Syriza Cannot Solve The Problems Of The Greek Working Class

The referendum is a decision made by the Syriza government because it has run out of road. Syriza lacking strategic vision is entrapped in a political cul de sac. Its politics have reached their limits. After approximately five months of negotiating with the EU leadership the abject result is capitulation to austerity. The recent draft deal would have meant the acceptance of even more austerity. Accepting such a deal would have split Syriza and alienated much of its popular support. Rather than face this it fell back on the referendum tactic. But this forthcoming referendum can only add to the confusion and further demoralisation of the Greek working class. This is because the referendum is ambiguous. It is not clear as to what it is about. It is not clear as to whether it concerns a vote for or against the Euro and even EU membership. The brevity of the campaign and the surrounding financial conditions entailing bank holidays, capital controls and cash withdrawal restrictions may not help debate. The referendum, as it stands, is a manifestation of the political bankruptcy of Syriza.

Should the public vote yes in this forthcoming referendum it will mean the transfer of political power back to the previous conservative Greek forces. In that way Syriza will have, in effect, surrendered power to these conservative forces thereby missing a golden opportunity to actively participate in the radicalisation of the Greek and European masses towards the seizure of popular power and the establishment of communism. But Syriza's very nature prevented it from such an achievement. Its function is the disarming of the Greek working class.

The Greek crisis is an acute and concrete manifestation of the limits of capitalism. The Greek crisis can only be resolved on a European and global basis through the popular democratic establishment of communist society. It is not a choice between being in or outside of the Euro. Both choices are capitalist I character entailing austerity. Anti-austerity is only realizable through a popular based social revolution that transcends the limits and contradictions of capitalism.

The various programmes advanced by much of the radical left are lodged within the limits of capitalism. But it is these very limits that the Greek financial crisis is manifesting. Leftists proposing the limits of capitalism to solve those very limits is a contradiction.

The principal problem, then, is not the bourgeoisie. The principal problem is the failure of the working class to recognise through its experience the Greek situation as a manifestion of the limits of capitalism. This is not, as such, an objective problem but a subjective one. It is a problem of the consciousness of the Greek and European working class --class consciousness. Capitalism in the form of the Greek crisis is telling the working class that it, capitalism, has limits and thereby cannot satisfy the needs of the workers. Yet the working class resist this thereby persisting in the maintenance of the deluded image of a capitalism that can overcome its own limits.

No Anti-Austerity Campaign Can Be Successful Under Capitalism

The Greek working class have no option but the promotion of European communist insurrection to abolish the EU and the capitalism that it supports. The Greek working class cannot achieve communist on a national basis. A revolution confined to Greece would be strangled at the hands of European and US capitalism. Greek society is too weak to successfully transform itself on a nationalist basis. Communism in one country is an impossibility.

Staying in or out of the Euro is not an option for the Greek working class since both options will involve austerity for it. Only communism precludes austerity. Syriza's anti-austerity platform is based on the false view that an austerity free membership of the capitalist Eurozone is possible for the Greek working class. Events are verifying the pro-austerity nature of Syriza. Even if Syriza was to take the working class out of the Euro austerity will still face it.

Consequently the entire debate as to whether Greece should stay within the Euro or not is a bourgeois debate of no real relevance to the working class. It is an option presenting itself within the limits of capital. Indeed present conditions concerning Greece are acutely manifesting capital's limits and the need to transcend them in the form of communism. Much of the Left, such as the Irish Socialist Party, show solidarity with Syriza in its pseudo anti-austerity campaign. In this way it is promoting capitalism and deceiving workers. Of course in Ireland the active politics of the Socialist Party suggest that anti-austerity is possible under Irish capitalism.

The Reformism of Maurice Coakley

Below is a piece from me criticising the interview with Maurice Coakely concerning his recently published book   Ireland in the World Order: A History of Uneven Development? The interview was published on the website PoliticalEconomy.ie on March 28^th 2013.

Maurice: It argued that the Irish capitalist class had been shaped by this structural underdevelopment and showed no inclination to develop an independent industrial base. From the 1960s onwards it sought to insert Ireland into transnational networks – above all by making it a conduit for US capital investment orientated towards the European market. Some of this was manufacturing industry that created real employment but much of it was fraudulent, with the Irish state becoming complicit with tax evasion on a massive scale. While the country significantly increased its average standard of living, it also made itself deeply dependent upon foreign capital.

Paddy: Maurice’s above use of the concept “underdevelopment” is questionable. This is because in the course of his interview he suggests that a sufficiently strong popular resistance movement can create conditions within Ireland that liberate the Irish people from conditions of oppression. Since such liberation from oppression, in its very nature, means an end to “underdevelopment”, for Maurice then, the latter is not necessarily a socio-economic condition that prevents independent development. For Maurice too the creation of these conditions does not involve the abolition of capitalism. Given this his concept of “underdevelopment” is of no historic significance.

Maurice: The radical left has long argued for greater workers’ control at the level of manufacturing industry but we also need to think through what needs to be done in other sectors of the social order. The workings of government and its many institutions should be transparent to the citizens and should be subject to democratic supervision. That would necessarily involve participation and consultation not only with the workers in any given institution, but also with citizens involved with them, like patients, commuters, residents etc.

The minimum measures necessary to defend popular living standards and the welfare state will face fierce opposition from the ruling elites. If a pro-worker government is to succeed in these very modest goals, it would need to achieve a deep popular mobilisation, and a politicisation of the populace.

Paddy: The above indicates his conception is tantamount to suggesting “structural underdevelopment” can be significantly modified or even dissolved within the framework of imperialism. But the notion of “underdevelopment” is based on the assumption that it is a necessary and unavoidable aspect of world capitalism. Consequently  “underdevelopment” can only be eliminated by eliminating capitalism. This being so there is no room for Maurice’s  brand of reformism within this theory.

