Archive for the ‘Rate of Interest’ Category

The Crisis (Pt 11)

June 28, 2020

Is capitalism approaching its limits?

In the first years of the 20th century, Rosa Luxemburg expressed great alarm when she discovered that Marx’s formulas of expanded reproduction in Volume II of “Capital” suggested that capitalism can in principle go on forever. These formulas appeared to contradict Marx’s famous Preface in “A Contribution to a Critique of Political Economy.” There Marx wrote: “No social order ever perishes before all the productive forces for which there is room in it have developed [my emphasis — SW] and new, higher relations of production never appear before the material conditions of their existence have matured in the womb of the old society itself.”

If, however, capitalism can engage in expanded reproduction without limit, how can capitalism ever develop all the productive forces “for which it has room”? Didn’t Marx himself mathematically demonstrate that capitalism can develop the productive forces without limit? However, a closer look reveals this apparent contradiction to be an illusion.

In the Volume II formula, the productive forces expanded only quantitatively but not qualitatively. There is no growth in labor productivity or what Marx called the organic composition of capital — the ratio of constant capital, which does not produce surplus value but merely transfers its value to the commodities it helps produce, and variable capital, the sold labor power of the workers, which replaces its value and produces additional surplus value.

It is also assumed that the correct proportions of production, including the correct proportions between Department I, which produces the means of production, and Department II, which produces the means of consumption, are maintained without explaining how they are maintained. And — almost always overlooked — among the correct proportions between the various branches of production that must be maintained is that between the production of money material and all other branches of commodity production.

In reality, the concrete history of capitalism has been marked by growth in labor productivity. The rate at which productivity grows is largely regulated by the competition between the industrial capitalists and the workers. To maximize their profits, the industrial capitalists as the buyers of labor power try to pay the workers the lowest possible wage. The workers as the sellers of labor attempt to get the highest possible wage right up to the mathematical limit where surplus value — and therefore its monetary form, profit — disappears altogether.

If Marx’s formulas show expanded capitalist reproduction running forever, it must be assumed that the quantity of auxiliary materials and the ores out of which money material is produced, and the supply of labor power that produces the means of subsistence for the workers, must be available in infinite quantities. If this is true — which it obviously is not — then the population, including the fraction of the population that consists of workers, can grow to the mathematical limit of infinity and capitalism can indeed go on forever. Otherwise, it can’t.

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The Crisis (Pt 9)

June 15, 2020

After police murder of George Floyd, demonstrations and uprisings sweep U.S.

On June 1, a combined force of military police, park police, and Secret Service brutally cleared an area around the White House of peaceful demonstrators who had been protesting the May 25 murder by Minneapolis police officers of African-American George Floyd. To clear the crowd, these military-police forces used a low-flying helicopter, tear gas, and stun grenades. This was so that President Donald Trump could appear in front of a nearby church Bible in hand.

Trump, who had earlier been sheltering in a special bunker beneath the White House, threatened to invoke the Insurrection Act of 1807, which would permit him to order the military to suppress the massive wave of demonstrations and uprisings that have been sweeping the U.S. since the police murder of Floyd. Trump’s threat to use the military, if carried out, would be a major step towards a military-Bonapartist dictatorship.

Trump’s threats led to a wave of complaints by mostly Democratic politicians and warnings of some retired generals, including Trump’s former Secretary of “Defense” General James “Maddog” Mattis, not to use the military against peaceful demonstrators. Republican leaders, with a few exceptions, either supported Trump or maintained an icy silence.

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The Crisis (Pt 8)

June 7, 2020

The dollar system, gold and the U.S. empire

The current international monetary system is a system of “fiat currency” centered on the U.S. dollar. It is bound up with the financial, political, and military system unofficially called the U.S. empire. To maintain the empire, the U.S. spends about 10 times more on its annual “defense” budget than any other country. Therefore, when it comes to raw military power, especially firepower and the ability to project it around the globe, the U.S. is a military power second to none. Unlike in the pre-1945 world, no other imperialist power can even think of challenging the U.S. militarily.

