Crisis of Neoliberalism or Crisis of Capitalism?

Stephan Hammel

Summary: Based on a talk given at the panel on “Revitalizing Revolutionary Theory and Practice,” Loyola University July 13, 2018, sponsored by Loyola University and the International Marxist-Humanist Organization. Discusses the drive to cope with so called underconsumption in the economy vs. the struggle to emancipate labor from the commodity form entirely.

Between 2009 and 2015 American capitalism threatened to breach its social contract. The financial panic of 2008 and the ensuing Great Recession tore the mask off of an intolerably unequal society whose most powerful economic agents were giddy on elaborately securitized debt, almost entirely unaware of systemic risk, and—most troubling—utterly unconcerned with risk given that the federal government would be forced to bail out the banking industry in the event of a collapse (should that government hope to avoid the end of the market system as we know it). The years that followed saw sluggish GDP growth, further wage stagnation, and the anger of a generation of millennials who, weighed down by student debt, discovered that their increasingly precarious labor conditions would all but guarantee that they would be worse off than the generation that gave birth to them.

The outlook since the fraught, painful, and thoroughly distracting presidential election season has been a different story.

Indeed, every mainstream media outlet the reports on the state of the US economy leads with a single statistic: the unemployment rate. Not what is known as the “real employment rate,” which counts discouraged workers and workers who are part-time but require full-time work to get by, a figure that stands at nearly 8%. But the official unemployment number, the one that only counts as unemployed those who have been looking for work in the previous month, a figure which stands at roughly half the real unemployment rate. Low unemployment has been the way our moment has chosen to understand the general health of the economy, a barometer presumably chosen to induce celebration. It is mostly overlooked that the growth in jobs has come at the bottom of the market. New, highly paid jobs in tech with excellent benefits, five weeks paid vacation and stock options are not what is on offer as position offers swell. Jobs are instead being created for low paid service employees such as full time Uber drivers, baristas, and call center drones. [It is worth noting that all of these are not only physically taxing (a driver’s legs ache at the end of the day), but primarily emotionally taxing. They combine boredom with routine customer abuse in what amounts to a hip, networked Sinclairian Jungle]

Consequently, there has been very little upward pressure on wages. After all, what robust labor organizations could make good on widespread service sector employment? As the Economic Policy Institute reports, nominal wage growth has been flat and workers’ share in corporate income has not recovered since the Great Recession. This has not stopped business news outlets from dripping sweat all over reports on shrinking unemployment. They report that companies, who understand that wage gains are always at the expense of profits, are aghast at the possibility that workers might discover their bargaining power. At the same time, those same outlets publish think pieces by befuddled economists musing about why there hasn’t been significant wage growth. It appears that, just as before, there are no mainstream experts on American capitalism, only opportunists and frauds.

Wage worry (perhaps this is better named: the fear that poverty might decrease) has been one of the only pieces of news that has successfully shaken stock markets in recent months. Those markets that have seen astronomical highs since Trump’s election. That are bolstered by his tax cuts, which rather than stimulate investment in means of production, or labor, have instead been used by firms to buy back their own stock, artificially buying its price. That stock market rally that fuels inequality given that a plurality of shareholders are in the highest income brackets. That rally that was unshaken by a federal investigation of the sitting president. That remains unshaken by the prospect of nuclear war.

What glitters on the surface of a semi-fictional unemployment figure, bubble-driven stock market rallies, and a presidential tweet storm of self-congratulation has succeeded in convincing a majority of Americans in recent polling that the economy is doing well. What this picture misses is the underlying reality, namely, the instability that haunts every capitalist system as an inherent property, and whose necessary mode of appearance is a cycle of boom and bust.

The beating heart of capitalism is its drive to valorize value invested. To make more money from money. And this, not only at the level of the individual firm, but of the system as a whole. The capitalist investor is obligated to seek the best return she can. And will decide on how to invest—and how much—based on the expected profit rate. It cannot be known in advance, so the interpretation of trends must guide planning. Capital will flow to those investments which can expect the best and surest returns.

The period since the crisis has seen a drop in the growth of capital stock in US and British firms. Less and less money is being reinvested into industry. It is attracted away by the returns available through finance. The slowing growth in capital accumulation, in turn, has caused a slowing in labor productivity. And ultimately, that leads to a slower growth in the economy overall. Even while current growth figures are high, even optimistic projections (barring Trump’s absurd campaign predictions) for the next several years all predict further slowing.

Stagnant productivity, growth, and reinvestment are all tied to the same phenomenon, namely, a decline in the overall rate of profit in the capitalist economy at large. In Volume III of Capital, Marx spells out what he takes to be the key contradiction in the process of capital accumulation. It remains the deepest explanation for crises, including the longterm crisis we face today. Put simply, Marx theorized that competitive pressures would cause firms to constantly revolutionize the means of production in every industry really subsumed under the capitalism. This would lead to a tendential increase in the ratio of value invested in means of production to the value invested in purchasing labor power. In other words, capital sheds labor from industry over time. But since value is created in the system through the application of living labor in the production process, the very drive to maximize profits at the level of the individual firm creates the conditions for a decline in the rate of profit at the level of the system as a whole.

It would be unnecessary to dive into rather arcane economic theory were it not for the political consequences of accepting this explanation. The Left often understands crises of capitalism to be crises of underconsumption. The workers, forever ground down to the level of subsistence by the structural greed of investors, are choked off from buying the goods produced by firms. This, too, is a model of internal contradiction. So, I suppose, so far so Marx. However, Marx’s theory is that capitalism drives innovation which undermines the conditions for the creation of new value as such. This always leads to underconsumption in practice. Goods sit on shelves in a crisis. But the underlying erosion is of the drive to invest. And that drive always regulated by expected profitability.

This is all by way of saying that the promises of social democracy (in the US, these can be listed in so specific order as: universal healthcare, an increased minimum wage, greater protections for union organization, etc.) would indeed improve conditions for the working class. But they come at the expense of a capitalist system that already feels enough desperation for profits that even a non-existent threat of wage pressure causes markets and the media to soft boil. The struggle to improve the lives of workers must be the struggle to emancipate labor from the commodity form entirely. To emancipate man’s essential capacities from the value form. And to free ourselves to produce for consumption, maximizing our capacities, skills and achievements for their own sake.

Technological development is not only the undoing of profitability and therefore of the system as a whole, but is also the key to any viable version of post-capitalism. It is often said (although no one knows to whom this quotation is properly attributed) that it is easier to imagine the end of the world than to imagine the end of capitalism. This doubtless rung true in the era of dark triumphalism that appeared in the wake of the fall of the Berlin Wall. It certainly rang true in the heady days of Occupy Wall Street. But it no longer does today. Today, even bourgeois futurists are all over YouTube imaging the end of capitalism. And socialists like Paul Mason have joined the chorus. Spurred by the creation of networks, by innovation for the sake of use rather than efficiency, and by the de-commodification of data, a post-capitalist reality might well be emerging. After all, mankind only sets itself tasks that it can solve. But any hope of achieving a new mode of production requires being clear about the mode of production we have. About the limits of social democracy. And the contradictions of value production.


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