Vol. 73/No. 1      January 12, 2009

The second excerpt is from issue 12 of New International, a magazine of Marxist politics and theory. Titled “Capitalism’s Long Hot Winter Has Begun,” it is a report given by Barnes to delegates at the SWP national convention in July 2002. Copyright © 2005 by New International. Reprinted by permission.

BY JACK BARNES  
The world capitalist economy has entered a long-term deflationary crisis, a contraction that cannot be fundamentally reversed by the ups and downs of the business cycle. With their profit rates under long-term pressure, the capitalists are in their “lean and mean” period, their “just-on-time” period, their “downsizing,” “computerizing,” and “de-layering” period. They are laying off workers and other employees, speeding up production, and raking in short-term cash in the bargain.

But the one thing the capitalists are not doing, and are incapable of doing, is expanding productive capacity to anywhere near the degree they need to fuel another gigantic boom, set industrial profit rates on a long-term upward course, and accelerate capital accumulation. Even as capitalists temporarily boost their returns by cutting costs and taking a bigger slice of market share away from their rivals, the long-run profit expectations of capital are such that they are still not investing in new plant and equipment that draws more and more workers into expanded production.

The money that is going into new equipment goes largely into ways to make us work faster to produce more with fewer coworkers. That does not expand productive capacity, however. It intensifies speedup and extends the workweek. But that alone does not create the basis for the rising profit rates and capital accumulation that marked the post-World War II capitalist boom until it began running out of steam by the early 1970s.

In fact, instead of issuing stock to finance expansion—the classic source of “capital formation” extolled in standard economics textbooks —U.S. corporations for most of the 1980s and 1990s have actually bought more previously offered stock from each other than they have issued in new shares. Capitalists have also issued large quantities of high-interest corporate bonds—gone deep into debt, in other words—to finance takeovers and buyouts.

So, the world’s propertied families have been fighting among themselves more and more to use credit to corner a bigger cut of the surplus value they collectively squeeze from working people. They have been blowing up great balloons of debt. But ever since the 1987 stock market panic, and at an accelerated pace since the onset of world depression conditions at the opening of the 1990s, the capitalists have been plagued by the problem that first one balloon, then another, and then yet another begins to deflate. And they have no way of knowing which balloon will go next until they start hearing the “whoosh,” and by then it is often too late.

All of us were children once and have blown up balloons. They can expand very slowly, very gradually. But then try to let the air out. That is harder to control. Remember? The balloons can get away and ricochet all over the room.

With returns on investments in capacity-expanding plant and equipment under pressure since the mid-1970s, owners of capital have not only been cost cutting; the holders of paper have been borrowing larger and larger amounts to buy and sell various forms of paper securities at a profit. They blew up a giant balloon of debt in Orange County over a period of years; the bondholders thought they had died and gone to heaven. Then the balloon began to deflate, as they learned the hard way that interest rates go up as well as down. When the balloon international bankers had inflated in Mexico in the 1980s began to collapse, the bondholders stepped in and blew it back up for a while. But in Orange County, the more local officials borrowed to make a killing using public funds to gamble with bond merchants, the greater their vulnerability became. Earlier this year, when rates started rising and low-interest bond issues were suddenly no longer available, the moment of truth arrived.

Now the capitalists and their public representatives—and not just in Mexico or Orange County—have been given another warning of the long-run possibilities of an uncontrollable deflation.

Over the past couple of decades, upturns in the business cycle have relied on floating large amounts of fictitious capital—ballooning debt and other paper values. The capitalists are now paying the piper for the lack of sufficient economic growth during that period to keep rolling over the loans.
 

Only a couple of participants at this convention, those close to eighty years old, have lived, as political people, through a world depression. Some of us have experienced two or three deep-going slumps since the mid-1970s. In one or another of these downturns stock prices dropped sharply over a number of years, unemployment shot into double digits in several imperialist countries, and there were sudden bursts of inflation. That’s different, however, from a deflation of such magnitude that the financial backbone of world capitalism—its debt structure and dominant financial institutions—buckles, production plummets, long-term joblessness spreads worldwide, and the great mass of humanity is hit by economic contraction or bouts of ruinous price explosions—sometimes both together. Masses of people lose faith in capitalism, but at first they just lose hope. Conditions of that kind, which have stalked the most vulnerable parts of the colonial world over the past decades, will become widespread and devastating. We’re not predicting such a world depression; we’re living through its very opening stages today.

To function effectively as communists in the world situation that is developing, we have to internalize an understanding of imperialism—the stage of world capitalism reached early in the last century. Until the contradictions of that exploitative and oppressive social system are resolved—and that can be achieved only by the proletariat taking power from the capitalists and landlords in the imperialist countries and joining in the worldwide struggle for socialism—humanity has no sure future.

As Lenin helped us learn, for the imperialist rulers “there is no such thing as an absolutely hopeless situation,” even when capitalism is in profound crisis. There is no hopeless situation for the bourgeoisie so long as state power is not wrested from it by the proletariat, led by a revolutionary movement that will not, at the decisive moment, fear the awesome responsibility of assuming power and shrink from taking it. And holding it.

Without such a revolution—without the insurrection that opens the road to workers power—the capitalist state and the employers will wreak devastating enough defeats on the working class through fascist terror, and will destroy enough agricultural and industrial productive capacity through wars as well as economic means that are “natural” (to capitalism) to restart a miserable but real revival of production and trade. They will continue dominating the earth, exploiting and oppressing the great majority of humanity, and threatening the very survival of civilization. So long as they don’t lose state power, the law of value guarantees that their system will start back up. They must only endure; we must conquer.
 
 
Related articles:
Auto bailout: huge cutbacks for workers
Bosses lay off thousands of workers throughout Mexico  
 
 
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