even if for many of them, such as the SWP and SPEW, the conclusion drawn from that was merely to create a Labour Party Mark II!

In the case of those who are desperate that interest rates should not rise, it is a reflection of a view of capitalism whereby wealth is created not by producing things, but simply as a consequence of exchange. The value of bits of paper just magically rises, as a result of these exchanges. It basically assumes that capitalism can keep expanding, keep creating wealth simply on the basis of these exchanges.

In the case of those who think the Labour Party is dead, they are also effectively those who think that capitalism is dead. They are desperate that Corbyn, or Syriza or Podemos should be defeated, simply to demonstrate that only Socialism (usually their view of Socialism) is the answer, and compromise is impossible.

But, both are wrong. Engels wrote that the development of capitalism itself had dealt with all those grievances of workers in its early period.

Thus the development of production on the basis of the capitalistic system has of itself sufficed — at least in the leading industries, for in the more unimportant branches this is far from being the case — to do away with all those minor grievances which aggravated the workman’s fate during its earlier stages.”

(Preface to the English Edition of “The Condition of the Working Class in England)

Moreover, he had also pointed out that the development of socialised capital had not only brought to an end the monopoly of private capital, but in the shape of the giant trusts, had also brought to an end the “planlessness” that characterised the early period of capitalism.

What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.””

(Critique of the Erfurt Programme)

In reality, despite the worst financial crisis in history, so far, in 2008 – a crisis which itself, in part, is a reflection of this division, described by Marx and Engels, between socialised productive-capital, and privately owned fictitious capital - capitalism, as an economic system has remained remarkably robust. As Michael Roberts points out in the Weekly Worker article, China's economy continues to grow strongly, even if it risks a meltdown of its stock market. The US, UK and EU economies continue to grow, and new economies in Asia, Africa and Latin America are emerging.

It is not capitalism as an economic model per se, therefore, that is in crisis, currently, but only that aspect of it that is conservative, that is a throw back to its origins, in the continued influence of the private owners of fictitious capital, versus the socialised nature of big industrial capital and the conflict of interests between the two.

Ironically, therefore, the desperation from both ends of the spectrum derives from a similar outmoded vision of capitalism, rooted in the early 19th century. For both groups, it is as though nothing has really changed. For one group, profit has always been a mystery that derives magically out of the process of exchange, and simple ownership of capital, whether it be real or fictitious. Fo them, capitalism is eternal.

For the other group, their view is closer to that of Sismondi than to Marx. Sismondi's view of capitalism could only see its negatives. For this group, “anti-capitalism” fulfils the same role as “anti-imperialism” or “anti” anything else. It is an alternative to seeing how the future emerges out of the present, and so removes the need to make any positive proposals as to how to move forward, other than being anti the present.

That is why they are so desperate that Syriza or Podemos or Corbyn should fail. It is why they are desperate to equate financial crises with an economic crisis of capitalism, whilst Marx was keen to differentiate between the two. It is why they want to present every crisis, as the precursor to the collapse of capitalism itself.

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