Left debates the credit crisis

Submitted by martin on 21 October, 2008 - 11:24 Author: Martin Thomas

Conway Hall, in London, was pretty full - over 200 people - for a meeting on 21 October on "Marx and the Credit Crunch". The content was, however, disappointing.

The meeting was organised by Andrew Burgin's "Public Reading Rooms" group, with a platform of three: the writer Istvan Meszaros, the SWP's Chris Harman, and Richard Brenner of Workers' Power.

Brenner's speech was particularly formulaic, composed almost entirely of generalities equally applicable (or inapplicable) to any economic disturbance at any time in the history of capitalism.

The crisis arose, said Brenner, from the Tendency of the Rate of Profit to Fall. At some point financiers "became aware that they could not get the expected returns". That created a "huge sudden puncturing of creditworthiness across the financial system".

Since this Tendency of the Rate of Profit to Fall is supposed to be something that operates across the entire history of capitalism, this amounts to no explanation at all of anything "sudden". And in fact the run-up to the crisis was a period of increased profit rates, thanks to sharply increased rates of exploitation. The UK profit rate in 2007 was the highest in the whole run of statistics available.

The speakers from whom one might have expected better were not much so. Chris Harman also based his exposition on the alleged Tendency of the Rate of Profit to Fall.

That, he said, had led more and more capitalists to put money into financial dealings, since they can't make adequate profits in industry. It was all a giant Ponzi scheme - "trying to get profits out of nothing" - and so eventually "came crashing down".

Now, financial firms can show paper profits which are actually unrealisable in hard cash or material commodities, and this Ponzi scheme element was important in the immediate run-up to the crisis.

But, whatever Harman says, the whole gigantic expansion of global finance over the last three decades has not just been a story of fictitious profits. The financiers have appropriated real surplus value, created by real workers, and they have the mansions, the yachts, and the private jets to show for it.

Finance is not an alternative way for capital to expand if real exploitation is insufficient. It is a way to redistribute surplus value, and in the last three decades it has been redistributed to the advantage of financiers. The global finance markets have grown up not as an alternative to the growth of global capitalist production networks, but as an organic accompaniment to it.

Harman concluded by predicting increased stability, and increased intercapitalist conflict.

Increased intercapitalist conflict has been the SWP's staple prediction since the late 1980s, when they evolved their "new imperialism" theory to rationalise their 1987 change of line on the Iran-Iraq war, from opposing both sides to backing Iran. In fact the dominant trend of the 20 years since then has been the relative smoothness with which world capitalist institutions - IMF, WTO, G7, European Union - have expanded to embrace the ex-Stalinist states.

Like the stopped clock right once a day, though, the SWP's prediction may become correct now. Crisis fire-fighting has vastly increased the role of governments in aiding and regulating the capitalist firms based in their own countries. It therefore increases the probability of those governments coming into conflict when the firms they regulate or bail out come into conflict, as they surely will as the recession generates a competitive battle to survive in shrinking world markets.

Harman was downbeat in his political predictions. Workers will face many defensive struggles, in a situation where the left is weak. There will be increased social bitterness, but that may accrue to the benefit of the far right. We should look to small acts of resistance.

Meszaros's speech was surprisingly insubstantial. He devoted a long time to mocking a Time magazine cover from 1987, "Marx is dead". I was reminded of Gramsci's critical remark on Bukharin: "Bukharin only wants to attack the weakest people and on their weakest points, in order to win easy verbal victories... On the ideological front, however... it is necessary to defeat the eminent people... the great champions of the opposing tendencies".

Meszaros stated - I can't say he argued - a prediction that we face a crisis of "unimaginable" proportions, vastly bigger than that of 1929-33, which, he said (inaccurately), only touched a small part of the world. He repeated his prediction that the USA will default on its foreign debt, a prediction he had already made in 1987 (p.960 of Beyond Capital, a book in which he argued, unconvincingly in my view, that capital has reached a terminal "structural crisis").

Stuart King of Permanent Revolution struck a different note from most floor contributions, drawing attention to the big expansion of capital over the last decades (16 years, he said, presumably to date it from the collapse of the USSR, but actually the expansion started before that). His conclusion was that the current crisis should be compared not to 1929-1933, but to the Panic of 1907. That, he said, was certainly a severe slump, but within a "long wave" of capitalist upswing.

I doubt the comparison is very useful. Anyway, can a generality about the "long wave" really guarantee us a quick recovery?

In my contribution from the floor, I asked for more attention to the unique features of this crisis.

* The fact that vast nationalisations and bail-outs and government interventions come after 20 years in which the dogma that "the markets" rule, and must rule, has permeated society.

The need for social regulation of the economy is again on the agenda. We should organise around the idea of workers' regulation, through a workers' plan and a workers' government. We should not allow that argument to be swamped by routine agitation about the distributional aspects of the crisis, let alone by cod-Keynesianism such as Richard Brenner offered when, after much bellowing about how very Marxist he is, he recommended "taxing the rich and increasing public spending in order to prevent a recession". So that would be enough to overcome the contradictions of capitalism, eh?

