Even before the 1990s the capitalist business cycle, described a century earlier by Engels, had changed in favor of capital. Marcy, in Chapter 3, focuses on the fact that capitalist recession lengthened in the post-World War II period and that “this is very important in relation to strike strategy, which had a lot to do with the duration of the capitalist economic crisis.” It raises the question of what workers can do if a recession turns out to be protracted and the bosses can hold out for a long time.
Workers, ‘boom-and-bust’ and low-wage capitalism
The new era of low-wage capitalism, worldwide wage competition and slowing capitalist economic growth has put workers under pressure even during times of capitalist upturn. The booms have weakened, benefiting only the bosses, with not even relative gain for the workers.
The era of rapid accumulation, that is, rapid and tempestuous growth of capital investment, has been undercut by the growing productivity of labor and the speed with which markets become saturated. The relative labor shortage during the upturn is a thing of the past. Instead, there are jobless recoveries and the consequent eradication of the opportunity for the workers to make up lost wages by forcing increases on the bosses.
The “golden chains” Marx referred to are not so golden anymore. Marx spoke of workers getting higher wages during a boom while the capitalist got even higher profits. This meant that workers’ real wages went up, although their wages declined relative to the larger profit gains of the bosses. In the present era, these conditions no longer obtain.
For the last several decades, with a slight exception in the mid 1990s, workers’ real wages have gone down or stagnated even during the periods of expanded capitalist accumulation—during upturns. Because of off-shoring, outsourcing and wage competition with workers in low-wage areas, workers in the United States went into massive personal debt and worked extra jobs; whole families worked just to compensate for the wage decline. Not only did the relative wages of the workers decline, but their absolute standard of living plummeted—and this was before the crisis.
This makes Marcy’s work, his admonitions to the labor movement to develop new strategies to deal with protracted crisis, to engage in class-wide struggle, to break out of the traditional capital-labor relationship, more pressing than ever before.
Engels spoke of the continuous cycle of boom and bust. Certainly the cycle continues, but under conditions of structural changes to capitalism. Booms have become weaker and weaker over time. The classic booms that reemploy most of the workers laid off during the bust are a thing of the past. That is the meaning of the increasingly protracted jobless recoveries.
Solving a crisis by creating a bigger one
In fact, the immediate roots of the latest global capitalist crisis, which began in December 2007, can be traced back to the attempt by the financial authorities to overcome the jobless recovery of 2001-2004 and the weakness of the capitalist upturn.
The Federal Reserve System pumped hundreds of billions of dollars into the economy by lowering interest rates from 5.5 percent to 1 percent. Alan Green-span directed much of this credit toward creating an artificial housing boom. He publicly urged home buyers to take out adjustable-rate mortgages. The housing market regulators gave a pass to the most egregious, often racist, subprime mortgage-lending practices. The Securities and Exchange Commission synchronized its efforts with the Fed by deliberately closing its eyes to the burgeoning market in mortgage-backed securities, derivatives and other shady practices. The rating agencies Moody’s and Standard & Poor’s played their part by giving potentially toxic assets triple-A ratings.
Much of the credit made available went straight to stock market speculation and banking operations. Huge sums of fictitious capital, paper wealth with no underlying value, found their way through an unregulated conduit known as the shadow banking system—hedge funds, private equity funds and insurance companies—backed by the big Wall Street banks. This shadow system was used to evade even the minimal constraints on finance capital.
In the end, a crisis emerged in the overproduction of housing. The bubble burst, housing prices plummeted and masses of people lost their homes. Throughout the economy, production had outstripped consumption. Auto sales and construction collapsed. Record credit-card debt could not bridge the gap. Debts based on housing sales, credit cards, student loans and auto loans became bad debts. Banks were insolvent.
As Engels had predicted, hard cash disappeared, credit vanished, goods piled up, means of production were destroyed. And in the end the attempt to stem the original crisis by artificially creating a housing boom led to an even greater crisis that enveloped the globe at the speed of light.
Here is the third installment of excerpts from a new introduction to the ground-breaking work “High Tech, Low Pay.” The book, written by Sam Marcy during the early stages of capitalist restructuring and first published in 1986, has long been out of print and will soon be reissued. Fred Goldstein, who wrote this introduction, is author of “Low-Wage Capitalism: Colossus with Feet of Clay.”
Analyzing the present crisis
The meaning of the crisis and its ultimate direction are questions for the ruling class and for the working class, from diametrically opposed points of view. The bourgeoisie has no theoretical framework within which to begin to approach the question. Their system is anarchic. Even government intervention and some limited planning cannot eradicate the anarchy imposed on a system based on private profit.
