Manual Long Cycles: Prosperity and War in the Modern Age

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Finally there is a crash. And a good thing too. The recessions are essential for the profitability of the capitalist economy. Weak companies, with old-fashioned technology, will go bankrupt. Their technology will either be junked or bought-up cheaply by better-run companies. Machinery in general will be cheapened during the downturn. So will labour power. There will be more unemployed; workers will be forced to accept lower pay. Debts and speculations will be wiped out in bankruptcies. Stronger companies will buy up resources from weaker ones, creating larger corporations.

All these factors clear the way for a more profitable economy. And so there will be a new upturn, moving toward a new period of prosperity. The collapse of the crisis was essential for clearing out the deadwood and preparing for the new and bigger upturn. There are counter-tendencies to the tendency of the rate of profit to fall. The business cycle, particularly the downturn, mobilises these counter-acting tendencies and restores profitability.

There are a number of such counter-tendencies. For example, the rate of turnover, from investment to the sale of products to reinvestment, varies from industry to industry. In itself, this may cause disproportionality. But the more rapid the turnover, the higher the rate of profit. Imperialism, in its various forms, also increases profits. It brings in commodities with lower costs and bigger profits than can be produced at home. The main counter-acting tendencies are caused by the very expanded productivity which due to the increased organic composition of capital causes the rate of profit to fall in the first place.

Expanded productivity makes cheaper less valuable commodities. If this becomes widespread, then the constant capital bought by the industrial capitalist the machines and materials become cheaper. Whether or not the capitalist goes out and buys the cheaper machines, the ones the capitalists keep will lose their value, become cheaper. If the capitalist makes the same profits as before, it is now compared to cheaper investment costs, and therefore the rate of profit goes up.

The same is even more true for the other costs of the industrial capitalist, the wages of the workers. As productivity increases in general, the goods which the workers buy to maintain and reproduce themselves become cheaper. The use-value of the goods they earn remains the same while the exchange value of their pay goes down. This lowering of pay may be done by directly cutting it or — less provocative to the workers — by inflation. The use-values the workers can buy may stay the same — or even increase! So surplus value increases, without necessarily lowering the standard of living of the workers.

This trend also makes it difficult to tell if the workers in a more industrialised country, with a higher standard of living, are being more or less exploited than workers in a poorer country. Further, capitalist firms get larger and larger, more and more concentrated see below. This does not directly counteract the fall of the rate of profit. But it does produce larger amounts of surplus value in one place. This goes far to counter the immediate effects of the falling rate. On the other hand, the larger enterprises get, the more capital is needed for investing in them, which a falling rate of profit makes it harder to acquire.

The tendency of the falling rate of profit is a major factor in the business cycle, behind disproportionality and over-production. Historically it is countered and set right by the downturn phase of the cycle, which restores capitalism to profitability. So the system lurches forward. Does this mean that the counter-acting effects can so compensate for the falling rate of profit that over the long run it becomes meaningless? It is observable that, over time, the organic composition of capital including the value composition has increased, despite counter-acting tendencies.

John Henry may have used a sledge hammer but he was beaten by the steam drill, which has since been replaced by gigantic automated mining equipment. Shovels have been replaced by earth-moving machines as big as houses. Steel puddling by almost-automated factories. Horses by trucks, railroads, and airplanes. Paper and pencils by computers. True, the difference in value between a pickaxe and an earthmoving machine may be less than their difference in weight.

Yet the tractor does cost much more than the shovel. And the number of workers it takes to dig the same size hole has gone way down. This should lead to a long term trend toward a lower rate of profit. For Marx, capitalism has a beginning, a middle, and an end. What was that beginning like? To the classical political economists, when they dealt with the question at all, capitalism began with small businesses in the nooks and crannies of feudalism.

Gradually they made more money for their owners, until they could afford to hire some employees. The first workers were available to be hired because they had not been as industrious as the original businesspeople. As in the fable of Aesop, the workers had been lazy grasshoppers while the original capitalists had been hand-working ants.

