Structural crisis of capitalism(2)

It was discussed in the part one, that capitalism crisis of 2008, which manifested as a financial crisis was not a repetition of the earlier periods of boom and bust. Rather, It was emerged as the structural crisis and thenceforth world capitalism entered into an era that encountering continuous difficulty to produce surplus value- the fundamental characteristic of capitalism. Never before in the history of capitalism, the fictitious capital dominated the process of capitalist production as it has , at the expense of manufacturing capital, effected since 1980s. I will discuss it below. Though, the impact of capitalism crisis of 2008 on china was almost overlooked, in fact, it had brought bearing upon the China`s capitalism too. As the China`s export to the crisis-ridden countries dramatically dropped, so  to stave off the effect of crisis, by way of adopting Keynes Doctrine china pumped several trillions of dollars to the provincial governors for developing various infrastructural projects. They built many new cities- some, each within a fortnight, the amount of cement was used on the construction of infrastructural projects, between 2011 and 2013, was equivalent to 6, 615 million tons, against 4,405 million tons, that US had used in the span of one hundred years, from 1900 to 1999. Thus, china   managed to harnessing the shock of massive factory closures, which threatened to plunge tens of millions of workers to the abyss of unemployment.  Apparently, the policy worked and china maintained its 10% GDP, whilst major economies, including US, Japan and a host of European economies had been submerged into the quick mire of crisis(1). The economy of Brics countries of Brazil, Russia, India, China and South Africa- the latter was later welcomed into the club-, and particularly china, were hailed as the engine of the world economy which cushioned the severity of 2008 crisis. But, the lot of Brics countries have now been dramatically changed, and each country is struggling in various degrees against the effects of capitalism crisis.

China`s government intervention, i.e. its application of Keynesian nostrum, did impart  only ephemeral benefit, and then the GDP set to slide down. Because, the capital was spent to developing infrastructure projects failed to stimulate manufacturing sector at the same time. In other words, If Keynesian Doctrine was going to work for a durable time, it requited in addition to generating job opportunity, had to work as medium to propel manufacturing sector to produce surplus value. But, It did not. Neither domestic market expanded nor export did pick up, and leaving aside the expansion of transportation system , etc, a big portion of the newly built cities were left empty ghost cities; and at the same time the project slammed $ 3trillion dollars debts on the lap of the central government(2). To keep up appearances, The National People`s Congress of China ,on 2013, contrived a novel economic terminology of   ̏New norm ̋ as the GDP climbed down from 10% to 7.4%. And, to guarantee sustaining 7.4% rate of growth or maintaining the ‘New norm’, the fulcrum of the congress was the launching of economic reforms, or rationalisation of economy. As such, the congress adopted a raft of resolutions, including  implementing  unremitting   measures to reduce the rate of pollution, restructuring loss making factories and speeding up the process of privatisation of state-owned factories, expanding service industry, relaxing financial sector regulations, moving from the intensive labour based manufacturing sector towards the  less intesive labour and more value added commodities, through introducing more high Tec technology, so on and so forth.

However, The execution of the intended reforms, in the middle of world crisis and declining demands for commodities, not to mention the timeline of carrying out the reforms , seemed a mammoth task. Taking the china`s painful problem of pollution- though thousands of notoriously pollution making factories were closed down-, however as recent as ,on 03/09/2015, two years after the convening of the National People`s congress, on the 70 anniversary of the China`s victory over Japan, thanks to taking an extraordinary measures the government managed to conduct a military parading on a clear skies of the Peking. Considering that the state owns a big part of both the manufacturing and financial sectors, which are run by the party oligarchy, their restructuring do not omen as if an easygoing challenge. Further, shifting from the producing cheap commodities aimed at exporting to foreign countries and introducing high Tec industries ,instead, is bound to training well skilled workforce which would earning better purchasing power in order to boosting domestic market, or elevating consumerism, seems a more innocent dreams than to make it a reality in the current conjuncture. Because, on the one hand, raising the technology will go with it the reduction of the workforce and thereby increasing the rate of unemployment. On the other hand, china`s economy has in general been geared on cheap labour, it meant that it  had built to great extent at unskilled and low-skilled labours. In brief, china`s economy has been dominated on the copying culture of foreign designs rather than based on its own inventing drive(3). Asregards the relaxation of the financial regulations, the story was quite different. The loosening of the regulations of the financial sector created a fantastic speculation, gambling, opportunity at stock market, so much so that, despite the GDP slipped down to 7.%, by contrast, at 1 January 2015 the composite stock markets of the Shanghai and Shenzhen were respectively jumped up to 60% and 120%. Then, Black Monday of 24/08/2015 descended and china`s bubble burst and the whole world markets plunged into turmoil. China's government intervened and government injected 0.5 $ trillion into the stock markets to nullify the effect of bubble burst, but to no avail.