The bosses operate in competition and in secrecy. Their economists can really only look backward over time at what has happened and hope to divine some pattern that can be used for the future. But they cannot, dare not, analyze the system; they can only describe its behavior in a pragmatic, strictly empirical fashion.
Marxists have a broad theoretical framework combined with powerful, scientific analytical tools at their disposal. These tools must be wielded on behalf of the struggle of the workers and therefore cannot be based upon wishful thinking or pure speculation.
The broad theoretical framework within which to analyze the present situation was laid out by Marx in 1857, in his Preface to “A Contribution to the Critique of Political Economy”:
“In the social production of their life, men enter into definite relations that are indispensable and independent of their will, relations of production which correspond to a definite stage of development of their material productive forces. The sum total of these relations of production constitutes the economic structure of society, the real foundation, on which rises a legal and political superstructure and to which correspond definite forms of social consciousness. ... At a certain stage of their development, the material productive forces of society come in conflict with existing relations of production, or—what is but a legal expression for the same thing—with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an epoch of social revolution. With the change in the economic foundation the entire immense superstructure is more or less rapidly transformed.”
This is Marx’s most general statement about the basis for the revolutionary transformation of society. In numerous places throughout his writings he applies this theory to the capitalist system. He describes how capitalism concentrates the proletariat into factories and workplaces, creating an increasingly complex division of labor in the productive process that involves more and varied types of labor from geographically diverse regions.
Marx showed how capitalism, by constantly revolutionizing the means of production under the internal compulsion of the system, socializes the productive forces—bringing workers everywhere into objective cooperation in the production of commodities. He scientifically demonstrated how this socialized production comes into conflict with private property, resulting in repetitive crises for the workers and, ultimately, for society in general.
The fundamental assertion implied by the paragraph quoted above is that sooner or later, capitalist property relations become a “fetter,” a brake on further development of the productive forces. Society cannot move forward any longer because of the stranglehold of private property. Revolution then ensues. The clash between socialized production and private ownership can only be resolved by socializing the ownership—that is, by bringing socialized ownership into harmony with socialized production and setting society on a new course of planned production for human need.
Marx was referring not just to the periodic crises and suffering brought about by capitalism. Nor does his point refer to capitalism holding back development that would be of great benefit to society—such as environmentally safe methods of production and green products. Nor is it a question of the enormous waste and gross inefficiency produced by capitalism. These are relative brakes on development.
Marx posits that at some point, capitalism inevitably becomes an absolute brake on the development of the productive forces, with a consequent crisis for the masses. Society is stymied by capitalist private property and cannot go on in the old way.
It is always helpful for clarity and educational purposes to discuss this fundamental premise put forward by Marx. It is the starting point of understanding Marxism. But it is only at rare historical moments that the discussion goes beyond making a general historical point and is raised in relation to imminent developments.
This question arose at the end of World War I when the economies of Europe had collapsed in the face of military devastation. There was revolutionary ferment in Germany, Hungary and other countries in the wake of the Bolshevik Revolution. Capitalism seemed to be on the ropes. World War I had signified the beginning of the historic crisis of the capitalist system.
The development of imperialism soon resulted in the complete division of the globe among the imperialist powers, as described by Lenin in 1916 in his book “Imperialism, the Highest Stage of Capitalism.” It meant that capitalism had outgrown the national state as a framework for development. Soon it came to pass that even imperialist expansion could not give capitalism sufficient room to grow by ordinary economic means. It had reached such an impasse that it could only resolve its contradictions through a devastating imperialist war.
The ruling classes in Europe survived these post-war revolutionary crises, only to soon be plunged into the Great Depression. It was during the world depression of the 1930s that the question of the absolute decline of capitalism was widely discussed in concrete terms pertaining to the immediate perspective of proletarian revolution.
For the entire decade, save for a brief period in the mid 1930s, capitalist society appeared to be in a downward spiral with no end in sight. Capitalism had reached a dead end. It seemed to fulfill Marx’s general prognosis that social revolution was on the agenda.
Capitalist property, private property in the means of production, the profit system itself, had become a “fetter” on the further development of the productive forces. Capitalism had brought about the socialization of the productive process on a world scale. Yet a small group of property owners, monopolists, owned and operated this global system for the narrow purposes of enriching themselves through exploitation and profit.
