The Economic Realities of U.S. Capitalism Laid Bare, and Our Tasks in the Present Period

Brad Forrest

Brad Forrest

The two fundamental problems that have to be solved in our time are the problems of private property and the nation state.

Although recessions occurred from time to time, the era from 1871, the fall of the Paris Commune, through 1914 was in general an organic upswing of capitalism in which there was an approximation to the idea of free competition. The First World War erupted in August 1914 and lasted until November 1918.

The First World War signaled that capitalism had reached its peak, a peak in which our productive capacity, the capacity to produce and exchange, had expanded beyond the territory of each country, penetrating into every corner of the globe. This meant exacerbating tensions among nation states as they struggled with one another over the possession of colonies and markets. The constant jostling with other countries for markets and raw materials at some time necessitates war. This is the true content of war in the modern period in which we live. This is different from other imperialist periods, because the turn of the century saw the emergence of Monopoly Capitalism. Big business uses the state as a direct tool of foreign policy.

The Great Depression of 1929-1939 was the definitive signal that the economic system of capitalism had veered into a blind alley. The Great Depression showed us that our capacity to produce commodities had outstripped our ability to consume them. To prop up economies, the home market for each imperialist nation was protected by gigantic tariff barriers completely reversing the long-term trend toward globalization that had taken place since capitalism’s inception. Globalization is not set in stone as some of the more optimistic commentators assume today.

Why must this necessarily be so? Capitalism is a system of exploitation. Most of us sell our ability to work to a boss in order to earn a wage to pay for the maintenance of our families. While we’re at work we produce value for our bosses. Initially we are repaying the boss for our wages, but then at a certain point in the day we accomplish this and begin producing value for which we have not been paid. For the rest of the day we supply unpaid labor. Karl Marx has analyzed this process in depth in his book, Capital. The product of this unpaid labor is called “surplus value,” which is roughly equivalent to profit. The bosses collect all of this surplus value, spend a little on themselves, and put the rest back to work buying raw materials and labor power from people.

This is extremely important to us, not just because we provide unpaid labor, but because the FACT that we don’t get back all of the value that we produce means we are unable to buy back all of the products that are sold on the market. This bland economic fact means that it is an absolute given that capitalists will “overproduce.”

Overproduction is the fundamental reason for the economic cycle in which the economy grows, surpasses the market, prices have to fall, profits shrink, layoffs take place, and we have a most distressing phenomenon of economic stagnation.

The split into modern classes, working class and capitalists and competition in a “market” economy will always bring about overproduction and economic crises.

Most economists believe in one of two options for solving the problem of economic crises. First come theKeynesians who believe that state spending and the use of our tax money will fill the hole in our spending. If we can’t spend, then we should get the state to spend for us or give us the money through such programs as unemployment insurance, welfare, and so on, so we can spend the money. Next are the “neoliberals” who believe that cutting taxes, and allowing wages and prices to drop to the “selling point” will cure the economic ills. State spending they say is wrong because taxes come from one of two areas, capitalist profit, or working class wages. If you dig in to either one of these two sources, you make the economic problems worse. If profits are squeezed, capitalists stop investing. If our wages are taxed, then we have even less to spend than we did before.

Right wing economists who declare that taxes must be cut, and that wages have to drop are at least closer to the mark, and more honest. By restoring profitability, it is claimed, jobs will be restored and the demand for labor will cause a rise in wages. Wages, in fact, will not rise unless they are forced up by workers acting in a union, or a serious outflow of the labor pool. We all know that “Trickle Down” economics does not work from the disaster of the Reagan years. The fairy tales of the rightwing never come true, and they won’t come true. Capitalism is by definition a system of exploitation. Capitalism can only be made to work better if you grease the wheels of exploitation by increasing profits. Profits can be increased by lowering wages and cutting taxes. Whether or not there is a market for the things they produce is another story!

After World War II, the second attempt to redistribute colonies among the capitalist powers, the bosses attempted to create some order out of the anarchy by creating the International Monetary Fund and the World Bank in 1944. These institutions attempted to coordinate efforts between the competing economies of the world so as to lessen the amplitude of the, now frequent, economic shocks. These institutions are completely dominated by the most powerful economic actors who use them as tools to exploit weak countries. Since World War II the Great Powers have been exploiting the “Third World” through the mechanism of these institutions, and completely normal trade patterns. The Great Powers Produce Cheaper!

The years 1945 to 1973 were another huge economic boom for international capitalism. The Baby Boomers remember these as the Golden Years, because the destruction of World War II created a decent market for production to attain a relatively impressive growth rate. But ever since the Oil Crisis of 1973, growth rates for the economy have been relatively low, because of the same mechanisms outlined earlier. We believe the growth rates of the post-World War II years will never be reached again, as long as capitalism survives. The current shenanigans on the financial markets that are routinely conducted by Wall Street is a recognition of the fact the profits are not to be made producing things. Individual investors are not aware of these pressures, but Marxists are. Nowadays it’s simply a case of robbing each other of their shares and dividends on the stock market through activities like Collateralized Debt Obligations, Asset Backed Securities, and “short selling.”

We live in an era known by Socialists as the “decay of capitalism” because, fundamentally, the change from one economic system to another takes place because the economic system ceases to be productive. Turn to any source of economic news, and you will be able to see that production, for the most part, is passé and economic stagnation is the new watchword. Although there is no final breakdown of capitalism, it has to be consciously overthrown by the people suffering under it. Can Barack Obama’s Keynesianism save the system this time around? We think not. Our task is to create a political party capable of generalizing the working class’s highest aspirations, socializing the means of production, producing for human needs, not for profits, and replacing the nation state with the creation of a world socialist federation!