Internationalist Perspective

A FEW REMARKS ON THE PRESENTATION OF `CONTROVERSES ON THE CRISIS

November 1, 2009 on 9:31 pm | In Uncategorized | No Comments

1. Compared to the analyses of the ICC, from which Controverses only recently split, this text is a clear step forward. No longer are we confronted with simple formulas; there is a real attempt to deepen that must be welcomed.

2. Still, and this is understandable since their separation is recent and they must still take stock of their experience, the bad influence of the ICC does not yet seem to be completely overcome. In the ICC, an article on the crisis is a repetition of formulae, with facts and figures selected to prove them. In Controverse’s text, the formulas are gone and what remains is only an empirical analysis. An analysis closer to Marx’s method, on the other hand, would be above all, historical, which is completely lacking in Controverse’s analysis. It would start from the fact that what occurs on the level of prices and profits, is different from, and determined by, what happens at the level of value. That, Controverses does not do either. The text speaks about profits and solvent markets, but never about `value’ or `surplus value’. Does Controverses assume that price = value and that profit = surplus-value? (They do, but only in their totalities). If Controverses distinguishes between them, we do not find any trace of it in this text.

3. This lack of a Marxist approach is shown in the interpretation of the graphs on which Controverses bases its conclusions. Already we can notice that Controverses uses the EU or the US as a stand-in for the worldwide economy. Furthermore, the lack of distinction between profit and surplus-value makes it appear as if all the profit of the US is generated inside the US. IP, on the other hand, shows that in the phase of the circulation of commodities, surplus-value is redistributed, and that it is thus necessary to integrate into the analysis an understanding of the way in which this distribution changes historically (see chapter on `metabolism’ in my recent text ‘Crisis of Value’). A large part of American capital is fictitious capital, however, its profits are quite real.

4. According to Controverses, the boom of the post-war period was terminated by a fall of the rate of profit, caused by a decline of productivity, (without explaining what caused the latter). The current crisis on the other hand, whose beginning it situates in1982, would be caused by a lack of markets, caused by the decline of demand of the working class whose purchasing power decreases because of the attack on wages, etc. According to Controverses, its graphs prove that. But we can interpret them very differently. Graph #3 does not necessarily show a fall of wages but a fall of the share of wages. It does not say a share of what but one can assume that it is a share of the BIP. Thus, that says that the cost of wages related to the total value of production is reduced. Does Controverses think that it would be better for capital that the cost of wages would be higher, because that would create more demand from the workers? From the point of view of capital, this additional consumption would be quite as unproductive as an increase of its own consumption. And it is the latter that it prefers. Thus graph #5, which shows a relative fall on behalf of consumption of the working class and a simultaneous increase in the total consumption of the US, shows, indeed, that the increase of ’solvent markets’ and the relative diminution of wages can occur at the same time.

5. The decline of the share of wages cannot be presented as a problem of reduction of the market in itself. If wages decrease relative to profit that means that the capitalist can consume even more. The problem is that this wage decline indicates that in future production less human labor will be employed and thus less surplus-value will be created. The problem of the markets and that of the tendency of the rate of profit to fall cannot be separated. We must see how they interact and for this we must see their common origin: the value-form, and the contradiction which results from this between exchange-value and use-value, abstract labor and concrete labor, capitalist wealth and real wealth, in the Marxist sense. We are completely in agreement with Controverses when it says that the current crisis is caused by an overabundance of capital but not when it says that it is divorced from the threat of the decline of the rate of profit. The overabundance of capital is only one problem because these capitals are not stable containers of value, because they must either valorize or devalorize. It is the decline of the creation of value that causes their devalorization. As Controverses affirms, it is the economic crisis which caused the financial crisis, not the reverse.

6. It is important to insist on the value-form as the cause of the crisis, because an analysis like Controverse’s which says that the cause of the crisis is a lack of demand on the part of the working class, is recuperable by the capitalist left. It is necessary to go to the root. If we speak about the economy, it is only because that gives us an opening to show the need and the possibility of a new world. But our analysis can only be this lever for consciousness if we can connect the bases of capitalist society to the contradictions which confront us today.

Sander

A Text by “Controverses”

November 1, 2009 on 9:26 pm | In Uncategorized | No Comments

The following text was released by a group which recently left the ICC. We will shortly post our response to it. The original text contained several graphs which are not available for reproduction here.

