-------------------------
Via Workers World News Service
Reprinted from the Oct. 23, 1997
issue of Workers World newspaper
-------------------------

Whatever you call it, Southeast Asia faces a capitalist crisis

By Hillel Cohen

Every October, while baseball fans follow the playoffs and anxiously await the World Series, capitalist economists anxiously watch the world’s stock exchanges.

The Great Crash of 1929, the big crash of 1987, and other, smaller "corrections" have occurred in late October and early November. And despite the "happy days are here forever" song coming nonstop from the First Saxophone in the White House, worldwide economic conditions are ripe for a major downturn. Could this be the big one?

Wait a minute. Aren’t Marxists always predicting a capitalist collapse? Yet the stock market keeps going up and up. Well, maybe up and down and up, but nonetheless the Dow Jones Index reaches new heights every year, profits have never been higher, and for the last five years the incomes of the rich and super-rich—which come from profits, not wages—have gone ballistic. Just ask Bill Gates.

So why did the Oct. 1 New York Times print an opinion piece by economic commentator William Greider called "When Optimism Meets Overcapacity"? Greider is worried. And he’s no Marxist. In fact, Greider wants so much not to be confused with a Marxist that he never mentions Karl Marx by name and never mentions Marx’s "O word" to describe the crisis of capitalism: "overproduction." Greider uses the word "overcapacity." But he means just about the same thing.

According to Greider, the economic crisis hitting much of Asia is a crisis of overcapacity. It is a global economy problem, he warns, not an Asian problem, which means it could spread across the ocean faster than you can say Mitsubishi.

What is overcapacity? Perhaps if Greider used Marx’s word, overproduction, the Times wouldn’t find him fit to print.

At Workers World, that’s not a problem.

A crisis of overproduction takes place, Marx wrote, when more commodities—goods and services—are produced than can be sold at a profit.

It’s hard to imagine that in this world, where so many people are hungry or without homes or clothes or just barely making it, that there could be too much food, too many houses or too much clothes—not to mention cars, computers, cough syrup and millions of other commodities. But that’s not the point.

Overproduction doesn’t mean too many goods and services. It means more than can be sold at a high enough price to yield a high enough profit.

Overproduction and business cycle

Under capitalism, all goods and services are made only to be sold for profit. And the profit has to be close to or higher than the average rate of profit.

If bosses are not making profit from their production or don’t see any coming soon, or if the profit is lower than they can get elsewhere, they will cut back production and invest somewhere else—assuming they can. And even when bosses are making a profit, they always try to make an even greater profit—which is why even the capitalists talk about "the profit motive."

One of the ways bosses increase their profit is to reduce the cost of wages by replacing workers with machinery.

The machinery is expensive and only raises profits by multiplying the productivity of the workers and turning out many, many more commodities, even with fewer workers. But the huge increase in the number of commodities tends to lower the price. Marx described this tendency in his writings on the labor basis of value.

The lower price means a lower profit per unit, so the boss is driven to add still more machinery—which produces more goods, and the cycle repeats. When other bosses are doing the same thing all over the world, you get the picture of how overproduction of any particular commodity can take place every few years.

Sooner or later the price drops to a level that yields a lower than average rate of profit and the boss starts cutting back or goes out of business altogether. This is the essence of the classic business cycle that Marx described more than 100 years ago.

While few capitalist economists would say that the business cycle no longer exists, most seem to think that new technology along with monopoly planning and government policies have moderated its effects. They argue that another big crash like 1929 is no longer possible, and even the 1973, 1982 and 1987 kind of downturns are less likely. After all, capitalist profits—especially for U.S. corporations—have never been higher. Why is that?

Wages held down

Since the downturn of 1973-74, the ruling class has been able to hold down workers’ real wages. Restructuring, downsizing, a drop in union membership, an increase in racism and attacks on affirmative action, and other factors put the working class at a disadvantage. The Reagan cutbacks intensified this process and the U.S. victory in the Gulf War and the collapse of the socialist camp and the USSR intensified it even more.

The enormous advance of computer technology also had a unique effect. The new technology and the automated production of computer equipment made the new "smart" machines not much more expensive, and sometimes even cheaper than the older equipment being replaced.

The desperate drive to produce more and more commodities to pay for the new equipment, as in earlier industriali zation, was somewhat blunted. Along with monopoly domination of some markets, the bosses were able to vary production to meet the ups and downs of market demands. That is why so-called contingent labor–part-time, irregular, temporary and especially low-paid–became a bigger factor.

The working class as a whole was working longer hours and getting less in wages and benefits. Families tried to maintain their overall income with more family members working, and working longer hours.

In other words, the bosses were able to keep up or increase their profits by squeezing them out of the workers—intensifying exploitation.

The enormous technological improvements in transportation, communications and the organization of production also made imperialist investments even easier. Companies could quickly relocate their finance capital—money investments—to wherever they could pay the lowest wages. The enormous profits to be made in Asia by paying starvation wages led to enormous investments there by U.S., Japanese and European capital.

‘Overcapacity’ in Asia

But sooner or later, the basic laws of capitalist development reasserted them selves. The huge industrial investments in Asia became, in Greider’s words, "overcapacity"—the capacity to overproduce.

Now the market for finance capital itself is showing signs of overproduction. Because finance capital—profits to be invested to make more profit—is itself a commodity.

The imperialist-driven underdevelopment of Asia, as well as Africa and Latin America, created a huge market for finance capital. But that market is drying up.

The crisis of overproduction of finance capital in Asia, as well as that of ordinary commodities, will of necessity find its way back to the United States and Europe. It is only a question of when and to what degree.

The "capitalist prosperity" of the last five years has been prosperity for the capitalists alone. Workers’ wages, in actual buying power, are still lower than they were 20 years ago, and working-class families have maintained their incomes only through a combination of more work and increased consumer debt.

According to Greider’s figures, workers owe an amount equal to as much as 91 percent of disposable personal income—what they spend. Grocery shopping with credit cards, homes mortgaged to the eyebrows, and personal and pension savings tied up in stock market mutual funds are not a prescription for long-range economic health and stability.

The world economy is very complex and the world-wide class struggle has a dynamic of its own, with many twists and turns. Specific predictions of how big a crisis and when or where it will occur cannot be made.

But it’s October, and Greider and the New York Times are worried. Workers also have a lot more to watch out for than who will win the World Series.

- 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@workers.org. For subscription info send message to: info@workers.org. Web: http://www.workers.org)

Copyright © 1997 workers.org