Socialism Is Now the Only Answer
“The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and the purpose of production; that production is only production for capital and not vice versa, the means of production are not mere means for a constant expansion of the living process of the society of producers. The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperization of the great mass of producers can alone move — these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. The means — unconditional development of the productive forces of society — comes continually into conflict with the limited purpose, the self-expansion of the existing capital. The capitalist mode of production is, for this reason, an historical means of developing the material forces of production and creating an appropriate world-market and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production.” – Marx – Capital – Vol. 3 – Ch. XV sec. II
Introduction
The present economic crisis marks the end of the latest stage of the development of capitalism. The post-WWII period of development, now coming to an end, brought forth a large increase in the productivity of labor and drew wide masses of the world's people into advanced production. It saw the rise of electrification, telecommunication, containerization, computerization, and globalization.
The crisis is a product of the development of the productive forces crashing up against the superstructure of the old social relations. The social relations are unable to bring about a new stage of development of productive forces.
The fact that the financial and economic crisis arose in the most developed capitalist market and democratic state exposes the limitations of any proposed solutions that rely on the market in allocating capital…or “more democracy” in resolving social inequity. The market is incapable of allocating capital and mobilizing labor and capital to develop the productive forces to fulfill the next technological revolution. Socialism is, therefore, necessary for advancing to the next stage of economic development and production, which involves new materials (nanotechnology), resource saving and environmental restoration technologies, and the elimination of poverty.
Socialism is the only alternative to the volatility, fear, violence and war as a means of job creation, profit and economic growth characteristic of capitalism.
The largely bourgeoisified US workers must at least be dissatisfied with the fact that the natural functioning of the market has destroyed much of the capital they have managed to accumulate in what must seem like a few magic moments.
This crisis is not due to any unusual degree of greed, corruption, mendacity, or venality.
Increasingly, capital’s every attempt to maximize profit inhibits the maximizing of profit. Protection stifles capitalist reproduction by preserving outmoded forms of production and restricting market access. Military production and war simply destroy capital and labor. The application of new technologies to cut labor costs accelerates the falling rate of profit.
The bourgeois state stands in the way of the kind of qualitative growth required for further economic development. It diverts vast amounts of capital into the unproductive military industrial complex and the intelligence industrial complex. Its extremely violent character expresses and reinforces its weakness. We have seen the superstructure (nation-state political apparatus) lagging behind the base (economy). The problem is not insufficient democracy. The solution is not more democracy. The problem is that the democratic state preserves class divided society, and is thereby an obstacle to the smooth functioning of the economy and economic and social revolution.
The Market Cannot Move the Economy to the Next Stage of Development of the Productive Forces
The function of the market is to move capital to where it will result in the greatest return. This is the meaning of “maximum profit.”
In the post-WWII period the enormous growth of productive forces and attendant increase in the productivity of labor was able to mitigate, for a limited time and to a limited degree, the long-term tendency of the rate of profit to decline. Profit is based on surplus value, which is the portion of the products of labor that is not consumed by workers and the process of capital renewal. The rate of profit tends to decline as capitalism develops, because as labor becomes more productive production becomes more capital intensive. So the portion of variable capital diminishes relative to the constant capital. The variable capital being the malleable part, its diminution can only result in profit decline in proportion to the total of capitals.
The Great Depression ended and the next stage of capitalist development was launched not by the New Deal, but as a by-product of the Second World War, which destroyed the largest part of the world’s productive forces. This allowed the US to become the hegemon, because its productive forces were untouched and in fact had expanded greatly in the war. That degree of destruction of productive forces attendant to a new world war may, in the view of some bourgeois analysts, hold the potential to open a path for capitalism's revival. It should be clear, though, that capitalist social relations would likely not survive such a war.
Some argue that so-called “financialization” is an aberration in the smooth functioning of capitalism. But the functioning of capitalism is never smooth. The development of financial products is an organic part of the development of capitalism. Derivatives, collateralized debt obligations, mortgage backed securities, and credit default swaps are all means of mitigating or spreading risk (while being a factor of instability). These financial products also increase the velocity of capital circulation, making more capital readily available for “other investments” down the road.
