“The only thing we learn from history,” the great German dialectical philosopher, Hegel, wryly noted, “is that we learn nothing from history”.
This statement can be aptly seen in relation to the short-lived bouts of false optimism that have occasionally overcome the capitalist commentators since the beginning of the current global crisis in 2008. Devoid of any deeper analysis of the processes underlying this world economic crisis, the superficial, shallow, and short-sighted bourgeois pundits cannot help but get carried away by their own talk about the “green shoots of recovery” that have perennially blossomed.
Needless to say, such glimmers of hope are quickly dashed upon the rocks of reality as the recovery recedes and the spasmodic nature of capitalism’s growth in an epoch of stagnation and decline becomes apparent. Buoyant moods soon turn into their opposite, and the ruling class and its representatives are once again plunged into a pit of pessimism and despair.
On the up?
One has to look no further than a recent front cover and editorial from the Economist magazine – a reliable mouthpiece for the thoughts of the more serious capitalists – to see such misplaced exuberance in action. Depicting a flotilla of balloons rising above the dark clouds of crisis, the cover of the Economist (dated 18th March 2017) proudly proclaims that the world economy is now “on the up”.
“Today, almost ten years after the most severe financial crisis since the Depression,” the liberal publication continues, “a broad-based economic upswing is at last under way. In America, Europe, Asia and the emerging markets, for the first time since a brief rebound in 2010, all the burners are firing at once.”
Memories are short amongst such types, it seems. Anyone who has regularly read the Economist and other similar pro-capitalist periodicals in the almost decade-long period since the onset of the crisis will know that proclamations of “green shoots” are as predictable as the seasons themselves – as is the inevitable doom-and-gloom that follows normally only months (or even weeks) later as the fundamental contradictions in the global economy rear their ugly heads once again.
Indeed, the Economist even notes with some trepidation their previous erroneous predictions: “The past decade has been marked by false dawns, in which optimism at the start of a year has been undone—whether by the euro crisis, wobbles in emerging markets, the collapse of the oil price or fears of a meltdown in China.”
Remarkably, the big business journal even goes on to describe some of the spectres that continue to haunt the capitalists. “China’s build-up of debt is of enduring concern. Productivity growth in the rich world remains weak. Outside America, wages are still growing slowly. And in America, surging business confidence has yet to translate into surging investment.”
One would expect such serious (and correct) concerns to provide some sobriety to the Economist’s later assessment. But why let such Cassandra predictions ruin the party?! The economy is growing! Let us rejoice and enjoy the euphoria while it lasts! Yes, we were wrong in the past, the authors admit, but this time “things are different”!
The task of Marxism, by contrast, is to look beyond the immediate “facts”; to uncover, instead, the key processes taking place; and to explain the main contradictions driving these processes forward. Rather than being dazzled and blinded by the shimmers on the surface, we must delve beneath and examine the situation scientifically in all its complexity and totality.
When we step back and take a deep breath, we see how ephemeral and insubstantial this so-called recovery really is. By the Economist’s own admission, the positive signals they have identified are “strongest from the more cyclical parts of the global economy” – in other words, not robust growth, but the result of unsustainable ultra-loose monetary policy and the temporary effects of fiscal stimulus. In short, the impact of a short-term adrenalin hit.
Genuine growth under capitalism, as Marx explained, can only come from productive investment; that is, from the capitalists reinvesting their surplus – i.e. profits – into new productive forces: into industry, infrastructure, and technology, etc. The flickers of growth seen under capitalism today, however, are not of this nature, but are driven by speculative bubbles and credit-fuelled consumption. As the Economist article notes, quoting James Stettler, an investment specialist at Barclays Capital, “no one’s really pushing the button on capex [capital expenditure] yet”.
The problem facing the capitalist class is that the underlying causes of the crisis have not been resolved: on the one hand, the enormous level of “excess capacity” that exists in terms of production on a world scale; and, on the other, the eye-watering burden of debt that hangs like an albatross around the neck of the global economy, weighing down on demand and clogging up the veins of circulation.
Again, the Economist’s writers are even willing to concede that these issues have not gone away, and are in fact responsible for the anaemic growth seen in the last period. “False dawns were perhaps to be expected,” the authors acknowledge; “recoveries from debt crises are painfully slow.”
“Spending suffers as borrowers whittle away their debts. Banks are reluctant to write off old, souring loans and so are unable to make fresh new ones. And the world has had to shake off not one debt crisis, but three: the subprime crisis in America; the sovereign-debt crunch in Europe; then the bust in corporate borrowing in emerging markets.”
At root, these – like the other ongoing concerns that the Economist mentions about China’s debt pile, weak productivity growth, stagnant wages, and so on – are all symptoms of the fundamental contradiction that remains within the system: that of overproduction, which is the root cause of this organic crisis of capitalism.
Ironically, the unjustified confidence that the Economist shows in relation to the current “green shoots” of growth is entirely at odds not only with previous overly-auspicious assessments, but also with their own analysis from…a week earlier!
In an article entitled “borrowed time”, another Economist author puts forward a rather different and more downbeat long-term perspective about capitalism’s future prospects. Commenting on the theory of “secular stagnation” – a more level-headed analysis put forward by some bourgeois economists to explain capitalism’s enduring weak growth and persistent low investment rates, excess savings, and stalled productivity – the magazine’s journalist warns that, “Now that the economic outlook is brightening a bit…it is tempting to laugh off the idea of secular stagnation as a bit of crisis-induced hysteria. Tempting, but also premature.”