The subject of this public meeting (Which crisis of capitalism?) being vast, the only aspect that will be treated here concerns the analysis of the causes of the crisis and the questions that can be posed in connection with its comprehension.

Indeed, this crisis is commonly presented as being a financial crisis, which then would have been transmitted to the real economy. In other words, the origin of the economic recession and unemployment would lie in greed, in the lack of regulation of the financial sector or its parasitism on the real economy. Our sense of the correct analysis is exactly the opposite: it is the contradictions in the real economy that have provoked the financial crisis.

Obviously, such as it unfolded through the succession of events, like the stock market crash, the bank failures, or the subprime crisis, the crisis appears above all as a financial crisis. In the same way, it also appears that the economic recession and unemployment developed after the financial crash. The facts thus seem to give credence to those who say that the current crisis is, above all, a financial crisis. This dimension of the crisis is undeniable. It would be absurd to deny it.

However, in limiting ourselves to this aspect, one cannot explain why the financial sector took on such importance in the economy, or why the financial sector could skid and also suddenly become so greedy. Limiting ourselves to the financial aspect prevents an understanding of the fundamental causes of the crisis. For Marxists, a financial crisis is only one consequence of more fundamental contradictions within the capitalist economy. It must be asked what are the fundamental contradictions of the capitalist economy? There are essentially two:

1) The first corresponds to the difficulties of capitalism to extract sufficient profits for a given investment. In current language: it is said that investments are less and less profitable. In Marxist language, it is what we call the tendency of the rate of profit to fall.

2) The second contradiction is the one relative to the difficulties of the system to engender demand at the high level of volume of produced goods, therefore, the difficulty of disposing on the market the entirety of production.

These are the two contradictions in the real economy that have regularly generated all the crises of overproduction until now. During a little more than two centuries of existence (1780-2009), capitalism knew a little less than about thirty crises of overproduction. Thus, that made, on average, a crisis every eight years.

However, to understand how these two contradictions function, as well as their connection with the financial crisis, it is necessary to add two other specifications:

1) In general, these two contradictions appear together and are mutually generated: indeed, not to be able to sell all its goods does not make it possible to recover the totality of its profit, and an insufficiency of profits generates an insufficiency of markets. However, it is necessary to insist on the fact that these two contradictions can also arise separately, or in a way such that one of the two contradictions prevails. This is important to understand the crises of capitalism, because all the crises do not always proceed in the same way, as we will see.

2) The second specification to make is that these two contradictions play out, at the same time, in the short and medium term. When one speaks about short term, one speaks about those cycles of intermediate duration of eight plus years; and when one speaks about medium term, they are periods from 25 to 40 years of growth or less.

After this brief recalling of the framework of the Marxist analysis of crises, we will see now, in concrete reality, how these two fundamental contradictions of capitalism can explain the crisis, and what link there is with the financial crash. The three graphs below can help us there:

The curve of the market index on the first graph shows us the two last speculative bubbles: the first is the Internet bubble at the time of the recession of 2000-01, and the second is the subprime bubble with the current recession. That is the financial shutter of the crisis. On the other hand, much more interesting is the other curve, that which shows the evolution of the real economy, more precisely of the profitability of companies, i.e. the rate of profit. Why is this more interesting? For three reasons at least:

1) The first, is that we can clearly note the close link which exists between the evolution of profits and the evolution of the stock exchange.

2) The second is that this connection is not unspecified: it is the evolution of the rate of profit that determines the evolution of the market indexes. In the business cycle in the short run, it is the reversal to a fall of the rate of profit (thus the insufficiency of profits) that causes the stock exchange crash.

3) The third reason is that it is also the reversal to a fall of the rate of profit that is at the origin of the cyclical economic crises in 2000-01 and 2008-09.

In other words, in the short run, it is, indeed, the evolution of the rate of profit that is at the origin of the business cycles, of financial crashes, but also of recessions. We thus have here an initial very clear answer in relation to the question with which we began: we are not in the presence of a financial crisis which was transformed into economic recession, but in the presence of an economic recession which was transformed into a financial crisis. It is an initial point that appears very important to us to emphasize, and with which to respond to the dominant ideology, and so to reaffirm the Marxist analysis of crises.

