What the general theory of crises suggests

  • 01/07/14 13.37

1. The causes of crises are rooted deeply in the very nature of capitalism, in its basic contradiction - between the strengthening social character of production and the private-property form of appropriation that, in pursue for profit, - leading to anarchy in production. It means, that the substantial cause of the crisis is hidden in the contradiction between the labour and the capital. When we tell about the contradiction between the labour and the capital, we first of all imply the contradiction between the end of capitalist production, i.e. the production of surplace value and the application of the socialised labour of immediate workmen, the employed workers, for production and reproduction. The purpose of the capitalist production is the extraction of the surplace value. The capitalist production is dominated by anarchy and antagonisms, that bring us to an unlimited expansion of the capitalist production. The very capitalist relations and the purpose of the capitalist production become an obstacle to the umlimited expansion of production.

2. With the anarchy of the production under capitalism from time to time a part of the accumulated capital (in goods, im means of production and in money) cannot be used as a means of exploitation, giving additional profit. Then there happens a termination and then a dicrease of the production, i.e. there develops a crisis of reproduction.

3. This above-mentioned main contradiction makes every capitalist increase his offer on the market, while reducing the demand for the means of production and the demand amongst his workers for the consumer goods through decreased wages. In any form of capitalism, with certain time intervals this leads to the crises of overproduction. It is impossible to avoid crises under capitalism. Their presence is due to the processes described below.

4. Capitalism, as we know, is a universal commodity-based economic system, or, in other words, it is a commodity-based economic system developed to the extent where the labour power is a commodity. Labour power is a conglomeration of physical and spiritual reserves that are used while producing material and other values. This is a special kind of commodity, which can be used to create a greater value than its own.

Due to the chaotic arrangement of commodity-based capitalist economy, even if the wage-labourers were paid the full cost of their labour power (which rarely happens), sooner or later the volume of commodities produced would exceed the demand, the major part of which is comprised of the demand of the majority of the population, i. e. the labourers, the other part is the demand of the capitalist entrepreneurs on the means of production. This is where the crisis comes in. Thus capitalism, being a commodity-based economic system from its very start, is bound to engender crises.

5. This fact was specifically remarked in the very early editions of the Programme of the Russian Social-Democratic Labour Party (Bolshevik) and Russian Communist Party (Bolshevik).

“The main characteristic of such a society is production for the market on the basis of capitalist production relations, whereby the largest and most important part of the means of production and exchange of commodities belongs to a numerically small class of people, while the overwhelming majority of the population consists of proletarians and semi-proletarians who, by their economic conditions, are forced either continuously or periodically to sell their labour power; that is, to hire themselves out to the capitalists, and by their toil to create the incomes of the upper classes of society…

Moreover, the same technical progress enables the entrepreneurs to utilise to an ever greater extent woman and child labour in the process of production and exchange of commodities. And since, on the other hand, technical improvements lead to a decrease in the entrepreneur’s demand for human labour power, the demand for labour power necessarily lags behind the supply, and there is in consequence greater dependence of hired labour upon capital, and increased exploitation of the former by the latter.

Such a state of affairs in the bourgeois countries, as well as the ever growing competition among those countries on the world market, render the sale of goods which are produced in greater and greater quantities ever more difficult. Overproduction, which manifests itself in more or less acute industrial crises — which in turn are followed by more or less protracted periods of industrial stagnation — is the inevitable consequence of the development of the productive forces in bourgeois society. Crises and periods of industrial stagnation, in their turn, tend to impoverish still further the small producers, to increase still further the dependence of hired labour upon capital and to accelerate still further the relative, and sometimes the absolute, deterioration of the condition of the working class.

Thus, technical progress, signifying increased productivity of labour and the growth of social wealth, becomes in bourgeois society the cause of increased social inequalities, of wider gulfs between the wealthy and the poor, of greater insecurity of existence, of unemployment, and of numerous privations for ever larger and larger masses of toilers.”

