Why is capitalism at a dead end?
The following is a slightly edited version of a talk Fred Goldstein, author of “Capitalism at a Dead End” and “Low Wage Capitalism,” gave at a June 26 “Political Tertulia” organized by supporters of the newspaper Tiro al Blanco in New York’s Dominican community.
Perhaps the best place to start a discussion of “Capitalism at a Dead End” is by asking three questions: What do we mean by capitalism at a dead end? Why is it at a dead end? And what does this mean for the multinational working class and the oppressed?
There are short answers to these questions. I will expand upon them, and we can discuss these and other questions later on.
First, being at a dead end means that capitalism cannot grow the way it has grown over the last 70 years. It is at a new stage of low growth, stagnation and long-term downward crisis.
Second, this has come about because the capitalists have introduced job-killing technology for decades. This technology has displaced workers at record levels. It has reduced skills and reduced wages. It has brought the system itself to a permanent crisis of overproduction and growing mass unemployment, which it cannot get out of.
Third, we are at the early stages of this crisis and the developing crisis of capitalism will open up a great potential and the prospect of the revolutionary destruction of capitalism itself, provided the working class, its parties and its mass organizations prepare for the future while they carry on their day-to-day struggles in the spirit of Lenin and the struggle for socialism.
No more capitalist boom
Let’s come back to the first point about the dead end. There have been 10 previous economic crises in the last 70 years. In each recession there have been mass layoffs and mass unemployment, but after each crisis, capitalism revived, workers were rehired, and employment eventually reached levels higher than before the crisis began.
Capitalist overproduction always caused these recessions. Production under capitalism expands very rapidly so long as there are markets. This is because of the laws of capitalist competition. The capitalists are in a permanent race to out-produce each other, to outsell each other and to capture the markets from each other as each wants to gain the most profit. This competition drives the system.
But they fight each other by racing to lower wages, increase production and use technology to get rid of workers. So while production expands at a rapid pace under capitalism during a boom period, the income of the masses grows at a snail’s pace, very, very gradually, or actually declines.
Soon, the bosses find that they cannot sell their goods at a profit. So they shut down businesses and cut back workers’ hours; the crisis of unemployment begins. This is the law of capitalism. It cannot operate in any other way. This is the profit system at work. This is called the boom-and-bust cycle.
We say that capitalism is at a dead end because the traditional boom-and-bust cycle is over. There is no boom. It was the boom, or greatly increased production, that put workers back to work during past recoveries. But once the system loses the ability to bounce back and move forward and upward in production and services, a permanent crisis sets in for the workers and the oppressed. This is what happened during the Great Depression of the 1930s. And this is where we are now.
What proof do we have that we have entered the stage of capitalism at a dead end?
The latest collapse lasted from the end of 2007 to June of 2009. The so-called “recovery” has lasted four years now. But this is clearly a recovery for the bosses and the bankers. Profits and executive pay have gone steadily up. There has been a slight rise in production. But there are still close to 30 million workers who are unemployed, underemployed, forced to work part time, or who have dropped out of the work force altogether. This is four years after the capitalists announced the so-called recovery.
We are now in the greatest jobless recovery since the Great Depression. A jobless recovery is when the production and profits go up but millions of workers are still without jobs.
In previous crises, most layoffs were temporary. Workers got their jobs back when the economy picked up. Over 7 million workers were laid off in the 2008-2009 period. The vast majority of those layoffs were permanent layoffs. The jobs were gone, destroyed by technology or by sending jobs abroad to low-wage countries to increase the bosses’ rate of exploitation.
Furthermore, close to 5 million youths have entered the workforce since the crisis began, which means that capitalism has to create 12 million new jobs just to get back to where it was in 2007. And these youth face unemployment or low wages.
The capitalist economists keep predicting a big recovery. But it never comes. More and more workers drop out of the workforce and try to live through odd jobs off the books — painting houses, fixing cars, doing part time maintenance for a landlord, walking dogs and caring for children. They move in with their families to save rent.
Traditional means to overcome crisis don’t work
How else is this crisis different from the 10 previous crises? These crises were overcome by a variety of means. In recent times, the system began to lose the ability to automatically recover from economic downturns. What did the capitalists do to get the economy going again?