To claim that this Irish capitalist class  “showed no inclination to develop an independent industrial base” suggests that this indigenous class has had choice as to how the Irish economy was to be structured. This then means that, for Maurice, “underdevelopment” is not an inevitable outcome of world capitalist development but a product of the subjective choices of the Irish capitalist class. This then suggests that the Irish capitalist class is not  dominated by imperialist capital (British capitalism). But this must is evidence that Maurice is contradicting the very nature of “underdevelopment”.  This implies that the Irish bourgeoisie has been a subjectively lazy or unenterprising class. Laziness, then, not “underdevelopment” or foreign capital,  is mistakenly the ultimate source of the problem for Maurice.

The economic development of Western Europe in the aftermath of the Second World War was largely determined by US capitalism. These Western economies were in an extremely dependent state. Yet it would make little sense to describe Britain, France and Germany as in a state of “underdevelopment” as a consequence of its then subordinate relationship to US capitalism. Even today there obtains a relationship of subordination between US imperialism and Western Europe. Indeed Maurice’s claim that the capitalist world is composed of a hierarchal state system suggests that there different degrees of structural development with regard to individual states.

To historically link social resistance in Ireland to a striving for national independence makes little sense. If Ireland’s condition was that of “underdevelopment” then there obtained no possibility of national independence been achieved. However the conditions existed for the realisation of social rights or reforms within “underdevelopment”. Catholic Emancipation was, in a sense, realised within the context of underdevelopment as was the land question. Yet these movements of social resistance were not necessarily linked “to a striving for national independence.” The conditions of nationality entails the existence of an emerging indigenous bourgeoisie free from conditions of “underdevelopment”.  Given Maurice’s perspective such an Irish bourgeoisie must be non-existent because of underdevelopment.

The character of the Irish economy in relation to global capitalism is not a result, as Maurice implies, of the subjective actions of its capitalist class. The Irish capitalist class cannot subjectively determine Ireland’s economic structure. If it could it would then constitute an independent capitalist class involving an independent nation state.

Maurice resorts to petit bourgeois morality when he claims that much of US investment has “a fraudulent nature”.  It is no more fraudulent than the exploitation of labour power. Collapsing economic and political phenomena into morality merely obfuscates reality and obscures the way forward.

The Southern Irish state did not make itself dependent on foreign capital. The objective processes inherent in world capitalism made it dependent on foreign capital. All capital is ultimately dependent. Dependent on the industrial working class as the source of value (capital). Neither foreign nor indigenous capital are morally better than each other. One is as bad or good as the other. The point is that they are both sources for the extraction of surplus value from the modern worker.

Maurice: At a more general level the book argues that uneven development is intrinsic to the capitalist system. This is not just a matter of the laws of the capitalism system working themselves out unevenly - though there is an element of that - but also that patterns of development are heavily shaped by politics. Global capitalism is a hierarchal system, and states play a central role in moulding that hierarchy,

Paddy: Maurice’s claim that “global capitalism is a hierarchal system” is a questionable  and rather undialectical claim. The USA was originally a British colony and then in the 18^th century was a relatively weak nation state. Yet it was to eventually become the strongest capitalist state in the world. Germany was slow to emerge into an independent state. Yet today  Germany is, arguably, the strongest state within the EMU. We see then that the strength and weakness of states is a somewhat fluid matter.

Maurice: The failure to the Irish state to pursue a course of independent economic development has made the Irish economy exceptionally vulnerable in the event of crisis. The Irish state found itself with very limited leverage to negotiate with the institutions of global and regional governance.

Paddy: An individual state cannot freely choose to follow a course of independent economic development.  It is not a subjective matter. It is a historical matter grounded in objective processes that transcend, albeit involve, mere subjectivity. Otherwise any state could freely choose to follow a course of independent economic development. If a country, such as Maurice claims Ireland to be, is in a condition of underdevelopment then this is even more so the case. States don’t have the power to subjectively determine the character of their economies. Furthermore capitalism is international in character which means that Irish capitalism is driven by global capitalism.

Maurice: To make matters worse the political elite has become closely interwoven with a rentier/financial oligarchy whose interests are very removed from any development project, or from the needs of the wider population. The Irish elite as a whole has become characterised by a mentality that combines dependency and fraud, a combination not uncommon across much of what is called the ‘developing’ world.

Paddy: Capitalism, including Irish capitalism, is a class based system –not an “elite”  based system. The Irish state is a capitalist state that ultimately serves the interests of the capitalist class. Thereby this system never existed, as Maurice suggests, to serve “the needs of the wider population”.  The category “wider population included all classes obtaining in a specific social formation. Neither can it be one of “mentality”,  as Maurice suggests. Psychology is not the driving force of societies. A different “mentality” cannot free Ireland from dependency and “fraud”.

 

Maurice: There has been a radical change in the balance of forces between capital and labour – to the detriment of labour – over the last few decades and this has been one of the defining features of contemporary capitalism. Other significant changes have also occurred.

Over the last few decades, global capitalism – especially in the North Atlantic economies – has been characterised by a massive expansion of the financial sphere, a process known as financialisation. Behind the financial upsurge are some wider changes in the global economy.

Paddy: The post-war world followed on the heels of the massive defeat of the world working class at the hands of both capitalism and Stalinism. Yet, in the aftermath of the war,  the Western working class experienced, to a large extent, radical improvements in both its working and living conditions. So Maurice’s claim that changes in the balance of forces against the working class necessarily involves falls in its living standards is not supportable by the evidence.

Maurice: One is the presence of global over-capacity in production which inhibits investment. Too many goods are chasing too few customers. Many corporations don’t see any way that they can achieve profitable returns by investing in new production lines so they are either hoarding their profits or looking for speculative fields to put their money in. In the old core zones of global capitalism, investment rates have been falling for decades.