 

6. We should remark specifically that, as a commodity, the labour power is virtually never, nowhere, not even in the most developed country, paid at its full cost, i. e. fully as a wage. The cost of the labour power is determined as a cost of means required to normally (correspondingly with the level of development and technical progress, culture and the level of the working class’ struggle) reproduce and develop the physical and spiritual capabilities of worker and his family. We should remark that this was intuitively understood by the most progressive representatives of the bourgeois class.  For instance, the prominent organiser of production, the father of the assembly lines, said:

“You pay the man for his work, but how much does that owe to his home? How much to his position as citizen? How much to his position as father? The man does the work in the shop, but his wife does the work in the home. The shop must pay them both. On what system of figuring is the home going to find its place in the cost sheets of the day’s work? … That is, after having supported himself and family, clothed them, housed them, educated them, given them the privileges incident to their standard of living, ought there to be provision made for still something more in the way of savings profit? And are all properly chargeable to the day’s work? I think they are.”

Ford, obviously, did not care much about social justice; rather, he showed understanding of how essential high consumer demand is for the production, and he also understood the possibility of social strikes was a great danger for capitalism. Nonetheless his position has been quite progressive not just by the standards of the first half of the 20th Century, but, in many ways, for our epoch.

What was understood by the high-flyers  is seen in a totally different manner by the typical representatives of the bourgeois class. This is well seen with the example of today’s Russia: the mean wage in 2008 (pre-crisis levels) had been around 16000 roubles per month, while the cost of the labour power converted into currency is estimated to be between 160000 and 240000 roubles (depending on the region, type of labour and the number of children). In other words, the wage today is 7 to 10 percent of the labour power costs.

7. As it’s well known, the worker creates the cost of the labour power in a certain time period, while the rest of the day, the surplus time, the worker spends working for capitalist, creating the surplus value, which will then become a part of the commodity mass, which under chaotic arrangement of capitalist economy can remain without demand, and from time to time it does remain undemanded. An excellent example of computing the rate of workers being exploited based on the statistical data of 1908 is given by V. I. Lenin in his brief outline entitled “Workers’ Earnings and Capitalist Profits in Russia”:

“Let us now compare the workers’ earnings and the capitalists’ profits. Each worker receives, on the average, 246 rubles a year, but he brings the capitalist an average profit of 252 rubles a year.

It follows that the worker works the lesser part of the day for himself, and the greater part of it for the capitalist. If, for example, we take the working day to average 11 hours, we shall see that the worker is paid only for five and a half hours and even somewhat less than that. The other five and a half hours he works gratuitously, without receiving any pay, and the entire sum earned by him during this half day constitutes the capitalist’s profit. ”

Marx’s theory of realisation and the inevitable crisis of overproduction is outlined in more detail in V. I. Lenin’s work “Development of capitalism in Russia”. Lenin notes that Marx’s thesis  that “the ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their outer limit” is unconditionally true, but that is not all. For the inner market the role of the means of production is uncomparably higher than the role of the consumption goods. The analysis of the laws of permanent capital circulation also shows the inevitability of capitalist crises.

8. Thus we emphasise again that in the process of spontaneous capitalist reproduction at certain regular intervals there come moments, when the demand for the goods and means of production is somewhat behind the available mass of commodities and services. Then comes the crisis. The other question is: what is the timeframe between the crises determined by, and is it possible to regulate them?

Some capitalist measures to stabilisation and to postpone the start of the next crisis.

9. Today’s theorists from the capitalist apologists camp claim that they have found the ways to avoid crises through organising at the level of state a market capitalist economy.

The most famous measures in this direction are Roosevelt’s attempts to overcome the Great Depression and what’s known as Keynesianism. All these measures are analysed quite deeply in the communist theory, and it is proven unequivocally that the ways out of crisis as well as the so-called crisis-free periods are attained through the more sophisticated and aggravated forms of exploitation of working people.

To support arguments in favour of the effectiveness of these measures they say that there were no crisis as deep as the world economic crisis of 1929-1933 in post-WW2 history of capitalism. Has capitalism really found a model of crisis-free regulation, and what new tools are used to postpone the crisis?

