Back to main newsUnderstanding the financial collapse, you've got to get stuck into Marx.
Mon 01 Dec 2008
Author: John FosterIN GENERAL, the left is wise to avoid too much Marxist phraseology when putting over its case. But the current economic crisis demands precision.
Only if we get to the root of the problem will the trade union and labour movement be able to make the demands that are required.
Financial journalists have provided a range of explanations. All have a certain degree of truth.
They point to the bonus culture and its encouragement of irresponsible risk taking. They detail the lack of financial regulation that allowed it. At an international level, they note the growth of massive imbalances between debtor countries such as the US and Britain and creditor countries like China, the oil states, Japan and Germany.
Address these issues, they say, take out the speculators, tighten our belts and allow the market to do its work and we can go on more or less as before.
Not so. More profound processes are at play. Only the term state monopoly capitalism, concretely applied, provides a full understanding.
State monopoly capitalism brings together two interlinked developments - the evolution of the capitalist market and the way that our ruling class organises that market to sustain capitalist profit.
It was Marx himself who drew attention to capitalism's tendency to monopoly, to giant concentrations of capital, to the resulting growth of credit transactions and the dislocation of markets.
Lenin used the term state monopoly capitalism to describe the stage where this dislocation of the competitive capitalist market demanded state intervention in the interests of capitalist stability. But he stressed that this state intervention was no more neutral than that of the capitalist state in general, except that, in these new conditions, it defended the interests of the great concentrations of capital against small business as well as against workers. As a result, the capitalist class was increasingly divided against itself.
That was 90 years ago, but the nature of capitalism's basic contradiction has not changed. It remains that between the increasingly narrow private appropriation of profit and the increasingly socialised character of production.
The cause of capitalism's periodic crises hasn't changed either - they occur when the scale of capital accumulation and production outruns what people can afford to purchase.
But the precise mechanisms have changed.
In the first phase of monopoly, the super-profits enjoyed by the very rich did derive directly from the monopolisation of essential commodities. This reduced the profits of the non-monopolists and accelerated the accumulation of capital by the monopolists, with the only escape from deepening crisis being capital export and imperialism.
The 1930s depression was described by Marxists as a crisis of a "special type," because it was the first after the capitalist world economy had become fully monopolised.
The price of capital goods and other monopolised products hardly fell at all. The price of non-monopolised commodities such as food, raw materials and some manufactured goods fell by up to 50 per cent.
Thousands of small businesses across Europe and the US were ruined. Farmers were forced off the land. Third World peasants starved. Millions more workers were laid off as the great monopoly concerns continued to cut production to prop up prices and profits.
As this seemingly permanent dislocation of the capitalist market began to threaten political stability, the capitalist state itself had to step in to provide the demand to revive production.
Yet this was always on the terms of big business. Whether it was through arms contracts in Germany or infrastructure projects under the US New Deal, it provided orders for the big monopolies at their price. And it was paid for, usually via inflationary finance, by the non-monopoly strata and workers.
Growth revived, but only on the basis of a redistribution of income by the state to monopoly and the still closer interlinkage between monopoly capital and the state apparatus. Hence the term state monopoly capitalism.
Essentially, this was how governments maintained growth for the 30 years after 1945. Keynesian policies called for the injection of liquidity whenever the economy slowed. The business cycle was smoothed and the growth of big business accelerated. But all this came at a grave cost to others.
Third World producers were further impoverished. Social structures in the main capitalist countries were transformed as non-monopoly strata and farmers were squeezed out. Fast proletarianisation took place.
The next major crisis came in the 1970s, when Third World producers fought back and secured temporary monopolies over oil and copper. At the same time, the far bigger and more unionised workforces in the main capitalist countries demanded a share in the increased wealth.
Keynesian policies became unmanageable. Inflation exploded. Severe economic crisis returned.
It was monopoly capital's response to this crisis, particularly in the US and Britain, that holds the key to the present crisis and the nature of the current highly parasitic version of state monopoly capitalism.
The response sought to transform the framework of the capitalist market in four ways. These now go under the general label "neoliberalism."
First, there was a direct attack on the bargaining strength of organised labour through mass unemployment, legal controls and by recreating a "flexible" casualised workforce.
Second, utilities and services were privatised so that the state could provide a direct income stream to big business.
Third, capital movements were freed up to permit capital export to regions of the world with a higher rate of exploitation and turning the City of London into a world centre for currency and commodity speculation. With tax haven status for external capital, London became the world centre for currency and commodity speculation, while Britain's economy was steadily deindustrialised.
Fourth and most critical of all for understanding the current crisis, workers' savings for pensions, insurance and housing were transferred into the private sector.
This "financialisation" has provided the key new mechanism for the extraction of superprofit. While an element of monopoly pricing continues, the bulk of capital in public companies and high street banks now comes from pension funds and the savings of both employees and the greatly reduced non-monopoly strata.
These funds earn a low and sometimes negative rate of real interest. But around them cluster an ever more complex array of financial vehicles for the very wealthy - merchant banks in the 1980s, hedge funds in the 1990s and private equity and commodity index investors in the 2000s.
These operate offshore, they don't pay tax and they secure immense profits.
Hedge funds had an average annual return of 19 per cent through the 1990s. And they used our savings for leverage.
This system was no more immune from capitalism's contradictions than its predecessors. The accelerated accumulation of capital placed pressure on average profit. The export of capital to countries like China and India generated immense imbalances in trade and currency reserves.
Fatally, the system fell prey to the inequality and poverty which it had created. Workers could no longer afford to buy all the goods produced.
So, to keep the money wheel spinning, governments and banks between them colluded in the creation of massive levels of sanctioned debt, above all in mortgages. In the hands of finance capital's investment specialists, this became the credit required for one last round of leveraged speculation in property, commodities and private equity buy-outs.
Then the bubble burst, leaving working people facing unemployment and repossession.
This is why it is essential that the trade union and labour movement understands the reasons why. It's not a matter of bonuses. It's about state power - state monopoly capitalism. Change will require the creation of an alliance that can budge that power by uniting all those who are suffering the consequences.
It is critical to demand public control of savings, pensions and insurance and to ensure that they are invested publicly to rebuild Britain's bombed-out productive economy. That means state-owned banks, not public subsidies for banks to feed on to finance capital as at present.
Then there are the vehicles for extracting superprofit. Speculative capital transactions must be stopped, tax havens - Britain controls over half of them - scrapped, PFI ended and wealth taxed.
This will not be easy, but it is obvious. And, if enough people understand the real cause of the current crisis, these are demands that no government could deny to an angry, mobilised majority.
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