ICC international online public meeting, 25 January
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As I said I think it’s clear that the recourse to debt as a solution to the debt crisis would suggest there must be a cumulative aspect to the crisis. Whether this means it will be “deeper” than the 30s is very difficult to judge but it does seem likely to be more universal/international than 2008 or the 30s.
________________________IsiahahBlake
I am curious about this argument about the role of debt. Public (government) debt for the US is about $33 trillion (there is also of course, household debt which is different), as I understand it. Actually, it is somewhat less since part of this is debt is money the government owes itself and the real figure is about $26 trillion . This supposedly represents a ratio of debt to GDP of about 98%.
It is a huge sum of money and apparently even just the interest repayments now exceeds what the American regime spends on its military.
I read somewhere that the debt-to-GDP ratio is projected to grow to about 160 per cent in the next decade and that there is an absolute upper limit of 200% beyond which it cannot grow without the system imploding. There are already countries that have a ratio in excess of 200% like Japan for example but there are offsetting factors in this case like a much higher rate of household savings
My question is – can it really be that there is some such upper limit as far as debt is concerned or is it a case of just endlessly kicking the can down the road?
My understanding is that Marx saw financial crises involving fictitious capital could have a disruptive or triggering effect as real crises are concerned but the latter are ultimately rooted in the real economy, for all the talk of “Minsky moments” and financially crashing the economy. Capitalism could survive a cataclysmic financial crash in other words. What do you think?
By coincidence this weekend’s Morning Star has a pull-out supplement putting the point of view of the Leninist-Stalinist “Communist Party of Britain” in which one of its leaders, Alex Gordon, expounds a similar essentially financial theory of crises:
“Beyond profits extracted from surplus value, capitalists amass capital via bank credit and stock markets. Fractional reserve banking creates new credit many times the original deposits. Stock markets likewise multiply the value of the original means of production. Marx called this fictitious capital, since it separates from and achieves value far beyond the original productive capital. Fictitious capital feeds the economy and finances debt out of all proportion to the means of production it is based on. When this bubble bursts this is a crisis.”
This is wrong on at least two counts.
First, banks can’t lend more than they have in terms of their own capital, deposits and what they themselves borrow. They don’t create credit out of thin air. Bank loans are an investment of real capital. They are not “fictitious capital”. Neither is money raised by share issues. It, too, is a real investment of money capital.
Second, trading of shares on the stock market does not (when share prices go up) increase the “value” of the capital originally invested in production.
Fictional capital is transforming an income stream into a notional capital sum which if invested or loaned would yield interest of the same amount.
Shares are a form of fictional capital calculated from the expected future stream of income coming from the profits made by the capitalist firm in which they give ownership rights. They are traded in their own right independently of the value of the capital invested in production. An increase in the price of shares is not an accumulation of capital.
Similarly a fall in the price of shares is not a fall in capital accumulation. The reduction or even disappearance of fictional capital is not a devaluation of existing real capital. In fact it will be a reflection of this — the drying up of the source (profits) of the stream of income that is turned into a notional capital sum.
There are sometimes purely speculative increases in the prices of shares. When such a bubble bursts what happens is that the share prices return to a more realistic reflection of the stream of future income their price is based on. The real economy is not affected.
On the other hand, a change in the real economy such as overproduction in relation to paying demand and so of real and expected profits can provoke a stock exchange collapse, as in 1929 and 2008. In other words, it is a fall in real profit-seeking activity that provokes a stock exchange collapse rather than vice versa.
The question of whether debt ever has to be paid is interesting but ultimately I think its a false question. The fact is capitalism is running into basic realities of nature, in the form of the climate crisis and the raw questions of power and war (as well as the underlying deep social crisis after 500 years of increasing atomisation and destruction of all authentic community forms). These factors are the ones that will bring the ultimate cause of capitalisms destruction (one way or the other).
Once the bottom falls out it will fall out more violently the longer they try to keep it off. Once each nation realises the others cant/won’t pay this will increase this tendency.
The more important question with regard to debt is, I think, the reason for its explosion since the 70s/80s onwards. There is clearly something different about the current crisis to previous ones in this regard. The degree to which companies more and more don’t ‘make profit’, whole economies like Japan’s are basically giving up on basic aspects of ‘growth’ etc…it is clearly not just business as usual
Citizen of the World’s statement about the need for discussion between organisations, and the possibility he will come to our meeting, are both very welcome. Just write to the email in the ad and we will send you a link.
Without entering into the various issues raised in the discussion, I just want to make one point about Rosa Luxemburg’s approach to the economic contradictions of the capitalist system. She did not consider that capitalism’s ‘end’ would come through a purely economic collapse “precisely because capital accumulation is not just an economic but also a political process” (Anti-Critique, chapter 6) – and we could add, also a process of inter-action with the natural environment. The more capitalism comes up against the limits of its expansion, she predicted,”the more the day-to-day history of capital accumulation on the world stage changes into an endless chain of political and social catastrophes and convulsions”. This chain of catastrophes is precisely what we are witnessing today in what we call the whirlwind effect, the acceleration and intensification of capitalist decomposition through the coming together of a whole series of catastrophes, political, economic, military and ecological.