10. We find it necessary to emphasise, that it was certainly socialism, or its influence to be more precise, that helped imperialism to soften and postpone the ordinary crises. The presence of a strong socialist camp headed by the USSR, the outstanding achievements of socialism in the field of providing the social rights for the working people forced capitalists, so as to avoid the growth of discontent of the working people in the developed capitalist countries, to increase what they pay for labour, and to invest significantly in development of social rights, education, healthcare, scientific progress and technical innovations, to introduce elements of state regulation in economics and so forth.

11. A new invention of capitalists, living in debt, has been quite efficient. Everything and everywhere is being credited anytime, in large scale. Not just people, but companies and even states. Instead of compensating workers the full cost of their labour power, its major part was given as loans with interest rates to be paid back. Thus it looked like the society was living OK, the demand was kept up, but the debt was growing higher and higher, up to a certain limit.

12. The distribution of wealth produced, given the development of scientific and technical progress and the growth of the productive forces, has been extremely uneven. This unevenness grew, in particular, the international unevenness. In his work “Imperialism, the Highest Stage of Capitalism,” Vladimir Lenin pointed out: “Capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of “advanced” countries… Capitalism has now singled out a handful … of exceptionally rich and powerful states which plunder the whole world simply by ‘clipping coupons’.” (Lenin Collected Works Russ. Ed. Volume 27.) But the rich wanted more and more. The second half of the 20th Century has seen a leap in accumulation of wealth through the stock-exchange-generated financial capital with ever increasing variety of stock certificates (stock certificates, share certificates, bonds, bearer bonds, state bonds etc.)

We should not assume that this has been something new in principle. It was Friedrich Engels who, in Supplement to Capital Volume III,

“With this accumulation the number of rentiers, people who were fed up with the regular tension in business and therefore wanted merely to amuse themselves or to follow a mild pursuit as directors or governors of companies, also rose. And third, in order to facilitate the investment of this mass floating around as money-capital, new legal forms of limited liability companies were established wherever that had not yet been done, and the liability of the shareholder, formerly unlimited, was also reduced…

Thereafter, gradual conversion of industry into stock companies…

Likewise in trade…

Likewise banks and other credit establishments…

The same in the field of agriculture…

Now all foreign investments in the form of shares.”

A great diversity of parasitic forms of existence has been unleashed in the 20th Century and, still more, in the 21st Century. The degree of their intellectual and technical performance can sometimes be a subject of admiration. But they are all part of what the classic called back in the 19th Century a “mass of people who are fed up with having to work all the time”.

The stock papers that were supposed to reflect the real cost of production were inflated in the turmoil of the market. Sometimes their index went down, but in the long term it went up and up.

13. We should take a special note that in these processes of what’s known as economic growth, capital has quite successfully involved considerable numbers of working people and of the small-scaled entrepreneurs and petty-bourgeois employees. Obviously the propaganda of the ruling classes has played a huge rôle in this process — that they can dream of becoming rich one day, if they are lucky — the propaganda to develop the cult of consumerism.  Russian President Vladimir Putin, speaking on the results of 2005, showed a great delight about the record-breaking rates of Russian economic growth, being the highest in the world and amounting to 80 percent annually. Citizens were invited to participate in this promising investment into economy through various mutual funds. That is, the financial bubble began with a direct participation of the authorities.

14. With the development of information technologies the expansion of financial bubbles unsupported by any real value has become particularly intensive. But we have now reached the stage when the population can no longer pay their debts and afford major spending. We are seeing the bubble burst, a new wave of panic is out, and the process has started growing rapidly, spreading both geographically and within the social structure of the production (from banking and finances to the real production).

15. Again we should emphasise that the main element in the crisis of overproduction is preserved till our time — the population’s purchasing power has been significantly lower than the available offer.