The source of the so-called asset bubbles has been a shortage of labor of sufficient quality to match up with the enormous quantities of capital ($70 trillion) available worldwide. That capital had to find a mechanism for reproduction and expansion or disappear.
However, capital can preserve itself and even expand if it circulates as money or capital – that is, as financial products. Credit, in the shape of mortgages, auto loans or consumer credit, acts as an abstract form of money. It is set to work to facilitate the realization of value. This “selling of money” also provides the opportunity for capital to expand in lieu of finding labor of sufficient quality, in this way preserving capital until the appropriate labor becomes available.
If this “selling of money” should provide greater return, lower risk, or increased velocity (shorter timelines) more and more capital will flow into this arena.
The claim that the machinery of capitalism did not work is a fallacy. On the contrary, it worked perfectly. Capital flowed to where it would give greatest return in the shortest time. That is profit maximization.
The World Economy is Highly Integrated and Socialized
The objective course of the development of capitalism is the socialization of wealth.
The growth of the US economy has been entirely related to the rapid growth of the world economy in the last decades. The economic engines of the world economy are Socialist China, India, Brazil, and the Russian Federation.1 US growth is a byproduct of that international growth. There can be no national solution for an economy that is as globally integrated as the US economy has become.
The economy is highly socialized and consumption in the most developed countries is on a communist basis. That is, consumption at will (to each according to their “need”). It is consumer credit that facilitates this.
The governments of the developed capitalist countries have embarked on programs of state intervention in their economies – financial bailouts, fiscal stimuli and increased regulation. The idea that these semi-“socialist” steps will resolve the problem or are even a step toward actual socialist transformation exposes a woeful misapprehension of socialism and a lack of understanding of the present stage of development.
In fact the intensely socialized economy is crashing up against the extremely democratic (class divided) state superstructure. This is not temporary.
This crisis, even according to the most optimistic bourgeois analysts and financiers, will be with us for some time. This should give communists pause. Within a decade the US could be thoroughly socialist and brought into harmony with the economic base, therewith achieving harmonious integration of the world economic, social and political systems. Communists have an obligation and responsibility to seek this outcome and nothing less.
The Basic Economic Law of Socialism is Now Operative Worldwide
The content of this process is the contradiction between two contending economic laws: the basic economic law of capitalism (BELC) and the basic economic law of socialism (BELS).
In Economic Problems of Socialism, Stalin explained:
“The … basic economic law of modern capitalism [BELC] might be formulated roughly in this way: the securing of the maximum capitalist profit through the exploitation, ruin and impoverishment of the majority of the population of the given country, through the enslavement and systematic robbery of the peoples of other countries, especially backward countries, and, lastly, through wars and militarization of the national economy, which are utilized for the obtaining of the highest profits.
…
“ The … basic economic law of socialism [BELS] might be formulated roughly in this way: the securing of the maximum satisfaction of the constantly rising material and cultural requirements of the whole of society through the continuous expansion and perfection of socialist production on the basis of higher techniques.”
Simply put, the BELC is maximization of profit, while the BELS is maximum satisfaction of the material and cultural requirements of all.
These two laws are not in equilibrium, and while they may co-exist for an extended period without necessarily leading to war or requiring resolution through the use of force, contention between the BELS and BELC is the main feature. Since the BELS operates on a global basis, beyond the borders of Socialist states, these laws contend in all contemporary societies.
The socialist and socialist-oriented sectors of the world economy are much stronger now than they were seventy years ago, and are even that much more able to influence the course of events in the direction of proletarian power.
The need of the US and other developed economies to interact with the economy of Socialist China, which is now the productive engine of the world, requires reshaping of the former to conform to the basic economic law that is operative in China. This necessitates their subordination to the BELS.
