Capitalism breeds war, depression
Published Oct 9, 2008 9:22 PM
Following is an excerpt from the introduction to the forthcoming book
“Low-Wage Capitalism” by Fred Goldstein to be published by World
The Crisis within the Crisis
As the crisis mounts there will be finger pointing by politicians and pundits
alike, meant to assuage the anger of the masses. Official opinion is blaming
the situation on greed and on a failure of regulation. To be sure, the bankers
on Wall Street are voracious and greedy. And it is obvious that the destruction
of regulatory restraint on finance capital opened the door wide to an
escalation of gambling and speculation—to the “casino”
This deregulation began with the Reagan administration, passed a milestone in
the Clinton administration with the repeal of the Depression-era Glass-Steagall
Act, and continued in the current Bush administration. Alan Greenspan, former
head of the Federal Reserve System, presided over much of this deregulation
during his reign of 19 years, from 1987 to 2006.
But to say that deregulation is the cause of capitalist excesses is to put the
cart before the horse. It is the irrepressible capitalist lust for profit
itself that leads to excesses. These excesses, such as the wild speculation in
stocks and land deals that led up to the market crash of 1929, led to New
Deal-era regulations restricting the financiers—but only after the
speculative horse was out of the barn and millions had been ruined.
The gradually accumulating need of capital to engage in speculation inevitably
results in the destruction of regulatory restraint. The system itself creates
excess money capital and drives it more and more toward financial speculation
and investment in paper wealth that has no relationship to underlying
The fact is that the bankers and the rich in general have vastly increased
their fortunes in the last three decades. Income inequality in the U.S. has
become notorious around the world. For example, in 1976 the top 1 percent of
households received 8.9 percent of total income. In 2005 the top 1 percent
received 21.8 percent—the highest percentage of total household income
since 1928, the year before the stock market crashed. (Inequality.org)
From 2000 to 2007 the wealthiest 400 individuals in the U.S. got a $670-billion
increase in their wealth and owned $1.5 trillion. While the top 1 percent of
households earn more than the bottom 50 percent, they own more than 90 percent
of the wealth. (Figures from Sen. Bernie Sanders’ speech against the
bailout.) These are truly staggering numbers and have profound implications for
the profit system.
The working class produces all wealth, all value in society. The class struggle
is really a struggle over which class will get a larger or smaller share in the
social surplus created by labor. If the bosses get more, the workers get less,
and vice versa. This is what makes class antagonisms irreconcilable.
Saying that there is growing income inequality in the U.S. is really a masked
way of saying that there has been a broad redivision of the social surplus in
favor of the capitalist class and to the detriment of the working class. The
bosses and bankers have taken a larger and larger relative share and the
working class has received a correspondingly smaller share.
However, the rate at which the owners of capital have accumulated this wealth
exceeds the rate at which it can be reinvested profitably in productive
capital. The scientific-technological revolution has made business more and
more productive. The workers turn out more goods and services in less time with
each new advance in technology.
Furthermore, the anarchy of production—that is, the unplanned and
competitive nature of capitalist production—sends each capitalist
grouping in search of greater and greater market share in pursuit of profit, to
the point that they collectively produce a glut of commodities on the market
and can no longer sell them at a profit. This is a fundamental feature of
capitalism and cannot be eliminated.
And after the rich spend billions on yachts, jets, mansions, servants and every
form of obscene luxury, they still have hundreds of billions in money capital
left over. And, as Karl Marx showed, capital cannot rest, cannot remain idle.
It seeks profit, and it seeks to maximize profit.
For example, the two largest industrial corporations in the U.S.—General
Electric and General Motors—both have huge financial subdivisions. GE
plows billions in profits into GE Capital, which invests tens of billions in
loans all over the globe. GM’s financial arm is GMAC. (In 2008, to raise
capital, it sold 51 percent of GMAC to Cerberus, a private equity firm.) While
GM has downsized its production and forced a large part of its workforce to
take buyouts, the company has expanded its lending. The same goes for Ford,
Chrysler and other industrial giants. Instead of investing surplus capital in
their own companies, they use it to make loans.
The collapse of the housing boom in August 2007, followed by turmoil in the
capital markets, was only the latest in a series of capitalist crises.
During the Reagan administration, a severe recession in 1982 and 1983 sent
unemployment above 11 percent. The capitalist class used the opportunity to
begin the technological restructuring of industry, leading to millions of
workers losing high-paying jobs. Reagan then stimulated the economy with $2
trillion in military spending, using Cold War propaganda to justify this huge
handout to the military-industrial complex.
The economy expanded and the stock market boomed again—until it collapsed
in October 1987 with record losses. Several trillion dollars of paper wealth
were wiped out. An economic collapse was prevented only when Alan Greenspan,
who was appointed head of the Federal Reserve in August 1987, poured tens of
billions of dollars into the financial system to support the banks and the
stock market on an emergency basis. This emergency rescue of the economy lasted
only until 1991, when there was another recession.
However, the collapse of the USSR, also in 1991, stimulated a decade of
capitalist expansion. Capital flooded into the former Soviet Union, Eastern
Europe, India and other places. The upturn in economic output accelerated in
the mid-1990s with the development of the Internet and related technologies.
From 1995 to 2000, venture capitalists, who are really fronts for the big
banks, poured billions of dollars in speculative capital into technology
companies. New companies were being created on a daily basis. The stock market
boomed, creating the so-called “dot-com” bubble—until the
overproduction of technology led to another collapse, beginning in March 2000.
From that time until October 2002, $5 trillion in paper wealth was wiped out
and an economic downturn developed simultaneously.
In the 110 years since the Spanish-American war of conquest, imperialist
capitalism has brought an endless cycle of wars, recessions, depressions and
more wars. After each economic downturn, the system has had to resort to
military expansion and financial manipulation to revive itself.
During the depression of the 1930s, Franklin D. Roosevelt tried to get the
economy going with the Works Project Administration and by allowing
workers’ wages to rise. But by 1937-1938, after a brief uptick, there was
a second depression. Only preparations for World War II and conquest in the
Pacific and Europe revived the U.S. economy.
Throughout the entire Cold War period, U.S. capitalism was dependent on
military spending to keep its economy going. The growth of the
military-industrial complex, with its web of prime contractors and tens of
thousands of subcontractors thriving on Pentagon appropriations for war and for
arms exports, was the principal means of keeping the capitalist economy from
sinking into stagnation and depression.
This history illustrates that since the turn of the twentieth century,
capitalism, in order to sustain itself, has had to resort to artificial
measures that bring disaster in their wake, in the form of war, depression or
Oct. 3, 2008
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