The current economic crisis = marxist crisis of overproduction = poverty + war

[Hannah Bell]

What is a crisis of overproduction?

Patrick Bond (South Africa) explains it here: http://www.marxmail.org/faq/overproduction.htm



To summarize:


Capitalists must keep up with the overall pace of automation or risk falling behind the pack & losing business & profits.

"Since capitalists cannot 'cheat in exchange'--buy other inputs, especially machines that make other machines, from each other at a cost less than their value--the increases in value that are the prerequisite for production and exchange of commodities must emanate from workers."

That is, profits come from systematically paying workers less than the value of the labor embedded in the goods.

But this entails a contradiction: as production automates, there's less labor is embedded in the goods, & profit rates tends to fall.

Fewer workers per unit of production = less human labor in each unit to steal the monetized value of.

But fewer workers per unit of production also tends to mean workers as a group have less means to buy the increased production; i.e. more intense competition between capitalists for sales.

Thus increased pressure for more cost-cutting.

A vicious cycle...leading to an "overaccumulation of capital".

"Overaccumulation refers, simply, to a situation in which excessive investment has occurred and hence goods cannot be brought to market profitably, leaving capital to pile up in sectoral bottlenecks or speculative outlets without being put back into new productive investment.

Other symptoms include unused plant and equipment; huge gluts of unsold commodities; an unusually large number of unemployed workers; and the inordinate rise of financial markets."

The classic Marxist crisis of famine in the midst of plenty. Plenty of productive capacity, plenty of idle labor, even plenty of finished goods -- but not enough potential profit to make it worthwhile to market the goods or put the people to work.

Such crises are resolved only by devaluation. Assets -- money, productive assets, labor & property lose value & people are bankrupted, impoverished, & even killed.

"Devaluation entails the scrapping of the economic deadwood, which takes forms as diverse as depressions, banking crashes, inflation, plant shutdowns, and...the sometimes "creative destruction" of physical and human capital (though sometimes the uncreative solution of war)."

But before the final act, a complex game ensues whereby various actors try to maintain the value of their assets & shift risk to others.

"overaccumulation has very important geographical and geopolitical implications...as attempts are made to transfer the costs and burden of devaluation to different regions and nations or to push overaccumulated capital into the buildings (especially commercial real estate), infrastructure and other features of the "built environment" as a last-ditch speculative venture.

Moreover, the implications of overaccumulation for balance in different sectors of the economy--between branches of production (mining, agriculture, manufacturing, finance, etc.), between consumers and producers, and between capital goods (the means of production) and consumer goods (whether luxuries or necessities)--can become ominous... as overaccumulation begins to set in... capitalists begin to shift their investable funds out of reinvestment in plant, equipment and labour power, and instead seek refuge in financial assets.

...those financial assets must be increasingly capable of generating their own self-expansion, and also be protected (at least temporarily) against devaluation in the form of both financial crashes and inflation... financiers, who are after all competing against other profit-seeking capitalists for resources, induce a shift in the function of finance away from merely accommodating the circulation of capital through production, and increasingly towards both speculative and control functions.

The speculative function attracts further flows of productive capital, and the control function expands to ensure the protection and the reproduction of financial markets...Where bankruptcies threaten to spread as a result of overenthusiastic speculation, the control functions attempt to shift those costs elsewhere."


This maneuvering & risk-shifting was what the "bubbles" were about, what the bailouts were about, what the current national "debt crises" in various nations (including Greece, Iceland & the US) are about, & what the calls for "austerity" are about (including Obama's commission to cut Social Security): who's going to eat the costs -- which region, which class, which capitalist sector or faction.

It's also what the increasingly Machiavellian international politicking & multiple sites of conflict abroad are about, as well as the reemergence of fascist formations & anti-immigration demagoguery in almost every nation.


Are you ready to pay the price?

[Juche]

1. We are in a huge capital glut

Corporations have 1.6 trillion in cash reserves

http://www.businessweek.com/magazine/content/08_07/b4071000181130.htm?chan=top+news_top+news+index_lifestyle

Corporate profits are up $280 billion since the recession started, wages/benefits are down $80 billion.

http://members5.boardhost.com/medialens/msg/1269351935.html

Corporate profits tripled from 2002-2007, going from $700 billion to $1.9 trillion.






There is too much capital in a way. Corporate profits are high, cash reserves are high, income for the top 1% is high. But there is no demand and no security.

[Hannah Bell]

2. There is general agreement that profit rates fell from the late 1960s until the early 1980s.

There is also agreement that profit rates partially recovered after the early 1980s, but with interruptions at the end of the 1980s and the end of the 1990s....