Nouriel Roubini (Professor of Economics and International Business, Stern School of Business, New York University) who publishes economic analysis says; Russia and China will emerge from the crisis faster because they are essentially state (i.e. Socialist) economies.
We Are at a Moment When Economic Crisis Can Spill Over to Political Crisis.
The masses are losing confidence not just in particular political parties or individuals, but in the whole apparatus of political rule that is the capitalist state.
The revolutionization of the productive forces has laid the material basis for communism by creating abundance, or, at least, the productive capacity for immediate abundance. This economy of advanced production has created a much more materially and culturally developed proletariat, which in turn is now capable of running society.
The US working class must take ownership of this crisis. It may not have been primarily of our making, but it is ours to solve. The bailout, even the 2nd one, and directed stimulus won’t do it.
US workers need to show our maturity and take solutions ourselves. We cannot rely on either the current set of elected officials and their challengers or the captains of industry and finance to solve the problem. They are looking only for short-term political gain or guarantees of their profits.
Rather than the citizens underwriting bad debts and other poor assets, we should take all the assets, dispose of those that are unproductive and utilize the remaining capital to revolutionize the forces of production. This is fiscal prudence, not a radical thing.
The argument for the bailout is that each of our lives depends on the functioning of the financial system, i.e. our social well-being is inter-connected through the market and credit is the lubricant of its harmonious operation. We can see the empirical validity of this claim. But it does not justify our underwriting bad debt or preserving bankrupt capitalist enterprises.
In the present crisis, one step toward proletarian power would be to demand seizing all the assets, not just bad debts. Warren Buffet put $5 billion into Goldman Sachs for warrants for 10% of total shares and 10% annual return assured on the investment. This means a total return of original investment in just 10 years! We – the US working class – should be demanding an ownership position at least as advantageous. This (proletarian control) would allow for the efficient allocation of the vastly greater quantities of capital that are required to move the economy to the next stage of development of the productive forces. This would mean not a quantitative increase of production, but rather, a qualitative change in the productive forces overall – a fundamental change in the quality of labor power and means of production.
Citigroup – on the day of the second of its two bailouts (capital infusion of $20 + 25 billion) had a total market cap of approximately $20 billion. We could have owned it outright. Instead, we got preferred shares, which are non-voting, with warrants that would eventually convert to 8 – 10% of the company. We are also underwriting $300 billion of the company’s debt. This is bad business. It is fiscally irresponsible. It would be better to seize the assets of the company; the market has demonstrated that Citigroup should not exit.
The same is true of the “strategic industry,” auto. The free market has determined that these companies have failed. If they have assets of value they should be taken and used to advance society. The demand to seize all the assets is consistent with current US legal precedent. Eminent domain law suggests that property not being utilized to its most productive end should be seized and turned to the betterment of society. Those that fail to utilize their assets fully forfeit the right to own them.
Socialism is on the Agenda.
Some politicians say we need more oversight, some say we need democracy, or more democracy or local control or democratic control. All of these are ruses. There is no lack of democracy in the USA. It is democratic capitalism that got us into this crisis. Democratic-capitalism demanded the $700 billion bailout. And, finally after more democratic input, Congress and the President democratically arrived at an $850 billion bailout, while the overwhelming majority of the population was opposed.
Democracy is not the power of the people… Socialism is!
Socialism is the people mobilized to take responsibility for their own lives and each other… and, being accountable for themselves and each other.
If we want the full fruits of what we’ve created, we must be responsible and accountable and not blame others – other countries, or people in some way different from ourselves, for our problems or deficiencies.
We have the ability and opportunity to set things right. We are on the hook for $850 billion. We must take ownership of these assets, they are ours! We have paid for them already. In fact we have paid higher than market price for them.
In addition, it has been revealed that the Federal Reserve has moved more than 3 trillion dollars into the financial system, again with no ownership benefit for us.
The assets are there to be taken. The only reasonable, prudent, moderate demand can be
Seize the assets! We have already paid for them! All else is simply transferring wealth from the masses, including productive elements of capital, to the most parasitic, unproductive sectors of capital (and the workers that are their hangers on).
