It should be obvious to anyone not completely in denial, that 21st century capitalism is currently mired in the most severe problems for over 80 years. This particular crisis is quite evidently a multiple one. It comprises of economic, financial, social, ecological and moral elements – each of substantial magnitude. It is the co-incidence of these fundamental parts of the current crisis of capitalism, which gives it its particular significance. If this current set of intractable problems does not exactly herald the actual death agony of the capitalist mode of production, then it is certainly the case that the systems supporters are being forced to fight to the death for its continued existence.
Any one of the above noted elements would be sufficient to create a groundswell of opposition against the capitalist system. However, the correlation of all five aspects of this crisis, and the consequent depths to which they will drive it, should ensure the most profound and widespread questioning of the system of capitalism. The consequent development of a critical questioning attitude among different layers of society presents a substantial opportunity for the anti-capitalist movement to engage once more with a mass audience. This engagement should take the form of a widespread dissemination of the five elements, which are briefly examined below.
1. The economic crisis.
The economic aspect of the current crisis takes the form of an overproduction of commodities and an overproduction of capital invested in commodity production. The capitalist mode of production based as it is on the pursuit of profit, actively promotes ‘commodity fetishism’. It also routinely produces more commodities and services than can be sold at a profit. Each increase in technology, and in the number and diversity of capitalist enterprises employing masses of workers’, constantly re-creates this problem of relative overproduction. This process leads to stagnation, slumps and eventual crisis. ‘Growth’ is the underlying primary cause of the current economic, financial, social and ecological problems, not the solution to them.
A further associated feature leading up to the present economic crisis had been a general fall in the rate of industrial and commercial profit. This ‘fall’ resulted in many capitalist production facilities and investments being transferred from the advanced countries of Europe and North America, to those in the east and south. These regions were chosen because of their lower labour costs. This fall in the rate of profit, due to competitive improvements in technology, is an integral product of the capitalist system and has re-occurred with predictable results. This pattern cannot be reversed or transcended without transcending the capitalist system itself.
The capital ‘outflows’ from the advanced countries led to three further symptoms related to current financial, economic and social problems. First it left unemployment behind as factories closed and workers were laid off, thus increasing the social costs of compensating for the loss of wages. Second and closely related, it reduced government revenue from direct and indirect taxes. Third, this reduced income increased government ‘borrowing’ and in this way placed the ordinary citizens of numerous countries into the grasping hands of the capitalist bond-market.
Simultaneously, the export of private capital to low-wage economies in Asia and South America, over the last several decades, resulted in a relative increase in both the rate of corporate profit and in the mass of profits available to the rich – primarily in the advanced capitalist countries. Since not all of this massive increase of profits was needed for re-investing in industry and commerce, a great deal of this surplus capital was siphoned off into the financial sector of the capitalist system. It was a deluge of surplus capital which kick-started and fuelled and current the financial crisis.
2. The financial crisis.
a) Leverage and fictitious capital.
Recent events have demonstrated that the finance-capital market has expanded so rapidly and exponentially that it has become the tail that wags the dog so to speak. This sector comprises of banks, investment firms, brokers, accountants, specialist legal firms, other related businesses and trading venues such as Wall Street and the City of London. With more spare capital available than the industrial and commercial capitalists needed, its owners sought alternative sources of investment and it is these ‘financial’ institutions and firms that have provided the dubious channels and instruments to enable this to take place. Not surprisingly, a recent government report (the Kay Review) was so appalled that it concluded that the City of London was ‘not fit for purpose’.
One of the ‘not fit for purpose’ sources of instability within the financial sector is the extent to which banks and other financial institutions, can extend credit many times beyond the amounts of assets they actually own. This difference between what they retain and what they lend, is called ‘leverage’. If a bank has 1 million ($, £, Euro’s) in currency deposits, for example, and it sets its leverage at 20, it can extend credit up to 20 million. It is obvious from this that if the depositors all wanted their money back, the bank would not be able to pay. This credit source, since it comprises only of ‘promises to pay’, amounts to a fictitious form of capital. And of course, credit lent out which does not get repaid, causes the chain of bank defaults we are now partly witnessing.
Banks are not the only issuers of fictitious capital and the leverage can go well beyond the supposed level of 20, with some banks leveraging up to 60 times. It is here that we should remember the financial crisis publicly emerging in 2008 and still continuing. It was then described in terms of ‘toxic loans’ and ‘credit defaults‘. We need only recall, the internet speculative ‘bubble’ of the late 20th century and the 21st century, collapse of the housing mortgage ’sub-prime’ mortgage packages in the USA, to see what an extended chain of liabilities and defaults can bring about. This is the inevitable outcome of the ‘vibrant’ financial sector supported and still promoted by politicians of left, right and centre, throughout the capitalist countries.
