[Marxism] Notes on the current crisis of capitalism

["Anthony Boynton" <anthony.boynton@xxxxxxxxx>]

[Marxism] Notes on the current crisis of capitalism



Matt Russo wrote this in response to my post regarding Mandel and crises of
overproduction. I am forwarding it on to Marxmail. Anthony

************



    I completely agree with you criticism of Mandel here.  Capital as a
(particular) commodity, whose form is money capital, must be analyzed quite
differently from (all) commodities as attributes of capital, and that is
exactly what I am reading from Marx in the relevant chapters of vol. 3.



    "Driving down the cost of production, basically speeding up workers and
cutting wages and benefits, does not alleviate a crisis of overproduction.
In fact it aggravates it by causing the market for consumer goods to shrink.
It can however, maintain profitability for businesses as profits begin to
fall in the early stages of a crisis of overproduction."  (That is you, not
Marx :-)



    I'd also add  to this in connection with measure C) below that extension
of credit to wages in the form of credit cards, auto loans and  mortgage
loans, i.e. 'consumer credit', as a means to address the overproduction of
capital, has as its precondition precisely this stagnation or fall in real
wages.  This introduces some important contradictions that are critical to
understanding how a crisis in consumer credit - involving quite literally
hapless Mexican immigrants trying to buy into "the American Dream" on the
south side of Stockton, California, just think of it! - acted as the
detonator for a generalized financial meltdown:



    1) Assuming the onset of an overproduction of capital - a chronic state
until now - on the one hand financial capital has a positive interest in
stagnating or declining real wages, and in particular in wages that fall
below refurnishing the necessities of life as determined by the prevailing
standard of living, as this provides a widening market for its product;



    2) On the other hand real wages can never fall so low that they cannot
service the interest on the credit required for the necessities of life.



    3) Further, by extending credit directly to wages, the competition for
credit by industrial capital is undercut and bypassed in two ways:



    a) Simply because the individual wage earner exercises much less market
leverage than the industrial capitalist, interest rates can be much higher
for consumer credit than for industrial loans, raising the average rate of
profit of the financial sector, thereby attracting more capital investment
into this sector;



    b) Because wages as the variable part of industrial capital must be
sufficient to cover consumer loan interest, this becomes an increment to the
total interest paid by industrial capitalists to financial capitalists, and
a subtraction from demand available for wage goods, further exacerbating the
overproduction of commodities in the long run in this sector and depressing
profits here.



    Note that finance capital does not cease to function as capital once put
into circulation in the commodity form of consumer credit, as the interest
becomes a component part of variable capital while the principle remains as
a lien on labor power.



    Marx states that there is no "natural rate of interest", no equilibrium
rate of interest as there is with the (general) rate of profit, therefore
there is no theoretical limit on the proportion of wages or gross profit
absorbed as interest, only the practical limit of the real extent of wage or
profit levels.  This alone gives the financial capitalist a certain
advantage in competition with the industrial capitalist for profits.  Marx
also states that the financial capitalist does not stand in direct relation
to the capitalist labor process as does the industrial capitalist, however,
Marx never had the occasion to analyze money capital extended in the form of
of consumer credit directly to wages, as this phenomenon began emerging only
in the early 20th century, with the Great Depression being one of the first
financial crises with significant involvement of consumer credit, though
this was not a detonator of that crisis.  It is my thesis based on the above
points that this does bring the finance capitalist into such a direct
relation to the wage laborer as a component part of productive capital and
is therefore a relation that is a direct form of the class struggle but,
unlike the relation with the industrial capitalist, presents itself
immediately as a total global relation between two social classes at the
moment of crisis.  Some obvious reform demands spring from this:
cancellation of consumer debts, caps on interest rates, etc. etc.



    Here I will not even go into other key dimensions of the
"financialization of wages" such as in the form of retirement plans of
privileged workers being funneled into the stock market, etc., as well as
the whole consumer insurance sector  It is more important to move to an
analysis of the other characteristic pole of the present crisis, the vast
financial universe of derivatives.  For if the present tendency for wages to
stagnate and fall to the point where a crisis in payment of consumer loan
interest was unavoidable was the detonator for this crisis, the fuse to
exploding much of the global banking system outside of Asia - including the
so-called 'shadow banking system' of hedge funds and whatnot - was the
packaging of these soon to not be performing consumer loans into mortgage
backed securities (MBS) derivatives atop which was pyramided a second order
of derivatives known as credit default swaps (CDS)  - essentially insurance
on the MBS - in themselves amounting to an approximately $65 trillion powder
keg.



    That for another writing.  Suffice to summarize that if ever a practical
proof was presented of the critical role of the balance of forces in the
class struggle, here in the form of the balance between wages and capital -
capital and not simply profits - as the primary motor of capitalism, this is
it.



    -Matt
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