The world economy hit by the acceleration of decomposition

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Capitalism is more and more being strangled by a whole series of contradictions inherent in its way of existing, which are now inter-acting and mutually reinforcing each other, threatening society at unheard of levels of scale and frequency.

In the face of these calamities, the bourgeoisie has always had the concern to discount and discredit any explanation which raise the question of the responsibility of the system itself. The goal of the ruling class is to hide from the working class the real cause of wars, world disorder, climate change, pandemics, the world economic crisis.

Overproduction and the falling rate of profit show the historic limits of capitalism

Overproduction was identified by Marx as being at the origin of the cyclical crises of capitalism in the 19th century[1]. The Communist Manifesto already proclaimed in 1848 that “in these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production”. Nevertheless, in the ascendant period of capitalism, this contradiction acted as a factor in the expansion of capitalism across the globe through the search for markets to serve as outlets for the production of the industrialised powers.

By contrast, in its period of decadence, overproduction is at the root of the economic impasse marked by the great world depression of the 1930s, by the succession of deeper and deeper recessions which have followed each other since the end of the 1960s, but also by the dizzying development of militarism, since “faced with a total economic impasse, with the failure of the most brutal economic ‘remedies', the only choice open to the bourgeoisie is that of a forward flight with other means - themselves increasingly illusory - which can only be military means.”[2] Tragic illustrations of this impasse: two world wars and, since the first, an almost uninterrupted series of local wars between states.

The cause of overproduction was shown by Marx in the Communist Manifesto. Pushed by competition to enlarge itself more and more on pain of death, production permanently tends to become excessive, not in relation to the real needs of human beings, but in relation to the buying power of the waged or unemployed proletarians. The proletarians only constitute an outlet for capitalist production so long as the reproduction of their labour power makes it necessary[3]. To pay the workers above this necessity would certainly reduce overproduction but would also stand in the way of the accumulation of the surplus value extracted from wage labour.

There is no solution to overproduction inside capitalism. It can only be eliminated by the abolition of wage labour, which means establishing a society without exploitation. Questions and misunderstandings about this have been expressed in our public meetings and meetings for contacts. For one comrade, overproduction could be lessened or even eliminated under the influence of other “inverse” contradictions that result in a scarcity of certain commodities. In reality, while shortages are affecting certain sectors of world production, for example due to gaps in supply chains, other sectors continue, in essence, to be affected by overproduction.

If the wheels of the world economy are not gripped all the time by the permanent and growing tendency towards overproduction, it’s because the bourgeoisie has resorted massively to non-reimbursed debt in order to create demand, leading to the accumulation of a colossal global debt which hangs like Damocles’ sword over the world economy.

The tendency towards the falling rate of profit, also identified by Marx, presents itself as a supplementary barrier to accumulation. Faced with the exacerbation of competition and in order to keep their enterprises alive, the capitalists are forced to produce more cheaply. To this end they have to increase productivity by using more and more machinery in the process of production (raising the organic composition of capital). The result is that each commodity produced in this way contains proportionately less living labour (the part of the workers’ labour not paid for by the capitalist), and thus less surplus value. Nevertheless, the effects of the falling rate of profit can be compensated by various factors, in particular augmenting the volume of production[4]. But this in turn comes up, as with overproduction, against the insufficiency of markets. While the falling rate of profit did not appear right away in the life of capitalism as an absolute barrier to accumulation, it’s because there were still outlets existing in society, initially real ones and later increasingly based on the growth of world debt, allowing it to be offset. In the present context, it is yoked dangerously to overproduction.

The soaring unproductive expenses generated by state capitalism and rising rates of inflation

With the outbreak of the First World War, capitalism entered into a new period in its life, its decadence, where social contradictions imposed the setting up of state capitalism, charged with maintaining the cohesion of society in the face of these contradictions, in particular:

  • War or the threat of war which implies the development of militarism and thus of military expenses
  • The development of the class struggle, but also the growth of crime and gangsterism, which makes it necessary to set up various repressive bodies (police, courts, etc)

These kinds of state capitalist expenses are totally unproductive and, far from contributing to accumulation, constitute a sterilisation of capital. Here again incomprehension has been expressed about the production and sale of arms, which are seen as part of the accumulation process and thus confer a certain rationality on war. In fact, the idea that the sale of such commodities implies the realisation of surplus value is rejected by marxism. To be convinced of this, you only have to refer to Marx: “A large part of the annual product, the part consumed as income and no longer re-entering production afresh as a means of production…This kind of productive labour produces use values, is objectified in products, which are only destined for unproductive consumption. These products have in reality, as articles, no use value for the reproduction process.”[5](our emphasis). In this category are all the luxury articles destined for the bourgeoisie as well as arms, since arms obviously do not re-enter the production process as means of production.

