Members’ Bulletin 2 THE CAUSES OF CAPITALIST CRISIS 1 CONTENTS A document on the Marxist theory of capitalist page 3 WHAT IS THE CAUSE OF crisis endorsed by the following members of THE CURRENT CAPITALIST the CWI: Steve Bush (E&W), Allan Coote (E&W), Sandra De Andrade (E&W), Steve Dobbs (E&W), CRISIS? Pete Glover (E&W), Georg Kumer (Austria), Rae Lewis-Ayling (E&W), Jordan Martinez (US), Alec Price (E&W), Wayne Scott (Scotland), Bruce Wallace (Scotland). A reply to Bruce Wallace and the Group of Eleven page 24 IN DEFENCE OF THE from the Socialist Party Scotland EC TRANSITIONAL PROGRAMME 2 WHAT IS THE CAUSE OF THE CURRENT CAPITALIST CRISIS? Theory and practice of Marxism which determines our perspectives, strategy and tac- tics, even if the issue appears at first glance something 1. The development of a new workers party in the next minor. period will almost certainly be achieved with the par- ticipation and guidance of the Socialist Party and the 5. The current capitalist crisis is perhaps the greatest in CWI. The last period has been extremely difficult for the history of the system, or at least since the Great the ideas of Marxism but the leadership and our mem- Depression of the 1930s. The crisis has been dubbed bers have established us as the most incisive current in the ‘Long Depression’ as capitalism on a global scale is the workers’ movement. attempting to limp back to recovery after the financial and industrial crisis of 2007-8. 2. Regarding both theory and practice, Lenin and Trotsky disagreed in the formative years of Russian Marxism. 6. For the working class who are facing the brunt of this But the disagreements of the early Marxists created the crisis and the austerity offensive of the capitalist class, mighty Bolshevik Party. This debate will strengthen the the articulation of a way out of the crisis is a central CWI as we move towards becoming the decisive force question and a crucial one for the forces of Marxism. in world history in the next period. This document is The movements in Turkey and Brazil, the Arab spring, written by comrades and friends in the same Marxist the Eurozone conflagration and the mighty move- organisation. This debate will be another milestone in ments in South Africa are not just the indirect out- the great history of our Party. come of the current crisis, but also pre-tremors of even greater upheavals to come. Therefore, a correct short 3. This document addresses the questions which we be- term and long term perspective, based on a thorough lieve are vital for comrades to grasp to further their examination of the economic evidence, is necessary to understanding of the Marxist theory of crisis and the map out a road for the working class and its leadership. centrality of the Law of the Tendency of the Rate of Profit to Fall, so that comrades are theoretically and 7. Our organisation needs an analysis of the crisis which politically armed for the class struggle and challenges can be used to 1) develop our cadre in the Marxist ahead. The intention of this document is to show that method - utilising the real living events that we are the CWI leadership have misplaced the Marxist theory presented with, 2) provide a correct, Marxist narrative of crisis and to highlight the dangers that this poses to explain the deeper fundamental reasons why work- for our organisation, and the fate of the future socialist ers are facing job losses, real terms pay cuts etc. (i.e. revolution. that the crisis is rooted in capitalist production) and 3) explain why only a socialist planned economy can overcome crisis. Understanding the crisis is vital 8. There is general consensus that the immediate trigger “And even when a society has got upon the right track of the crisis was the bursting of the housing bubble for the discovery of the natural laws of its movement (based on ‘sub-prime’ mortgages) in the USA. This has — and it is the ultimate aim of this work, to lay bare led many people to examine the horrors of the finan- the economic law of motion of modern society — it cial and credit system and lay the blame here. An un- can neither clear by bold leaps, nor remove by legal derstanding of how this works is indeed important in enactments, the obstacles offered by the successive providing a rounded out analysis. However, the Marx- phases of its normal development. But it can shorten ist method tells us that we need to dig a little deeper to and lessen the birth-pangs”. (Karl Marx, 1867, Preface find the root cause of the problem. This is where the to the First German Edition of Capital Volume I) discussion is needed within our party, because the leadership appear to be at odds with what we under- 4. Lenin (1921) wrote ‘‘Politics is a concentrated expres- stand to