10.07.2002

Crisis of capital, not policies

When the president of the United States finds it necessary to go to the New York stock exchange and reassure the world that the capitalist system is not in crisis, we know that something is seriously wrong. Maurice Bernal writes

As Bush put it, at a press conference on the eve of his address to the nation, "I'm worried about a country that could lose confidence in the free enterprise system. I understand how tender the system can be"� (The Times July 9). Typically, Dubya's speech was long on rhetoric but short on substance. Just as we predicted, the spate of US corporate scandals that has rocked world markets is being attributed to a "lapse of ethics"� on the part of a few bad apples like Ken Lay (Enron) an old buddy of Bush, and Bernie Ebbers (WorldCom), to name but the two most prominent scapegoats (Weekly Worker July 4). The soothing message is: "It is not the system that has failed, but a few people who have failed the system."� Acknowledging the flagrant "excesses"� of corporate America in the last few years, the president assures us that in future errant executives will find themselves in jail for 'accounting irregularities': ie, cooking the books - previously, the worst that they could expect would have been a derisory fine. It is now, we are told, basically up to companies themselves to usher in a new era of "integrity"� and "transparency"�. Executives will have to swear an oath to the effect that "to the best of their knowledge"� their balance sheets are accurate (a loophole that will have the big law firms positively slavering). Small wonder that markets were hardly impressed by this feeble White House 'crackdown'. The president's sermon was in any event irredeemably flawed by recent revelations concerning his own dealings and those of people close to him at the top of the administration. It turns out that back in 1990, when Dubya was a director of Harken Energy Corp, he just happened to dump some $800,000 dollars worth of the company's stock two months prior to a results announcement that saw the shares fall by 20%. Insider dealing, or what? The securities and exchange commission apparently launched an investigation, found that he had clearly broken the law, but dropped the case. After all, Dubya was the son of the president, goddamit. When challenged recently about the matter, Bush simply lied. But it transpires from a press notice quietly released by the White House that this business whizz kid (the first MBA ever to occupy the oval office) somehow took eight months to notify the authorities about his dealings. Now, more than a decade after this shady little transaction (no doubt one of many), he tells us: "I still haven't figured it out completely."� Incredible - in every sense of the word. Likewise, Bush's running mate and now vice-president Dick Cheney is under active investigation for "accounting irregularities"� at the oil services company, Halliburton, in 1998 and is facing fresh lawsuits for misfeasance. For good measure, the army secretary, Tom White, a Bush appointee, is also under investigation on account of his Enron connections. He worked for the company for more than a decade and is suspected of being a key conduit of information between Enron and the White House in the period immediately prior to the company's collapse. Finally, there is defence secretary Don Rumsfeld, who (so far as we know) is not under investigation at all. But it is interesting to note that, in order to comply with so-called 'ethics in government' rules, he had to sell $91 million worth of shares upon taking office, and still bitterly complains about how much it cost him in accountancy fees. As the Russian proverb has it, the fish rots from the head down, and it is here, at the head of a Republican administration whose election campaign received more business dollars than any in the history of the USA that we find the pious guardians of 'integrity', not to mention the most doughty defenders of freedom, democracy and the American way of life. On the markets, life has been surreal since the WorldCom debacle. The initial drastic falls have to some extent been recouped, but rallies have been ultimately unconvincing, largely the result of short covering in a classic bear squeeze. Good news from the real economy is ignored, while the slightest hint of a fresh scandal sparks off fresh waves of selling and the short-term trend is decidedly on the down side. This is the stuff not just of a bear market but of a potential crash. WorldCom is not in any sense the cause of the present crisis, but merely one of the symptoms. What we are seeing is a complex combination of factors: an aftershock from the bursting of the dot-com bubble - a genuine case of speculative madness - together with the reckless overinvestment in telecoms and related infrastructure, and the merger mania that characterised the turn of the century. Merck and Co, the huge pharmaceuticals blue chip and Dow Jones Index component, announced almost as an aside the other day that it has systematically overstated its revenues over recent years to the tune of up to $14 billion. Not even the experts can agree as to whether this was a crime or just another piece