by Ben M
As we pass the 10th anniversary of the collapse of Lehman Brothers and the subsequent descent of the world economy into the Great Recession, the horizon is once again darkening for capitalism. While economic forecasts often resort to little more than reading tea leaves, e.g.- the regular predictions of a “double dip” recession during the early 2010s that never materialized, the warning signs of new and potentially greater recession are getting harder to ignore.
The last few months have seen noticeably volatile stock markets (oftentimes set off by a Trump tweet) as well as the total collapse of the cryptocurrency market (set off by the fact it was always a bubble and only fools thought they could cash out in time). But the economy isn’t the financial and stock markets- they are just the turbulent foam on top of deeper shifts in the world economy; rather something longer term has started to errode the capitalist class’ confidence in their own ascendancy.
First is the paradoxical fear of growth. The economy has technically been growing continuously since June 2009 (though you might not have noticed), which is an unusually long time without what capitalist economists like to call “self correction”, i.e. the capitalist cycle of boom and bust, kicking in. During that time over 85% of that growth went to the fabled 1%, something you may have noticed. This has created a highly “efficient” and massively topheavy economy of low wage workers working harder than ever to make things they can’t afford for an uppercrust of capitalists with more money than they know what to do with. The rich can only buy so much, and with most of Americans sinking more and more of their paychecks into just paying off loans and for the essentials, there is a rising fear of what would happen when a glut in consumer goods occur. The extent of how far overproduction has oriented itself for the needs of the rich can be seen in the absurd scenario of the explosion in construction of empty luxury condos, helping to fuel the housing crisis.
On the macro side, the China vs Trump trade war, combined with the massive payout to corporate America through Trump’s tax cuts, was meant to fuel some form of nationalistic re-industrialization. Instead of this MAGA pipe dream, something very different has emerged. Major capitalist enterprises has re-invested their tax cut windfall not into expanded domestic production, but rather buying back their own stock, hitting records not seen since right before the last recession in 2007. At the same time General Motors (GM) has announced the closure of three plants and the layoff of 5,600 industrial workers, to help create the “lean” overly automated and disposable workforce for the future. Combined, these look like companies battering down the hatches for the economic storms to come.
While these problems alone could potentially set off a recession, changes to the US financial sector could have a bigger impact. The last decade of economic growth for the rich has been financed in part by dirt cheap loans at super-low interest rates set by the US Federal Reserve. Essentially this means the Fed has been printing money for a decade to keep the cost of the loans that keep the economy rolling low, but that is soon to change. With the Fed expected to raise interest rates to something more close to reality, the overly leveraged financial markets are freaking out that the days of easy money are gone. At the same time the International Monetary Fund is saying that they don’t have the resources on hand to meet a financial crisis when it hits.
Short term Treasury bond rates are closing in on the long term rates, meaning long term outlook isn’t looking good from the financial markets’ perspective, a typical early sign of a recession. Demand for raw materials is holding steady for now, though we are starting to see a flurry of bankruptcies in principal industries impacted by Trump’s trade war, an apparent slowdown in some manufacturing sectors, and lower homebuilder confidence. It is still difficult to perceive through the noise to the deeper trends, but once we start to see slacking demand for the raw materials and capital equipment needed to expand production, then we will know we are in trouble.
So what does this all mean? To help situate us and begin to see through the fog of often contradictory economic data, we can start with the classic theory of capitalist crisis first outlined by Marx and Engels as early as the Communist Manifesto,
“Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells… It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of overproduction. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce.”
What Marx and Engels are talking about here is capitalism’s inherent drive to over expand, to overproduce. Individual capitalist companies are in fierce competition to take over greater segments of their market or else risk falling by the wayside. Since there is no coordination between them, and their outlook is purely short term, there is constant habit of “supply to overstrip demand” to use the mainstream economics speak. Capitalism isn’t producing for human demand necessarily, they are producing to achieve profits. So there is a deep irrationality to production, seen for instance in the explosion of luxury condo construction that house no one because the housing costs are too high.
