The ABC of the capitalist crisis

By Sam Marcy (April 2, 1992)
George Meany, at one time the leader of the AFL-CIO and before that head of the construction and metal trades department of the AFL, was by no means a paragon of trade union militancy. But toward the end of his many years as head of the federation, he had much time to think about the nature of the many capitalist recessions and recoveries he had seen in his lifetime.

During the late 1970s the news was full of economic data about the recession going on. A reporter from the big-business press asked him, "When is a recession over?"

"The recession is over," Meany replied, "when everybody goes back to work."

This answer is the very soul of simplicity and common sense. Every worker, especially the unemployed, would eagerly agree with it. Yet not one bourgeois economist will agree with this definition. That's not what they're paid to say.

There are many so-called independent economic institutes. But they're all oriented toward the myth that the capitalist system and economic crises are eternal. They may be very interested in an economic upturn, but getting everybody back to work? That is not their concern.

Economic growth not same as jobs

Their concern is "getting the economy moving again." That is an altogether different concept than getting everybody back to work.

Of course, the capitalist system can't run without workers. The workers are the one indispensable element in capitalist production. But full employment is another matter.

Now, if Meany had been more knowledgeable about the origin and development of the capitalist system, he might have noted that ever since the first worldwide capitalist crisis back in 1825, there has been no capitalist recovery where everybody went back to work.

Army of unemployed

All the workers are never hired back. Some are always left behind--not just because of the ill will or greed of the capitalist class, but because, on pain of losing out in their competition with other capitalists, they must introduce labor-saving devices which cut down the labor force.

This is as inevitable as the rising sun. It has been one of the immutable effects of every capitalist crisis, resulting in a so-called reserve army of hundreds of millions of unemployed worldwide.

(Of course, if a war follows a capitalist crisis, and if it's long enough and big enough, it will "employ" everybody, including regimenting the very young, the old and the disabled.)

This reserve army of unemployed exists not only at the beginning of a recovery, but when it begins to gallop, and even at its very climax. It's a fact of the historical evolution of capitalism. Even after a recession, when the economy has fully recovered, some workers are supplanted by the onward march of technology. At the present time, when innovation and new technology have reached a wild and uncontrolled level, millions have been so displaced.

Today the pool of unemployed threatens to become an ocean. And even if there is a recovery and a phase of so-called prosperity, this ocean of unemployed will be wider and deeper than in any previous upturn.

Every phase of capitalist prosperity, it should be remembered, carries the seeds of its own destruction.

Unemployment 'too high' ?

In one of his recent interviews, President George Bush permitted himself to say that he thinks unemployment is "too high" and believes the economy will soon spurt upward. Note this: he didn't bemoan unemployment itself, but just that it is too high. Astonishingly enough, none of the opponent capitalist politicians rebutted him.

This is the acceptable political and theoretical premise that underlines capitalist ideology. There is and always will be unemployment. It just must not get too high.

If 5 or 7 million are unemployed, that's legitimate and in accordance with the norms of capitalist development. Only when it's too high should the government be concerned. Otherwise, it's up to the individuals to solve their own problems.

It's a commentary on the capitalist political system and its leaders, especially the current Democratic presidential candidates, that they don't take Bush on for this. They don't see unemployment itself as an evil that corrodes the working class and the lower echelons of the middle class, who are constantly falling to the bottom of the pit with each shakeout of the financial system.

Reports of economic recovery

The latest issue of Business Week (dated March 30) proudly proclaims that "The recovery is here at last" and "KA-Boom--the rebound is underway."

It devotes five full pages to documentation, saying that evidence of a recovery is mounting in housing starts, plant output, employment, retail sales and so on. "Consumers are back into the malls, edging into auto showrooms and thumbing through real estate listings," says this mouthpiece of high finance and industry.

As one would expect, Business Week hedges here and there, but also manages to include some of the downside of all this optimism. Nevertheless, the general picture they give is that a capitalist recovery is on the way.

Most of their statistics are derived from the releases of the Federal Reserve Bank. This is a bankers' bank. Commercial banks can borrow from it at a low interest rate that no individual could ever hope to get.