Eventually the capitalists became rich enough to displace the feudal lords. To begin with, this pretty story overlooks the violent upheavals of the Cromwellian British revolution, the US revolution, the French revolution, the South American and Caribbean revolutions, and the failed European revolution. But some of this story was true, no doubt. There were blacksmiths and artisans who did build up their original capital; there were merchants who carried goods between widely separated markets until they decided to directly invest in production here or there. However, this misses the main dynamic of the beginning of capitalism.

For capitalism to begin on a large scale, even in only one country, it needed two things: the accumulation of masses of wealth in the hands of a few people who could invest it capital , and secondly, free workers who were available for work in factories and fields under capitalist discipline. In Europe, these two things were achieved through violence, legally and illegally: driving peasants off the land, replacing them by sheep; taking away the common grazing lands which had been open to all peasants and giving them to the lords; forcing poor people to wander the highways; cutting the benefits to the poor and unemployed, and so on.

On a world scale, the European rulers seized continents and subcontinents — in the Americas, India, other parts of Asia, Australia, and Africa. Black people were forced into slavery far from their homes while Native Americans faced genocide. European people were settled on land once owned by others. The Asian-Indian economy was destroyed by foreign imports, even as natural resources from gold to cotton were robbed from them.

Marx was fully aware of the interaction of class, nationality, and race in the origins of capitalism. Sometimes Marxists, and even Marx himself, criticised anarchists for supposedly under-emphasising the role of economic forces and over-emphasising the power of the state. But when discussing primitive accumulation, Marx was quite clear about the key role played by the state and other forms of organised violence.

While capitalism may be said to have created the modern state, the state may also be said to have created capitalism. Marx did not directly discuss the effects of primitive capitalist accumulation on gender. This was concentrated in the 16 th and 17 th centuries, and somewhat before and after. Led by the church, but including state authorities, a hue and cry was raised against women who were accused of following a heretical sect, composed almost only of women, which supposedly worshipped the devil. Special tribunals were set up, methods of torture were standardised, and witch hunting manuals were published.

The numbers of women so persecuted is unknown. Some estimates run into the millions, but the best estimate is that, over three centuries, about thousand were accused of witchcraft, of whom thousand were killed Federici, It is impossible to know how many of these people were just women whom someone disliked, how many were midwives or herbalists, how many were practitioners of pre-Christian religions, and how many were genuine worshippers of the devil.

If any were. The witch hunt was an attack on half the population, mostly focused on poor women in the cities and countryside.

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The campaign against supposed witches was part of general misogynist sentiments promoted by the church and state. It divided working people, causing men to cling to male privileges even while their general conditions were being undermined. It drove women out of the traditional workforce. While Marx does not discuss the role of women in the capitalist economy, it is implicit in his theory. Of course, women may work in paid jobs, as do male workers, and Marx describes their actual conditions in the factories and mines. In that case they were paid less than men for the same work, being more vulnerable.

Female paid labour is common now. That women workers are directly exploited does not cancel out that there may be positive effects also, such as increased individual independence. But there was another, and more fundamental role for women, which applies to women not as waged workers but as non-waged members of the working class. The working class — as a class — is broader than those who are immediately employed; it includes children, the unemployed, the retired, and wives and mothers who labour in the home. The commodity labour-power of the workers mostly male included what was necessary to recuperate them, to let them rest-up and be able to work another day.

The work of doing this also fell on the women. This included passing on the necessary social psychology and ideology to the children. In all this, the women at home were not directly creating surplus value but were producing reproducing the necessary labour power commodities of their husbands, children, and themselves. He speculated that class society grew out of the original oppression of women.

The above is not at all an adequate analysis of how women are oppressed; but it is clear that the oppression of women, in the family and in the workplace, is thoroughly intertwined with capitalist exploitation as it had previously been with pre-capitalist forms of exploitation. Marx and Engels noted the way early capitalism was destroying the biological environment.

