"Marx said that the key to understanding the capitalist mode of production lay in the nature of production to sell commodities on a market for profit. Profit was the key. And contrary to the views of capitalist economics, both neoclassical and Keynesian, value and surplus value (profit) came from the labour of the working class. Those that owned the means of production could appropriate the value of the commodities and selling them on the market for money. The workers got their wages but did not get the full value of what they produced. The difference was profit for the capitalists. Now the capitalists might have to use some of that profit to pay interest on loans or rent on property and, if these ‘rentiers’ (bankers and landowners) squeezed the profit-holding capitalist too far, sure they could cause a crisis in investment. But the Marxist view shows that, even if interest rates are low or zero and even if rents are low or zero, even if the rentiers had passed away in euthanasia or had been killed off by the capitalists or by a progressive government, there would still be crises, slumps and depressions. Why? Because rent and interest and profit come from surplus value, not the other way round. And that surplus value comes from the exploitation of labour. Marxist theory turns things round the right way. Keynes says the crisis comes about through a lack of ‘effective demand’, namely an unaccountable fall in investment and consumption and this causes profits and wages to fall. Marx says: let’s start with profits. If profits fall, then capitalists would stop investing, lay off workers and wages would drop and consumption would fall. Then there would be a lack of effective demand, as Keynesians like to put it, but this would not be due to a drop in ‘animal spirits’, or ‘confidence’ (we often hear that phrase from economists: ‘a lack of confidence’), or even due to ‘too high’ interest rates, but because profits are down. The problem lies in the nature of capitalist production, not in the finance sector. Think of how a capitalist crisis caused by falling profits (and profitability) can be solved if Marx is right. The only way that it could be ended was if enough capitalists went bankrupt, enough old machinery and plant were close down and enough workers were laid off. Then eventually, the costs of production and investment would be sufficiently reduced to raise the profitability of production for those capitalists still surviving to start to invest again. After a while, however (maybe years, even decades), the law of profitability would again exert its power and the whole ‘crap’, as Marx called it, would start again. Thus we have cycles of booms and slumps. (...) Indeed, the austerity policies of most governments are not as insane as Keynesians think. Keynesians say: why can’t big business see that it is their interests for governments to spend more, not less, in a slump? But austerity policies are perfectly rational: they follow from the need to drive down costs, particularly wage costs, but also taxation and interest costs, and the need to weaken the labour movement so that profits can be raised. It is a perfectly rational policy from the point of view of capital, which is why Keynesian policies were never introduced to any degree in the 1930s. Capitalism came out of the Great Depression only when profitability rose and that was when the US went into a war economy mode, controlling wages and spending and driving up profits for arms manufacturers and others in the war effort. Capitalism needed war, not Keynes. So in my view, contrary to Keynes’ view, Marx is both right and relevant about why there was a Great Recession and why we are still in a Long Depression. Marx’s analysis shows that the capitalist system is not just suffering from a ‘technical malfunction’ in its financial sector but has inherent contradictions in the production sector, namely the barrier to growth caused by capital itself. What flows from this is that the capitalist system cannot be reformed or corrected in order to achieve sustained economic growth without booms and slumps – it must be replaced. That is the ultimate policy action for the left."
Posted on: Sat, 24 Aug 2013 11:39:56 +0000
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