The chairman of the Federal Reserve Board is Alan Greenspan. Few people are likely to know the names of the six other bankers on the Federal Reserve Board. That's because they are rarely mentioned. They're all appointed, and the public isn't supposed to be concerned that they're all white, all men, all rich bankers and industrialists in this "democratic society." Heaven forbid that anyone should ask why no workers are on it!

It took a virtual working-class revolution in France in 1968 to somewhat change the composition of the French central bank. The bourgeoisie allowed it to take in two or three Socialists who could consent to the direction that the bankers take in charting the economic course of French capitalism.

Here, the Federal Reserve Board plus the directors of the 12 District banks are in charge of the central banking system. Their role in charge of the money supply makes them more omnipotent than any ancient monarchy. This bank has a Federal Open Market Committee that deals with the financing of the government's obligations. It buys and sells dollars and bonds, and conducts currency wars abroad.

The game of interest rates

Historically, there's a neat game that goes on between the U.S. president and the chairman of the Federal Reserve Board in times of economic crisis. Congress plays a role in it, too.

The president, whether Republican or Democrat, ever so carefully plays the point man as the advocate of low interest rates or "cheap money." This is supposed to help the mortgaged farmer, the poor home owner, or little business person borrow from the bank at low interest rates. About 650,000 small businesses have died so far in the past decade, leaving hardly a trace behind.

The lower interest rates are really for the industrialists. The big banks give the ones that are thriving lower rates. As for the ones that don't make it, the banks can establish themselves as the first and most important secured creditors in case of bankruptcy.

At the present time there has been such an avalanche of failures that it has overpowered some of the biggest banks. But all that is part and parcel of the merits of the free enterprise system.

But to get back to the game: The chairman of the Federal Reserve Board historically plays the role of the hard-headed, tight-fisted guardian of the money supply.

Usually the president and the Congress say that interest rates should be lower. But the chairman replies: "Not yet. It will endanger the credit standing of the government. If that goes, the whole universe might collapse.~"

Eventually, however, the chairman gets around to lowering interest rates, and that is supposed to ease the economic crisis. Pretty soon, almost everybody will go back to work, according to the economic mythology of the bourgeois economists. There is some truth in it, but it's mostly a myth.

At the present time, all the articles about a recovery are basing themselves on the latest report from the Federal Reserve's survey of activity within its 12 Districts. It gathers statistics from other agencies of the government and also from the private sector. Its estimates are of course important as are its statistics. But it carefully guards its language, which carries a great deal of weight.

In March, the Federal Reserve reported an economic improvement. Among other things, it said there was "a slow but widespread advance in the economy since the end of January." But the careful reader must note that further on it narrows its estimate to "some improvement in economic conditions."

The two assessments are not identical. The Federal Reserve measures its words carefully.

Economic conditions may improve if, for instance, you as a house painter agree to paint my apartment and I borrow some $500 from the bank to pay you. You are then able to pay the rent for your apartment and the insurance for your old car. Many examples like that can add up to economic improvement, especially if they are multiplied by the millions.

But in a general way, an improvement in economic conditions as it is posed in the Federal Reserve survey is not the same thing as restarting the capitalist cycle of development.

What starts up the economy again?

A restart of the economy begins with the employment of workers, from whom the capitalists extract real profit. The capitalist system of exploitation begins with the unpaid labor of the worker, who produces a surplus over and above what is required generally or historically to perpetuate the working class.

All the rest is merely the exchange of values within the system, and can at best only be peripheral to capitalist exploitation. For example, you can multiply the averages on the stock exchange a millionfold, but that in and of itself cannot generate profit. The profit merely changes hands.

Real profit comes from the sweat and blood of the working class. Without that, the capitalist system cannot maintain itself.

The fact that the capitalist stock market is rising is not evidence that the capitalist economy itself is rising. On the contrary, the stock market may be rising because there has been a severe restructuring of the capitalist economy, throwing out millions of workers. The market is anticipating fabulous profits from the restructuring of the capitalist economy.

Whether the capitalist cycle of production has been restarted has to be examined independently of any ephemeral improvement in economic conditions generally. This improvement may herald an oncoming capitalist recovery, or it may fizzle out just like the last one.

