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A crisis of profits?
I WOULD like to comment on Peter Taaffe’s excellent
article in Socialism Today No.156, March 2012, headlined: Striking back
in austerity Britain.
Peter mentions in his article that "[capitalism is]
so ‘progressive’ that it is on a strike of capital, a refusal to invest.
It is resting on a mountain of cash locked up in the vaults of big
companies in Britain and the US: an eye-watering £120 billion in Britain
and a colossal $2 trillion in the US".
Why does this ‘strike of capital’ say so much about
capitalism in 2012? I think the answer lies in Marx’s law: the Tendency
for the Rate of Profit to Fall (TRPF). In his three volume opus,
Capital, Marx differentiates between constant capital (c) and variable
capital (v). Constant capital being capital tied up in factories and
machines etc. Variable capital being capital produced by the labour of
human beings.
During the Second World War both constant capital
(factories, machines etc) and variable capital (soldiers, sailors,
airmen, and civilians) were both destroyed. Once the war was over, this
immediately led to a rise in the rate of profit, leading to the post-war
capitalist economic boom of 1945-1974.
However, during this period the rate of profit
started to fall, especially in Britain. The response to this falling
rate of profit was the destruction by the Thatcher government of
constant capital, whereby 20% of manufacturing industry was destroyed. A
higher percentage, incidentally, than that achieved by Hitler’s
Luftwaffe.
However, Mrs Thatcher did not reduce the cost of
variable capital. Wages for those in work held up. Hence, the Tory
victory in the 1987 general election. At the same time, the cost of
unemployment benefit was paid for with receipts from taxes on North Sea
oil and gas. The newly-privatised industries also provided a new source
of profit, leading to an overall rise in the rate of profit.
Today, in 2012, British capitalism is, again, being
hit by a long-term fall in the rate of profit as advanced by Marx in
Capital. However, current tax receipts on North Sea oil are a fraction
of those in the 1980s. There is also the debt mountain which threatens
to sink British capitalism. This is the dilemma faced by the Con-Dem
government.
So how are the Con-Dems going to increase the rate
of profit? One solution is the privatisation of the NHS, local
government, the civil service etc. Another solution is to cut the cost
of variable capital. Hence, the planned transfer of one million people
from Incapacity Benefits onto the Job Seekers’ Allowance claimant count.
The reason for this lies in Marx’s idea of a reserve
army of capital as a means of reducing the wages of those in work ie a
cut in the cost of variable capital. Does Peter agree that the root
cause of the Con-Dem’s policies, including their cuts, is an attempt to
raise the rate of profit, which, as Marx pointed out, has a tendency to
fall?
John Smithee, Cambridgeshire
Peter Taaffe responds:
WE WELCOME John Smithee’s letter. It is true that
Karl Marx argued in the third volume of Capital that capitalism did
evince a tendency for the rate of profit to decline because it led
ineluctably to a growth of constant capital – the means of production –
compared to variable capital, labour power.
However, he also indicated that this law would only
manifest itself over time, and sometimes a considerable period. This was
because capitalism, by constantly revolutionising, through technique,
and therefore cheapening the elements of the means of production, etc,
was able to the cut the value of constant capital. It could therefore,
for a period, ‘counteract’ this tendency for the rate of profit to be
pushed down. In Capital, after first elaborating "The tendency of the
rate of profit to decline", in a following chapter he elaborates what he
calls the "counteracting causes", which check this tendency. This has
led some economists – even those claiming to be Marxists – to conclude
that these "counteracting causes" in effect nullify Marx’s argument
supporting the case for the tendency of the rate of profit to decline. I
would not agree with this. I think the law will be manifested, but
sometimes over time.
However, what the capitalists are mainly interested
in is not the rate but the mass of profit. Marx makes the same point a
few times: "…A drop in the rate was generally accompanied by an increase
in the mass of profit, due to the increasing mass of total capital
employed". (Capital, vol III, part III, chapter 14) They will continue
to invest if the rate goes down yet the mass of profit is still greater
than the capitalists’ outlay of capital at the beginning of the
production process. In the 1970s, there was one year where the mass of
profit did suddenly drop, which led to panic stations by the
capitalists. It was one manifestation of the seriousness of the crisis
at that stage.
Since then, however, the capitalists, first through
neo-liberalism, which began in the 1970s, then through the favourable
position created for them by the collapse of Stalinism – particularly
the liquidation of the planned economy and the ideological
counter-revolution which followed in its wake – have been able to
massively change the balance of forces in their favour. This has
resulted in wage repression in the US – where the average median wage
has not increased for 30 years and is now at the level of the 1950s –
and in Europe. Together with other factors, this has led to a colossal
bonanza for the bosses. Record profits – accompanied by a colossal
widening of the wealth gap – have been made.
Therefore this crisis is not primarily one of
‘profitability’, as John seems to imply. There are many and differing
factors that can lead to or be the immediate cause of a capitalist
crisis. The capitalists are presently swimming, literally drowning, in
profits. In our Socialism Today article we underestimated the amount of
unused capital, profits, stashed in the vaults of the big companies.
Latest figures show that £750 billion is ‘fallow’ – not being invested
by the capitalists – in Britain alone. It is a huge $2 trillion in the
US! The capitalists refuse to invest because there is no ‘profitable
outlet’. In this sense, it is a crisis of ‘profitability’. Not because
profits have dropped or there is a ‘tendency’ for the rate of profit
decline. Both the rate and the absolute amount of profit have increased,
it seems, even during this terrible crisis. This is one of the
manifestations of capitalist crisis Marx wrote about.
‘Unemployed’ capital exists alongside ‘unemployed’
workers. They seek to overcome this problem not through investment in
industry – which is closed off to them in Britain because of its
collapse – or in China or elsewhere, but by seeking to create new fields
of investment by looting the state through privatisation. It is this
fact that lies behind the irrational, ruinous policies to privatise the
NHS, the police, and the state sector as a whole.
This is the crazy ‘logic’ of modern capitalism.
Marxism alone is capable of analysing the processes of capitalism and
preparing a socialist future for the working class. |