Because the financial system is an integral part of the capitalist system, this extension of leverage, credit and speculation effects not just the financial sectors, but all members of society. The most effected being the poor, the unemployed and the working classes. This is because, a breakdown at any link in the increasingly complex chain of leveraged credit circulation throws the whole essential economic process of production and exchange into chaos, confusion and crisis. Yet this is not the only problem bearing down on working people, because the financial sector is also the source of the now crushing levels of sovereign, or governmental debt.
b) Sovereign Debt.
As noted, a part of the finance capital market lends money and credit to governments and in this way, services government debt. From very early on in their development capitalist governments have borrowed money by issuing government bonds and repaying them with their income from taxation and the other duties. With the huge reductions in government revenue, due to reduced direct taxation from workers, firms and tax-dodgers, capitalist governments have increasingly relied upon massive borrowing from this source. In the present circumstances of capitalist initiated structural change and crisis, this level of borrowing can no longer be repaid by future taxation. Under the present pro-capitalist regimes, governments and their citizens are now subject to the whims, needs and dictates of the bond-holders.
The transformation in the technical composition of industry and commerce (computer controlled automation etc.) and the consequent change social composition of working classes are both irreversible symptoms. The modern capitalist system of industrial and commercial production no longer needs as many paid workers as previous generations. As a consequence the capitalist states can no longer afford to support as many unemployed and public service workers as they have previously. Hence, the current and future efforts to reduce welfare expenditure and the numbers of governmental and public-sector employees. The logic of this entire process has now created a serious social crisis.
3. The social crisis.
The modern technical developments of the capitalist mode of production have produced two substantial and contradictory changes to the economic and social structure of capitalist countries. The first change is in the proportion of money capital required to set up, or develop, the fixed means of production (factories, machinery etc.) and that paid to the flexible elements of production (employees).
a) The ratio of constant capital to variable capital.
As already noted, this aspect refers to the relationship between the means of production (constant capital) and the numbers of people employed in them (variable capital). The number of industrial, agricultural and commercial workers, required for a given amount of production has been massively reduced. This, in capitalist economic terms, has resulted in the creation of an increasing surplus labour capacity or in social terms – relative and permanent levels of unemployment. However, in the advanced capitalist countries, the development of jobs in the welfare state, was (for a time) able to absorb some displaced members of the working and salaried population and their offspring. The second change is to the proportion of workers producing surplus value to those workers providing services.
b) The ratio of productive labour to un-productive labour.
So the same development of industry and commerce which altered the ratio of fixed capital to variable, has resulted in a vast reduction in the number of working people required to maintain the basic levels of existence necessary for the average person. Hence, during the late 20th century, a reverse shift occurred in the numbers of workers employed in industry and commerce, compared with those employed in the public sector occupations such as, education, social services, health, local government and other public services. These 20th century developments, (along with the co-operative movement) in essence represent a shift away from the capitalist mode of production whilst remaining dominated by the capitalist mode. They are organisations producing for need, not greed, within the existing capitalist mode but with an alien controlling hierarchy which is parasitic upon them.
It is important to understand that under the capitalist system the surplus value produced by those who work in the production of goods and their related services is the source of the income required by other sectors of society. Under the capitalist mode of production the income, in monetary terms, generated by the sale of these goods and services, provides the profits and the various taxes from which government employees wages and salaries are paid. It is not that occupations in the public services are unproductive in general, it is that they are not directly productive of surplus value, which the capitalist mode of production is based upon.
That is another development which the supporters of capitalism must now try to reverse. In order for the governments and the rich to hang onto the bulk of the surplus production, they must now ensure that even less goes to the ordinary citizen. Pursuit of this policy, dressed up as austerity, will radically ramp up the class struggle in each of the advanced capitalist countries, with similar repercussions within countries less advanced.
Another important change in the social structure of advanced capitalism concerns age. Life expectancy in the advanced capitalist countries has advanced well beyond the previous retirement age. In the UK, for example, it is estimated that there are over 400,000 citizens over 90 and over 3 million over 60. These figures, replicated in other advanced capitalist countries, should be something to celebrate. However, under capitalism they are a problem. This is because under capitalism the retirement age signals the onset of a period in which wage-labour ceases and along with it, a wage income from which to live.