Our earnest columnist continues:
“But the most devilish aspect of the secular-stagnation story is that good times do not necessarily indicate underlying health. The persistent gap between desired saving and investment that it describes can result from a scarcity of attractive investment options…But it can also be driven by the concentration of income among those with little inclination to spend. Income inequality could contribute to stagnation, for instance, by leaving a shrinking share of income in the hands of the poorer households that would most like to spend.” (our emphasis)
In other words, the continued problems facing the world economy of low growth, etc. are a product of the inequality and concentration of wealth that capitalism creates, as explained by Marx 150 years ago in the pages of his magnum opus, Capital.
The Economist article carries on with more foreboding words:
“In such cases, the bonds of secular stagnation may temporarily be broken by a period of financial excess in which bubble conditions drive speculative investment, or in which groups short of purchasing power borrow from those with savings to spare. The reason to doubt the solidity of this recovery is that we have been in such circumstances before, only to watch it end in tears.
“In the late 1990s, for example, soaring tech stocks drove a wave of investment in internet infrastructure which yanked the American economy out of a jobless recovery. When that fever broke, the economy slumped again, until the global financial system found a way to funnel credit to American households looking to buy or borrow against a home. In the euro area, thrifty core economies lent heavily to the periphery, often against soaring property prices, fuelling an economic boom that ended disastrously.” (our emphasis)
So, the author understandably asks, “Is this time different?” The conclusion: probably.
In particular, the Economist notes,
“Across advanced economies, private debt as a share of GDP is above the pre-crisis level and rising fast. Most dramatic of all has been the increase in borrowing in China, where private debt as a share of GDP has nearly doubled since 2008. It seems very unlikely that the world economy would have escaped its deflationary doldrums without this vast credit expansion, which has kept its building boom rumbling along.”
The future for the world economy, then, might not be quite so bright and rosy as initially suggested, then.
So what are our sombre journalist’s solutions?
One possibility, we are informed, is that, “firms might suddenly find new capital projects in which to invest: thanks, perhaps, to technological advance.” Alternatively, “an effort to reduce inequality could be a way out: the rich could be taxed and their wealth redistributed rather than lent.” And finally, the author suggests, is the option of “a massive public-investment campaign”.
In each case, it is clear that the Economist columnist is left clutching at straws.
On the first hopeful suggestion, it should be emphasised that the capitalists are already failing to invest in new technologies: on the one hand, because of the “excess capacity” – i.e. overproduction – that exists; and, on the other hand, because of the barrier that private ownership and production for profit have become to the development of the productive forces. Why would the capitalists invest in machinery and automation when they already produce too much for the market to absorb; and when they can instead employ and exploit an army of cheap, low-wage, precarious labour?
In terms of the second point: of course we wholeheartedly support the idea of redistributing the wealth in society and making the rich pay for this crisis. But who is going to do this? Does our benevolent journalist seriously believe that the ruling class will take so kindly to his/her suggestion for the rich to hand over their money? And, most importantly, if the means of production – the means by which new wealth in society is created – are left in private hands, then what will prevent this extreme inequality and secular stagnation re-emerging once again?
Finally, then, is the call for Keynesianism; for a government stimulus in “new roads and railways, electric grids and broadband”. But isn’t this exactly what has been done in China since the beginning of the 2008 world crisis? Isn’t this precisely what has led to the enormous Chinese debts that the Economist elsewhere warns are continuing to threaten the stability of the global economy? And isn’t it Chinese Keynesianism that has added to the fragility and volatility of the capitalist system, exacerbating the crisis of overproduction and pushing world politicians further in the direction of protectionism? The answer to all three questions is a clear and resounding “Yes”.
The most sobering element in the equation to remember in relation to the capitalist commentators’ “false dawns” of recovery, however, is the political factor. Since the onset of the crisis in 2008, and its later reflection as a crisis of the Eurozone and of “emerging economy” debt, it is clear now that the main source of instability for the Establishment are the plethora of political crises they face.
As the Economist correctly notes,
“Populist victories in Europe’s various elections could bring about a crisis for the euro…Or Mr Trump might make good on the repeated threats he made in his campaign to raise import tariffs on countries he considers guilty of unfair trade, thus taking a decisive step away from globalisation just as the world’s main economic blocs are at last starting to get into sync.”
Added to these, we might also include any number of other turbulent international events, such as the train-crash of Brexit that Prime Minister May has initiated, which threatens to tear apart the Tory Party, the “United” Kingdom, and even the EU itself.
Marxists do not possess any crystal ball. The future is increasingly uncertain; as such, any predictions can only be of a conditional character. But as we have stated and emphasised elsewhere, we live in an epoch of sharp turns and sudden changes, where the world can be turned upside down and the status quo shattered in the space of days or even hours. And whilst a temporary economic stabilisation or weak recovery may be possible over the backs of the working class, the longer-term prospects for capitalism remain that of stagnation, decline, instability, and crisis.
What we can say for certain is that the period ahead will be one of intense class struggles; of political polarisation and radicalisation – in which the ideas of Marxism will increasingly find an echo amongst a new generation of revolutionary fighters. Socialism is back on the agenda.