As I said, comrades are welcome to continue this debate at our meeting.Luxemburg and the ICC are being entirely consistent with their belief that capitalism cannot exist without outside of the system markets, to conclude that when these markets come near to being exhausted the system will suffer from increasingly severe economic, political and social convulsions.
The trouble is that their basic assumption that capitalism does not generate enough purchasing power to buy all that is produced. It is wrong. The surplus that Luxemburg imagined could not be bought is in fact bought by other capitalists. There is no built-in shortage of purchasing power.
Capitalism certainly suffers from convulsions, always has and always will, but one question of fact that arises is whether or not these are becoming worse. So far we have not seen a world depression worse than that of the 1930s nor a world war worse than that of 1939-45. In fact, in other respects there have even been some improvements, as in the condition of women and a decline in colour prejudice.
From their contributions here, the ICC seems to be switching the emphasis from economic convulsions to other types such as the growing atomisation of social relations and the threat to the global biosystem, which are certainly happening but can be explained without recourse to Luxemburgian economics.
The question of whether debt ever has to be paid is interesting but ultimately I think its a false question. The fact is capitalism is running into basic realities of nature, in the form of the climate crisis and the raw questions of power and war
This is plausible – though it is difficult to say whether capitalism would collapse (implode) or merely shrink as a result of factors such as climate change or war coming to manifest themselves. These are exogenous factors, however, and the argument that the SPGB makes is that there are no endogenous factors – internal to the economic system itself – that would cause capitalism to collapse (such as the falling rate of profit). Obviously in the event of a nuclear war, say, there will be not much left of human society let alone capitalism.
The more important question with regard to debt is, I think, the reason for its explosion since the 70s/80s onwards. There is clearly something different about the current crisis to previous ones in this regard. The degree to which companies more and more don’t ‘make profit’, whole economies like Japan’s are basically giving up on basic aspects of ‘growth’ etc…it is clearly not just business as usual
The dichotomy of the productive versus unproductive sector of the capitalist economy might be relevant here. People like Fred Moseley have charted the relative growth of the unproductive sector – the non-profit-producing or non-commodity-producing sector of the American economy (in his case). Unproductive labour might not generate profits but is still functional – even vital – to the needs of capitalism. It is financed out of surplus value generated by the productive sector but that, in itself, imposes limits on the extent of this sector vis-a-vis the productive sector. It is significant that we have seen cutbacks in jobs in the unproductive sector in recent years which might be interpreted as an attempt to get the balance right and ensure a healthy flow of profits on which the system depends
“The dichotomy of the productive versus unproductive sector of the capitalist economy might be relevant here. People like Fred Moseley have charted the relative growth of the unproductive sector – the non-profit-producing or non-commodity-producing sector of the American economy (in his case). Unproductive labour might not generate profits but is still functional – even vital – to the needs of capitalism. It is financed out of surplus value generated by the productive sector but that, in itself, imposes limits on the extent of this sector vis-a-vis the productive sector. It is significant that we have seen cutbacks in jobs in the unproductive sector in recent years which might be interpreted as an attempt to get the balance right and ensure a healthy flow of profits on which the system depends”
I’m sure that is a big part of it but I would also say that the scale of the unproductive sector has swollen to the extent it has precisely because of decadence. The productive forces have so long ago outgrown the social relations that capitalism needs to invent this globalised unproductiveness to keep the whole mad cycle going.
I’m sure that is a big part of it but I would also say that the scale of the unproductive sector has swollen to the extent it has precisely because of decadence. The productive forces have so long ago outgrown the social relations that capitalism needs to invent this globalised unproductiveness to keep the whole mad cycle going.
isiahahblake
Yeah I would basically along with that. The only slight quibble would be that productive/unprpductive distinction, while it might be relevant to the question of the rate of profit in capitalism (as Moseley argues) might not be entirely relevant to the question of to what extent the productive forces have outgrown the social relations of capitalism.
There are, for example, certain categories of unproductive labour in capitalism that we will continue to need in a post capitalist society. An immediate example that springs to mind is an NHS nurse. There are also examples of productive labour in capitalism that we will definitely not want to continue with such as armaments producers.
A more useful distinction would be between socially useless and socially useless work. However, this is only apparent from a standpoint external to capitalism itself so data relating to this is not that easy to come by. Most estimates seem to settle around the 50-60% mark (that is, the percentage of jobs currently in the formal sector of the economy that would not be needed in a post capitalist society) Some estimates are excessive in my opinion – up to 90% in Ken Smith´s book, “Free is Cheaper” (a figure similar to that cited by Buckminster Fuller).
Are you aware of any detailed studies recently that might throw more light on this? Has the ICC published anything on it?
I think the percentage of ‘sectors’ that will be needed/continued post revolution massively depends on when we are talking about and what the specific context of the revolution is.
By post-capitalist society I assume you mean a society emerging from capitalism rather than one which has had time to form itself on its own basis. I say that because I would imagine that in communism any idea of easily definable ‘sectors’ will become more and more meaningless.
In terms of icc material this one cane to my mind but I’m not sure if it is specifically what you’re looking for
https://en.internationalism.org/content/16838/bordiga-and-big-city
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