be a genuine Marxist understanding of crisis. sion of economics’’ and our economic analysis inevi- We view the current position as posing serious dan- tably translates into our political position and pro- gers for our forces in the stormy period ahead and that gramme. Therefore it is a profound misunderstanding the juncture of the crisis has been misjudged. to describe the present debate in the CWI over the causes of the current capitalist crisis as being a nar- rowly theoretical disagreement. It is, in fact, an impor- tant question for the working class and its leadership 3 WHAT IS THE CAUSE OF THE CURRENT CAPITALIST CRISIS? Uniqueness of capitalist crisis 13. Marx’s Law of Value explains that only workers create new value during production. Since capitalists need 9. Before the development of capitalism, the pre-capital- to obtain new value, profit, to accumulate and expand ist societies (slavery, feudalism etc) also experienced their capital, the maximum rate of capital accumula- crises. However, unlike capitalism, production was tion is therefore determined by the rate of profit. The fundamentally organised for direct use. For example, rate of profit is the amount of surplus value obtained the feudal serfs worked the land directly for themselves as a proportion to the value of capital employed in pro- and for their landlords. Crises occurred when they did duction. As the rate of profit falls, so eventually does not produce enough to meet their basic needs, such the rate of capital accumulation. For Marx, the rate of as in the case of a bad harvest or famine. These were profit was the motive force of capitalist production, the crises of under-production, in relation to need. soul which animates it. 10. Under capitalism, however, production is not organ- ised to meet human need. As Marx explained, capital- The falling rate of profit ism’s sole mission is to expand the value of capital. As capital is self-expanding value, the capitalists are the 14. Marx explained that the underlying cause of a crisis of embodiment of capital and subject to its laws. They over-production was the falling rate of profit in capital- must invest their capital for the production of com- ist production: modities, the realisation of the value congealed in these commodities and the subsequent reinvestment “[T]he rate of profit being the goad of capitalist produc- and expansion of capital value, which is the sole rea- tion..., its fall checks the formation of new independ- son for the existence of capitalism. As a secondary out- ent capitals and thus appears as a threat to the devel- come of this process, the capitalists are able to pocket opment of the capitalist production process. It breeds a portion of the new value created as money profit. over-production, speculation, crises, and surplus-capi- tal alongside surplus-population.” Marx (1894) 11. This continuous expansion of capital (“economic growth”) for the sake of expansion itself inevitably 15. The falling rate of profit shows capitalism meets the leads to periodic crises. These are crises of over-pro- limits of the capitalist mode of production itself: duction as Marx explained in The Communist Mani- festo: “The real barrier of capitalist production is capital it- self. It is that capital and its self-expansion appear as “In these crises, there breaks out an epidemic that, in the starting and the closing point, the motive and the all earlier epochs, would have seemed an absurdity — purpose of production; that production is only produc- the epidemic of over-production. ... Because there is tion for capital and not vice versa...” Marx (1894) too much civilisation, too much means of subsistence, too much industry, too much commerce.” Marx (1848) 16. The increasing productivity of capitalism manifests it- self as an economy-wide average falling rate of profit. This is because more machinery and materials, ‘dead Karl Marx on crisis labour’, are used during production in relation to ‘liv- ing labour’. Hence the source of new value, the working 12. A capitalist crisis is always a crisis of over-production, class, is squeezed out of production, so that less sur- but because capitalism is not organised to meet social plus value is produced in each commodity and there- need it cannot be described as over-production in re- fore less is realised per sale. All else remaining equal, lation to social demand. Instead, capitalism is organ- the rate of profit falls. This is the essence of The Law of ised so that capital can continuously expand in value. the Tendency of the Rate of Profit to Fall (subsequently This has historically been the progressive aspect of referred to as The Law) and the central tenet of Marx’s capitalism in developing the productive forces.