Furthermore, to expect that a right-wing Republican chairman of the Federal Reserve Board, just reappointed by a reactionary Republican president, will take an Olympian view of the capitalist economy and not be influenced by the elections is ridiculous. Is it possible to avoid a flood of phony statistical evaluations calculated to overwhelm the electorate? Of course, this is only March. Come October, look out.

The havoc caused by the capitalist crisis has become so severe that the capitalist newspapers in some regions are competing with each other to give vivid pictures of the devastation suffered by millions of families throughout the country. Even the TV networks are forced to show at least once a week the homelessness, hunger and continuing slump in Bush's standing with the electorate. Some of the truth must come out one way or another.

But what is sorely missing is an explanation of the causes of the capitalist economic crisis. Whatever criticism does appear leads to illusions and hinders independent action by the working class.

Limitations of bourgeois exposes

For instance, the Philadelphia Inquirer published a very well-documented series of nine articles on Oct. 20-28 of last year showing the ravages of the capitalist economic crisis with facts and figures. But this series, "The Dismantling of America," took a fundamentally erroneous approach.

The writers, Donald L. Bartlett and James B. Steele, showed that the increases in the salaries of people earning more than $1 million have risen 2,184 percent in the last decade; people earning $200,000 to $1 million saw an increase of 697 percent; for people earning $20,000 to $50,000, it was only 44 percent.

They conclude that the total amount of dollars in salaries funneled to the rich soared in the 1980s, as did the number of rich themselves. Meanwhile, the total dollars in wages that went to the middle class increased an average of just 4 percent a year, or 44 percent over the decade.

Their statistics, meticulously gathered from a variety of government sources, cannot be impeached. But it is not the salaries of the rich, the very rich, the superrich or what they call the middle class that are the determining factor in the development of a capitalist crisis.

What they leave out is who owns the means of production, who owns the big plants, the big establishments, the military-industrial complex. Suppose an inflationary trend happens that is so violent the currency becomes no more than a piece of paper. What happens then? Those who own the plants, equipment, means of transportation, etc. will still be the owners. But the salaried people and wage earners will get ripped off completely.

An inflationary trend that affects wages or salaries on all levels still leaves the capitalist system intact. What is fundamental is which class owns the means of production versus who works as a wage slave.

Instead of proceeding from the viewpoint of ownership and possession of the material wealth of society, these writers deal only with a superficial aspect, the income from salaries and wages. That hides the oppressive, exploitive character of capitalist society.

It is a typical bourgeois approach to judge society purely on the distribution of income. This is not decisive. Targeting the great spread in incomes of course shows the gross and monstrous social inequalities in capitalist society. But nevertheless this doesn't point out the source of the inequality, which lies in ownership of the basic means of production.

Unfortunately, the writers of this series make another error. One of the articles is entitled, "How the Game Was Rigged Against the Middle Class." At the present time, all capitalist politicians speak in the name of the middle class. They almost never mention capitalist class or working class--just rich and poor.

It is true, of course, that there is a struggle between the rich and the poor. But this does not adequately describe who the rich are, what makes them rich, the basis for their wealth and the basis for the poverty that many millions in this country suffer. The report really obscures the actual relationships that exist in present-day society, characterized by a struggle between the capitalist class and the working class.

To define the middle class merely on the basis of income is to include many workers, thus masking the function of the working class as the producer of all material values. It lumps the workers together with a vast section of the middle class proper. This includes millions who work for themselves, or employ a few workers whom they exploit, and are a buffer between the working class and the capitalist class. The fact that at the end of the process some may earn even less than a skilled worker doesn't necessarily qualify them as producers of material values.

In fact, capitalist society has middle layers in it that serve a reactionary purpose--police, prison guards, military officers and pen-pushers, hundreds of thousands of others who work in the capitalist state apparatus and are a parasitic element--not to speak of the actual big-time bureaucrats. In any capitalist government these constitute a formidable element of the population that neither produce anything nor serve a useful function.

This social layer of the population is needed to protect and defend the capitalist class's interests. It is pitted against the working class when necessary.