Paddy: If the above comments  are true then the recent industrial development of  China could not have taken place on such an enormous scale. To suggest that profits are being hoarded makes no sense. Hoarding profit (surplus value) can only mean the contraction of profits. If surplus value, in the form, of profit is hoarded then it ceases to function as capital. It thereby must contract.  Even if industrial corporations invest their profits in a bank they are still not being hoarded. Banks cannot make profits by hoarding. Over-capacity in capitalist production cannot, given capitalism’s nature, constitute a sustainable process. Over-production of capital occurs at a particular stage in the business cycle. Over-production is followed by stockpiling of commodity capital and the eventual devaluation and destruction of capital itself. This entails the increased centralisation and concentration of capital. The consequent capital adjustment brings about an end to this over-accumulation of capital.  But this  cyclical process can be softened, even interrupted, by progressively increasing public expenditure. The latter ultimately constitutes a deduction from surplus value. But there is a limit to this process. This is why the 2008 crash and the Euro crisis took place.

There cannot persist in a sustained way, as Maurice is claiming, too many goods chasing too few customers. The goods, the commodities in question, then cease to be goods (commodities). Too many goods chasing too few customers is based on false underconsumptionist assumptions which conflict with Marxist political economy.

Maurice: In this context financialisation was useful because more people could buy goods on credit, but the huge debt which was built up from the 1990s ultimately became unmanageable and the financial system imploded. We are living with the consequences of that. Most of the world’s banks are underwater, and have only survived because of massive infusions of public money from governments around the world.

Paddy: Huge debts are a relative matter. The accumulation of huge debts does not necessarily, as Maurice claims, become unmanageable leading to the implosion of the financial system. The debt tolerance of capitalism is a function of the scale of surplus value produced by its valorisation process. Debt tends to cause problems when the valorisation process is producing insufficient surplus value relative to debt.

Maurice: Because workers could not afford to buy the goods produced, the credit system was vastly expanded to cope with this but it ultimately collapsed under the weight of the huge levels of debt which had accumulated. The crucial point is this: capital will not be able to resolve the crisis this time by further assaults on labour. This does not of course mean that they won’t try. But even if they are successful in their efforts, it will not end the systemic crisis. On the contrary, it will deepen it because ordinary people will be even less able to afford the goods being produced.

Paddy: Expanding credit excessively is capitalism’s  means of seeking to escape from its profitability problems. The enormous burgeoning of credit had a universal character in the West. To claim that “assaults on labour”  involving further cut-backs in the price of labour power will not help resolve the crisis is ludicrous. To claim that such a development leads to further underconsumptionism demonstrates Maurice’s ignorance of the nature of capitalism. If there obtains a sustained accelerating accumulation of capital then falling wages do not necessarily lead to falling demand.

Maurice: Marx spoke about the ‘over-accumulation’ of capital. We usually think about this as an economic process, but it is also a social one. The huge wealth and power that capital has built up over the last three decades has become an obstacle to the capitalist system itself

Paddy: But if, as Maurice claims, growth and profitability have been falling then it cannot be the huge wealth and power of capital that is the cause of the crisis.  If profitability is falling then the scale of capital is correspondingly contracting. To suggest, as Maurice does, that capital would be rational if it followed a certain programme is to misunderstand the nature of capital. The only way capital can be rational is by its self-negation.  The very nature of these aspects make such rational action impossible under capitalism.

Maurice: If capitalism was a rational system it would have imposed harsh sanctions on the bankers and the brokers, and ensured that sufficient resources went into social services and into the creation a sustainable energy system. It would also make a serious effort to ensure that the general population would be able to buy the goods being produced by capital. But capitalism is not a rational system, or rather what is rational for the individual capitalist – or the individual state – becomes irrational for the system as a whole.

Paddy: Maurice is again engaging in contradictions. If, as Maurice claims, capitalism is not rational then it is inconsistent of him to call for a programme involving the public ownership of the credit system since this would constitute a futile attempt to render capitalism more rational. Yet he has already claimed that the capitalist system is not rational.

Maurice: If a substantial popular and democratic resistance to neo-liberal polices does not emerge, we are likely to see a deepening of destructive and irrational trends, alongside more imperialist adventures, across the globe.

Paddy: Popular and democratic resistance is not the issue. The issue is the emergence of a global communist movement that successfully overthrows capitalism. Neither is it, as Maurice suggests, a matter of mere resistance to neoliberalism but the mounting of a sustained offensive against the capitalist class. Maurice’s  antiliberalism suggests that there is a good and a bad capitalism: defeating bad capitalism in the form of neo-liberalism while restoring the previous good form of capitalism. The only way to eliminate neoliberalism is to eliminate capitalism.

Maurice: To many people, including many trade unionists, this seemed like a good deal. It is only with the global financial crisis that the downside of the deal has become more evident. Suddenly, Ireland was being demoted to the status of a ‘peripheral’ state, albeit a periphery of the world’s second major core region. One of the reasons why resistance in Ireland has been muted so far is because people are afraid that resistance could be counterproductive, that deeper confrontations could damage Ireland’s position in the global system. The EU leaders and the debt collectors are aware of these fears and use them to their advantage.

Paddy: The problem is, not simply, as Maurice suggests, the failure of the Irish working class to seriously challenge the cut backs. The problem is that the cut-backs cannot be successfully challenged within a national framework. Only the European working class, including the Irish working class, can successfully challenge the cut backs by transforming itself into a working class communist movement. On its own the Irish working class, no matter how radicalised,  is objectively too weak to destroy capitalism in Ireland.

Maurice: While many are beginning to realise that there may be a heavy price to pay for having so lightly abandoned national sovereignty, they see no easy way to regain it.

Paddy: It is ironical that Maurice should suggest that Ireland had (before the fall) national sovereignty given that he claims it has been in a state of  “underdevelopment”.  Ireland’s has been surrendering its national sovereignty over many years.  To a certain extent it has been the further loss of sovereignty, as a result of becoming part of the Eurozone, that has led to the southern Irish economy’s current disastrous economic condition.  Indeed it is questionable as to whether Ireland has  ever  been  an authentic sovereign country.