Simultaneously, there is a drive within capitalism to forever reinvest in production in such a way that undermines capitalism’s ability to realize the profits it is after to begin with. To stay competitive, capitalist enterprises since the early days of the industrial revolution have had a strong incentive to find ways to replace more and more workers with automated machinery to help lower costs (see GM’s recent announcement to layoff thousands of workers while still aiming to meet similar if not high production quotas). The structural problems hit when you start laying off and underpaying the working class to such an extent they can’t buy your products anymore. This drive to ever automate and an ever increasing pool of precarious workers with bullshit jobs was first called out by Marx when he said capitalism, “dispels all fixity and security in the situation of the labourer … it constantly threatens, by taking away the instruments of labour, to snatch from his [sic] hands his means of subsistence, … to make him [sic] superfluous. [T]his antagonism vents its rage in the creation of that monstrosity, an industrial reserve army, kept in misery in order to be always at the disposal of capital; in the incessant human sacrifices from among the working-class, in the most reckless squandering of labour-power and in the devastation caused by a social anarchy which turns every economic progress into a social calamity.”
These factors of overproduction for a consuming workforce that have been edged out of their sources of a livelihood inevitably and recurrenly explode into a full economic crisis. As the late Marxist economist and historian Chris Harmen said, “Thus what makes sense for an individual capitalist—investment in new technology—plants the seeds of crisis for the system as a whole. Eventually the competitive drive of capitalists to keep ahead of other capitalists results in a massive scale of new investment which cannot be sustained by the rate of profit. If some capitalists are to make an adequate profit it can only be at the expense of other capitalists who are driven out of business. The drive to accumulate leads inevitably to crisis. And the greater the scale of past accumulation, the deeper the crises will be.”1
Growth itself, paradoxically, then becomes the biggest threat to capitalism’s continued expansion.
Attempts to mediate these structural tendencies of capitalist growth through the financial market – using it as something of an emergency cushion – have mostly made had the effect to kick the can down the road. As Marxist economist Ernest Mandel details, the production cycle does interact and impact the financial markets, but often the two are autonomous. “Marx visualised the business cycle as intimately intertwined with a credit cycle, which can acquire a relative autonomy in relation to what occurs in production properly speaking. An (over) expansion of credit can enable the capitalist system to sell temporarily more goods that the sum of real incomes created in current production plus past savings could buy. Likewise, credit (over) expansion can enable them to invest temporarily more capital than really accumulated surplus-value … would have enabled them to invest … But all this is only true temporarily. In the longer run, debts must be paid.” Sooner or later the costs of capitalist over-expansion and overproductions come home to roost.
Looking at more historical examples, we see how and when each ‘boom’ is in a way creating the conditions for the next ‘bust’, that each recession is in part the creation of capitalism’s inability to fully “fix” the prior recession. The Great Recession came from world capitalism’s shift to the US housing market after the dotcom bubble and the wider financialization of capitalism as a means to address the stagflation of the 1970s. Too many eggs in one overproduced basket of the housing market, and a too highly leveraged financial market led to a spectacular bust. The 70s recession originated from the failure of Keynesian economics to overcome declining rates of profit in a period when the US was facing increased international competition. Keynesian demand side economics was adopted as a way to pull world capitalism out of the Great Depression of the 1930s but it would take a World War and the construction of a permanent arms economy to pull that off. And so on and so on.
The coming crisis in capitalism likely will have its origins in how the Great Recession was temporarily overcome by the capitalist class. The strategy the capitalist class pursued after 2007 largely followed the, “[t]raditional methods for the restoration of profits,” identified by Marxist economist Joel Geier at the time, of, “cheapening the elements of capital (plant and equipment, raw materials) and labor costs; using the reserve army of the unemployed to raise the rate of exploitation on the job; destroying inefficient capitals; and the healthier capitals buying up their distressed rivals on the cheap.” In other words, in order to return profit rates the capitalist class oversaw the total amelioration of the world working class through austerity to lower labor costs, combined with the massive influx of pure additive cash liquidity by capitalist governments to grease the wheels of corporate centralization. The temporary overcoming of what can be called the “Neoliberal Recession” of 2007 required the single greatest transfer of wealth from the working class to the capitalist class in human history. The current economy is a castle built on sand.
So when is the recession going to hit? No idea, and anyone who says otherwise is probably a charlatan. It could be 3 weeks, 6 months or 4 years before these contradictions start to hit. Many economists are talking about 2020, but that just speculation. The final economic trigger could be anything, but will likely be something ridiculous and petty in one of capitalism’s weak links, cause that’s just the times we live in. We don’t know when it will hit, but we know, due to the fact that capitalism is crisis-prone by its own profit motive fueled nature of perpetual growth, that it eventually will. By then we need to be ready.