The U.S. empire in its modern form — in contrast to the North American U.S. proper and the relatively small but growing colonial empire that the U.S. had been building since the Spanish-American War of 1898 — dates to the lopsided victory of the U.S. over Nazi Germany (1) and Imperial Japan in 1945. Thereafter, and this was confirmed in the Suez Crisis of 1956, [link to posts which discuss this] no other imperialist power can undertake a major military operation without U.S. approval.

This emerging situation enabled the U.S. at the Bretton Woods Conference — held in Bretton Woods, New Hampshire, in 1944 — to establish the U.S. dollar as the world currency and the U.S. Federal Reserve System as the world central bank. The dollar remains the world currency even though the U.S. dollar since 1971 has not been convertible into gold.

Originally, the U.S. built up a huge gold hoard by running balance of trade surpluses that were the result of the superior productivity of its industrial, extractive and agricultural enterprises. The size of the U.S. gold hoard was further increased in the 1930s when with a new European war looming, European capitalists moved much of their gold to the U.S. in exchange for U.S. dollars. Some European governments moved their gold reserves to the U.S. for safekeeping as well.

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The Crisis (Pt 7)

June 3, 2020

An unprecedented crisis

The current economic crisis has many unprecedented features. Most importantly, it was triggered by a pandemic and the resulting business shutdowns and stay-at-home orders. This led to a sharp decline in the sale of commodities. The result has been a collapse of industrial production, world trade, and employment over a period of a few weeks that is unparalleled in the history of capitalism. Because nothing like this had ever happened before, it is extremely difficult to predict what will happen next.

For example, we don’t know the future course of the pandemic as capitalist governments move, even as the pandemic continues, to lift the shutdowns of nonessential businesses and stay-at-home orders. Will these moves to “reopen the economy for business” cause the pandemic to accelerate? Or will the pandemic decline in the Northern Hemisphere, where the largest capitalist economies are located, as summer conditions set in? Many virus-caused diseases decline in the summer months and accelerate in the fall and winter. Will COVID-19 follow a similar pattern?

Even if we assume the pandemic peters out over the (Northern Hemisphere) summer and doesn’t come back this fall/winter, an extremely optimistic and experts say unwarranted assumption, will the U.S. and world economy revive rapidly in a so-called V-shaped recovery? Or will the recovery be slow and torturous, with Depression levels of unemployment lingering on for years? Or will it be something in between?

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The Crisis (Pt 6)

May 24, 2020

U.S. unemployment hits Depression levels

In April, the U.S. Labor Department U-3 measure of unemployment hit 14.7 percent. The U-3 rate had been used over the last year or so to claim that unemployment was the lowest since 1969. In fact, it is designed to greatly underestimate the real level of unemployment. Even some Federal Reserve Board officials admit that the real rate of unemployment is over 20 percent and fast approaching the all-time quasi-official estimate of 24.9 percent that occurred at the very bottom of the Depression in March 1933. Nobody denies that the number of unemployed in the U.S. is in the tens of millions — around 50 million if you believe AFL-CIO President Richard Trumka.

However, it is claimed by Trump and most economists that the current unemployment crisis is the result of the deliberate shutting down of the economy made necessary by the COVID-19 pandemic. What is occurring, according to this logic, is not the long-feared Depression II but the “Great Suppression.” Though unemployment generally declined after March 1933 — except for the sharp but short-lived Roosevelt recession of 1937-38 — “full employment” did not return until the U.S. had entered World War II in 1941. This time, it is claimed by Trump and many economists, in contrast to 1933 there is no underlying economic crisis. Therefore, “full employment” will return much more quickly. The pandemic will have run its course within months, as Trump claims, or at most within several years, as claimed by more cautious economists.

Therefore, the argument goes, while still a terrible situation it is not quite Depression II. Though unemployment may be as bad as during the Depression, it won’t last nearly as long. Anyway, Depression-level unemployment is the necessary price we have to pay to stave off the much greater evil of millions of deaths in the U.S. alone from COVID-19. Not surprisingly, Donald Trump, who had been planning on running on “prosperity and full employment” as shown by the Labor Department’s U-3 unemployment rate, is leading the charge to “open America for business.”