Maurice: The argument put forward by the European Commission and the European Central Bank – that cutting public spending will rejuvenate the private economy by making it more competitive – is simply not credible... It is clear that the austerity programmes are not only having a disastrous social effect, but are also damaging the capitalist economies in the affected countries. Not only are these deprivation programmes socially and economically harmful but they have also significantly eroded the position of the political establishment in these states.

Paddy: Austerity does work. Indeed an austerity programme is needed for Western capitalism as a whole. The reason as to why  the Western capitalist class has not faced up to its problems is because of fear of the working class. Divisions within that capitalist class is another reason. If widespread austerity was introduced it would lead to the demise of the weaker sections of the capitalist class. It is this component of the capitalist class that may be more sceptical concerning an austerity programme. For capitalism to recover there needs to be enormous cut backs made in the living and working conditions of the working class together with the elimination of less  productive forms of capital.

Maurice: To make matters worse, they are now forcing austerity policies on their neighbours, ignoring the evidence that these are thoroughly counter-productive. As an economic strategy, this was bound to crash because if the peripheral economies are on their knees, who then is going to buy German goods?

Paddy: Above is the false underconsumptionist rubbish repeatedly spewed out by much of the radical left. If German capital is to continue to accumulate it needs to export both commodities and capital to other parts of the EU. To achieve this it needs to maintain and increase profitability. Exporting capital is one of the chief means through which to achieve this. This means keeping costs down including both the price of the commodity labour power and social benefits. The imposition of EU wide austerity can help prevent German profits from falling. This is done by reducing the price of labour power and the elimination of weaker forms of capital. The latter is largely sustained by state spending of one sort or another. The biggest danger confronting the West European bourgeoisie, concerning this, is the potential challenge from the European working class. However because profitability conditions are so bad West European capital has no other option but to take action that may lead to historically significant challenges by the working class. However current working class weakness is encouraging it to impose radical austerity.

Maurice: More than that, it would appear that as capitalism becomes more mature, it can only be stabilised by more and more public spending. Without that, these economies go into reverse gear. This is what is happening today across the European periphery.

Paddy: The opposite is the case. Because of capitalism’s growing maturity public spending needs reduction to a necessary minimum. It is enormous public spending that largely constitutes a deduction from surplus value leaving less room for the accumulation of capital.

Maurice: One way of overcoming Europe’s debt problems would be to simply write off the debt. This happened to German debt in 1953, with the blessings of Washington. Were the European Union to do this, it would be a massive blow to the interests of financial capital, and it would probably force the European states to take public ownership and control of the credit system. Another solution would be to print money to inflate away the debt. This would damage both the interests of financial capital and also of savers, who would see the real value of their savings reduced. It is considered to be politically unacceptable to the German government. Instead, the ECB, the EC and the Berlin continued to push through austerity programmes that they know are self-defeating. This whole policy is incoherent and behind the arrogance of the European leadership one can detect more than a hint of panic.

Paddy: It is not the job of the working class to assist capital in its effort to resolve its problems. Much of the Irish radical left have been repeatedly engaged in this treacherous exercise. It is a reactionary exercise which deceives the working class. The class interests of workers is not advanced by announcing ways to save capitalism from itself.

Anyway the European Union won’t write off debts because this means a reduction in total surplus value accruing to its capital –particularly the capital of its strongest economies. It will only engage in such undertakings when left with no alternative. The other solution promoted by Maurice is “to print money to inflate away the debt.” Inflation is an anti-working class measure involving consumer price rises which tend to reduce working class income. Excessive money printing can destabilise capitalism.

Maurice: Some of the points that the Keynesians make are valid enough. There is a necessity to increase public spending in both social and physical infrastructure. We are, however, not likely to see a return to the high growth rates of earlier decades, nor is it clear that high growth would be a good thing. The Keynesians have yet to get their heads around the global ecological crisis. Endless economic growth is simply not possible, nor is it ecologically viable. The global environment is much too fragile for that. If we are to establish a viable economic model, it has to include an agenda of moving towards a sustainable energy system.

Paddy: Public spending means more debt. Excessive debt has been a key source of the problem. Calling for a “pro-worker government” under capitalism is tantamount to calling for more credit and public investment independently of its profitability. Yet more credit, contrary to what Maurice claims, only intensifies the problem.

Maurice: Given that a return to high growth rates is impractical, it is difficult to see how a social compromise between capital and labour of the sort that existed in the post-war decades could be revived. At a very immediate level, the private banking system is a massive obstacle to economic revival because it represents claims on future production. These claims are strangling investment projects. This private financial sector needs to be closed down, and the credit system should be turned into a public utility system, like electricity, water or transport. A publically owned, democratically structured credit system would enable the population to determine where investment should go and what forms it would take. Such a programme would not, in itself, abolish capitalism, but it would significantly re-structure the system and shift the balance of power from capital to labour.

Paddy: The nationalisation of credit means more debt. Given the global character of credit its nationalisation by a little Irish state is impossible. In fact the public finance that is being injected into the world banking system is a form of nationalisation by the back door. This enormous financial cost is being undertaken at the expense of the working class.  Bank nationalisation would prove an even greater burden on the working class.

If the financial system was to be made public on a popular democratic basis in such a way as to enhance the interests of the working class the capitalist class would challenge this attempted restructuring of capital.  The capitalist state then could not, by its very nature, support such nationalisation. The nationalisation of finance is just not possible under capitalism. Finance capital is by its very nature private. Capitalism cannot be managed in the way that Maurice suggests, A managed capitalism constitutes  the negation of finance capital.

