An optional companion reading will be David Harvey’s classic The Limits to Capital (1982).

More about Harvey and Marxist economics

We will be meeting fortnightly on Tuesdays commencing
7-8.30pm Tuesday 25 May
Upstairs at
Better Read Than Dead
265 King St Newtown NSW 2042

It is not essential that you have read the first chapter in time for the first meeting.
Other dates – 8 June, 22 June, 6 July, 20 July, 3 August.

Reading

Marx on capitalist crisis: notes from Brisbane Workers Liberty Study Course

Section 5. “Underconsumption” - plus references Capital Vol 3 chapter 30 and Capital Vol 2 Chapter 20. The quote in the crisis notes is from – Simple Reproduction Part 1 IV. Exchange within Department II. Necessities of Life and Articles of Luxury

Section 6. “Wage squeeze” - plus references Capital volume 1 chapter 25

It is definitely worth making the effort to read as much as you can manage from the Capital references. They add a lot of insight to the topics, and sometimes point to what empirical data would help to decide if Marx’s argument stands up to the evidence.

Sections 3. Turnover of fixed capital (ref. Capital Vol. 2 mainly Chapter 8 and Chapter 9) and

Section 4. Credit (ref. Capital Vol. 3 mainly Chapter 30.

“This explanation of over-production in one field by underproduction in another field therefore means merely that if production were proportionate, there would be no over-production. The same could be said if demand and supply corresponded to each other, or if all spheres provided equal opportunities for capitalist production and its expansion—division of labour, machinery, export to distant markets etc., mass production, i.e., if all countries which traded with one another possessed the same capacity for production (and indeed for different and complementary production). Thus over-production takes place because all these pious wishes are not fulfilled. Or, in even more abstract form: There would be no over-production in one place, if overproduction took place to the same extent everywhere. But there is not enough capital to over-produce so universally, and therefore there is partial over-production.”

“When speaking of the destruction of capital through crises, one must distinguish between two factors. In so far as the reproduction process is checked and the labour-process is restricted or in some instances is completely stopped, real capital is destroyed. Machinery which is not used is not capital. Labour which is not exploited is equivalent to lost production. Raw material which lies unused is no capital. Buildings (also newly built machinery) which are either unused or remain unfinished, commodities which rot in warehouses— all this is destruction of capital. All this means that the process of reproduction is checked and that the existing means of production are not really used as means of production, are not put into operation. Thus their use-value and their exchange-value go to the devil. Secondly, however, the destruction of capital through crises means the depreciation of values which prevents them from later renewing their reproduction process as capital on the same scale. This is the ruinous effect of the fall in the prices of commodities. It does not cause the destruction of any use-values. What one loses, the other gains. Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt. If the value of the commodities from whose sale a capitalist reproduces his capital was equal to £ 12,000, of which say £ 2,000 were profit, and their price falls to £ 6,000, then the capitalist can neither meet his contracted obligations nor, even if he had none, could he, with the £ 6,000 restart his business on the former scale, for the commodity prices have risen once more to the level of their cost-prices. In this way, £ 6,000 has been destroyed, although the buyer of these commodities, because he has acquired them at half their cost-price, can go ahead very well once business livens up again, and may even have made a profit. A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction. This is also the period during which moneyed interest enriches itself at the cost of industrial interest. As regards the fall in the purely nominal capital, State bonds, shares etc.—in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalists who hold such securities—it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.”

This is not specific to crisis. I put it here as a record of the kind of insights Marx offers, in which he reconceptualises and renames the appearance of capitalism for what it really is. So – to find and relate meaningful examples, specific instances that can generate recognition of this, and other aspects of capitalism, that more people will understand and integrate a critique of capitalism into their daily outlook on the world…

Having looked at a number of articles on the current crisis, we have decided to go back to Marxist theory of crisis, taking as a starting point:
Marx on capitalist crisis: notes from Brisbane Workers’ Liberty study course (2000), edited and rearranged.
These notes reference Marx’s Capital (link is to Vol 1), Theories of surplus value and Grundrisse - the relevant sections of which may alse be read. As the notes are dense and the ideas are complex, we will read in sections. For 15 June we have chosen to read sections 1 and 2 of the notes, dealing with money vs commodities, and “from the possibilities of crisis to the fact of crisis”. Most of the original Marx referred to can be found on the Marx Internet Archive.