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The Crisis (Pt 5)

May 17, 2020

U.S. infection rates rise as states move to reopen

More and more U.S. states are moving to reopen non-essential businesses though there is no sign the COVID-19 epidemic is dying down. “Take the New York metropolitan area’s progress against the coronavirus out of the equation, Nicky Forster, Carla K. Johnson, and Mike Stobbe wrote May 4 in an Associated Press article, “and the numbers show the rest of the U.S. is moving in the wrong direction, with the known infection rate rising even as states move to lift their lockdowns. … ”

According to a leaked CDC document that appeared in The New York Times and Washington Post, the government projects that new COVID-19 cases will increase 225,000 a day by June, with deaths climbing to 3,000 per day. In early May, when this is being written, new cases are only 25,000 with deaths a mere 2,000. This despite all the social distancing and stay-at-home orders.

With President Trump leading the charge to reopen America for business, state and local governments are competing with one another for which one can lift the social distancing and stay-in-place orders the fastest. So far, these are the only policies that have slowed the pandemic in some areas.

In reality, the pandemic is still gaining momentum nationwide. Thanks to Trump and various state and local governments, the spread of COVID-19 in the U.S. could very well accelerate further in the coming months. A similar pattern is emerging in other capitalist countries. Of course, the growth of the pandemic in one country, particularly one as large as the U.S., is a threat to people of all other countries, since the virus does not respect national boundaries.

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The Crisis (Pt 4)

May 10, 2020

May Day strikes

On May 1, International Workers’ Day, a wave of worker and renter strikes swept the United States. Workers protested the dangerous conditions in which they are forced to work during the COVID-19 pandemic. Among the companies struck were Amazon, Walmart, FedEx, Target, Instacart, Shipt, and Whole Foods. The May Day strikes show the increasing influence the internationalist traditions of the world workers’ movement is having on the U.S. working class, especially among the lowest paid and most exploited workers. The current medical-biological-economic-employment crisis has only deepened this tendency.

Also, and this should be noted, the internationalist implications of the global May Day holiday stand in complete opposition to the traditional AFL-CIO union leaders, Bernie Sanders, and many progressives and newly minted “democratic socialists” going down the disastrous road of economic nationalism and China bashing. Trump and the other economic nationalists, both Democrats and Republicans, are trying to divert attention from the disastrous mishandling of the pandemic by the U.S. government — both federal and state — to China. More on this in the coming weeks.

‘Party of Order’ versus Sanders

As we saw last week, Bernie Sanders has for many years operated well within the limits of capitalist, or — to use traditional Marxist language — bourgeois, politics. He has done nothing to organize an independent workers’ party or an independent workers’ media, either print, radio-TV or Internet. Nor is he internationalist like the working-class leaders of the past, such as Sanders’ personal hero Eugene Debs. Rather, Sanders is an economic nationalist and an imperialist dove.

Why then is the Party of Order so hostile to Sanders? As its leaders know full well, capitalism has in many countries survived presidents and prime ministers far more radical than Bernie Sanders. No knowledgeable person believes that U.S. capitalism would be in danger of being abolished under a Sanders administration.

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Political and Economic Crises (Pt 15)

January 12, 2020

Trump orders assassination of top Iranian general

On Jan. 2, 2020, Donald Trump ordered a drone strike that the next day assassinated among others General Qassem Soleimani, considered Iran’s leading general and one of the most powerful and popular leaders of the Islamic Republic. Soleimani was killed at the Baghdad airport while on a diplomatic mission aimed at improving relations among Iran on one side and Saudi Arabia and the United States on the other. The murder of such an important military and political leader while on a peaceful diplomatic mission has few if any precedents in the history of diplomatic relations stretching back over thousands of years. Rather, Trump’s action is straight out of the history of the 20th-century New York mob.

This has brought the U.S. to the brink of full-scale military war with Iran, and frankly, as I write these lines it is hard to see how this war can be avoided. The U.S. is already at war with Iran in the economic and political sense. Iraq’s Parliament has now demanded that the U.S. withdraw its 5,000 troops in the country, which are supposedly there to fight ISIS, though the U.S. has announced it has now “suspended” its war with ISIS.