 

Crisis’ specific features for Russia

16. Russian specifics are first of all characterised by the fact, that Russian capitalism, already entering the stage of imperialism, - has only recently came out of the stage of initial capital accumulation. The main way of formation of capitals in Russia has been the robbery portrayed as privatisation — the privatisation of huge amounts of property created by the labour of several generations of Soviet people under socialism. (They even broke laws that allowed privatisation (to be more precise, theft), as those laws did not fulfil their desire to privatise everything.) Crimes and corruption are immanent to every capitalism. The Russian capitalism has even more criminal and injurious character. This is confirmed by the facts outlined below.

17. The levels how much the labour power is being underpaid in Russia are extremely high: the mean wage is about 7 to 10 percent of the labour power costs. This condition has been imposed onto the working people by the class enemy in conditions of weakly developed trade union movement and the limitations of legal opportunities of their struggle with constantly strengthening police component of the régime. Thus the underdevelopment of the economic struggle at present is one of the main reasons for low wages in Russia.

18. The absolute majority of Russian capitalists does not stick to the technically justified norms of reproduction of the basic capital; they provide virtually no budget for replacing the worn-down equipment etc. or for renewing and developing the means of production. Practically these means get converted from the cycle of production and circulation profits of the owners (profits directed into offshore, wages for top managers, bonuses and so on). That is, the means necessary for the basic (let alone extended) reproduction are taken out of the production cycle.

To understand what this amounts to, let us refer to the official statistics which estimate the production’s fixed assets  in Russia in early 2008 at 60,4 billion roubles, while the mean rate of the renewal of fixed assets in 2007 ranges, depending on the type of economic activity, between 1.9 percent (production of electric power) and 6.6 percent (raw productions). Back in the Soviet era the rate of renewal of fixed assets in production had to be at least 13 percent. Thus the underinvestments in real economy only related to renewal of the worn-down equipment, let alone the underinvestments in the economic growth, amount to no less than 6 billion roubles yearly. This is one of the reasons of the increasing numbers of Russian billionaires (billion as in billion of US dollars), in particular, during the Putin’s rule (from 13 in 1999 to 100 in 2008). On the one hand, the disregard for the laws of reproduction of the basic capital led to the decrease of the load on Russian production assets, to the decrease of the number of jobs, which correspondingly decreased the amount of funds that could otherwise reach the working people and thus create the demand. On the other hand, this led to the degradation of the basic funds and of the technologies, first of all, of the high-tech industry. Hence the volumes of real production and the wages dropped.

19. The new, poorly investigated process in conditions of Russia has been the injection into the market of huge amounts of items which were not a commodity under socialism: production’s fixed assets, real-property, various real-estate, land, forests and so on. They were converted into commodities without application of contemporary labour, and this led to the bloated money supply in Russian economy, which was concentrated in the hands of the rich camp. The majority of the population were presented with programmes like “accessible property” which was in fact becoming more and more inaccessible. (The prices are now twice higher than the level of 2007-2008 in Moscow and St. Petersburg, amounting to 7000 and 4000 USD per square metre, respectively.)

20. Today’s Russia even in the confession of the present authorities is inherent with an extremely high level of corruption (in some estimates, the turnover of corruption amounts to over one third of state budget). This shadow re-distribution of money resources, in its turn, strengthens the misbalance in favour of the rich camp.

Thus when the present apologists of capitalism claim that the crisis we are living through is absolutely new in its features, that this kind of crisis was unknown before, that this is primarily a crisis of finances and that there is allegedly no overproduction and so on, we must give a straight answer that this is not true. There was a deficit of real money, in other words, there was no demand supported by the money, amongst a large part of the population for a decent reproduction, while Russian capitalism had an abnormally low demand for the means of production.

That was the reason for the start of the crisis. It was instigated by the financial bubble burst in the USA and by the panic that followed. The fact that the Russian economy was very much based on the raw materials production, the fall of the prices for oil and other raw materials, huge external debts of Russian corporations (over 500 billion USD at the end of 2008) have been aggravating this process. Due to the stock market crash in Russia being three times heavier than in the US (by 75 percent in March 2009), and due to huge debts on oil and other raw materials, huge credit debts of private corporations, taken as a loan against mortgage in terms of enterprises’ securities decreasing in values, the processes of further acquirement of national economy by a stronger trans-national capital is possible. It is unlikely that this process would result in high-tech production, raw production and industry getting healthier. This suggests that the situation will be used to suppress competitors and to consolidate the condition where raw and fuel production would be dependent upon the trans-national corporations.