Neither is capitalism going to shift what Maurice calls “the balance of power” against itself. The state is an organ of class power that cannot thereby serve the interests of the working class. Furthermore given the global character of finance capital a puny Irish state lacks the power to successfully challenge it. Neither capitalism nor its state are rational which means a rational capitalism cannot exist. Popularly determining where resources are to be invested means that profit is no longer to be capital’s driving force. This is to fly in the face of the law of value. This an historic impossibility.
Maurice: The crucial arena for establishing a modicum of self-determination is the financial one. The debt burden imposed upon the population is not only immoral, it is also impractical. It effectively condemns the state to extended stagnation, which will be accompanied by a gradual but accumulative reduction in social spending and social rights.

Paddy: The above piece makes no sense. Immorality is not the issue. Morality is not an economic policy. The category  population includes capitalists, petty capitalists, the industrial working class and lumpen elements. In this context it is a term of great ambiguity even  suggesting that Ireland is not a class society. Maurice’s conception suggests that the state is a neutral force that can be used by either working class or capitalist class.

Maurice: The details of what policies a progressive government would need to introduce would have to be worked out collectively and these would change over time depending on circumstances. In the 1930s trade policies were considered more central than they would be now, but that could change again. A lot of good work has been done by people like Michael Taft, the Anglo Not Our Debt campaign, and the Irish Left Review.

Paddy: There can be no such political institution as a progressive Irish government. If such a government were possible then there is no reason as to why Fianna Fail, Fine Gael or the Labour Party would not have formed one. These parties don’t act in a reactionary way because they sadistically enjoy punishing the working class. The point is that they cannot  function as government without being compelled to implement policies that serve the interests of the capitalist class both in its indigenous and foreign forms. Their policies are not a product of subjective factors but of objective ones. Furthermore the EU would obstruct the existence of a progressive Irish government.

Michael Taft is a reformist nationalist who sees the solution as a reformist one that is confined within the Irish national framework. This is a utopian solution.

Maurice: Any political advance towards a more just society must begin from where we are now. In the case of western Europe, a defence of social rights and the welfare state has to be the starting point for launching a political challenge to the existing order, at least for the foreseeable future.

 

Paddy: “A more just society!” Is this The Just Society programme promoted by the Fine Gael Party in the second half of the 20^th century? It is not a matter of a defence of social rights and the welfare state. Capitalism has launched an attack on the working and living conditions of the Irish working class because it is left with no real choice. Why else would it engage in such an exercise? Why is the state currently engaged in this exercise on such a scale? The current government is not engaged in a severe austerity programme because for the pleasure of it. It does not willingly promote a programme that makes it increasingly unpopular. The point is that it has no real choice under present circumstances.

Maurice: However, a strategy that is based solely of making demands on the state and expects that the population, or the working class, will become radicalised when these demands are not met, is hardly credible. Politics has moved on over the last century and the ruling class now appeals directly to the population – mainly through the media – arguing that while certain social rights may be desirable, they cannot realistically be granted or maintained because the state cannot afford them.

Paddy: Appealing to the population mainly through the media is not to appeal directly to the population. The bourgeois mass media is a reified form. It itself forms a part of the problem.

Maurice: If the left is to defend the earlier gains achieved by workers and the wider population, it needs to explain how these social rights are to be paid for. It is not good enough to say: “that’s their problem”. It is our problem too.

Paddy: This above means that there is essentially no difference between “the left” and the two political parties currently in government. Both “the left” and the government are then arguing for policies within the narrow constraints of the national capitalist framework. The point is that the problems of the working class cannot be solved within the constraints of a national capitalist framework. Consequently the left cannot “explain how these social rights are to be paid for” under capitalism. This is because they cannot be paid for under capitalism. The bourgeois political parties are right when they make this claim. Again it has to be wondered what Maurice means by “the left”. Is this left to include the variety of different groups that are considered to be “the left”: ranging from Stalinism to Trotskyism. Is it possible for such a left to subscribe to the same programme (“socialism in one country”)?

Maurice: Re-distribution of income is only one part of a programme of transition to a more equitable society. Another crucial aspect is control over the credit system. This would involve not only having capital controls but also a publically owned credit system.

Paddy: It is questionable as to how the above programme of action can be successfully realised within the framework of the EU. The EU is not going to passively sit by while this programme is implemented. A publicly owned credit system used to benefit the working class is a contradiction. The credit system forms a necessary part of finance capitalism. It exists to serve the interests of capital as opposed to labour power. It exists to sustain and increase the exploitation of labour power. Consequently it cannot be designed to benefit the working class.

Maurice: The radical left has long argued for greater workers’ control at the level of manufacturing industry but we also need to think through what needs to be done in other sectors of the social order. The workings of government and its many institutions should be transparent to the citizens and should be subject to democratic supervision. That would necessarily involve participation and consultation not only with the workers in any given institution, but also with citizens involved with them, like patients, commuters, residents etc. This kind of project would need to be accompanied by the development of new democratic media.

Marx is often criticised for failing to outline a comprehensive plan for a socialist society, but this is arguably a strength of his position rather than a weakness. We have to begin from where we are and work from there. The minimum measures necessary to defend popular living standards and the welfare state will face fierce opposition from the ruling elites. If a pro-worker government is to succeed in these very modest goals, it would need to achieve a deep popular mobilisation, and a politicisation of the populace.

Paddy: The above piece is grossly misleading. However the problem is that many workers are deceived by such ramblings. There cannot exist a “pro-worker government” under capitalism. To argue for a “pro-worker government” is to paradoxically argue for a pro-worker (capitalist) state. Should such a society be realisable there would be no need for communist society.

 

 

 

 

An Outline Of A Model Of The Capitalist Industrial Cycle

The Capitalist Crisis


The capitalist economic system is a cyclical system  of interrupted reproduction of wealth. It is this cyclical interruption that is known as the economic crisis or depression. Consequently invested constant and variable capital is significantly reduced. There thereby follows a significant decline in the scale of the reproduction of wealth and thereby the consumption of wealth by humanity. The result is increased poverty.

