Cooking the Books: The Recession that Roared
‘It’s official: the Great Recession has ended. Growth set to match record peak of 2008’ was the front page headline in the Times of 9 May, anticipating the publication of figures which would show that in April GDP had reached the same level as in March 2008. This, after six years: ‘The British economy shrank 7.2 per cent in the 15 months from April 2008, before suffering the slowest on record’.
This was always going to happen sooner or later but the terminology is interesting. ‘Recession’ was a word introduced by economists in the 1950s and 60s to describe the small, short-lived reductions in production which occurred during the long post-war boom. It was meant to suggest that ‘depressions’ as larger, longer-lasting reductions had become a thing of the past. In this sense a ‘great’ recession should be an oxymoron, but bourgeois economists still cannot bring themselves to use the D-word.
The course of capitalist production is upward but in cycles: a boom ending in a ‘crisis’, followed by a ‘slump’, followed by a recovery, followed by another boom and so on. There is no such thing as a permanent boom as boom conditions inevitably lead to overproduction in one key industry in relation to its market and to this having a knock-on effect on the rest of the economy.
Equally, there is no such thing as a permanent slump. That’s because what happens during a slump (clearance of stocks, devaluation of capital, falling real wages, lower interest rates) creates the conditions for a restoration of profitability and so, in the profit-driven economy that capitalism is, for a recovery, however long this might take.
That is why, throughout the depression, we were always careful not to say that capitalist production would not be able to recover; in other words, that the capitalist economy had broken down and/or entered a period of permanent stagnation. Others were not so careful. A case in point being the Trotskyist group around the paper Socialist Appeal whose editor, Adam Booth, wrote in its 26 November 2013 issue an article entitled ‘The permanent slump – an organic crisis of capitalism’. This, he claimed, would have happened thirty years ago had workers not been lent money to buy things. He went on:
‘The use of credit to artificially maintain demand and avoid a crisis is a symptom of the contradictions of capitalism itself: primarily the contradiction of overproduction, due to the nature of capitalism as a system whereby production is in private hands and is only for profit, which means that – since profit is nothing but the unpaid labour of the working class – the working class (as a whole) can never afford to buy back (with wages alone) all that they produce. The current crisis is a reflection of this contradiction unravelling itself on a global scale. All the chickens have come home to roost for the capitalists, and now they – and society as a whole – are faced with an organic crisis of capitalism and a new normality.’
The fallacy here is that the market for goods under capitalism is confined to what workers can buy. But what workers can’t buy, capitalists can, not necessarily or even primarily consumer goods but the elements of production (raw materials, machinery, energy, factories, etc); in a word, investment.
The boom/slump cycle is in fact a reflection of the fluctuations in what capitalist firms chose to invest in the light of the prospects for making a profit.