We can already predict what Trump’s response will be – the wholesale destruction of what remains of the social safety net and a jingoistic campaign of divide and rule like nothing we have ever seen in the US (and that’s saying something). While it’s too easy to fall into hyperbole, we have already seen this monster erect kiddy concentration camps and deploy armed forces to the border to gas mothers and babies. Now imagine what he is capable of with a mandate from his fanatical base for a “final solution” to the sudden economic woes. Even if the crash happens after the new Democrat controlled House takes office, the logic of what Naomi Klein called the “shock doctrine”, combined with the history of the Democrats’ legendary spinelessness, indicates they will likely go along with the worst of what Trump comes up. “Bipartisanship” in the face of this crisis and this president will mean Democrats’ complicity in ethnic cleansing.
But it is the energy this will give to the fascist alt-right which is the most immediate threat. These killers who have shown their true intentions from Pittsburgh to Charlottesville will jump immediately on the opportunity to spread their nativist poison. We must prepare to confront the right at all cost. We can’t sit passively and hope people will naturally take anti-capitalist conclusions from the coming crisis. The right is perfecting its methods of taking the disenchantment of downwardly mobile pople and turning it towards fascism. But the same crisis that empowers the counter-revolutionary right can empower the revolutionary left. It all matters who is the best organized and the most bold. We must think of ourselves as actors, not just reactors to the titanic forces of world capitalism.
We will need to seize the initiative and capture the narrative of the coming crash. Protests, rallies, pickets, and organizing then is our first responsibility. Blog posts, videos, media spots, “memes” that articulare a anti-capitalist message are our next. There is an answer and alternative to more years of amelioration, austerity, unemployment, and low wages. The rich don’t have to get away with it this time. We can build a new world without borders, unemployment, debt, pollution, or crisis, and it is called socialism. And we can be ready this time to win it.
Now we have a left that has learned much in 10 years of post recession political struggle. Occupy taught us the importance of organization. The Obama wars taught us the value of anti-imperialism even in time of liberal warmongering. Black Lives Matter showed us a shining vision of uncompromising politics of human dignity that could seize the streets. #MeToo made clear that we either make our spaces accessible, safe, and intersectional, or we are little better than our enemies. And the strike waves of teachers from Chicago to West Virginia has proven again that workers have the power to bring this rotten system to heel.
For all of its room for improvement, Democratic Socialists of America (DSA) is in the best position to synthesize the past lessons, take advantage of the coming crisis, and go on the anti-capitalist offensive. It membership may be learning largely by building a mass socialist movement by the seat of our fucking pants, with a shoestring budget and prayer, but it is happening here. Our elected members are front and center, our protests are in your face, our message is spreading, and we are already shifting the “politics of the possible.” It is heady and confusing times, but by some strange decree of fate, whatever comes next in the American working class struggle will likely have its foci in part in the Democratic Socialists of America.
It is the job of every socialist to invest their time in analyzing the current political-economic climate and to figure out how to intervene in it. To that end there are number of steps the DSA and our local chapters need to prepare for the coming crisis built around the old Industrial Workers of the World tinirity: Educate, Agitate, Organize.
First we must deepen our political education. Comrades need to understand how capitalism works and how it doesn’t, why economic crises happen, and prepare to articulate this knowledge to a mass audience. With this knowledge we need to be thinking about how to prepare our agitational media. We need to be able to rapidly deploy our anti-capitalist narrative through all means, from our elected members in Congress to our members holding placards at rallies, in order to counter and smash the fash right’s.
This, then, becomes a basis for our organizing. We need to take this time to deepen our relationship with local activists, our community neighbors, fellow socialists and progressives, all to prepare for a united left wing offensive. We must center and expand our labor organizing and immigrant solidarity work as our blood and air. In doing so we must be ready to flex our muscles and our direct action and protest organizing abilities. With 55,000 members, but only a fraction regularly engaged, member mobilization is critical. Chapters should be exploring all means to better activate their membership and get people out to protests, strike solidarity, ICE blockade actions, etc. Please forgive the pun, but real politics happens in the streets not the tweets.
And above all else, we must be adaptable, flexible, and our eyes fixed firmly to the political situation. As can be seen in France, things can rapidly accelerate in times of political and economic crisis. Shifting political winds can give opportunity or risk, and the ability for an organization to turn on a dime with tactics and strategies as the occasion dictates is no easy task. A lot will come down to local chapters and individual comrades making the right call on the fly as things progress. Preparing ourselves for the potential struggles ahead could help to make the difference.