* I think the whole thesis of the Tendency of the Rate of Profit to Fall is wrong. To put it briefly: in technological change, as such, what Marx adduced as "countervailing tendencies" will generally prevail over tendencies to depress the profit rate. In fact, the long history of capitalism shows no clear downward trend of profit rates.

Adam Smith and David Ricardo, and other classical economists, believed a slow long-term downward trend of the rate of profit to be a fact. So did John Maynard Keynes. They all had their (wrong) theories about it, which allowed little room for countervailing tendencies. Marx's contribution was to give a more rational (though still, I think, flawed) explanation of why such a tendency might exist, and to analyse numerous "countervailing tendencies".

Far from considering the Tendency of the Rate of Profit to Fall a cornerstone of economic analysis, Marx never mentioned it in anything he readied for publication. And in his main writings on crisis (mostly in Theories of Surplus Value volume 2 and Capital volume 2, both unfinished) he did not mention it either.

I did not have time for this argument in my contribution from the floor. I just pointed out that, whatever you think in general about the Tendency of the Rate of Profit to Fall, this particular crisis was preceded by rising profit rates.

* The vast expansion of global finance markets is an integral companion of the expansion of globalised production, and not to be explained away as a mere futile search after fictitious profits.

In addition, finance capital has begun to be able to extract further surplus value from the working class outside production, by direct tribute via workers' payments to service mortgage and credit-card debts (not much less than 20% of household spending now, in the USA and in the UK). This is the first ever crisis in which an implosion of consumer credit is a big factor.

* The crisis takes place in a world economy more globalised - with faster and more various global interactions - than any before.


Submitted by martin on Tue, 21/10/2008 - 23:58

As I note above, Chris Harman of the SWP was downbeat in his predictions of the political consequences of the economic crisis.

Workers will face many defensive struggles, he said, in a situation where the left is weak. There will be increased social bitterness, but that may accrue to the benefit of the far right.

His emphasis was on building resistance, on however small a scale, to the economic repercussions on the working class of the crisis, while organising "a network of socialists".

On the front page of its website the SWP has, uncharacteristically, placed a link to articles by Trotsky on the relationship between boom, slump, and political radicalisation.

The articles are well worth reading, and indeed we in AWL have often cited them. Trotsky's basic, broad-brush argument is that the effect of boom or slump on working-class consciousness depends on prior conditions. After working-class defeats, a slump is likely to bring demoralisation; it will be the subsequent economic upturn which allows workers to regain confidence. On the other hand, a slump coming at a time of high working-class confidence can produce rapid radicalisation.

What does all that mean for now? It is not yet clear (to me, anyway). Working-class confidence is low, but there may have been some "molecular" revival signalled in such things as votes for left-wing rather than right-wing candidates for union leaderships. If the general effect of the economic downturn is to dampen mass trade-union-type struggles (and I fear it may well be), that does not at all rule out the economic tumult, and the vast public discrediting of the dominant "neo-liberal" mode of capitalism, also producing significant political radicalisation among a significant minority.

What does the SWP think? They note that they previously published those same Trotsky articles in 1983, at which time the SWP was telling its members that the working class was deep in a "downturn" and they should focus ruthlessly on propagandistic "party-building" activities. Is the messages the same now?

Socialist Worker (4 October) gave the job of writing an exposition to John Rees, the SWP leader whose advocacy of political coalitions such as Respect has recently been rebuffed by the SWP Central Committee's decision, against Rees's vote, to put the rump of Respect, "Left Alternative", on the shelf.

Rees is not clear.

The effects of the crisis will build on a deep scepticism about politicians and the political system in general, including scepticism about a Labour Party that has adopted Thatcherite economics virtually without amendment.

This sentiment has grown massively since the birth of the anti-capitalist movement in 1999. The scale of the anti-war movement after 2001 then radically enhanced it.

The same feeling has seeped into the trade union movement. Its first fruit in this area was the election of a raft of left wing general secretaries in 2002 and 2003. There has also been a political breach between the Labour leadership and many in the unions.

More recent and more important, though still limited, is the revival of industrial struggle that has been towed forward by this general radical mood.

So, there has been a rise in working-class confidence? It's not like 1983 at all? We already have a "general radical mood", and we can expect it to burgeon?

He is overstating too much, isn't he? You'd think from what he writes here that the SWP's Lindsey German had won Mayor of London, rather than getting 0.68%. And "scepticism" is double-edged. It can lead to disillusioned resignation as easily as to struggle.

But Rees then gets in his "on the other hand..." argument, bringing him closer to what Chris Harman argued on 21 October.

Not all political developments have been to the left, of course. A delicate comment that, on the 0.68%... The rise in votes for the fascist British National Party and the resurgence of the Tories remind us that working class opinion polarises in a crisis – some blame the system, some blame the nearest scapegoat they can find.

Every crisis involves a race between the right and the left as to who can most convincingly express people’s anger at the system and suggest the most effective ways of fighting back.

Rees concludes with more on the lines of "it could go either way".

As this recession strikes there is a pre-prepared disillusionment with the economic and political system among wide layers of the working class.

