Dominic Alexander examines the state of capitalism and the ever-deepening multi-faceted crises it finds itself in
Capitalism globally has not recovered from the crash of 2008. We have since been living through a period of persistent low growth that qualifies as a new ‘long depression’ to rival the profound crises of the late nineteenth century and the 1930s. In every previous crisis, capitalism has recovered, and entered into a new phase of profitability and expansion. The question remains whether, and how, it might do so again, or has capitalism as a system reached the end of its historical capacity to renew itself?
A major mechanism by which crisis has been overcome is through a wave of new technologies, which cheapen production, allow the expansion of new industries, and restore the rate of profit. Always such booms, however, contain the seeds of the next major crisis, since when new technology has been generalised across the economy, average profitability once again declines. New methods of production generally reduce the quantity of labour needed to manufacture commodities. Initially this can raise profitability for some industries at least, and if the cost of the reproduction of labour is cheapened, for example through cheaper food, this can raise profitability generally. However, labour is the source of surplus value, and hence profit, so the less labour involved, the less surplus value is produced. As a result, the long-term trend eventually re-asserts itself, and the overall rate of profit in the economy is reduced. Crisis resumes.
The economic history of the last fifty years suggests that escaping from crisis is becoming more difficult for the system than was historically the case. Various studies, using different methods, have all shown that profit rates broadly declined in the late 60s and early 70s. They recovered only slightly as neoliberal policies from the late 1970s cut public services, and restructured production globally, driving down wages and costs of production. Profit rates then resumed a downward trend, again declining before the crash of 2008, and remaining historically low. The latest crisis therefore comes after a long period in which capitalism had failed to re-capture the high growth rates of the post-war boom.
The current wave of innovation in computing and digital technology has been underway for some time, and has indeed given rise to huge new corporations, and billionaire capitalists. However important this sector has been for the last three decades, it has not translated into a convincing renewal of capitalist growth and profitability more generally. Capitalism requires ever greater expansion, but lately it appears to be running only to stand still.
Tellingly, notable successes such as Google and Facebook are engaged not in commodity production as such, but rely upon advertising as sources of revenue. That is to say, they are taking a slice of existing surplus value, not creating new value themselves from production. Yet capitalism depends upon value-creating activity. As a vector for renewing capitalism, such successes look barren. What we are seeing now is a far cry from the electronics, chemical and automation booms of the late nineteenth and early twentieth centuries.
Who is to say that some other wave of productive innovation is not about to arrive? It may be, or it may be that capitalism is approaching a limit to its ability to cheapen production in ways that allow for accelerated expansion. Moreover, there is nowhere significant in the world for capitalism to expand into; China is clearly part of the world system. The top-heavy growth of the financial sphere, and its absurdities, is a sign that capital is fleeing from productive activity into competition over the share of existing social surplus.
Another sign of the same problem is that housing is now a sink for unproductive capital, actually creating a greater drag for the system as a whole as this increases the cost of the reproduction of labour. These and other such problems suggest that capitalism is becoming, even in its most prosperous zones, dysfunctional by its own low standards. None of this is even to mention accelerating, and multiple, ecological crises.
Another way that capitalism has, in the past, restored profitability is through the massive destruction of rival capitals. This happened in the Second World War, for example, and was a major basis for the post-war boom. Capitalism might be in decline, but it is capable of unthinkable levels of devastation in its desperation for the renewal of profitability.
We cannot wait to find out if capitalism has reached its own internal limits, we must organise to replace it, before it destroys us all in its death-throes.
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Dominic Alexander is a member of Counterfire, for which he is the book review editor. He is a longstanding activist in north London. He is a historian whose work includes the book Saints and Animals in the Middle Ages (2008), a social history of medieval wonder tales, and articles on London’s first revolutionary, William Longbeard, and the revolt of 1196, in Viator 48:3 (2017), and Science and Society 84:3 (July 2020). He is also the author of the Counterfire books, The Limits of Keynesianism (2018) and Trotsky in the Bronze Age (2020).
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