However, when we take a step back and look at the medium-term evolution, other important components appear. It is what the second graph tells us, where three phases are very clearly distinguished:

1) The first phase of the post-war period until the end of the 1960’s, is the boom period where the rate of profit and accumulation went up, and in parallel.

2) The second phase starts at the end of the 1960’s with the reversal to a fall of the rate of profit. It is also seen that this fall of the rate of profit involves the rate of accumulation until 1982. Consequently, it is noted again that it is the dynamics of the rate of profit which puts an end to the prosperity of the post-war period and which inaugurates the long period of crises of the last forty years.

3) The third phase starts in 1982. There, on the other hand, the two evolutions diverge: the rate of profit goes up strongly, but not the rate of accumulation, which continues to decline (NB: the calculation of the rates of profit obviously does not include here the speculative rise of the value of stacks and bonds.)

We can then put forth the four following questions vis-a-vis these evolutions:

1) Why profits increase from 1982 after having dropped for a long time?

2) If profits increase, why doesn’t accumulation re-establish itself, and why does crisis persist?

3) Since profits go up drastically, can we still say today that it is the fall of the rate of profit that is the cause of the crisis?

4) What is the connection between the financial economy and speculative bubbles?

1) A response to the first question appears immediately: profits could be restored because wages were compressed. It is what one clearly sees on the 3rd graph: wages represented two thirds of final demand until 1982, whereas 25 years afterwards, they represent only a little more than half. The principal consequence which results from this is a drastic contraction of the solvent markets, a formidable restriction of the capacity to sell the produced goods, because neither is compensated by the consumption of the capitalists (which, in addition, is unproductive by definition), nor by investments and the sales in emerging countries.

2) We can then easily respond to the 2nd question: why accumulation does not start again and thus why the crisis endures in spite of the rise of the rate of profit? Quite simply, and mainly, because of this drastic contraction of the markets: there are, indeed, still investments today, but they are primarily investments of rationalization and merger, not of widening as during the period of prosperity after the war.

3) To answer the 3rd question is also easy: can one still say that it is the fall of the rate of profit that is the cause of the crisis inasmuch as it increases drastically? Yes, as one saw on the first graph, the short-term evolutions of the rate of profit are always the motor of the business cycles and the crises. However, since 1982, we have no longer been in the presence of a general tendency to a fall of the rate of profit, but of a medium-term upward trend.

Consequently, and this is important, the essential economic problems since the 1980’s are not related to a lack of profitability of companies, but an insufficiency of solvent markets to which production can flow. In other words, since the 1980’s, capitalism is again profitable, but that has happened through a low level of accumulation and growth, a significant level of unemployment, and an increasing misery for the large majority of workers, since this re-established profitability of companies is made by lowering wages, while laying off, and by intensifying work conditions, and not, as in the post-war period, by an increase of productivity gains which are still weak as we can see it on the fourth graph:

4) With respect to the 4th question, that relating to the origin of the importance taken by the financial sector in the economy since the 1980’s, the response is also easy to understand. We can read it on the second graph: it is all the space represented between the two curves, this space growing during time represents the mass of the profits not used for investment and which fed finance. In other words, it is the absence of sufficient markets that did not allow the mass profit to be invested to widen production. Consequently, profits then moved towards finance.

This is very important to understand, because it is generally affirmed in the revolutionary press that the rise of finance since the 1980’s, and the repetitive bursting of the speculative bubbles would be the consequence of the fall of the rate of profit; i.e. the capitalists would take their money out of circulation as a consequence of the low profitability of productive investments. However, all the graphs here show that this reasoning is false in the medium-term: productive investments are profitable and the profits are ever greater. It is logical: speculation is all the more strong as the profits are high. In the medium term, it is thus completely false to say that capital runs out of money because profits are weak! It is not this phenomenon (the weakness of the profits) that can explain the rise of the importance of the financial sector in the economy. It is precisely the reverse: the superabundance of profits that do not find wider outlets for investments.

The consequence of all that, and it is the 2nd important point of our presentation, is that the essential aspect of the economic dysfunctions since 1982 is related to the weakness of solvent markets, and no longer to the fall of the rate of profit as in the 1970’s. The best proof is the configuration which led to the last stock market crash: as wage demands were drastically compressed (graphic 3 and 5), growth was obtained only by boosting consumption (graphic 5) by a flight to debt which began in 1982 (graph 6) and a reduction in the rate of saving which also began in 1982 (graph 7).