We shall emphasize again that from scientific viewpoint we are dealing with a normal (inevitable and expected) crisis of capitalist overproduction in the era of imperialism.

Who will have to pay? (The overcoming of crisis and the opposite positions of communists and opportunists)

21. Forecasting the details and the depth of development of the crisis is quite a difficult task. This depends on a number of circumstances. However, the overall direction of the bourgeois politics is quite clear. First of all, bourgeois governments will put every effort to avoid the responsibility for the aggravating crisis, blaming some real or artificial scapegoats. They have already found and will be looking for financial fraud-makers, bank employees and banking structures and so on guilty of major errors. Big capital is ready to sacrifice any name or authority, so as to divert the responsibility from capitalism itself, the system of social production based on the private-property form of appropriation.

Second, they are already offering tens of measures, action plans and models of supposedly “changing” the existing system so that having changed something, the essence, i. e. the foundation of capitalist system, would remain unchanged.

It is absolutely clear that the bourgeoisie will do everything so that the working people bear the entire burden of crisis. There are two tactics applicable to similar conditions known in history and practice of communist movement. The opportunist tendency during the crises tries to calm down the situation and to prevent social conflicts; in Russia they take what they call a “responsible patriotic position”, essentially aligning in their politics with the ruling authorities, saving the home entrepreneurs and the home market, appealing to people to get enough patience, to appreciate responsibility, not to destabilise things, so as to overcome the hard times together.

Of course, opportunists have to support a number of progressive demands to the government, such as the introduction of measures of state regulations, including the partial nationalisation, saving the social support for the unemployed, for the working people and for the citizens. However, these measures are contradictory in their character and serve the main purpose — to prevent the broad manifestations of the working people as well as the dicrease of the capitalists’ profits.

Russia has somewhat a recent example of such a coïncidence in the interests of opportunist parliamentary opposition and bourgeois government. In 1998 during the Russian financial crisis the government resorted to a default, thus provoking the devaluation of rouble with the ration of 4. By that time a growth of working people’s protests was seen throughout Russia, with the demands to pay the debts in the wages that amounted to billions of roubles. The breadth and radicalism of the protests had surpassed the levels known by that time in the Modern History of Russia. The protests took forms such as the blocking of roads and railways, including the Trans-Siberian railway, and were even called a rail war.

At the time of maximum confrontation the government of new reformers headed by prime-minister Serguei Kiriyenko was sacked, he was found guilty of all mistakes in economic management. Evgueny Primakov, once a functionary in Gorbachov’s cabinet, was appointed as the new prime-minister.  He promoted an national patriotic course of saving the Russian economy, and was supported by the parliamentary opposition including the CPRF that delegated their representative Yuri Maslyukov into the government.

As the result this so-called "government of popular confidence" has stopplled the multibillion holes in the vage debts of employers with devaluated rubbles, brought down the tide of popular protests, helped to the ruling class and the whole bourgeois system to overcome the crises by means of the second (after 1992) impowerishment of the people in the comtemporary history of Russia. The fourfold devaluation of the Russian Rubble subserved to somewhat liven up the Russian industry. And as soon as the most critical period of the crises was passed (from August 1998 to May 1999) the "government of popular confidence" was sent to resignation as they fulfilled their function, the former minister of internal affairs Sergey Stepashin was appointed a new prime minister (from May to August 1999), and then he was replaced by Vladimir Putin, the former FSB (the Russian abbreviation for the Federal Service of Security).

Thus we can see a classical example of how all hardships of the crises were laid on the shoulders of the working people with the help of the so called patriotic, and indeed -- opportunistic opposition.