They pumped money into the military; they carried out imperialist wars and expansion to increase their exploitation of the Third World; they pumped money into bailouts for the banks and the corporations; they restructured industry and lowered wages.
In this crisis, the bankers, the bosses and the capitalist government have used all these methods to try to build a strong recovery and none has worked.
They have spent over $2 trillion on wars in Afghanistan, Iraq and Libya, and now Syria. The Pentagon is expanding in Africa, the Pacific and the Middle East.
But most money goes into high-tech weapons that don’t generate jobs.
The Federal Reserve has pumped well over $20 trillion into saving the banks, buying up bad mortgage loans, and is now pumping in $85 billion a month.
Unemployment, cutbacks in services and layoffs continue to increase. The bailouts are at record levels never seen before in the history of capitalism in the U.S., Europe and now Japan. But they have failed.
The bosses have created a restructured, globalized, low-wage system of capitalism on every continent. Every capitalist country has brought in millions of immigrant workers to be superexploited by unscrupulous bosses. This has only sharpened the crisis.
All traditional methods of getting out of the “jobless recovery” have failed. And capitalism is truly at a dead end.
Only Marxism can really explain these developments. Marx showed that the laws of capitalism drive the bosses to fight each other by getting rid of workers and making the remaining workers produce more and more in less and less time at lower and lower wages.
But this can only be done by technology, by improving the means of production and distribution and services. I’ll give some examples from my book.
“Ann Taylor Stores, which had 959 stores when the article was written, installed a program that displayed ‘performance metrics.’ Each day when a salesperson punches their code number into the cash register, the program displays average sales per hour, units sold and dollars per transaction. The system schedules the most productive sellers to work the busiest hours.
“The company studied the workers for a year and established precise standards for different tasks: three seconds to greet a shopper; two minutes to help someone try on clothing; 32 seconds to fold a sweater; and five minutes to clinch a sale.
“Based on these numbers and the customer traffic in any given store, the company would hire precisely the number of workers needed to make sales according to these time standards. The goal was to shed workers in as many stores as possible and, if possible, to increase sales at the same time. …
“Consider Kiva Systems, founded in 2003 and based on the introduction of robots that ‘bring shelves of clothing, parts, electronics, car parts — whatever a retailer sells — to specialized work spaces called packing stations,’ according to a November 2010 article in Bloomberg Businessweek Logistics. ‘Humans then pick out products, pack them into boxes and push them onto trucks. The systems cost somewhere between $4 million and $6 million. The cheapest, for $1 million, comes with 30 robots and two packing stations.’”
The capitalist system has now reached a tipping point.
They have created a technological machine that is so productive and a low-wage work force that is so impoverished, that as soon as they increase production at a rapid rate, the system fails. People cannot buy the commodities produced. Inventories back up and no hiring goes on at all or else layoffs take place. Capitalist productivity is strangling capitalist production.
Crisis and austerity
Another important feature of capitalism at a dead end is austerity. When unemployment is high, tax revenues fall, governments have to borrow from the bankers, but the bankers want to make sure that they get their hands on the public treasury to get their interest payments. That is what is behind the austerity in Europe and that is what is behind austerity in the U.S.
When Mayor Mike Bloomberg shuts down health care centers, elder care centers and drug rehabilitation centers, and sells off public parks and projects, it is to protect the bankers’ interest payments in the face of the economic crisis.
To conclude, the economic system is not going to recover. There is only greater crisis in the future. The automatic processes of capitalist recovery and the traditional methods of forcing it back to life have all failed.
The workers and the oppressed in the U.S. and around the world will have future opportunities to launch struggles. That is why we must build militant unity among all revolutionary organizations to prepare for the coming struggle. We do not know when or how it will come, but it is inevitable and we must be ready.
To quote from the book:
“As the ruling class runs out of options and moves in the direction of military adventure and political reaction, its traditional measures of recovery can no longer reverse the crisis. Thus, the situation is historically favorable to the intervention of the working class and the oppressed to resolve the crisis on a revolutionary basis.
“The profit system is entering a stage at which it can only drag humanity backward. The masses of people will come to a point where they cannot go on in the old way because capitalism is blocking all roads to survival. This is the point at which humanity can only move forward by clearing the road to survival, which means nothing less than the destruction of capitalism itself.”