China accounts for the second highest GDP in the world and simultaneously ranks the world`s prime manufacturing centre, it has overtaken US. Thus, both the growth of the capital and the latters` depression would foster international ramifications, e.g. the economic ramification of the reduction of the iron ore import from Australia, damaged the economy of the latter, etc. China`s lightening development, in the course of past three decades, has been built on the brutal exploitation of the working class(4), reminiscent to the prevailing conditions of the working class of nineteenth century of Victorian UK. When the china embarked on its naked capitalist mode of production, at the beginning of 1980s, China`s organic composition of capital was quite low, and as the result, it furnished the basis for a high rates of growth. Now, following three decades of relentless growth the organic composition of capital has grown on to such a high degree that, there is no escape to china from approaching to the precipice of capitalism crisis(5).Marx gives an enlightening example, i.e., the growth of capital from 100 units to 200 units does not meet any problem. However, china`s three decades of ruthless expansion/capital accummulation has now produced a GDP of equivalent to 7$ trillion, can it rap up GDP to 14$ trillion- even supposing that the world capitalism is not passing through crisis? And, there are, indeed, capitalist economists, who are shutting their eyes to Marx`s Critique of Political Economy of Capitalism and believing that china not only can get there,but will reach to US per capita in the course of  certain decades.    According to the IMF`s recent report, china will fail to meet its target of 7% GDP growth, this year. Ironically, some economists even argue that china`s actual growth is now corresponding to less than 5% GDP(6).

China`s black Monday , 24/8/2015, was the first phase of the storm of the bubble burst, and there comes in the near future a further and much devastating power of bubble burst.

Fictitious Capital

Marx discussed on the capital V3 that, at the initial stage of the emergence of credit, banking or financial system, it played to accelerate the realisation of the process of capital accumulation. In doing so, a portion of  the surplus value of manufacturing capitalist, in the form of income, accrued to the financial sector. That meant that, all in all, the nascent credit system or financial sector was dependent on the fortune of the manufacturing capitalist- the pillar of capitalism process of production. However, as the capital of the financial sector augmented, in the pursuit of higher rate of income, the latter expanded its fields of operation beyond the domain of commodity production(7), in the form of speculation, gambling, practice. Marx coined the latter as the fictitious capital, in contrast to the real capital, material production, i.e., commodity production. Though, the nature of fictitious capital, as defined by the Marx, had not been evolved since then, however, the scope of operation and particularly the magnitude of fictitious capital is now mind boggling. Fictitious capital now seeks to make big killings, A) it gambles, speculate, on stock markets, thanks to the flush of QE- quantitative easing, money printed by the state-, on the one hand, and the near to zero interest rate of the central bank, on the other. B) speculating on bonds, at pricing of  various commodities. C) a segment of fictitious capital, as hot money, short term loans, travelling around the globe, targeting emerging economies. D) It aims at the development of big construction projects, housing, malls, huge leisure projects, etc. However, it does not desire to invest at the manufacturing sector, because the latter does not produce satisfactory income, if at all. Thus, a portion of fictitious capital, over $ 20 trillion are hoarded in the safe havens. Marx grasped the parasitic nature of the fictitious capitalism and remarked that the manufacturing sector should bring the fictitious capital under its control. Though Marx`s diagnosis has not been realised, yet. However, it merits to mention that in the wake of financial crash of 2008(8), at long last, some capitalist economists came to sense and admitting that the way out of crisis is bound to advancing at real economy- commodity production.

The hegemony of parasitically fictitious capitals can afford dictating their disastrous policies to the capitalist states and using them as cash cow in their service of speculation and gambling, which has been glaringly manifested since the outbreak of capitalism crisis of 2008. Further, today, the extent of parasitically financial sector`s supremacy has developed so massive that it set watershed to the operation of capitalism. Finally, fictitious capital feeds on the states` gargantuan debts, now accounts to $ 300 trillion.

