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-------------------------
Via Workers World News Service
Reprinted
from the Oct. 17, 1996
issue of Workers World newspaper
-------------------------
The economy is showing signs of what business economists call a slowdown. Working people might call it a recession.
Unemployment is rising for the first time since 1993. In August, factory orders had their sharpest decline since 1993. Orders were down 1.9 percent.
When the military is excluded, orders fell 3.6 percent.
Wall Street bankers and stock owners hope that a rise in unemployment will force wages down. Although wages in general are down, keeping them down or even reducing them more is one of the main ways for the ruling class to increase profits.
Another way to increase profits is by introducing more advanced methods of production. New technology means reduced labor per unit, reducing production costs. This allows the capitalist corporation to undercut its competition.
The telecommunications revolution-what Vice President Al Gore called the Information Super Highway-was supposed to be the driving force behind an ever-upward capitalist expansion.
The myth of never-ending expansion was dealt a blow Sept. 24 when AT&T's stock took a stunning fall. When AT&T reported that its profits would fall short this year, a feverish sell-off began on Wall Street.
By the end of the day, AT&T stock had lost 9.8 percent, or $9 billion.
It's a loss even billionaires would notice. It's a clear sign of economic stagnation and crisis.
AT&T is one of the monopoly giants that seemed invulnerable. But the great monopolies-like IBM and AT&T- have been breaking up.
While the tendency of capitalist competition is to turn into monopoly, this tendency is never fully realized. That's because of the constant struggle between competition and monopoly.
In his ground-breaking study of capitalism, Karl Marx showed there are underlying forces at work in the capitalist market that the capitalists cannot control.
One of those forces is the tendency of capital to flow to wherever the rate of profit is higher. The other side of this tendency is that capital tends to retreat as soon as a lower rate of profit makes itself evident.
When AT&T announced that its profits are not increasing at the same rate they had been, a big chunk of Wall Street capital pulled out--$9 billion.
Profit does not come from new technology. A worker's labor produces profit.
Workers produce a greater value than they receive back in wages. The unpaid portion of their labor is the profit taken by the capitalists.
Machinery, computers and all the new technology do not produce a profit. Only human labor can produce profit.
New technology makes workers more productive so that fewer workers are needed for production. While this lowers production costs, it also reduces the rate of profit because there is less human labor in production.
Competition forces capitalists to adopt new technology, because the capitalist with the lower unit costs can lower prices and expand. Thus the lower rate of profit can be offset by taking over a larger share of the market.
But eventually all the competitors are using the new technology and profits in general decline.
Marx noted that the fall of the rate of profit "promotes over-production, speculation, crises." ("Capital," Vol. 3, p. 283)
With a recession looming, understanding the source of the crisis is critical. The big-business-controlled media and the bosses will have many explanations. Most of them will blame the workers-wages are too high, the workers are not productive enough, management made mistakes, etc.
But the real source of recessions and crises is capitalism. Crises are not something natural. They are created by the forces of capitalism.
Therefore, they can be prevented. Getting rid of capitalism is the way to end the cycle of unemployment and crises.
- END -
(Copyright Workers World Service: Permission to reprint granted if source is cited. For more information contact Workers World, 55 W. 17 St., NY, NY 10011; via e-mail: ww@wwpublish.com. For subscription info send message to: ww-info@wwpublish.com. Web: http://www.workers.org)