Since the beginning of the 20th century unproductive expenses have continued to grow, especially military expenses, and the present war in Ukraine have given them a further impetus.

Inflation

Inflation should not be confused with another phenomenon in the life of capitalism, the rising price of certain commodities resulting from a lack of supply. The latter phenomenon has taken on a particular significance due to the war in Ukraine which has affected the supply of an important amount of agricultural products. This is already aggravating poverty and hunger on a world scale.

By definition, inflation is not one of the contradictions inherent in the capitalist mode of production, as is the case for overproduction for example. Nevertheless, it is a permanent element in the period of capitalist decadence and has a major impact on the economy. Like the lack of supply, it expresses itself in rising prices but it is the consequence of the weight of unproductive expenses in society, whose cost has repercussions for the commodities being produced: “Today, in the price of each commodity, alongside profits and the cost of labour power and of constant capital used in production, there is a greater and greater involvement of expenses which are indispensable to its being sold on a more and more saturated market (from the salaries of those engaged in marketing to the amount set aside to pay the police, functionaries and soldiers of the producer country). In the value of each object, the part which embodies labour time necessary for its production becomes smaller and smaller in relation to the part embodying human labour imposed by the system’s survival. The tendency for the weight of these unproductive expenses to annihilate the gains of labour productivity manifests itself in the constant rise in commodity prices”[6].

Finally, another factor in inflation is the result of the devaluation of money which accompanies the uncontrolled expansion in global debt, which today is nearing 260% of world production.

The ecological crisis

If the bourgeoisie has thrown itself so avidly on natural resources by incorporating them into the productive forces, it’s because they present the peculiarity of being “free” for capitalism.

However polluting, murderous and exploitative capitalism was in its ascendant period as it was conquering the world, this was nothing compared to the infernal spiral of the destruction of nature since the First World War, the consequence of ferocious economic and military competition. The destruction of the environment has thus reached new levels, as capitalist enterprises, private or public, have increased pollution and the pillage of the resources of the planet to unprecedented levels. What’s more, wars and militarism have made their own contribution to pollution and destruction of the natural environment[7]. In the second half of the 20th century there has been a new dimension in the disaster that capitalism is storing up for humanity: the development of climate change which threatens the very existence of our species. Its causes are economic, and, in turn, so are its consequences.

Climate change is having a greater and greater impact on the life of human beings and the on the economy: monstrous fires, violent and extensive flooding, heatwaves, drought, violent storms… increasingly affecting not only agricultural production but also industrial production and human habitats, thus more and more punishing the capitalist economy.

Such a threat can only be removed through the overthrow of capitalism. But on this point there exists the idea that you can’t rule out the bourgeoisie being able to avoid the climate disaster by installing new “clean” technologies. There is no doubt that the bourgeoisie is still capable of making considerable advances in this domain, even decisive ones. But against this, it is totally incapable of unifying itself on a world scale in order to put such technological advances into practice.

It's not the first time in history that such illusions in the bourgeoisie have been put forward. In a certain way they took the form in the theory of “super-imperialism” developed by Kautsky in particular on the eve of the First World War and purporting to show that the great powers could come to an agreement among themselves in order to establish a shared, peaceful domination over the world. Such a conception was obviously one of the spearheads of the pacifist lie, aiming to make workers believe that you could put an end to wars without needing to destroy capitalism. Kautsky’s view ignored the deadly competition between capitalist powers. It also ignored the fact that the highest possible level of unification between the different national fractions of the world bourgeoisie is precisely that of the nation, making them incapable of setting up a really supranational political authority and organisation of society.