Capitalist crises tend to have an inherently cyclical character entailing the indefinite sequential expansion and contraction of the reproduction of capital. The capitalist economic cycle involves sequential phases that regularly repeat themselves. This is the necessary and contradictory form by which capitalism regulates itself indefinitely. It is a form of regulation that is inherently unstable tending to generate political crises, wars and even social revolution. Consequently the sustained  existence of capitalism cannot be guaranteed.

Typical crises have a unique form peculiar to capitalist society. Under capitalism the material destruction of the elements of production occur not as the cause but as the result of the cyclical crisis. It is not because fewer workers are engaged in production that a crisis breaks out. Instead the opposite is the case: Fewer workers are engaged in production as a result of the break-out of a crisis. What appears to be the case is not the case. Reality is reversed. A capitalist crisis is a crisis of overproduction of exchange-values in the form of capital. On the market commodities fail to find buyers thereby rendering these commodities  unsalable. Full employment is the exception rather than the rule under capitalism. At best full employment tends to have a cyclical character. Capitalist crises tend to have a generalised global character.

The intrinsic contradiction of the commodity, the contradiction between use-value and exchange-value, is externalised in the form of the splitting of the commodity into the commodity itself and money. The split creates the general possibility of capitalist crises. This contradiction means that to appropriate use-values one has to be able to buy them. To buy or sell one has to be a buyer or seller. Individuals exist, then, in the form of a buyer or a seller. They need only exist in this narrow abstract form. Power resides in one’s existence in the context of the constraining narrow abstract forms of buyer or seller. This circulation process plays a role in determining the character of the working class and the capitalist class.  Consequently individuals are reified as the personifications of buying, selling and consumption. Consequently success is circumscribed  by the constraints of the reified forms of buyer, seller and consumer. The worker as seller of labour power is only conceived from within that narrow form. This is why s/he is so summarily disregarded by the ruling class. His/her more humanist nature is thereby precluded, except marginally, from conceptions based on this socio-economic. One’s commercial value or status is significant not one's kindness, say, towards others. Consequently one is celebrated as a musician or artist because of one’s commercial success but not for one’s virtuosity and creativity.  Since the worker’s existence is exclusively grounded in this constrained form, seller of labour power, his/her existence concerning every aspect of his/her being is conditioned by this narrow reified form. In past societies this was not necessarily the basis of economy. The separation between the commodity and its money equivalent facilitates the emergence  of  the systems of trade, credit and eventually capitalism. Accordingly these systems of reification conditioned the development of social being in such a way that they indelibly inscribe themselves on existing human conduct.


The Process of Circulation of Capital

The existence of circulation and thereby circulation time means that there is a time interval between sale and purchase or selling and buying. Circulation or the process of exchange rather than ensuring that every sale  matches every purchase excludes any guarantee of the existence of such a condition. Circulation renders Say’s Law (supply creates its own demand) impossible. It prevents any guarantee that sales must match every purchase. In short there is an element of inevitable contingency featuring in the exchange process. It is this peculiar reification of human relations (circulation) that creates these conditions --the possibility of crises.

The circulation process is an inherently contradictory process. It is the necessary social form, albeit reified, by which commodities are distributed. It never guarantees that this distribution and realisation of exchange values will take place. There is thereby, as intimated, an element of contingency entailed in this process of reification. It is a contradiction that entails the existence of both necessity and contingency. This means the process of reproduction of both exchange value and thereby wealth can never be guaranteed under capitalism. This renders the general process  of reproduction itself contingent. It is subject to chance  even perhaps permeated by chance. Consequently the future can never be predicted with any certainty or accuracy. This being so capitalism can never be depended upon to reproduce wealth or to reproduce the present and thereby the future. This is why it must be dispensed with. The capitalist circulation process is both a combination of necessity and contingency. Without chance there can be no novelty, change nor development. However with chance there is the danger of the opposite occurring  -loss.

Many agents active on behalf of the bourgeoisie in times of crisis are forever endeavouring to enhance or improve the circulation system. They hope to render the circulation process more rational and streamlined in such a way that as a mode of realisation and distribution it cannot hinder the flow of commodities and capital through the system. But this illusion entertained by these ideologues indicates their inability to comprehend the nature of capitalism and its circulation process in particular. They are under the illusion that it is the task to restructure the circulation process in such a way that Say’s Law can freely assert itself and thereby create economic freedom. Depending on their political allegiances some are of the view that circulation needs to be cleaned out by eliminating “the debris” (such as oversized banks and excessive regulation) fouling up the circulation sphere. For them the problem  is the lack of authentically free markets. For them  markets are over-regulated.

On the other side the circulation process or the market is too free. It needs much more regulation and interventionism to guarantee that it operates harmoniously serving the interests of the public.

But both sides effectively support the market, in one way or another, believing it to be a necessary social form  of regulation. This means that both sides support capitalism. But today’s massive over-accumulation of debt is evidence that market relations (the circulation process), in whatever form, cannot form a central part of the solution. Neither can they see that the core problem lies much deeper --deep within the heart of the production process itself. The source of the problem is the contradiction that exists within the capitalist process of production itself. This process either has to be  abolished (communism) or cyclically transformed under the freely operating industrial cycle.


Say’s Law

Vulgar economics argued that the total value of commodities is equal to the total incomes of the various classes of society. From this it is concluded that the total production of commodities is at the same time the production of the incomes needed to absorb these commodities. Hence arose the law of markets called Say's Law. This law excludes the possibility of general overproduction. At most it allows for the existence of partial overproduction, overproduction in some sectors alongside  underproduction in others. This, it is claimed, is caused by the unbalanced distribution of the "factors of production" within the economy. The mistake of the law of the markets arises from neglect of the time-factor. It assumes a static system instead of a dynamic one. STOPPP

During intervals between sale and purchase the prices of commodities can vary, in either direction, thereby creating a surplus of incomes or a surplus of commodities without the corresponding change in the money form on the market. Furthermore the incomes distributed during a certain period of time will not necessarily be used to buy commodities during this  period. Only the incomes of wage-earners tend to be immediately and entirely spent. Capitalists are under no obligation  to invest all these exchange- values immediately thereby using them as purchasing power to acquire  goods. With falling profitability many capitalists tend to postpone such expenditure. The hoarding of incomes, non-productive saving, may thus give rise to a surplus of income which corresponds to an overproduction of certain commodities. This, in turn, brings about an initial reduction in employment which may lead to overproduction spreading throughout other parts of the economy  leading to a further decline in employment. In this way the vicious spiral progresses.