Today this history repeats: again there come calls on opposition for responsibility, for the whole-national consent, for the tention of all forces and doing some cadre reappointments of officials in the governmental, finantial and economic block and so on. This line is in one or another way supported by the opportunistic wing of the left movement. There come various advices to the government in the broadest band of constructive measures, ranging from "to issue obligations of the state anticrises loan for all willing to by them (and with obligitary purchasing by capitalists -- authors)" to "a real apulence is necessary in the political process, the authorities should repudiate from the administrative pressing, and elections should acquire their initial function - a compareson of political programs and free possibility for all citizens to exercise their will". Provided all that fulfilled, in the view of the CPRF leaders, "...one can say about a certain format of counteraction and realisation of anticrises measures".

The tast of orthodox communists and their tactics in the period of crisis is principally different. The task of communists -- to seek not for the softening of the situation, but to use the situation for the explanation of the true causes of the crisis and to maintain the maximum everpossible development of the struggle by the working class itself. The communist demands should, on one hand, contain proposals how to reduce pressure on the social and economic interests of the working people and, on the other hand, this proposals should aim the resistance movement at how to obtain additional degrees of the freedom for struggle in the period, when the whole capitalist system is weakened.

The task-minimum of communists is To lead out the working class from the crisis as more organised, more ralied and more combatant, than in the precrisis age. In some favourable concatenation of circumstances the development of crisis in some countries may grow into a revolutionary situation, and communists must be ready for this and not frighten ourselves as well as the working masses by the danger of a social explosion. As V. I. Lenin wrote: "Who fights in a real way, he naturally fights for all; who prefers a deal to struggle, he, naturally, points out in advance the pieces, by which he is inclined to satisfy himself in the best case (in the worst case he is satisfied even by the absence of struggle, i.e. he reconciles for long with the rulers of the old world)...;.[1]

22. Now many leaders of the left movement come up with the point, that the world capitalist system has ultimately crashed, that the deduction, that the world community concludes from the crisis, will lead to the formation of a totally different world, that will not be a capitalism any more, but a more rational, perfect and just one, and so the task of communists is to subserve to these processes, to demand a progress in this direction and so on. For instance, Gennady Zyuganov, a chairman of the CPRF, had this to say at the press-conference on the 9th of April 2009: "This is a crisis of the capitalist system as a whole. The outcome from this is possible only in the socialist direction. But while most farsighted politicians and most literal specialists in the West have already comprehended this, and they are already taking corresponding measures in the state level, in our structures of power this subject is even out of discussion". (One has to note, that we have never heard similar statements from the leaders of the Western communist parties about the socialist orientation of their national governments).

We would like not only desagree with the point, but to drastically object such sayings. The resources of capitalism are far from being exhausted: neither in the world scale, nor in the dimensions of single countries. More over, now we have to confess, that one of the major resources of capitalism, i.e. imperialism, is the powerful and muddy wave of opportunism in the left movement. The imperialism itself has an enormous experience of control over the processes of formation of the public opinion. Capitalists always supported and will support those political parties, that in their names and verbosity look like revolutionary organisations, they will support their struggle with the organisations of orthodox marxists. Figuratively speaking, if the situation gets worse, capitalists themselves will raise the red flag and will sing "the International" (the more that it is not difficult for them to find precentors among opportunists, who now the verse of the proletarian hymn) and they will say, that they are constructing a modern socialism of the XXI century.

Thus, today in the conditions of the current crisis, when communists are working out their tactics of organisation of struggle with capitalism, its defenders and henchman, prophetic words of V. I. Lenin sound in a very actual way: "Most dangerous in this respect are the people, who are unwilling to comprehend, that the struggle with imperialism, if only it is not closely connected with the struggle against opportunism, is an empty and layous phrase".[2]

 

V. A. Tiulkin, the first CC secretary of the Russian Communist Workers' Party -- the Revolutionary Party of Communists (RCWP-RPC)

M. V. Popov, professor of the Saint-Petersburg State University, a doctor of filosophy sciences

 


[1] Lenin V. I. The full collection of works. Vol. 10, p. 197.

[2] Lenin V. I. The full collection of works. Vol. 27, p. 426.

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