And tomorrow? Tomorrow, this perverse dynamic of the capitalist economy will continue still more because nothing was resolved; worse, the installation of patches to re-establish the machine will worsen the medium-term difficulty, even if it will make it possible to push back the short-term recession. If nothing changes, we run into a stone-wall; that much is assured. And, here it is the workers who will feel it, initially at the level of jobs, by an explosion of unemployment. It is what is already at hand today and which is announced even more massively for the months to come.

End Notes A Response – A letter from Gilles Dauvé

November 1, 2009 on 3:52 pm | In Uncategorized | No Comments

The following post is letter from Gilles Dauvé of Troploin in response to our review of End Notes 1

October 12, 2009

Dear Internationalist Perspective:

Here are some remarks on the review of End Notes on your blog, July 26, 2009.

First, I’d like to say that you give a fair summary of our views and those of Théorie Communiste.

I’ll just go back to a few points.

You write that we do not explain “Why the proletariat allowed itself to be led by the left” in 1919, 1936, 1968, etc. This is indeed a major question. Some would say a riddle. Yet the problem is which question needs to be asked and answered exactly.

We can understand why the Russian Revolution failed, because it did happen and eventually failed, but understanding why no (or not much) revolution happened in Germany in 1919-21 is a different matter. In the first case, we’re explaining what took place; in the second, what did not take place, or only partly. In fact with Russia, we’re dealing with how; with Germany, we’d be looking for why. We cannot evade whys, they’re often inevitable, but we can’t expect the same result as when we’re searching for hows.

It certainly is frustrating to think that no German revolution occurred in 1919…because the vast majority of German workers did not want revolution. But there’s no way we can avoid this intellectual dissatisfaction. Trying to turn history into equations like physics or astronomy only provides us with the comforting appearance of a solution.

Surely the appeal of T.C.’s theories is that they come up with explain-it-all answers, but what do these answers actually answer?

Slicing up history into phases can be very useful, except when it becomes a quest for the “last” phase. Marxists ought to be a bit wary of this effort (or temptation). When 1914 broke out, and even more so after 1917, we said that mankind was entering the epoch of wars and revolutions. True, but we’ve seen a lot more wars than revolutions. You’re well aware of the traps of the “decadence” theory.

It’s interesting to note how new historical slices are discovered. Théorie Communiste tells us that communist revolution was impossible under 19th century capitalist formal domination. Then real domination comes in the 20th century, with lots of class struggle but hardly any communist attempt. So theory cuts real domination into two and delineates a second real domination phase, more real than the first, so this time the proletariat has no alternative but to try and communize the world. This time, at long-last, no dead ends, no side roads: reformism and radical democracy, we’re told become devoid of content, and unions and parties are bound to lose their grip. There’s no deep difference between this perspective and the “final crisis” theme: the ideas differ, the attitude is similar: both look for the ultimate stage when only revolution is the possible outcome. So logically, this perspective has to re-write the past and find the ultimate cause that explains both why there could not be a revolution before, and why there will be one now.

Such theories are very appealing because they can integrate any fact, even those that contradict them. In 20 years, if revolution has not come, the same theory will define a third phase within real domination.

By the way, I doubt we ever wrote that the workers had been “betrayed.” I’d say that they chose to follow the SPD in 1919, the French CP in 1936, etc. Worker bureaucracy only prevails because the rank-and-file supports it (not without contradictions and conflicts, of course).

This is not being finicky about words. Believing in treason is also believing in the existence of traitors that mislead the workers and have to be constantly exposed. The Trotskyists used to do it by calling the unions and parties’ bluff. The ICC does it by systematic denunciation.

One last word on the importance of the value-form. We fully agree. In fact, value is the undercurrent in all our analyses on the evolution and present state of capitalism.

This is just a short letter. We’ve dealt with these issues in

Whither the World? (2002)
In for a Storm. A Crisis on the Way(2007)
What’s it all About? (2007)
A Contribution to the Critique of Political Autonomism (2009)

(I mention only the texts that are available in English)

Thanks to the latest issue of I.P. I found about Controverses and wrote to them.

All the best to you…

Gilles Dauvé