Capitalism’s recurrent crises are not aberrations. Financial deregulation and shifts of income between and within countries were achieved by powerful capitalist interests responding to the crisis of the 1970s, which Keynesian-inspired state regulation failed to prevent. To understand the real problems we need to go beyond the criticism of neoclassical economists or Keynesians. We need to examine the dark underworld of exploitation within capitalist production.
He provides a useful summary of a key Marxist explanation for why capitalism goes into repeated crisis – the tendency for the rate of profit to fall:
Competing firms invest in new technologies and new equipment – what Marx calls “constant capital”. The innovators steal a march on their competitors and capture a greater share of profits. As others follow, the new techniques become generalised and the leaders’ advantages are lost. Moreover, capitalists overall are now investing more in constant capital than in labour, or “variable capital”. While they must continue to pay the machine-making capitalists for the full value of the capital they purchase from them, it is only the workers they can exploit.
So, Marx argued, even as the total surplus being extracted from labour increases, this can fall relative to the overall amount being spent on constant and variable capital. There is a tendency for the rate of profit to fall.
The simplest way to restore profits is to cut wages, either directly or through cuts in welfare. The attack was particularly savage in the US. People were also forced to work longer and harder. Millions were forced into second jobs and, of course, into debt. Across the rich countries the wages share of national income, if not absolute wages, fell substantially, on average from about 75 percent to 66 percent between 1975 and 2006. Meanwhile restored profits and higher salaries for the rich increased the financial supply. They had more money to lend in financial markets.
Dunn concludes by looking to potential anti-capitalist forces of resistance:
Against this, there have already been some magnificent fights. The wave of general strikes in Greece is the proudest example. Many of those fighting rightly insist there are better ways to recover government deficits – taxing the rich for example. They point out that there are more important priorities than tackling government deficits and repaying the bankers.
Financial speculation can and should be restrained. Whether in the US or China, increasing wages and reorienting the economies to productive investments would be a better way of addressing the imbalances. Yet these reforms seem unpalatable to the ruling class.
Ultimately, the fight against austerity quickly forces us to face the need for a systemic transformation – the overthrow of capitalism.
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