The Great Depression seemed to be the end of the line. Capitalism was unable to revive itself by economic means. In the mid thirties there was a slight upturn, but then world production continued to decline. Massive unemployment remained. The colonial countries staggered under the weight of the world depression, which struck them even more drastically than the imperialist countries.
In the present period it is once again helpful from a working-class point of view to revive this discussion in order to get an accurate estimate of the period, clarify a perspective and prepare for struggle.
Here is our fourth installment of excerpts from a new introduction to the ground-breaking work “High Tech, Low Pay.” The book, written by Sam Marcy during the early stages of capitalist restructuring and first published in 1986, has long been out of print and will soon be reissued. Fred Goldstein, who wrote this introduction, is author of “Low-Wage Capitalism: Colossus with Feet of Clay.”
Many comparisons are made between the present crisis and the Great Depression. But while the depression of the 1930s is fully known, the present crisis is in its early stages and has yet to be played out. Many specifics cannot be known at this point. It is best from a Marxist point of view, i.e., from a materialist standpoint, to focus on what can be studied right now.
What can be compared are the historic periods leading up to the depression of the 1930s and later to the present crisis, which began with the collapse of the housing bubble in 2007. These periods can be effectively compared.
From Civil War to Great Depression
In the first crisis, the economic forces that drove U.S. capitalism forward in the 70 years from the U.S. Civil War to the world depression of the 1930s had exhausted themselves. They were no longer able to stimulate any significant capitalist revival during the entire decade from 1929 to 1939. No economic means could bring back capitalist prosperity.
What were those forces? The Indigenous nations had finally been driven from all their lands. The so-called “frontier” had been occupied, including the half of Mexico that was annexed to become the Southwest of the United States. After the Civil War the African-American population of the South had again been subjugated, this time into a state of semi-slavery through the sharecropping system. The railroad boom had run its course. Imperialist expansion in the so-called Spanish-American War of 1898 had brought Cuba, Puerto Rico and the Philippines into the U.S. empire, along with Samoa and Hawaii. U.S. businesses had pushed deeper into China and Latin America.
Profits rolled in from World War I and helped sustain the system for a period. There was rapid expansion of the auto industry, the electrification of the country and mass production of appliances. But by the late 1920s the expansion had led to overproduction. Massive credit and land speculation led to a crash in real estate and the stock market crash in 1929.
These were the forces that drove capitalism for 70 years after the Civil War. Once they were exhausted, the system went into a state of absolute decline and could only be revived by war preparations and, finally, World War II itself.
It took 15 million U.S. soldiers under arms and an emergency regime of total war production to alleviate mass unemployment in the U.S. It took the deaths of 50 million people or more and the destruction of factories, mines, ports, railroads, bridges and residential buildings throughout Europe and Asia to overcome the pre-war economic crisis and put capitalism back on its feet.
From World War II to 2007
A review of the situation leading up to the present crisis bears an ominous resemblance to that which preceded the Great Depression. Namely, the forces that have propelled U.S. capitalism and the development of the means of production to higher and higher levels throughout the last 70 years, since the beginning of World War II, have exhausted themselves. Artificial means employed to keep the system going are no longer sufficient to revive it in any significant way. This has led to a period of profound stagnation and perhaps to absolute decline.
In the period since World War II, U.S. capitalism has relied on various artificial methods to keep the system from collapsing. War and war preparation were a basic stimulant for decades during the post-war period. The Korean War, the Vietnam War, the military buildup during the Cold War—all served to generate capitalist production and profits, as the system could not rely on the civilian economy to automatically keep it going.
But by the end of the 1980s, even the $2 trillion Reagan military buildup in a “full-court press” to undermine the Soviet Union and the socialist camp was insufficient to sustain capitalist prosperity. The monstrous growth of the military-industrial complex has it limits as an economic stimulant.
Marcy dealt with the role of the military in bolstering the capitalist economy in Chapter 2. He showed how it fostered the scientific-technological revolution and shaped crucial sectors of the corporate economic structure to aid its design for world empire. At the same time, he showed how dependent even the largest corporations had become on the military.
The continuous development of the scientific-technological revolution, the restructuring of capitalist industry, the relentless anti-labor campaign of union-busting, the extraction of concessions, the destruction of benefits, the driving down of manufacturing wages and the steady expansion of the low-wage service economy—all enormously increased inequality in the national income in favor of capital and at the expense of the workers. All this served to bolster the profitability of the bosses and bankers. It gave the bosses a great infusion of surplus value, stolen from the workers, to ease the crisis of capital.