State intervention in economic life is on the order of the day. The only question is on whose behalf? Will it be “socialism” that guarantees the profits of capitalism - bourgeois socialism, or…Socialism that maximizes the material and cultural requirements of all - Socialism of the dictatorship of the proletariat, of harmonious social development?
Appendix
We provide some excerpts below from Marx’s Capital Volume 3, and Engels’ Anti-Duhring, which informed our analysis and were helpful in preparation of this document.
From Marx:
The creation of this surplus-value makes up the direct process of production, which, as we have said, has no other limits but those mentioned above. As soon as all the surplus-labour it was possible to squeeze out has been embodied in commodities, surplus-value has been produced. But this production of surplus-value completes but the first act of the capitalist process of production — the direct production process. Capital has absorbed so and so much unpaid labour. With the development of the process, which expresses itself in a drop in the rate of profit, the mass of surplus-value thus produced swells to immense dimensions. Now comes the second act of the process. The entire mass of commodities, i.e. , the total product, including the portion which replaces the constant and variable capital, and that representing surplus-value, must be sold. If this is not done, or done only in part, or only at prices below the prices of production, the labourer has been indeed exploited, but his exploitation is not realised as such for the capitalist, and this can be bound up with a total or partial failure to realise the surplus-value pressed out of him, indeed even with the partial or total loss of the capital. The conditions of direct exploitation, and those of realising it, are not identical. They diverge not only in place and time, but also logically. The first are only limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society. But this last-named is not determined either by the absolute productive power, or by the absolute consumer power, but by the consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce surplus-value on an extended scale. This is law for capitalist production, imposed by incessant revolutions in the methods of production themselves, by the depreciation of existing capital always bound up with them, by the general competitive struggle and the need to improve production and expand its scale merely as a means of self-preservation and under penalty of ruin. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law working independently of the producer, and become ever more uncontrollable. This internal contradiction seeks to resolve itself through expansion of the outlying field of production. But the more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest. It is no contradiction at all on this self-contradictory basis that there should be an excess of capital simultaneously with a growing surplus of population. For while a combination of these two would, indeed, increase the mass of produced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplus-value is produced and those under which it is realised.
– Marx – Capital – Vol. 3 – Ch. XV sec. I (highlighting added by ComCen)
Alongside the fall in the rate of profit, mass of capitals grows, and hand in hand with this there occurs a depreciation of existing capitals which checks the fall and gives an accelerating motion to the accumulation of capital-values.
Alongside the development of productivity there develops a higher composition of capital, i.e., the relative decrease of the ratio of variable to constant capital.
These different influences may at one time operate predominantly side by side in space, and at another succeed each other in time. From time to time the conflict of antagonistic agencies finds vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions. They are violent eruptions which for a time restore the disturbed equilibrium.
The contradiction, to put it in a very general way, consists in that the capitalist mode of production involves a tendency towards absolute development of the productive forces, regardless of the value and surplus-value it contains, and regardless of the social conditions under which capitalist production takes place; while, on the other hand, its aim is to preserve the value of the existing capital and promote its self-expansion to the highest limit (i.e., to promote an ever more rapid growth of this value). The specific feature about it is that it uses the existing value of capital as a means of increasing this value to the utmost. The methods by which it accomplishes this include the fall of the rate of profit, depreciation of existing capital, and development of the productive forces of labour at the expense of already created productive forces.
The periodical depreciation of existing capital — one of the means immanent in capitalist production to check the fall of the rate of profit and hasten accumulation of capital — value through formation of new capital — disturbs the given conditions, within which the process of circulation and reproduction of capital takes place, and is therefore accompanied by sudden stoppages and crises in the production process.
The decrease of variable in relation to constant capital, which goes hand in hand with the development of the productive forces, stimulates the growth of the labouring population, while continually creating an artificial over-population. The accumulation of capital in terms of value is slowed down by the falling rate of profit; to hasten still more the accumulation of use-values, while this, in its turn, adds new momentum to accumulation in terms of value.
