Notes on the current crisis of capitalism

Notes on the current crisis of capitalism

The crisis of capitalism is moving from the esoteric realm of obscure derivatives into the real economy rapidly, and relentlessly.

In truth, its source has always been in the “real” economy: the financial sector is an extension of the real economy, the apex of the pyramid (should I say pyramid scheme?).

What we are at the beginning stages of is the first ever global general crisis of overproduction coupled with the first ever global general crisis of overproduction of capital.

Background

Capitalism as a world system entered into crisis at the end of the 19th century because its nationally limited markets were individually reaching crises of overproduction, and in a related process, crises of overproduction of capital. The obvious solution for these individual, but connected national crises, was to expand markets and investment beyond national borders. The attempts to do so led to World War I and World War II, and their consequences led to the Russian revolution and the great depression.

The crisis of the first half of the twentieth century was resolved, temporarily, by those cataclysmic historic events.

An enormous amount of both fixed and variable capital – human lives – was destroyed. National limitations to markets were also destroyed. The cold war system divided the world into two great economic zones: a capitalist market system dominated by the United States covering the Western Hemisphere, Europe, Africa, the East Asian Rim, and South Asia; and an isolated zone of planned economies stretching from Eastern Europe to China, and dominated by the Soviet Union.

Enormous advances in technology due to war related research and development opened gigantic new markets which had not previously existed – transistor radios to computers - and dramatically lowered costs of production and transportation in older markets. Markets grew to undreamt of size due to very rapid and continuous population growth resulting mostly from the green revolution and the wide spread use of antibiotics which dramatically cut mortality rates after WWII.

The new system was structured through a series of international agreements and organizations: the Bretton Woods Agreement, GATT (which evolved in the World Trade Organization) , the IMF, the World Bank, the United Nations, the European Coal and Steel Community (which evolved into the European Economic Community (EEC) and now the European Union.) and NATO.

All of these agreements in one way or another were undemocratically structured to give the United States of America predominance over all other countries. All of them depended in turn on the common fear of socialist revolution among the ruling capitalist classes of Europe and the United States. That fear was made palpable by the revolutionary victories at the end of the second world war, the continuous revolutionary turmoil in the post colonial world, and by the military power of the Soviet Union, its victories in the Second World War, and its development of nuclear weapons.

The social and political instability of this new global system of capitalism were enormous, especially in the immediate aftermath of World War II and in the post colonial world.

Imperialism could not control the processes which were unleashed especially in the countries which had been conquered and subjugated most recently by Japanese and German imperialism in Eastern Europe and East Asia. The Chinese revolution and the Red Army of the Soviet Union swept away imperialism, and temporarily established revolutionary dictatorships and planned economies.

In the dismantling of the British and French empires national and social revolutionary movements emerged and won partial complete or partial independence from imperialism, opening up the possibility of advancing further toward socialist revolution.

Ironically, the danger of revolution was a key political element in the revival of capitalism: it pushed the ruling classes of the world together behind the United States in forging a previously unimaginable political unity which made possible the dismantling of trade barriers, the establishment of the dollar (at first backed by gold) as the world currency, and the establishment of a world wide financial system.

This new structure, combined with the new technologies developed during World War II, combined with the dramatic reversal of the long term crisis of overproduction (i.e. destruction of war had destroyed both inventories and factories, reversing the imbalance of supply over demand and creating an imbalance of demand over supply to lead to a very long period of economic growth from 1946 to 1973.