We will continue with these readings from April.

LAPAVITSAS, Costas

The debacle of financialised capitalism (Jan 09)

A new sort of financial crisis (April 08

MOSLEY, Fred

The bondholders and the taxpayers (Jan 09)

Long trends of profit (March 08)

PANITCH, Leo

The chain broke at its weakest link (Jan 09)

The crisis depends on the fightback (April 08

PETRAS, James

World Depression: Regional Wars and the Decline of the US Empire, Part I (March 09)
and Part 2 (April 09)

The chain broke at its weakest link (Jan 09)

The crisis depends on the fightback (April 08)

Panitch makes two main points in these articles.

1. “I don’t think that US hegemony has waned”
2. “social-democratisation” of globalisation is underway. 

 US hegemony

The US is still the strongest economy.

The US is the only global military power.

Panitch makes the point that world capitalism need the US as a financial centre – New York, and US banks operating out of London.

Capitalism needs the US dollar as a pseudo world currency which no other currency can replace as the “most stable store of value in a highly volatile capitalist world”.

Because of this the US deficit can be sustained for a long time and the US will continue to play a major role in global capitalism.

‘Social democratisation’ of globalisation

Increased governmental intervention and even nationalisation of financial institutions and possibly nationalisation of manufacturing firms like GM. But this is not like the social democratic push of post 1945.

The current push for increased government intervention in the economy is more like a social-neo liberalism than social democratic intervention. Continuationof neo-liberal policies of:

Privatisation of public services; relatively liberal trade, financial and investment  regimes; regressive taxation such as VAT/GST; central bank independence geared to restraining inflation.

Intervention for the purpose solely of safeguarding the health of the profit system.

Working class indebtedness

“People tend to overlook the extent to which, even though real wages have not increased, or not by much, since the 1970’s, living standards for workers in the advanced capitalist world have gone up. They’ve gone up primarily through those workers becoming more integrated into finance.”

He asks whether advanced capitalism has reached its limit here. This is the breaking of the ‘weakest link’. The sub-prime crash.

Questions

Panitch: “If derivatives play the central role they do, as Dick Bryan explains, in hedging risk, there is a question whether the financial crisis will affect trade in the long run.”

 Why does Panitch poses this as a question?

According to the Australian newspaper on 18 October 2008:

“The world financial system is leveraged beyond comprehension. It is estimated that between $US500 trillion ($732 trillion) and $US700 trillion worth of derivatives are outstanding.”

“Compare this with the total economic activity (GDP) of the world, which is about $US50 trillion..”

 The trillions of ‘fictitious value’ will need to be paid for, written off or otherwise dealt with sooner rather than later. If companies can’t borrow because banks won’t/can’t lend there must surely be an impact on production and trade.

Panitch poses questions about whether the balance of class forces will alter as a result of the current crisis. Whether the working class will push from below.  At present there is not much evidence of that.

On another Blog Andrew Kliman points out that world capitalism has not really recovered from the 1970’s crisis:

“Thus there have been persistent debt crises, and these will continue until:

(a) sufficient capital is destroyed (in value terms and physically) to once again make investment truly profitable – the present crisis may well end up being this moment, or

(b) there’s such a panic (“liquidity lock,” as a Fed official recently called it) that lending stops and the economy crashes, ushering in chaos or fascism or warlordism or whatever, or

(c) capitalism is replaced by a new human, socialist society.”

Can advanced capitalism find a way to re-integrate into indebtedness those workers who are the victims of the financial crash? Will the internal dynamic of the economies of China and India be enough to pull capitalism out of the world recession any time soon? Ditto for the various bailouts to corporations, banks and the cash splashes to the population in general. Will it be enough considering the trillions of value which needs still to be accounted for?