They saw human labour as the way humans interact with nature, satisfying human needs while maintaining a biological balance. The most important factor, to them, was the split between city and country, between industry and agriculture, between town and farmland. Kropotkin and other leading anarchists several of whom, like him, were professional geologists and geographers were also to raise this as a problem, well before the modern Green movement.

What Marx and Engels noted was that the farms and the cities were increasingly separated. Agriculture drained the soil of nutrients, which had once been returned to the soil through local consumption of food and the use of animal and human manure. But now the animal and plant nutrients were shipped over increasing distances to cities. Their eventual waste was not returned to the land, but polluted the cities and the rivers and lakes around them.

Meanwhile waste products from production — coal dust, dyes, cotton dust, etc. Engels walked through Manchester, the centre of British industry, and noted the ill-health of the working class, the filthy conditions they lived in, and the diseases which spread through their quarters. Of course, since then we have learnt a great deal more about the ill effects which capitalist production has on the ecological environment and on general health.

But Marx and Engels saw this quite early. During the epoch of primitive accumulation, the capitalists were able to accumulate wealth by robbing the land of its nutrients and by not paying to keep their cities clean or their working classes healthy. These were not simply matters of indifference or ignorance; they were a way to accumulate riches, to increase values. That is, in the earliest stage, capitalism is weak.

It must rely on non-market forces primitive accumulation for overall protection, in order to expand. This process may be said to have begun as far back as the 14 th century, but reached its high point in the 17 th to 18 th centuries. In the 19 th century capitalism may be said to have really taken off, first in Britain and then as a world system. As this is the height of its well-being as a system, it relied mainly on market forces to batter down all obstacles to expansion. This was the hey-day of capitalism! It was also the time when the working class and socialist movements begin to grow.

It was when Marx wrote his books and led the First International, and in which Bakunin started the anarchist movement. Last is the final epoch, beginning in the early 20 th century, when capitalism has reached its limits and its contradictions threaten to tear apart all society. This will be discussed in the next chapter.

There are no sharp divisions among the three epochs. They are just abstractions to help us conceptualise the history of capitalism. They overlap in their traits and tendencies. Primitive non-market accumulation, including violence by the state, continued during the height of market capitalism and expanded again during the final epoch of capitalist decline.

For example, in the epoch of primitive accumulation, there was a vast expansion of African enslavement in the Americas. This lasted into the 19 th century and was only ended through revolutionary violence in various countries Haiti, the US, parts of South America, etc.

However, the special oppression of African descendents continued. In the US, Jim Crow segregation laws not customs, laws continued through the end of the 19 th century and the early 20 th century and were not abolished until the late 20 th century. Even now, African-Americans remain oppressed, discriminated against, and mostly at the bottom of society. Capitalism does not seem to be able to end its racism.

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Every previous social system had reached an end and the same will be true of capitalism. From forms of development of the productive forces these relations turn into their fetters. Production for value holds back the production of useful goods for all. Capitalism becomes less competitive; it revives older methods of non-market, statist, support; it returns to primitive accumulation.

Of all the improvements in productivity, including automation, computers, and nanotechnology, the most significant which capitalism has created is the international working class. This class exists in concentrations in cities and in industries, working collectively and co-operatively unlike peasants who generally work their own farms and usually want to be prosperous businesspeople. This class, with its hands on the highly productive new technology, could lead all the oppressed to create a new society, without classes, or states, or warfare, or ecological destruction.

Marx and Engels did not live to see the actual epoch of capitalist decline beginning about or so. All of them had important insights, although only Rosa Luxemburg was influential in the development of libertarian-democratic Marxist trends. However, I am going to stick as close as possible to the actual theories of Marx and Engels. That Marx had been correct in describing an epoch of capitalist decline was easily believed from onward. There was the historically unprecedented First World War. This was followed by the shallow prosperity of the twenties and then by the worldwide, decade-long, Great Depression.