Capitalism`s structural crisis

When one talks of structural crisis of capitalism, it is meant that the world capitalism no more possessing any credible alternative to the prevailing crisis. Leaving aside Exploiting probable apocalyptic Armageddon of nuclear war(9) and wholesale fascism, capitalism lacks any credible alternative to tackling the prevalent crisis. Up until the end of 1979, capitalism employed alternately Laissez-faire, liberal economy, and mixed, partial state intervention, to steer through capital crisis. Then, the much trumpeted new-liberalism as the only credible political economy for organising social production, in the course of past three decades has ended at impasse. Thus, since the outbreak of the capitalism crisis on 2008, too many economists, of course not claiming as followers of Marx, have virulently criticised New-Liberalism. Suffice, to name Thomas Piketty, an economist within the mainstream capitalist economists, rather than without it, has comprehensively criticised the political economy of capitalism. As such, what capitalist countries are doing now is just   displacing manifestations of crisis from one place to another. There is relentless currency wars- between main centres of capitalism-; for instance, Japan devalues Yen to boost its export, it hits European Union, US, China and etc. Governments print money and lower interest rates to almost 0.0%, it benefits parasitically financial sector, and at the same time manufacturing sector is starving from capital. It is claimed that, US is out of wood and enjoying a real economy growth of 2.5 to 2.7 %, and paradoxically the economy is going a through deflationary course; because, inflation is almost 0.0%. Janet Yale, the head of Federal Reserve, US Central Bank, had indicated she will raise the interest rate on September 2014, to boost real economy(10). However, she put it off to June 2015, and again postponed it. What is happening? The reality is that, zero% interest favours Wall Street, Stock Exchange sharks, and the US Federal Reserve is doing their bit. Thus, there is no parity between the so-called real economy growth and that of the high growth rate- inflation hike- of Stock markets. Further, we have to add that, with the mass of dollar availability and zero interest, it is flowing out of the US. If, the US Federal Reserve increases the interest rate, conversely dollar would drifted back to the US, and adversely affecting foreign countries, particularly emerging markets, Wall Street and housing bubble.

Everywhere, governments` debt is a revealing problem, which ratchet up rather than contracting. And, governments and consumers are resuscitated by the debt machine. Unemployment is a hallmark of capitalism`s reality, it wreaks havoc to the fabric of societies. For instance, In Spain and Greece; more than 25% of adults and 50% of youth are afflicted with the plight of unemployment. In countries, e.g., US and UK, which touting the reduction of unemployment as a success story, big portion of jobs are made up of low paid, under-employment oand temporary jobs.

Austerity is a far-reaching feature of crisis-stricken capitalism. Austerity policies are placing the cost of capitalism crisis or fictitious capital`s gambling habit on the shoulders of working classes. Whilst, austerity befits the fictitious capital to run speculation frenzy , it savaging public services, rubbing employment, attacking wages, etc. In brief, the structural crisis of capitalism is going to submit  all the more misery to  the world working classes.

Notes

1-See national debt graphs for various countries at the first article: the Structural Crisis of Capitalism(1) at: www.bee-hive.org

2-Is it time to start panicking about China’s debt? If you believe Beijing won’t support the municipalities that have overdosed on credit over the last few years, then absolutely. But overall, China’s federal level debt remains low, bank’s remain strong despite higher non-performing loans on the balance sheet, and yet we still get a total debt to GDP ratio of a whopping 282%. Forbes, May 9 2015.

3-Recently, during an economy discussion at CCTV, China`s English channel TV , the Chinese interviewer revealed that in China students aspire to get a comfortable office job and higher salary, rather than going to work at the manufacturing sector earning much lower wage. By contrast, in Germany, skilled workers are receiving much higher salary than office employees. Thus, interviewer reinforced the secret of the drive to  invention in Germany.

4-The general expropriation from peasants and turning them into workers who now had no means of production except selling their labour power began in China on 1978. This was the time, when the capitalist representatives within the China`s Communist Party, led by Deng Xiaoping, won the ideological battle and china embarked on the trajectory to open capitalist process of production. To secure cheap labour for attracting  the foreign capital, particularly from US and UK, Hukou system amplified the conditions of china's cheap labour, including long hours and low wages.   What was Hukou system? In nutshell, So-called peasant immigrants to cities - new labour force- were barred from being registered and acquiring city residence status. Thereby, These innocent labours were excluded from benefiting of meagre public services, and had to pay for it.

5-China`s capital export to much lower developed counties possessing cheaper labour than china, such as Vietnam, Cambodia, etc, is an indication that china has to some extent lost its position as dominant cheap labour of world workshop- Cambodian labour wage equivalent to 1/5 of china`s worker.

6- The calculation of GDP is a matter of serious dispute. Some economists rightly arguing that it would be misleading to include expenditure on fighting against pollution or developing armaments, spending on military aggression, etc, at the calculation of GDP.

7. In his ̏introduction to a critique of political economy ̋, Marx remarked that: to begin with, the question under discussion is material production. Individuals producing in a society, and hence the socially determined production of individuals , is of course the point of departure...

8- The Wall Street, house of US Stock Market, protestors slogan that we are 99% against 1% manifested the parasitic nature of financial oligarchy.

9- It must be stressed that the world capitalism is no free ,at all, from the conventional wars, and the Imperialist powers and their allies engaged at unholy wars of aggression, killing, maiming, injuring, devastating, making millions fleeing their places of domicile, etc.

10-Mark Carney, the governor of Bank of England walking in step with his US counterpart.

Morad Azimi