Chapter 5 – The Crisis of Social-Democracy
The fundamental basis of social-democracy is the idea that social progress depends upon the accumulation of capital, the steady increase in social productivity, and the improvement in living standards, which this brings about. The failure of social-democracy to follow through on the logic of its own ideology, by confronting conservatism, and the antediluvian forms of capital, as Marx describes them, on which that conservatism rests, undermined its own social base. It undermined socialised industrial capital, vis a vis fictitious capital, and the consequences of that are now being felt, because, as illustrated earlier, the latter ultimately is subordinated economically to the former. It is this basic contradiction that explains why the political centre, across all the developed capitalist economies, has collapsed.
Social-Democracy can only go forward by capital itself going forward. In the period after the the end of the post-war boom, in 1974, capital responded in the way it always does. To deal with high wages, caused by a relative shortage of labour-power, as capital accumulation had proceeded to a degree where it had been overproduced, capital engaged on a programme of intensive rather than extensive accumulation. In other words, it concentrated on introducing new labour-saving technologies.
There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit. As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.
This process, by raising the rate of surplus value, by relatively diminishing the proportion of labour employed, acts to reduce therate of profit/profit margin, because the proportion of new labour (v + s) contained in each unit of output declines, whilst the proportion of dead labour (c) in the form of processed materials rises. However, the very same process of technological development and increase in social productivity raises the annual rate of profit, and so the general annual rate of profit of society.
It does this in a number of ways, as Marx describes in Capital III, Chapters 6 and 15. Firstly, by raising productivity, it ends the relative shortage in the supply of labour-power, which had caused wages to rise, and profit to be squeezed. It creates a relative surplus population, which causes wages to fall, surplus value to rise, and the rate of profit to rise.
Secondly, the mass of new technologically more advanced equipment that is introduced causes a large moral depreciation of the existing fixed capital stock, which brings about an immediate rise in the general annual rate of profit. Thirdly, the rise in social productivity reduces the labour-time required for the production of both fixed and circulating constant capital, again bringing about a rise in the rate of profit, as the value of constant capital falls. Fourthly, that rise in social productivity also reduces the value of wage goods and so of the value of labour-power, causing the rate of surplus value to rise, and the rate of profit along with it.
Fifthly, new technologies create more effective ways of using existing materials, as well as introducing new, more effective materials. Better engines burn oil more effectively, carbon fibre is more effective, and required in smaller quantities, than steel, and so on. Finally, the rise in social productivity increases the rate of turnover of capital, and thereby raises the general annual rate of profit, and releases capital for other purposes.
This huge rise in social productivity that began in the mid 1980's, and brought about a consequent huge rise in the general annual rate of profit, is what caused the secular decline in interest rates that began at that time, as this mass of realised profits grew at a faster pace than the demand for money-capital to finance additional real capital accumulation. The secular fall in interest rates fuelled a secular rise in the capitalised values of financial assets and property, which underpinned the growth in the power of the owners of fictitious capital, and the conservative ideas that are based on it.