Huge fees not all that's wrong

In their second article, "The Very Lucrative Business of Bankruptcy," the authors also fall into error. In the course of examining the rising tide of bankruptcies, they say the winners are high-priced consultants hired to close companies, while the losers are workers thrown out of their jobs. They go on to show that the lawyers and consultants get huge fees--$787.50 for three hours of sorting files, over $1,000 for five hours spent on a plane, $562.50 for two and a half hours of telephone calls, $900 for four hours of filling out forms.

There's no question that these bankruptcy attorneys, advisers and consultants get enormous fees. This should be exposed. But to make them out as the super-devils in bankruptcy is just plain nonsense. They must have their fees approved by the bankruptcy judge, which the authors neglect to mention. Together with the bankruptcy judge and the federal district courts, they are part of a trinity that serves big business and the banks, particularly the biggest creditors. They are the ones primarily responsible for the restructuring of capitalist industry over the last decade.

These writers, by pointing the finger only at the big fees of the high-priced attorneys and consultants, avoid the fundamental causes of the crisis. They absolve the capitalist class as a whole from responsibility for the ravages and destruction of human life and material.

So while their research is valuable and impressive, at the same time it obscures what most needs to be clarified.

One of the most glaring omissions in these articles is the international character of the capitalist crisis. They do well when they point out the huge indebtedness created during the Reagan administration and the havoc it caused later. But it is dealt with as exclusively a national phenomenon. Britain, France and above all Germany and Japan, which contributed so much to U.S. indebtedness by buying U.S. bonds and stocks and investing in U.S. industry, are not mentioned at all.

For a long period the capitalist press incited workers into Japan-bashing because they said Japan was "taking over America." Now Japan has its own economic crisis, so it is withdrawing its funds from the U.S., thereby aggravating the capitalist crisis. First the capitalist press and politicians bashed Japan for investing in the U.S. Now that it's withdrawing, they're bashing it even harder.

It's part and parcel of the ruinous imperialist competition which, if it goes much further, can end up in warfare.

The international character of the capitalist crisis was first brought out in Workers World newspaper when the Bank of Commerce and Credit International collapsed, demonstrating that the U.S., Britain, France, Germany and more than a dozen Third World countries were involved. The fact that corruption was also involved was purely incidental. The main thing is that it demonstrated the international character of the capitalist crisis.

Lest that seem like yesterday's wisdom, it's important to note that just as the March 30 issue of Business Week trumpeted the emergence of a capitalist recovery, Olympia and York, the world's biggest real estate property developer, announced it was seeking guidance from financial consultants and advisers because of its inability to deal with a $20-billion debt. The company owns dozens of the choicest real estate properties in New York City and abroad.

But the most interesting aspect of this giant financial and industrial complex is the banks that have supported it with loans and are now seeking to dismantle it. These banks are Citicorp, the biggest U.S. bank, and a half dozen Canadian banks including the Canadian Imperial Bank of Commerce, the Royal Bank of Canada, the Bank of Montreal, and the Bank of Nova Scotia. Other lenders include Chemical Bank, the Dai-Ichi Kangyo Bank, the Sumitomo Bank, Barclay's P.L.C., Credit Suisse, Credit Lyonnais, and the Hong Kong and Shanghai Bank.

The capitalist press dins into the ears of the workers day in and day out, whenever the workers complain about jobs being shifted abroad, that we are living in an integrated world economy. But they never bring up the most quintessential and characteristic feature of contemporary world relationships--that is, domination by the giant banks.

A scientific solution

Today there is scarcely any question that doesn't lend itself to scientific solution, although it might take many years. So with all the economic tools available, not to speak of the new technology, why isn't there even one bourgeois economist who will say, "Let us solve the economic crisis scientifically and eliminate crisis"? It's because capitalist crisis can only be eliminated by abolishing the profit system itself and laying the foundation for a socialist society. To ask the capitalists to solve the capitalist crisis is asking them to sign their own death warrant.

Only the working class can solve the capitalist economic crisis, and then only by taking the wealth of society, the basic means of production, into their own hands and establishing a true workers', socialist society.

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