Cooking the Books I: Will capitalism collapse?
In fact, is it already collapsing? Yes, according to John Smith, author of Imperialism in the Twenty-First Century, in an article published online on 31 March ‘Why coronavirus could spark a capitalist supernova’ (tinyurl.com/yctydrvf ).
Likening capitalism to a supernova (a rather dubious analogy), a star which implodes before finally exploding, Smith sees the implosion stage as what happened after the crash of 2008. The trillions of dollars, he says, that the ‘neo-liberals’ spent ‘bought another decade of zombie-like life for their vile system.’ Then, after the dubious analogy, the bold prediction:
‘This time they will be lucky to get 10 months, or even 10 weeks, before the explosion phase of the supernova begins.’
Well, it’s not happened in the ten weeks since 31 March, so Smith is well on the way to making a fool of himself. We will have to wait till the end of January next year to see just how much egg there will be on his face.
There is a precedent for this. In August 1931, as the slump which followed the Wall Street Crash of October 1929 got worse, Jimmy Maxton, the left-wing leader of the Independent Labour Party, then still affiliated to the Labour Party, predicted:
‘I am perfectly satisfied that the great capitalist system that has endured for 150 years in its modern form, is now at the stage of final collapse, and not all the devices of the statesmen, not all the three-party conferences, not all the collaboration between leaders, can prevent the system from coming down with one unholy crash. They may postpone the collapse for a month, two months, three months, six months but collapse is sure and certain’ (quoted in our 1932 pamphlet Why Capitalism Will Not Collapse.
Smith based his prediction on an inevitable coming collapse of the price of shares traded on stock markets rather than on anything happening in the real economy such as overproduction in some key sector. Capitalism, however, is not driven by what happens on the stock exchange but by what happens in the realm of actual surplus-value production.
The stock exchange is a place where past profits are distributed and future profits anticipated. Those who gamble on the future profit-making of particular companies base these on information about what is happening in the real economy. To this extent a fall in stock market prices can be a sign that a slump in production is coming. But it is not the stock exchange crash that causes the slump but, rather, overproduction in some key sector that causes both.
There has been a slump, a quite drastic one in fact, but not caused by a stock exchange crash nor even by overproduction but by actions taken by governments to deal with the pandemic of an infectious disease. Governments deliberately shut down production by locking down all but key workers and requiring them to stay at home.
When the pandemic is under control or when, with the development of an effective vaccine, it is over, governments will allow people to go back to work and production to resume. Of course things might not go to plan and production might take longer to resume than they anticipate or hope, but in the absence of a movement that consciously aims to end capitalism and replace it with socialism, capital accumulation will eventually recover and resume its zig-zag upward course of ever-repeating cycles of booms and slumps.