Because of the relatively low levels of pay, and high levels of taxation, during their working life, many workers have had to rely upon the state for their retirement pensions. In this way, the extended 20th and 21st century development of capitalism has created a mass of employment-aged workers, who are no longer needed by capitalist industry and commerce, together with another mass of older workers who have retired. Under capitalism, both categories are now too ‘expensive’ to support, particularly when capitalist governments want to spend, spend, spend on sophisticated armament programmes. The capitalist system will need to discard many of the present, public service workers, unemployed and retired workers, unless the workers discard capitalism. The future really is as stark as that.
4. The ecological crisis.
The manufacture of commodities generates by-products which in the vast majority of cases, are treated merely as waste. In the majority of cases these waste products are not profitable and the safe disposal of them would require a deduction from the profits, so they are simply dumped at the nearest and/or least costly place. This leads to the ruthless extraction and exhaustion of raw materials provided by nature and to the negligent dumping of waste. Many of these unwanted waste products of industry and agriculture are highly toxic.
It is reliably estimated that the existing process of production and transport now mixes into the air 15 million tons of soot and dust per year. In addition, two hundred hazardous chemicals are also regularly vented by industry into the atmosphere. Many of these chemical pollutants are cancer causing carcinogens, which permeate the air and wait to be sucked into our lungs with each breath. According to the World Almanac of 2011, over 3 billion lb. of toxic chemicals are allowed to escape into the air each year in America. America is only one of many advanced industrialised countries of the world which daily add their respective contributions to this huge amount.
Water is another essential of life that is constantly and increasingly being polluted as a by-product of the capitalist system of production. It is not just the chemical rain which finishes up in rivers and the sea. Many of the chemicals used in food production (pesticides herbicides and fertilisers) are drained from agricultural land by rain, and finish up in the rivers, groundwater, and the sea. There they join the billions of tons of crude oil which are regularly dumped into the sea and the billions of tons of solid waste from the kitchens and toilets of the worlds seaside towns and cities.
b) Ecological destruction.
The capitalist mode of production requires large consignments of raw materials, which are obtained as quickly and profitably as possible. Trees are sawn down for timber in large quantities irrespective of the short and long-term effect upon the environment such as species loss, soil erosion and depletion of the oxygen-generating nitrogen cycle. 170,00 square kilometres of forest and woodland is eliminated annually and 150,000 of arable land is lost to desertification. Minerals are extracted from the ground in the quickest and cheapest, often open-cast way, again irrespective of the detrimental effects upon the immediate and surrounding environment.
Land fill dumping, because it is cheapest in the short term, is also the preferred method for storing the hundreds upon hundreds of tons of nuclear waste products, some of which will take thousands of years to decay to a point at which they are no longer dangerous. Rising rivers, hurricanes and alternative droughts and heavy rainfall occurring at times when they are not normal, or in places where they do not normally occur, cause damage to villages, towns and cities by floods or fires. Many low-lying human communities throughout the world are in real danger of repeated floods making their lives miserable and dangerous. There are currently a further 1,667 species endangered or threatened ranging from mammals through birds and reptiles, to fish, insects, conifers and ferns.
Forests are cleared to create short-lived profit-led capitalist plantations, which soon exhaust the land and where the soil, lacking the previous binding power of tree roots, is soon washed away. Soil erosion of 5 – 10 tonnes per year is taking place in Europe, Africa and Australia and to a larger extent elsewhere. Thousands upon thousands of small, and large, ecosystems are being destroyed annually and their wildlife robbed of their habitat and food sources as global capitalism searches every nook and cranny – even the deep sea trenches – to exploit the planet’s resources in order to turn in a quick profit. Capitalist production, based as it is on the profit motive, cannot end pollution and ecological destruction. In a very real sense the planet cannot sustain a further epoch of capitalist industrial production and exploitation.
5. The moral crisis.
Any socio-economic system based upon exploitation has at least one foot in a moral quagmire. The system of capitalism, however, has both feet firmly planted in a veritable cess-pit of corruption and moral degeneration. The elite economic, political, military, state, medical and even religious actors in capitalist society are embroiled either indirectly or directly in the immorality stemming from the capitalist mode of production. Here are just a few examples.
The financial elite actively assist the miss-selling of financial services, and are involved in extensive financial manipulation. As recent evidence regarding HSBC suggests, this extends to substantial money laundering. Politicians are directly and indirectly bribed by businesses and routinely fiddle their expenses. They, along with practically the whole of the well-paid capitalist elite, enter into tax avoidance schemes. Indeed, it has been estimated that the rich throughout the capitalist world have managed to hide up to 13 trillion dollars in offshore tax havens. In this way, even though they are the most exceptionally rewarded, they still try to avoid paying a significant share toward, the social welfare and infrastructure provisions from which they benefit.
