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U.S. facing recession
Recessions inevitable under capitalism
By Nathan Johnson
Our economy suffers recession because of “overproduction,” as 8 million people die of poverty each year. How can capitalism cure world hunger when “overproduction” causes recession and poverty? Capitalism can’t.
All signs indicate the United States is in the beginning stages of a recession, which is predicted by many economists to be more intense than the early 2000s recession. Surprised? You shouldn’t be; recessions are inevitable under capitalism. In U.S. history, there have been at least 25 so far.
Pre-capitalist societies were plagued by crises of scarcity, but capitalist recessions are actually crises of overproduction. When the market is glutted with commodities businesses cut down on production and layoff workers, which increases job competition and lowers the average wage; which means the working class will earn a smaller wage; which makes it harder to buy up those extra commodities on the market.
It should be pointed out that the crisis of “overproduction” is from capital’s point of view, not humanity’s. Our economy suffers recession because of “overproduction,” as 8 million people die of poverty each year.
How can capitalism cure world hunger when “overproduction” causes recession and poverty? Capitalism can’t.
The growth in productivity that causes the overproduction is a result of the growing concentration of capital. The more human labor is replaced by mechanized labor, the greater the productivity of labor and capacity to produce greater quantities of commodities.
People get fired when machines replace their labor, and can’t earn wages until they find another job. When automation outpaces the working class’ ability to maintain full employment, (a condition marking periods of economic prosperity,) overproduction ensues.
It’s a law of capitalism that capital concentrates into fewer and fewer hands. When this concentration proceeds too rapidly for the capitalist framework, overproduction arises and ignites recession, forcing a large percentage of capital to lie idle.
The concentration of capital is a permanent feature of capitalism; likewise recessions will recur again and again so long as the means of production are the private property of capitalists under the influence of the profit motive. Capital thus becomes a fetter to the development of the productive forces, to society’s detriment.
The overproduction as such does not cause the crisis; rather, it causes the inability to draw profit from unsaleable goods. The falling rate of profit isn’t coincidental: Marx discovered that the rate of profit has a tendency to fall, amidst counteracting influences.
The rate of profit is given by p’= s/v+c where “s” is surplus-value (profit), “v” is variable capital (wages) and “c” is constant capital (raw materials and machinery). Machinery is always replacing human labor, meaning c’s value has a tendency to rise, and as the denominator of the equation rises, everything else held constant, the rate of profit declines.
While an individual corporation will gain a greater profit by increasing its productivity of labor through labor-saving machinery, once the rest of the industry adopts the same technology the rate of profit will equalize. Investments flood into industries, producing above average profits, until competition brings down the rate of profit to the average rate, which will now be lower than before, since the ratio c:v has increased.
Counteracting forces to the rate of profit’s decline includes intensifying the pace of work, decreasing wages, economizing the cost of machinery and increasing exports or expanding the market. However, the structural tendency for the rate of profit to decline can’t be reversed under capitalism any more than objects on earth can escape the pull of gravity.
There will never be a crisis-free capitalism. Capitalist society is, after all, a class society. The government cannot eliminate the class character of capitalism, however hard politicians try, (and they are not trying very hard at all, I might add,) just as all their anti-cyclical policies cannot prevent recessions. This demonstrates the primacy of capitalism over the state. The state caters to capitalism, not the other way around.
Fredrich Engels, who elaborated on the Marxist theory of the state as the product of irreconcilable class conflicts, wrote, “It is, as a rule, the state of the most powerful, economically dominant class, which, through the medium of the state, becomes also the politically dominant class, and thus acquires new means of holding down and exploiting the oppressed class.”
Only planned economies, the antithesis of the market, eliminate the business cycle and crises of overproduction, among other absurdities of capitalism.
In socialist society the issue of overproduction is overcome in an easier manner: declaring a vacation. If workers produce a surplus of non-perishable goods, then why shouldn’t they be allowed to rest? Just to make sure, the democratic unions that manage the economy will take a vote amongst the workers, “Which would you rather have, a vacation or recession?”
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