Trump responded by saying he will refuse this demand unless Iraq repays the U.S. for the “aid” it has given Iraq and threatened Iraq with vicious sanctions if it does not withdraw the demand. For its part, Iran has announced it is finally pulling out of the nuclear accord it signed under Obama that exchanged intrusive inspections for promises by the U.S. and its imperialist satellites to relax economic sanctions — dial back economic warfare. These events have raised the chilling possibility that the year 2020 could be for this century what 1914 was to the last.

Trump’s action should remove the illusions shared apparently by the government of Russia and even a few progressives that, however racist and reactionary he is, in other ways Trump is part of some right-wing “isolationist” anti-war tradition that opposes the “Wilsonian” imperialism that has long dominated the Democratic Party, and since at least 1940 the Republican Party as well. In reality, Trump’s economic and political nationalism has always pointed in the direction of war, not peace, whether Trump personally wants war or not. History shows that the beginning of a major war brings with it a “rallying around the commander in chief.” Such an effect could considerably increase Trump’s chances of reelection. True, as the experience of many countries shows, as wars drag on public support for the war and the government turns into its opposite. But by then, Trump may be thinking, the election of 2020 will be far behind him.

In general, there seems to be an unofficial rule that U.S. presidents don’t start major military campaigns in election years. Otherwise, every president facing dubious reelection prospects would be tempted to start a war. But Trump’s Bonapartist and autocratic tendencies mean that he does not feel bound by such a rule, any more than he feels bound by the rule that the president should not criticize the Federal Reserve System.

However, while Trump’s unstable personality and autocratic tendencies are extremely dangerous factors in the current crisis, it is not the main factor behind the current war danger. The roots of the current war crisis can be traced back to George W. Bush’s decision to invade Iraq — supported by Democratic Senators Hillary Clinton and Joseph Biden — on March 19, 2003. The Bush administration intended to create a new Iraqi puppet government that would provide a thin veneer over what would amount to U.S. colonial control of Iraq.

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Political and Economic Crises (Pt 14)

December 8, 2019

The Democrats’ impeachment of Donald Trump

The public impeachment inquiry hearings held in November by the Democratic majority in the U.S. House of Representatives brought into the open the increasingly bitter rift between Donald Trump on one side and the professional apparatus of U.S. imperialism on the other. Left in the lurch was the Republican faction of the “Party of Order.”

Witnesses called by the Democrats were members of the imperialist apparatus — called the “deep state” by some. These include diplomats such as former U.S. Ambassador to Ukraine Marie Yovanovitch, Russian “expert” Fiona Hill, military officer and White House National Security advisor lieutenant-colonel Alexander Vindman, among others. These people have all made careers advancing the interest of U.S. imperialism and its world empire.

The impeachment inquiry finally allowed these men and women in the “trenches” of the U.S. world empire to unveil their bitterness and even hatred of Trump and his aides such as his personal attorney and former Republican Mayor of New York Rudy Guiliani. For these “professionals,” Trump, Guiliani and the others are corrupt blundering amateurs who are in well over their depth when it comes to defending the interests of U.S. imperialism.

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Political and Economic Crises (Pt 13)

November 11, 2019

Trump faces impeachment

On Oct. 31, 2019, the U.S. House of Representatives passed a resolution by a vote of 232 to 196 that established procedures for the ongoing impeachment inquiry into President Donald Trump. No articles of impeachment — equivalent to counts in a criminal case — have been passed or even drawn up against Trump. The resolution only establishes the technical procedures under which the impeachment probe in the House will proceed.

The vote was almost entirely along party lines. Two Democrats who come from districts that went for Trump in 2016 voted against the proposed procedures. One congressman, who was until recently a right-wing Republican but is now strongly anti-Trump and calls himself an independent, voted for the resolution.

The vote indicates that Trump will probably be impeached in the House. It is possible that new revelations about Trump’s conduct in office could cause — or provide a pretext for — the Republicans to turn on Trump, forcing him to resign or be removed by a vote of two-thirds of the Senate. This is what happened in August 1974 during the Nixon impeachment crisis. But at this time it appears a long shot. Assuming that Trump is acquitted as expected in a Senate trial, he will be in office until Jan. 20, 2020 — or until Jan. 20, 2024, if he wins a second term.

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