Disturbances  may arise from the injection of money into the circulation process. Within the production process fixed capital is gradually written off over a number of years and then all at once replaced by the expenditure of the accumulated depreciation funds. In a smoothly working  system, the annual fixed capital replacements are equal to the annual depreciation allowances. If the age-composition of existing machinery is unequal  or if  business conditions suggest a speeding up or postponement of renewals, orders for replacements will exceed depreciation allowances in some years and fall short of them in others years. This discontinuity in the expenditure of depreciation allowances for capital replacements disturbs the smooth course of the circulation process. This is responsible for fluctuations in employment and thereby profit. The accumulation of depreciation funds is a sale without a purchase, as is any saving, while any investment is a purchase without sale.

Indeed interruptions, delays in sale or purchase, are  the necessary contradictory nature of the circulation process. This form is a necessary condition for the realisation of capital accumulation.  Consequently circulation is both a form of motion and non-motion.

Say’s Law would only tend to hold under conditions resembling  universal simple commodity production. However such an economic system is an impossibility.  A society exclusively producing mere use-values, not values, cannot create overproduction. Increases in the organic composition of capital leading to a consequent downward tendency of the general rate of profit form the general laws of development of the capitalist  mode of production. The capitalist mode of production thus acquires its characteristic rhythm of development. This rhythm  proceeds in the form of cyclical alternate contractions and expansions.

During the crisis phase the commodity split into itself and money is stretched to the utmost leading  inevitably to slump. The long-term tendency of the general rate of profit to fall does not assert itself in a linear form. Instead it asserts itself in a cyclical form. The stages of a classical cyclic model of capitalism are as follows:


Economic Recovery

Under conditions of the over-production of  capital under-utilisation of existing production capacity leads to stock elimination. Consequently the demand for goods tends to exceed supply. Prices and profits eventually start to rise again. Some factories (probably under new ownership) which have been closed  open again. Others operating below capacity eventually increase their operations to full capacity. This encourages capitalists to increase investments. This is because, when demand exceeds supply, less social labour is crystallised in commodities present than socially necessary.  This implies that the total value of these goods easily finds its universal equivalent on the market. The factories operating at higher  productivity levels, higher than the average, realise  super-profits. Less productive enterprises, still surviving after the crisis,  realise the average (normal)  profit. The circulation time of commodities is reduced. Gaps between selling and buying grow increasingly shorter.

The orders for equipment from the consumer goods sector  make possible  recovery in several capital goods sectors. Recovery reduces unemployment and increases purchasing power which stimulates a new wave of investment.

Capital goods production is much less elastic than that of consumer goods. When recovery is well underway an interval appears between the order for additional constant capital and its delivery. During the interval there is a relatively big demand within Department Two for the commodities from Department One that are already available on the market. The prices of these goods will rise faster than the prices of consumer goods. This produces different rates of profit in the two sectors. The disproportion in the two sectors is shifted to prices and profit. Wages tend not to rise at the beginning of recovery owing to pressure from the industrial reserve army of the unemployed  on the labour market. Factories not working to full capacity re-engage workers without any plant change. This tends to lead to a lowering of the organic composition of capital thereby increasing the rate of profit.
                                                                           
The expansion of production is slow at first. The demand for constant capital in the form of new plant and technology remains at a level lower that the supply which implies that the rate of interest remains very low. The coincidence of a low rate of interest with a rising rate of entrepreneurial profit leads to a general tendency by entrepreneurs to renew fixed capital. Investment in new plant cannot be generally undertaken incrementally. Assuming a constant rate of increase in output an individual firm cannot alter its fixed capital at a parallel constant rate.



Boom


Much of the available capital flows into production in order to take advantage of the increase in the average rate of profit. Investments rapidly increase. New enterprises are set up  and old ones modernised. The newly launched enterprises raise the average level of productivity. So long as supply is exceeded by demand  prices continue to rise and the average rate of profit remains high. The most modern enterprises realise substantial super-profits which stimulate fresh investment and develop credit, speculation etc.

The disequilibrium between rates of profit in the two sectors is now transformed into a disproportion between the rate of increase of their production. The capital goods sector experiences a burst of frenzied activity.  It causes an increase in demand for consumer goods and even leads to  shortages. Given that demand exceeds supply prices are higher so that the more productive firms earn super-profits. The rate of interest begins to rise. Eventually profit is maximised and aggregate effective demand is met. The cycle reaches its first critical  point. One would expect falling demand to lead to a corresponding contraction in production. Such rationalism is impossible because of the inherent contradictory nature of capitalism. We see here how capitalism’s character obstructs the development of rationalism. In fact its anarchic nature promotes irrationalism. This helps explain why irrationalist ideology and religion is still prevalent.

A contraction of production leads to an increase in depreciation charges thereby raising costs. Capitalists try to overcome this problem by intensifying the use of  the production apparatus and increasing the intensity of labour. An increase in the mass of surplus value is needed to offset the lowering of the general rate of profit. This  implies increased productivity by means of technological progress.

Capitalists cannot know when equilibrium has been reached. Complications such as the publicly unaccountable existence of hidden inventories in the hands of speculators thwart access to such knowledge. Over and above all this, although not unrelated to it, markets don’t feel the effects of maximum productivity until months after that stage has been reached. Production therefore continues to increase. Due to credit expansion this goes on even longer. But ultimately there is a limit to credit expansion. Then banks stop lending money.