Profit rates did recover from about 1982 onwards—but they only made up about half the decline that had taken place in the previous period. According to Wolff, the rate of profit fell by 5.4 percent from 1966-79 and then “rebounded” by 3.6 percent from 1979-97; Fred Moseley calculates that it “recovered…only about 40 percent of the earlier decline’’; Duménil and Lévy that “the profit rate in 1997” was “still only half of its value of 1948, and between 60 and 75 percent of its average value for the decade 1956-65”.

Why did profit rates recover? One important factor was an increase in the rate of exploitation throughout the economy, as shown by the rising share going to “capital” and opposed to “labour” in national output...There was, however, also a slowdown in the growth of the ratio of investment to workers (the “organic composition of capital”), at least until the mid-1990s. An important change took place in the system from around 1980 onwards—crises begin to involve large scale bankruptcies for the first time since the interwar years:

During the period from World War II through the 1970s, bankruptcy was not a major topic in the news. With the exception of railroads, there were not many notable business failures in the US....During the 1980s and early 1990s record numbers of bankruptcies, of all types, were filed. Many well known companies filed for bankruptcy… Included were LTV, Eastern Airlines, Texaco, Continental Airlines, Allied Stores, Federated Department Stores, Greyhound, R H Macy and Pan Am… Maxwell Communication and Olympia & York.

The same story was repeated on a bigger scale during the crisis of 2001_2. For instance, the collapse of Enron was, as Joseph Stiglitz writes, “the biggest corporate bankruptcy ever—until WorldCom came along”...This was not just a US phenomenon...

What occurred through these decades was a process of recurrent “restructuring through crisis” on an international scale. However, it was only a limited return of the old mechanism for clearing out unprofitable capitals to the benefit of the survivors. There were still many cases in which the state intervened to prop up very big firms or to pressurise the banking system to do so...the near bankruptcy of Chrysler in 1979-80, with the crisis of the S&Ls in the late 1980s and the collapse of the giant derivatives gambler Long Term Capital Management in 1998. On each occasion fear of... instability prevented the crisis clearing unprofitable capitals from the system..."In 1970 public investment was only 10 percent of private investment. It increased to 24 percent in 1990 and from then on maintained levels almost double those of 1970”.

Moseley, Shaikh and Tonak, and Simon Mohun have all noted another feature of capitalism’s most recent development—one highlighted by Kidron back in the 1970s. This is the growing “non-productive” portion of the economy...Kidron calculated that, using his wide definition, “Three fifths of the work actually undertaken in the US in 1970s was wasted from capital’s own point of view”.

http://www.isj.org.uk/?id=340

[bridgit]

9. I think that's exactly the reason to pull Bush tax giveaways retroactively...

All the money went that-a-way under the guise of their being able to invest in more factories they had no intention of building unless they were overseas along with American jobs, no prices went down all prices went up, the money still sits there like the chattel of wicked kings & queens end it - end Bush tax giveaways to corporate whores retroactively to when they popped the first champagne cork

[FarCenter]

3. This ignores the fact that the economy becomes progressively more complex

Organizational and technological innovation are continually creating new categories of jobs.

Therefore, although the number of workers employed in the production of X may decrease, workers are newly employed in the production of new products Y and Z.

For example, no one was writing iPhone apps a few years ago, but there are 10s of thousands of apps on offer now, at least some of which are making money for their authors.

[Hannah Bell]

4. it doesn't miss that point at all. that point is mostly irrelevant. job categories also

disappear, & automation = fewer workers engaged in actual production functions regardless.

[ipaint]

5. Most folks think they are ready because they are under the mistaken assumption

the price will be paid by someone else lower in class than they are.

This is a huge permanent ratcheting back of the economy and the only folks being given any tools to survive it are the very same people who caused it. The rest of us are thrown crumbs/clubs labeled welfare cheat, insurance deadbeat, illegal alien, fatty, smoker, uneducated lower class, etc. to beat each other to death with.

Helps speed the process for the have's.

[Hannah Bell]

6. +100

[Flaneur]

7. So...I was at this immigration rally yesterday and...

there were a couple of people toting hammer and sickle flags, and something called the International Bolshevik Tendency had a little booth. Haven't seen any commies for awhile, until now.

[Hannah Bell]

8. hmm. i guess they're trotskites.

http://www.bolshevik.org/

[blindpig]

11. Sign o' the times...

k&r

[JoseGaspar]

10. Patrick Bond is very good on this subject.

He described with near perfect accuracy what actually happened. And in your link, he did it four years before the Great Recession. It's not your standard, "The Real Estate market is going to crash" type of prophesy, either. He describes overproduction becoming a surplus of capital transforming itself into a "bubble". And he does it as if he were looking backward rather than forward.

Yes, this crisis is not yet resolved. If it is over, it is over for moment.