The collapse of the USSR and Eastern Europe in the 1990s and the opening up of China to capitalist investment gave imperialism a brief period of unprecedented global expansion. The monopolies seized this opportunity to create global networks of exploitation and vast super-profits as they engineered a worldwide wage competition among the international working class and promoted the vicious race to the bottom previously referred to. Driving down the value of labor is the time-tested method of capital for combating the declining rate of profit brought about by the growing cost allocated to constant capital (plant, equipment and raw materials) and the reduction in variable capital (wages).
Globalized production has now brought a worldwide epidemic of layoffs and mass unemployment.
Militarism, technological development and anti-labor attacks were not enough to save the banks and corporations. Huge injections of credit were required. The ruling class resorted to speculation, credit bubbles, mortgage schemes, exotic financial instruments and all manner of fraud to make profits based on trading in fictitious capital. To overcome the limitations on the profitability of industry, unlimited paper profits were conjured up.
Following is the fifth part of an excerpt from the introduction by Fred Goldstein to an upcoming reprint of the groundbreaking work “High Tech, Low Pay,” written by Sam Marcy in 1986 during the early stages of capitalist restructuring. Goldstein is the author of “Low-Wage Capitalism: Colossus with Feet of Clay.”
In the present crisis, none of these measures is available to restart the system in any significant way.
The two wars now underway in Iraq and Afghanistan are draining the coffers of U.S. imperialism. Overall militarization has largely been accomplished. New rounds of military development are technology intensive, such as laser-guided bombs, satellite-guided missiles, Predator drones, high-tech missile ships and fighter planes. Current imperialist wars are limited and heavily dependent on air power. The hundreds of billions of dollars spent annually on militarism are essential to the system, but, at best, military spending can only help to slow down the economic crisis. It cannot restart the capitalist economy and generate prosperity.
The long period of creating a regime of low-wage capitalism, with a working class in debt and living closer and closer to the poverty level, has intensified. As this trend deepens it only aggravates the crisis of overproduction by further reducing the buying power of the masses. Driving down wages any more will only intensify the contradictions of the system.
Further use of credit on a major scale is a vanishing option. Credit has been stretched to its limit as a mechanism for reviving capitalist accumulation. The government’s handout of trillions of dollars in financial bailouts to the banks and other financial institutions has stretched the credit option even beyond the limit.
Capitalism has reached a point where, even if the trillions of dollars that the ruling class is spending in an attempt to mitigate the crisis were to result in a revival, it would be weak and short-lived, leaving many millions unemployed as jobs continue to be lost even as capital accumulation expands. Capitalism is entering a period of permanent and deepening crisis for the masses.
In the present crisis the historic methods of reviving the profitability of capitalism, of restoring capitalist accumulation and prosperity, appear to have run their course, as they did leading up to the Great Depression. This is what has the ruling class running scared.
Marx’s proposition about the inevitability of social revolution, already quoted, bears repeating here. It was phrased in the most general way:
“At a certain stage of their development, the material productive forces of society come in conflict with existing relations of production or—what is but a legal expression for the same thing—with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an epoch of social revolution.”
This is a summary of the broad contours of history. The specifics can only be filled in by analyzing the concrete development of the productive forces of capitalism at each stage.
Sam Marcy in his foreword to this book gave an economic characterization of the period that pointed clearly in the direction of the present profound crisis of capitalism.
“The justification for each new social system as against its predecessor is that it raises society to a higher level. It has done so in each succeeding social order by raising the productivity of labor. The great achievement of capitalism was that it not only promoted a tempestuous development of the productive forces, of science and invention on an unheard of scale, but it raised the productivity of labor. Over a period of centuries it laid the basis for raising the material standards of society and the wage levels of the working class as a whole.
“The distinctive feature of this particular phase of capitalist development, the scientific-technological phase, is that while it enormously raises the productivity of labor, it for the first time simultaneously lowers the general wage patterns and demolishes the more high-skilled, high-paid workers. It enhances the general pauperization of the population.”
But Marcy looked beyond the crisis to the future of the struggle. He discussed the changing character of the working class from a revolutionary, optimistic point of view that was firmly rooted in a materialist analysis.
He spoke at that time of the fundamental trend arising out of the objective changes in the capitalist economy: the vast expansion of lower-paid workers and the decline of the higher-paid, which he regarded as one of the most significant and profound developments to emerge in the history of capitalism.
Its significance is ultimately political. It means that the lower-paid workers, the downtrodden and oppressed who can ill afford to be held down by a conservative labor leadership, will ultimately become the predominant voice in the labor movement and provide it with the militant and ultimately revolutionary energy to challenge capital. He showed that this transformation of the working class must ultimately have a political expression.