Reality is quite the opposite to the illusion of a bourgeoisie capable of avoiding the climate disaster. What we are seeing is the persistence and even aggravation of total irrationality and irresponsibility in the face of climate change, expressed not only by the unleashing of new imperialist conflicts like the war in Ukraine (catastrophic for the human beings but also for the planet) but also through lesser, but still significant, aberrations like the running of Bitcoin, which requires a consumption of energy equivalent to that of all of Switzerland’s activities[8].

The consequences of capitalism’s entry into the final phase of decadence, the phase of decomposition

Decomposition corresponds to the final phase of capitalism’s life, initiated by a deadlock between the two main antagonistic classes, neither of them able to bring its own solution to the historic crisis of capitalism. The deepening of the economic crisis thus determines the phenomenon of society rotting on its feet. This affects the whole of social life, in particular through the development of the tendency towards “every man for himself” in all social relations, and in particular within the bourgeoisie. This was illustrated very clearly during the Covid epidemic, notably through two examples:

  • The inability to coordinate and centralise research for a vaccine and to establish the planned production and distribution of vaccines for the whole planet;
  • The gangster behaviour of certain industrialised countries, stealing medical material destined for a neighbouring country on the tarmac of an airport.

Thus, while the roots of decomposition lie in the economic crisis, we have seen since 2020 that the latter is itself being increasingly affected by the most severe manifestations of decomposition. Thus, the course of the economic crisis has been aggravated by the development of every man for himself in all domains, but especially in the relations between the great powers. Such a situation cannot but act a major handicap to setting up concerted economic policies in response to the next recession.

The risk of chain reactions in the economic sphere

The reality of such threats is reflected in the declarations in July 2022 of the head economist of the IMF, who can hardly be suspected of trying to throw oil on the fire: “It may well be that we are on the eve of a world recession only two years after the last one”[9] (our emphasis).

In fact, “it is certain” that the situation is much more alarming than it was two years ago. The conjunction of a whole number of phenomena is there to support the prediction of major disturbances at the economic level and, as a result, well beyond it:

  • all the contradictions of capitalism examined in this article – reduction of solvent markets, frenzied race to increase productivity, intensification of global trade war – are being exacerbated.
  • Capitalism is facing the near certainty of having to fork out major new expenses: everywhere in the world, particularly in Western Europe, the acceleration of militarism is generating a powerful rise in unproductive expenditure. Similarly, aging infrastructures have been forgotten for decades in state budgets, which in turn makes society even more fragile, demanding enormous expenses to deal with perfectly predictable phenomena, as we saw with the Covid pandemic.
  • There are various possible detonators of an economic cataclysm, like the property sector crisis in China (which is at the origin of zero growth in this economy in the second trimester of 2022[10]), where bankruptcies like that of Evergrande may not be limited to this country but could have heavy international repercussions, such is the fragility of the world economy; the surge of inflation, as well as deeply affecting the lives of the exploited, and thus the working class in particular, poses other political problems for the bourgeoisie. An uncontrolled inflation is a fetter on a world commerce already affected by imperialist tensions. To the point where, faced with the seemingly ineluctable prospect of a rise in interest rates in a certain number of industrialised countries, recession seems inevitable. A menace whose gravity the bourgeoisie doesn’t seem able to admit since it would take place in the context of an already deteriorating economic situation, thus exacerbating the trend towards every man for himself and in some cases open hostility between the main powers.

Today, after more than a century of capitalist decadence, we can see how visionary were the words of the Communist International about the “internal disintegration” of world capitalism which will not disappear on its own but will drag humanity into barbarism if the proletariat doesn’t put an end to it. The hour has come for the proletariat to again react as a class in response to the apocalypse that capital is preparing for us. There is still time for that.

Silvio 5.10.22

 

[1] See Marxism and crisis theory, International Review 13

[3] “The consuming power of the workers is limited partly by the laws of wages, partly by the fact that they are used only as long as they can be profitably employed by the capitalist class. The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit.” Capital Vol 3, part V, chapter 30

[4] There are also other counter-tendencies to the falling rate of profit, in particular the intensification of exploitation

[6] World Revolution 2, “Overproduction and inflation”

Rubric: 

Economic crisis