Capitalist production seeks continually to overcome these immanent barriers, but overcomes them only by means, which again place these barriers in its way and on a more formidable scale.
Marx Capital Vol. 3 Ch. XV sec. II
A drop in the rate of profit is attended by a rise in the minimum capital required by an individual capitalist for the productive employment of labour; required both for its exploitation generally, and for making the consumed labour-time suffice as the labour-time necessary for the production of the commodities, so that it does not exceed the average social labour-time required for the production of the commodities. Concentration increases simultaneously, because beyond certain limits a large capital with a small rate of profit accumulates faster than a small capital with a large rate of profit. At a certain high point this increasing concentration in its turn causes a new fall in the rate of profit. The mass of small dispersed capitals is thereby driven along the adventurous road of speculation, credit frauds, stock swindles, and crises. The so-called plethora of capital always applies essentially to a plethora of the capital for which the fall in the rate of profit is not compensated through the mass of profit — this is always true of newly developing fresh offshoots of capital — or to a plethora which places capitals incapable of action on their own at the disposal of the managers of large enterprises in the form of credit. This plethora of capital arises from the same causes as those which call forth relative over-population, and is, therefore, a phenomenon supplementing the latter, although they stand at opposite poles — unemployed capital at one pole, and unemployed worker population at the other.
Over-production of capital, not of individual commodities — although over-production of capital always includes over-production of commodities — is therefore simply over-accumulation of capital. To appreciate what this over-accumulation is (its closer analysis follows later), one need only assume it to be absolute. When would over-production of capital be absolute? Overproduction which would affect not just one or another, or a few important spheres of production, but would be absolute in its full scope, hence would extend to all fields of production?
There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production=0.
****
Marx Capital Vol. 3 Ch. XV sec. III
Frederick Engels’
Socialism: Utopian and Scientific/ (part of his Anti-Dühring),
is a description of the crisis of capitalism that seems uncannily
appropriate to today.
Commerce is at a standstill, the
markets are glutted, products accumulate, as multitudinous as they
are unsaleable, hard cash disappears, credit vanishes, factories are
closed, the mass of the workers are in want of the means of
subsistence, because they have produced too much of the means of
subsistence; bankruptcy follows upon bankruptcy, execution upon
execution. The stagnation lasts for years; productive forces and
products are wasted and destroyed wholesale, until the accumulated
mass of commodities finally filter off, more or less depreciated in
value, until production and exchange gradually begin to move again.
Little by little the pace quickens. It becomes a trot. The industrial
trot breaks into a canter, the canter in turn grows into the headlong
gallop of a perfect steeplechase of industry, commercial credit and
speculation, which finally, after breakneck leaps, ends where it
began--in the ditch of a crisis. And so on over and over again. We
have now, since the year 1825, gone through this five times, and at
the present moment (1877) we are going through it for the sixth
time.... The fact that the socialised organisation of production
within the factory has developed so far that it has become
incompatible with the anarchy of production in society, which exists
side by side with and dominates it, is brought home to the
capitalists themselves by the violent concentration of capital that
occurs during crises, through the ruin of many large, and a still
greater number of small, capitalists. The whole mechanism of the
capitalist mode of production breaks down under the pressure of the
productive forces, its own creations. It is no longer able to turn
all this mass of means of production into capital. They lie fallow,
and for that very reason the industrial reserve army must also lie
fallow. Means of production, means of subsistence, available
labourers, all the elements of production and of general wealth, are
present in abundance. But "abundance becomes the source of
distress and want" (Fourier), because it is the very thing that
prevents the transformation of the means of production and
subsistence into capital. For in capitalistic society the means of
production can only function when they have undergone a preliminary
transformation into capital, into the means of exploiting human
labour power.
Frederick Engels, Socialism: Utopian and Scientific, - New York: International Publishers, 1935, pages 64-65.
1In the Russian Federative Republic, economic power rests on the socialist foundation of the Soviet Union.