of creative accounting. Whoever said that accountancy was a dull profession? While investors wait for the next revelation, we have the bizarre situation in which company after company is giving press conferences or issuing statements to the effect that its balance sheets are clean - honestly, you can trust us. Collapse Trust is, of course, at the heart of the matter. Speculation is one thing, but with an eye on their own legal liabilities in terms of fiduciary duty, the big institutions, investment houses, insurance companies and pension funds, who own the bulk of shares, are frankly scared. When the likes of Xerox and Merck turn out effectively to be fraudsters, who the hell can you trust? The word 'crisis' is certainly not out of place in these circumstances. The question is how do we, as Marxists and revolutionary socialists, try to put this situation into perspective and analyse it? What does a capitalist crisis actually mean? We can be sure that in certain sections of the left, the habitual catastrophists will be dusting off their doomsday scenarios and eagerly anticipating the 'final' and 'inevitable' apocalyptic cataclysm that will, like a deus ex machina, bring about not just the collapse of the whole edifice of capitalism but somehow lead to the development of socialist consciousness and spontaneously inaugurate a glorious socialist future. The theoretical poverty of this mechanical approach, not to mention its historical myopia and its rotten political passivity, are self-evident. It has more to do with a sort of religious conviction than with any sober theory. In their calculations, there is evidently no place at all for the class struggle, the self-activity and self-emancipation of the working class. Under the weight of its inherent contradictions (to which the catastrophists give a constant but pitifully superficial theoretical genuflection) capitalism will explode (or implode - choose your own metaphor). Leaving aside some writings in the period up to 1857, when Marx and Engels themselves were enthused by the apparent possibility that commercial crises could by themselves create the preconditions for a revolutionary uprising of the proletariat, the catastrophists have not a theoretical peg on which to hang their faith in crisis in and of itself moving the working class in the direction of revolutionary socialism. At the other end of the spectrum we have those who would bemoan the crisis and its inevitable consequences on the lives and livelihoods of the working class as essentially a failure of 'policy' on the part of our capitalist rulers. Take the editorial in the latest issue of Socialist Review (presumably written by editor, comrade Lindsey German). Quite correctly, the comrade draws attention to the appalling state of social provision under the Blair government as a failure of the market system; quite correctly, she points to the unsustainable rise in property values as a source of much future pain for many thousands of people, who, if they ever pay off their mortgages and live long enough, will find themselves eking out a meagre existence on a paltry pension. All true. But to what does the learned editor, with decades of Marxist study and political activity behind her, actually attribute the crisis? "Deliberate policies have led us to this mess,"� she says. Privatisation, first under Thatcher and then under Blair, means that "the most basic aspects of our lives ... are subject to the whim of the market"� and "the current problems are a damning indictment of the market economy"� (July-August). Well, yes. But the implication of her remarks is that other policies might have resulted in a different, more tolerable outcome for the working class, for, the comrade tells us, "There is an alternative to the madness we face at the moment."� And what is that alternative? Does it, for example, rest on the obvious Marxist conclusion that it is the capitalist system itself which, so long as it exists, will inevitably engender all the oppression and alienation under which we suffer; that only the revolutionary overthrow of existing conditions by the working class can lead to the emancipation of humanity as a whole from this quagmire? Well, no. Comrade German's panacea involves merely a massive increase in public spending on the social services and a "switch"� in priorities "from private to public provision"�. Renationalisation is not posited, but is implicit. We are told that "it is up to all of those who are currently feeling the brunt of the market madness and who are angry with New Labour's complicity to force them to do otherwise"�. And how, precisely? The Socialist Alliance, does not get a mention, nor does the necessity of revolutionaries fighting for extreme democracy under capitalism. Presumably though, if Blair and his entire cabinet fell under a bus and the Labour Party underwent a Damascene conversion to state ownership, punitive taxes on the rich, and a radical redistribution of wealth, then we would be back to auto-Labourism? I prefer the analysis offered by another SWP comrade, Rob Hoveman, in an excellently informative and instructive article entitled 'Financial crises and the real economy', in which he writes: "The attempt by