A mass anti-war movement has already mobilised millions and deepened scepticism about reformism.

Industrial resistance has been weak, though it has grown stronger in the last couple of years.

The push for coordinated public sector strikes remains a vital part of the response to the crisis. And the recent action on the London buses may well portend further strikes.

We must bend our every effort to ensure that the weaknesses of the movement are diminished and the possibilities of resistance are magnified.

That means a clear political argument about the nature of the capitalist system and an equally clear political commitment to working with others to defend workers from the effects of the recession wherever we can.

A classic statement, by the way, of the "minimax" approach - minimalist defensive demands (as per the SWP's "People before Profit" charter), plus maximalist argument about abolishing capitalism. No room for a workers' plan of transitional demands.

There is great danger here – but also a great opportunity for socialists.

I'd guess that the article by Rees and the speech by Harman reflect an SWP leadership unsure or divided about its perspectives.

Submitted by Jason on Thu, 23/10/2008 - 09:48

A fairly measured response. Indeed your article in its recognition that the left is weak and that we need toreorganise in the working class and as socialists to some extent answers its own question in relation to Stuart from PR's musing that "that the current crisis should be compared not to 1929-1933, but to the Panic of 1907. That, he said, was certainly a severe slump, but within a "long wave" of capitalist upswing.
I doubt the comparison is very useful. Anyway, where does it lead? Take your pick. The "long wave" in process in 1907, on Stuart King's own account, ended in 1913; so is this credit crisis the harbinger of the end of the current "long wave"? Or is the main point that we can expect a recovery soon?"

I think the point is that we cannot be schematic about where the current crisis will lead- it may even be the harbinger of a more general coolalpse but this is probably not nealry as imminent as some of the catstrophists would have us believe. certainly for the working class to take power we need to reform working class organisations and fighting organisations almost from scratch- that is the task of this period.

This article unusually for one from the left at least has a degree of sobriety about the difficulties of the task ahead that we need to (as Harman apparently said) build "resistance, on however small a scale, to the economic repercussions on the working class of the crisis, while organising "a network of socialists".

Submitted by martin on Sun, 26/10/2008 - 10:10

1. I agree with Stuart that the last couple of decades have been a period of immense expansion of capitalism. With hindsight, I think the long upswing started before the collapse of the Stalinist states.

2. I'm very dubious about the "long waves" theory. I just don't know about the current downturn. There are some reasons for supposing that the downturn in trade and production will be less spectacular than the financial collapses, but I don't think you can deduce that just from the "nature" of the (long) period.

3. Yes, in the Grundrisse Marx wrote that the tendency of the rate of profit to fall was "in every respect the most important law of modern political economy..."

I think he was wrong about that; I think the more elaborated (though still unfinished) exposition in Part III of volume 3 of Capital is flawed. But even if I am wrong about that, the facts remain:

a) Whatever about Marx scribbling into his private rough notes (maybe in the small hours of some morning) that the tendency of the rate of profit to fall was "the most important law of modern political economy", he never mentioned it in anything he completed for publication. If it was really his settled opinion - not just a scribbled flourish - that this tendency was so important, why did he not mention it somewhere for publication? Visibly he put a lot of stuff into Capital volume 1, and into Wages, Price, and Profit, that would belong later in a complete exposition, and made a point of at least alluding to other stuff he considered important (e.g. formation of prices of production). Or he could have written an insert on it for Anti-Duhring. He didn't.

b) Part of the answer is that for Marx, Capital was not a work of "political economy", but of "critique of political economy". His scribbled flourish dubbed the TRPF the most important law of "political economy", i.e. of orthodox, mainstream, bourgeois economics. It was not at all the most important of Marx's own "economics".

c) No wonder that Marx, finding so many orthodox economists subscribing to a proposition that capital would eventually run out of momentum, was elated by it, and inclined to seize upon it. But that does not give great theoretical weight to it.

d) In any case, Marx does not mention the TRPF in his most substantial and connected writings on capitalist crises (TSV II and Capital II, as I mentioned above). In the Grundrisse itself, the reference to the TRPF is separated from the discussion on crises (pp.401-447). If Marx thought the TRPF was important, it was not for crisis theory that it was specially important.

In the bit on the TRPF in Capital III there is a short passage suggesting that the TRPF may trigger crises through its specific effects on smaller capitals. But the suggestion is visibly half-hearted; unconnected with Marx's main writings on crises; and, anyway, I submit, not true to the facts of crises.

Martin Thomas

Submitted by martin on Sun, 26/10/2008 - 18:45

I'm far from dismissing the Grundrisse. Read Workers' Liberty 3/16, entirely given over to discussing the Grundrisse and its relevance for today.

But the Grundrisse is rough notes - and, from what we know of Marx's work habits, a lot of them written late at night.

There are, I think, some brilliantly illuminating passages in it. There are also stretches of it, for example, given over to hypothetical arithmetical examples of economic processes, broken off short with remarks like "the devil take this wrong arithmetic!"

To make Marxism into a doctrine based on reverent exegesis of Marx's every scribbled comment is to descend from science into scholasticism.

Martin Thomas

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