Put simply overproduction of capital and thereby commodities is not felt by the markets until months after that stage has been reached. Production  persists even after the stage of overproduction has been reached. Credit relations accentuate this situation. Retailers and the firms in intermediate stages of production have to replenish stocks exhausted due to the depression. Sales increases encourage industrialists to undertake further production which may coincide with stagnation or even slight shrinkage of ultimate consumption. Even when final consumption has been reached factories continue to produce and retailers continue to stock up





Overproduction

As more and more commodities are hurled onto the market the relations between supply and demand change. Some of the commodities produced under the least favourable productivity conditions contain labour time which is wasted from the social standpoint. These commodities have become unsaleable at prevailing prices of production. Thanks to the expansion of the credit system these unproductive factories go on producing for a certain period. This is reflected in the accumulation of stocks, the lengthening of the circulation time of commodities and the widening of the gap between supply and demand. At a certain moment it becomes impossible to bridge the gap with credit. Prices and profits collapse. Many capitalists are ruined and the enterprises that work at too low a level of productivity are crowded out.

The disequilibrium between Department One, the capital goods sector, and Department Two, the consumer goods sector,  first shows itself in the sphere of prices and the rate of profit thus spreads more and more into the spheres of production. The total amount of purchasing power for consumers' goods does  not increase any further or at least very little. But production still continues to increase. Stocks  first grow at the final stage (retail trade) then at the wholesale stage and finally in the industrial enterprises themselves. As this increase in stocks grows the entrepreneurs resist any immediate price falls which would mean a lowering in total stock value --a serious loss. Circulation credit is increasingly sought from banks. The banks themselves would have already extended substantially to  enterprises in this sector. They put off as long as possible any credit refusal. This is because this would bring about the  bankruptcy of these enterprises and so the entire loss of the capital already advanced in loan form. In the case of Ireland the fact that the banks were forced to stop lending to  businesses meant that they lost much of the  money capital lent to them. This increased the losses of the bank and thereby created the situation they sought to avoid. This leads to credit inflation leading to speculation and swindling. This tension on the money market and the finance market comes just before the reversal of the conjuncture and is marked by a sharp rise in interest rates.

Now obliged to put off their investment projects many enterprises use this capital to meet added circulation costs.  (Some may even create hedge funds to conceal their debts so that their enterprises continue to appear to operate at profit ). The orders for capital goods thus increasingly fall. Production starts falling off in the consumer industry. The capital goods sector follows it in a vicious downward spiral.

The rhythm of production in the capital goods sector is governed by the expansion and contraction of production in the consumer goods sector. The capital sector uses borrowed money much more than the consumer sector. This is because of the higher rate of profit in this heavy industry sector. Rises in interest rates hits them harder. Emptying of their order books means falling consumer demand and rising stocks and falling profits due to rising wages and costs.

Demand for circulation credit accumulates. But the supply of money capital declines because the difference between the rate of profit and interest increasingly disappears. Enterprises short on money capital draw out their bank deposits and sell off their property, securities, shares and bonds. This brings about falls on the stock exchange and other financial markets. A snowball effect sets in. The massive burgeoning of  derivatives, especially devices such as credit derivatives more than add to this problem. Banks refuse credit leading to increased bankruptcies debtors dragging down creditors. Soon an avalanche sets in. Investors are forced to sell stock at any price. This is the cyclical character of the capitalist economy.


Crisis

The fall in prices means that only the enterprises working under the most favourable conditions of productivity survive. Firms with super-profits now have to be  satisfied with average rates of profit. A lower level of average profit is attained. This corresponds to the new organic composition of capital. The bankruptcy and closure of many factories means large-scale destruction of  machinery and thereby fixed capital. The total capital of society is reduced through the devalorisation and destruction of capital. This smaller amount of capital is now more profitable than the previous amount of capital. Indeed it was the previous oversized capital that was the cause of the crisis.

The cyclical movement of capital is thus nothing but the mechanism through which the  general  rate of profit asserts itself. The latter regulates the reproduction of capital and thereby its development and decline. The tendency of the rate of profit to fall forces the adaptation of the amount of labour which is socially necessary, the individual value of commodities, to their socially determined value.  Because capitalist production is not a consciously planned and organised process these adjustments take place  a posteriori. For this reason the regulatory process  necessitate violent shocks involving the destruction of enormous quantities of values and created wealth. Over and above all this it causes damage and destruction of thousands of lives.




The Depression

It takes time for stocks to be disposed of  which means there is no change in unemployment. Many firms have had to use funds normally made use of for the renewal of fixed capital for other purposes. Consequently the activity of enterprises in the capital goods sector is much reduced. The consumer goods sector does not decline as much as the capital goods sector. Even the unemployed have to eat. Perishable goods cannot be put off to another time. Workers’ wages don’t fall as much as the fall in prices which helps keep up the sale of perishable goods. The demand for semi-durable goods does not collapse as much as those of durable consumer goods. Yet durable consumer goods sell more easily than capital goods. In the depression the disproportion between the two sectors will spread to the sphere of prices and profits.




The Return Of Economic Recovery

While the depression lasts industrial activity remains at an abnormally low level. However it never absolutely collapses. There is always some industrial activity. When the rate of profit is very low no reduction in the rate of interest will make any difference to a revival of investment. But the very logic of the stagnation creates the elements of recovery. The contradiction of capitalist stagnation contains the conditions of recovery, As stocks are disposed of thanks to the collapse in production the consumer sector is able to slightly increase its activity. The prices of these goods  find a floor that tends to steady things. It is enough for these enterprises to remain stable for a certain period for these enterprises to start re-equipping. Everything encourages this. The price of raw materials and means of equipment are very low.

Funds at first hoarded make their way back to the banks. There is a reduction in the demand for money capital  because of the absence of investment activity which is why interest rates are low. The low rate of profit which produces recession compels enterprises to introduce new methods of production. Costs of production falls make possible an increase in the profit rate. Investment thereby begins in the consumer goods sector.