The Economic Situation (1/6)
Paul says,
“We’ve entered the worst economic slump since 1921, with a global economy that was already stagnant, heavily unequal and debt-burdened. Anyone who thinks the current geopolitical order will survive hasn’t understood the 1930's.”
Its certainly, true, as the Bank of England, and other economic institutions have said, that government lockdowns have caused the biggest economic slowdown in 300 years, but does this mean that we have entered “the worst economic slump since 1921”? Not at all, because the conditions today are completely different to those of 1921, or the 1930's. In fact, I made that point at the time of the 2008 financial crisis.
In the 1890's, a period of rapid economic growth began, following a period of 25 years of crisis and stagnation, of what has been called the First Great Depression. In this period, we see the growth of the New Unionism, in Britain, when millions of unskilled workers, for the first time became organised in trades unions, and launched into a series of strikes. The period sees also the growth of political consciousness leading to the creation of the Labour Party. In Germany a similar growth of class consciousness develops, and the SPD grows massively. This period of long wave upswing ends around 1914. It creates a series of social conflicts, and as capital seeks to resolve the crisis by a further concentration and centralisation of capital, and creation of larger single markets, it leads to the attempts, by Germany, to unify Europe under its control, whilst Britain attempts to protect its position by frustrating any such unification. This period also results in the Russian Revolution in 1917, German and Hungarian Revolutions of 1918 and so on.
The period of crisis resumes after the end of the First World War, following a brief economic upswing, and provides the backdrop for the strikes of British miners and transport workers in the Triple Alliance, in 1921, and the General Strike of 1926. Similarly, there is the failed German Revolution of 1923, and the Chinese Revolution of 1927. But, already, by the time of these revolutions, in the 1920's, the economic conditions have changed from one of economic growth as part of the long wave upswing, to one of long wave downswing, and a willingness of employers to lay off workers, to close down production, and so on.
The backdrop to this is given by the nature of the Long Wave and its cycles. The period of crisis, such as that which begins in 1914, is a period of crises of overproduction of capital. Following a long period of growth, the demand for labour-power has meant that absolute surplus value cannot be increased by increasing the social working-day. But, also this growth in economic activity means that the demand for labour-power has continued to grow, until labour shortages cause wages to rise and profits to be squeezed. These very tight profit margins mean that it takes only slight changes to turn these small profit margins into losses. Workers whose wages have risen, and whose standard of living has risen have no desire to increase their consumption of many commodities further, unless their market prices fall by increasingly large amounts, and those price drops mean that the commodities can't be sold profitably. Workers begin to consume other types of commodities, but these don't exist in such variety to soak up the money they no longer spend, and although they consume some of the luxury products formerly the preserve of the rich, this only counterbalances the reduced consumption of those commodities by the capitalists, whose profits have been squeezed, and who have to devote a larger proportion of profits to investment rather than consumption, so as not to lose market share.
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