The media, is another active supporter of the capitalist system and its elite will stoop to the lowest depths and commit the grossest distortions for profit or advantage. The Levison enquiry in the UK, has recently exposed, what many people already knew, that the owners and senior staff are part of the ‘establishment’ elite and in pursuit of profit, behave accordingly. But also by biased reporting and distortion, they often hide malpractice and present a view of the world which is beneficial to them and detrimental to any serious criticism of, or opposition to, the system as a whole.
The police record on deaths in custody is appalling and the recent acquittal of a police officer who had previous form with regard to violence, is typical. This example is merely the most recent exposure of an institution with almost unlimited power combined with almost no respect for and accountability to, those (the public) who finance it with their tax payments. Even the elite members of the medical profession are not immune to improving their already comfortable earnings, by private fees from ‘vanity’ surgery such as ‘tucks’ and inserting unsafe breast implants. Worse still some in the UK, for example, make money from the genital mutilation (clitoral amputation) of very young girls. The rationale of respecting patriarchal ‘traditions’ in the latter case is a thin camouflage that displays no respect for a female’s rights to decisions effecting her own body.
The military carry out the most horrific crimes against humanity if ordered to do so by their political and military superiors. Killing on a large scale, without any pretence of due process, is now a routine procedure for the armed forces of the advanced countries of the world. The most recent blatant case concerns the interface between the USA political elite and the ‘military industrial complex’ which has developed a ‘drone’ assassination culture. The US president, without any substantial evidence or due process, can now order the assassination of anyone it suspects of activities against how he sees the ‘national’ interests.
The religious elite’s not only turn a blind eye to this form of killing but in some cases bless the military perpetrators and conduct services in their honour. For centuries, religious elite’s have been an ideological prop to whatever ruling elite was in power. This has not altered under the capitalist system and they remain firmly hand in hand with the elite’s of politics and the state. All three religions Judaism, Christianity and Islam, also perpetuate a hierarchical and patriarchal form of ideology. It is a system of ideas which fits comfortably with capitalism, to the detriment of the poor and in particular women.
6. Resistance to the crisis.
Resistance to this five-fold crisis is as yet sporadic and varied, but it is continually growing. Those occupying the lower socio-economic positions, under the capitalist mode of production; workers, students, unemployed, disabled and working class pensioners are the ones suffering the most at the moment. However, those salaried workers employed in the public sector, nurses, teachers, social workers, local authority and central government workers are also facing immediate and future losses of income and job security. There is therefore the potential for a great deal of solidarity and some degree of unity.
The forms of organisation created under previous stages (and earlier economic cycles) of capitalism, are no longer capable of effective resistance to this multiple crisis. Trade unions are heavily bureaucratised, single-issue campaigns are being sidelined, political parties are elitist as well as being part of the problem. The need for across sector unity and solidarity has spawned new forms of non-hierarchical organisation such as ‘Occupy’, Uncut and others. New generations of activists do not share the illusions in politics that previous generations suffered from. There is growing awareness, internationally that politics is the problem, not the solution.
The large sustained demonstrations, which have featured so much in the Middle East and North African protests, are now close to being replicated in Europe. Already Greece and particularly Spain, both of whom are at the head of the capitalist inspired austerity queue, have witnessed numerous and growing numbers of citizens, demonstrating, protesting and demanding. So far the dominant protests everywhere are no more than polite requests or impolite demands to the economic and political elite to change or stop what they are doing. This ingrained deferential habit is something that will sooner or later have to change.
Placing demands on a pro-capitalist elite to curb capitalism, is unlikely to succeed and sooner or later working people will be faced with either having to accept the fate handed out to them or they will have to find more positive ways to fight back. Historically, placing demands upon any state has been to accept and adopt a subordinate posture. In the 21st century, to place them on states in such present dysfunctional conditions is also an act of complete folly. Politics and the state are the problem, not the solution. Indeed, the state is already being used to suppress protest and will be used in future to prevent solutions emanating from the ordinary working class citizens.
For this reason, self-organisation, self-activity and community co-operation, are the only sustainable solutions for the future of humanity. These are the necessary organisation forms not only to defend communities, but to become the embryo for present and future economic and social formations. They are also the only forms that will enable people to break out of the deforming and destructive capitalist ‘mode’ of production, and introduce a mode of production based upon social need, rather than private greed.
Roy Ratcliffe. (July 2012.)