left reformists to isolate the city [for which, I take it, we can read 'the market' - MB] as the primary cause of Britain's economic problems poses a false dichotomy. The bosses are driven as a whole by the pursuit of profit wherever they can derive it from and it is the anarchy of competition in the pursuit of profit that afflicts the working class"� (International Socialism March 1998). At least here we have an honest whiff of the truth, that is not the 'policies' of this or that government, but the capitalist system itself which is to blame. By contrast, comrade German's approach sits comfortably with the long line of supposedly Marxist theory from Bernstein onwards which tells us that capitalism is reformable. New economy The intrinsic irrationalities of the capitalist system - rooted in the fundamental categorical contradiction between use value and exchange value - mean that crisis, in terms of an almost perpetual tension and disequilibrium, is not so much an event but a perennial precondition of the system. For all his typically academic sniffiness and condescension when it comes to the messy world of real politics, Simon Clarke was right to point out in his book Marx's theory of crisis, that the notion of crisis is central to Marx's political economy. Certainly, compared with the events of the last decade, the current situation is a qualitative departure. In the Asian crisis of 1997-98, for example, and during the period of acute instability in world markets caused by Russia's debt default in 1998, the US economy was still basking in a dream scenario of steady growth and low inflation. True, many billions of dollars of finance capital - much of it chasing speculative gains through manipulation of currencies and derivatives - were wiped out, but the relative stability of the majority of metropolitan economies meant that most of the real pain was confined to the periphery. Against this background, the paradigm of the 'new economy', in which the business cycle had effectively been banished and recession was something to read about in history books, became orthodox ideology. This hubris was, no doubt, in part a reflection of the demise of the USSR and the apparent victory of 'democracy' - portrayed, absurdly, by the likes of Fukuyama as signifying the 'end of history'. Now the situation is radically different. Despite the fact that the federal funds rate has been ratcheted down to just 1.75%, economic growth in the US is faltering. Not since 1982, when the US was afflicted by its worst recession since the 1929 slump, have interest rates fallen so quickly in so little time. Company profits in nearly every sector are flat and business investment in new means of production is around historical lows, whereas corporate and individual indebtedness are at historically high levels. Judging by the revised figures, it turns out that both the productivity gains and the rising profits that characterised the so-called boom years of the 'new economy' - gains that led many enterprises to overinvest by acquiring cheap capital on the basis of ramped up stock valuations, and led to such phenomena as the mania for dot-com shares and tech stocks in general - were somewhat overstated. By historical standards, the revised growth rate of around 2.5% in the second half of the decade was healthy enough, but not sufficient to justify the 'new economy' euphoria, which saw in the information technology revolution an epochal source of almost inexhaustible profit. That bubble has now definitively burst, and the worldwide collapse in asset values and profits of companies producing semi-conductors, computers and telecoms equipment - with all their related infrastructures - is spreading the contagion to broader sectors of the economy. The general surplus of both commodities, resulting from growing inventories of unsold goods, and capital, caused by the lack of investment outlets brought about by contracting industrial investment in new means of production, holds within it the possibility of great volatility and a deflationary spiral. Rather than seeing crisis as a specific empirical historical event, we would argue that it is intrinsic to and inherent in a system whose fundamental contradiction is between use value and exchange value, between production to satisfy human need and production of commodities, of values. It is in the relentless drive of capitalism to develop the means of production (and hence the source of surplus value) beyond limit that the ultimate source of crisis is to be found. In this sense, therefore, crisis is not an event but an intrinsic, perennial condition. To theorise and fully to understand this process is clearly a vital task, but theory by itself is not enough. As communists we must primarily be concerned with transforming theory into practice, equipping ourselves and the working class with the tools necessary to break the chains of a contradictory and irrational system that alienates us from one another and prevents us fulfilling our potential as human and social beings. Foremost among those tools must be a revolutionary programme and a revolutionary party. Only thus can we transform the capitalists' crisis into a means of our own self-liberation.