The consciousness of the workers is forced to catch up to their condition. A delay in this process is inevitable, but overcoming this lag is equally inevitable. Being ultimately determines consciousness. Historical circumstances have delayed this radical development among the workers. But Marcy’s projection of the pauperization of the working class has developed more fully since he wrote.
Following is the sixth and final part of an excerpt from the introduction by Fred Goldstein to an upcoming reprint of the ground-breaking work “High Tech, Low Pay,” which was written by Sam Marcy in 1986, during the early stages of capitalist restructuring. Goldstein is the author of “Low-Wage Capitalism: Colossus with Feet of Clay.”
The days when the conservative labor leadership has been able to hold the working class in check are numbered. Its base is shrinking with each round of concessions it makes to the bosses, with each sweetheart contract it signs. As Marcy noted, at the beginning of each crisis the workers are thrown back onto the defensive. But sooner or later they will cry “Enough is enough!” Then the tide will turn.
There is no bourgeois economist who can see ahead past one quarter. Yet Marcy’s analysis of 25 years ago, proceeding from Marxist theory, put a sharp focus on trends deep within the organism of capitalism and outlined the forces that have shaped the present.
The inevitable imbalance between production and consumption has finally led to a protracted and profound crisis of overproduction. This is certainly the worst crisis in the post-World War II era. As of June 2009, it has lasted the longest—19 months. The measures taken by the world capitalist class to overcome it are by far the greatest. It follows two previous jobless recoveries, the second far more pronounced than the first, which were only overcome by extraordinary, nonreproducible measures (expansion in the wake of the collapse of the USSR, massive bubble-creating measures in the dot-com and housing markets).
Even the most optimistic bourgeois economists concede that a recovery of capitalist production would still leave massive unemployment, as the system will be unable to reabsorb a large proportion of the workers laid off in the present crisis.
Furthermore, in the era of imperialism and the scientific-technological revolution, each round of new technological innovation by the ruling class makes it more and more difficult to start the capitalist system up again after a bust. The two most important reasons are that technology reduces the skills and buying power of the workers, while at the same time increasing productivity, thus insuring that production saturates the markets at a faster and faster rate.
The question that remains for the working class is whether or not quantity has turned into quality in the matter of the capitalist recovery—that is, whether or not the scientific-technological revolution and its effects, so profoundly analyzed by Marcy, have brought capitalism to the point where society will not be able to go forward. Has the profit system reached an impasse?
Because of the previous period of expansive globalization of capital, this crisis is the most far-reaching in terms of the numbers of workers affected. The world socialization of the production process has been brought to an extraordinarily high level. Private property is becoming a more and more intolerable brake internationally.
The ruling class is trying to shift this crisis entirely onto the backs of the workers and the oppressed, just as it did during the Great Depression.
Many are promoting the notion that crisis automatically leads to uprisings and the collapse of capitalism. This is sterile, abstract thinking, far removed from the reality of the working class. It fails to take into account the disintegrating forces exerted upon the workers by a capitalist crisis of unemployment. The workers become atomized and lose the sense of strength derived from being together on the job. Their sense of confidence and of their potential power is undermined by a crisis.
It takes great efforts by working-class leaders to find strategies and tactics to counteract the effects of the downturn, develop methods of resistance to every attack and take advantage of every upturn in the economic situation to push the struggle forward onto the offensive.
This was the principal purpose of “High Tech, Low Pay” and of much of Marcy’s life work, for that matter.
Marxism has no crystal ball. It does not dole out prescriptive formulas for how a major, global capitalist crisis of profound dimensions will play itself out.
Capitalism experienced a global economic collapse during the Great Depression. A decade of mass unemployment ensued that could not be overcome except by rearmament in the U.S. and Europe and ultimately war. Thus the manifestation of the absolute, general crisis of capitalism has been economic collapse. This variant must be taken seriously. But the possibility of a protracted period of weak and short-lived recoveries alongside growing and irreversible mass unemployment must also be considered. There could be a temporary delay in a sharp crisis as a result of massive financial manipulation and capitalist state intervention. However, that it could end either in collapse or war or both must also be considered.
The precise, immediate future cannot be known. What is known is that genuine working-class leaders must prepare for struggle and adapt to any eventuality to assist the workers in dealing with the crisis, whatever form it takes. Above all, the working class must rise to assume its historic destiny as the subject of history and lead the way out of the state of permanent crisis, into which capitalism has led humanity, towards a socialist future.
Workers World
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