There were revolutions and near-revolutions throughout Europe, the Russian being the closest to successful. Other revolutions failed in Germany, Italy, and Eastern Europe. There were big labour struggles in Europe and in the United States, as well as national rebellions in China and elsewhere. Eventually all the revolutionary struggles were defeated and replaced by totalitarian regimes. In the Soviet Union Stalinism wiped out the last remnants of the Russian revolution anarchists believe that it was Lenin and Trotsky who first betrayed the revolution by establishing a one-party police state.

Fascism came to power in Italy, Germany, Spain, and other countries. Even slavery was revived, as a state measure, under Nazism and Stalinism. Finally the period ended with the destructiveness of World War II. I will discuss the post-war boom below. What was the underlying nature of this epoch of capitalist decline? The political economists took for granted the continuing reality of a competitive capitalism, where many firms competed in a market and took the prices and rate of profit which the market enforced. Marx was one of the first to point out the drive of capitalist enterprises to grow larger and larger.

That this has come to pass is well-known. The trend was toward merger of all the capital of one country into one, which would lay the basis for state capitalism. However, this tendency was interfered with by counteracting forces as usual! Nor did the growth of huge firms end competition. The huge enterprises still competed with each other. Even if they were monopolies in their fields, they competed with other monopolies for example, even a firm which monopolised aluminium would compete with the steel monopoly. Giant firms often found it useful to use smaller firms as the auto producers distribute through dealerships.

New inventions arise which can force their way into the political economy as personal computers did. And there are international firms: for decades no US firm could break into the domination of the auto industry by GM, Ford, and Chrysler. Then giant auto makers from Japan, Korea, and Germany with backing by their states were able to successfully compete with the former Big Three. This includes distortion of the law of value the tendency of commodities to exchange according to the amount of socially necessary labour they embody.

But even distorted markets are still markets; even distorted value relations are still value relations. Marx saw the growth of centralised big business as mostly progressive. He was aware that it caused great suffering for the workers, but he believed that it laid the basis for socialism communism , the end of classes and poverty.

Anarchists had a more critical attitude toward the growth of big business. They agreed that it made possible someday a co-operative, non-profit, system of production: socialism. Often firms merged solely for financial reasons, or in order to increase their power over the workers, or to have better access to markets.

Such weak reasons often caused these semi-monopolies to break apart after a while. It is sometimes stated that Marx predicted that the growth of concentrated capital would end the existence of middle layers between the stock-owning bourgeoisie and the working class. This is not true. Marx did expect that small businesspeople, independent professionals, and small farmers would decline in numbers with the growth of big business.

Long Cycles: Prosperity And War In The Modern Age

But he also predicted that huge firms would cause a split between the ownership of capital and the job of managing the firm. As capitalist enterprises expand, the capitalists themselves become superfluous, at least to the productive aspects. The managers manage. The capitalists invest in the stockmarket. This new layer of managers and supervisors has basically two tasks. One is the technical co-ordination of the various work taking place. This is something which would have to be done in any economic system. Under socialist democracy, it might be done by the workers meeting to plan their work, or the workers might elect a co-ordinator, or they might take turns.

To the extent that the capitalist managers are doing necessary technical work, they are part of the collective labour that produces the commodities. On the other hand, they are agents of the capitalists and personifications of capital. For Marx, the replacement of family-owned and managed firms by ever-larger stock companies points to the end of capitalism, its last phase. He thought that the growth of semi-monopolies would result in more state involvement in the economy as well as the growth of finance and speculation all of which came true.

He did not think that all workers would be immediately and constantly driven to extreme poverty. He knew that workers could be relatively well-paid, while still being exploited. He expected that workers would earn higher pay during periods of prosperity in the business cycle. For a time, this evolves into a relatively stable value of the commodity labour power. But the capitalists will continue to press the workers, especially when profit rates decline discussed further below and when the bosses feel stronger due to increased centralisation.

Increased productivity permits the capitalists to keep or even lower the value of what they pay the workers, while maintaining their standard of living as judged by use-values. This is at least until the crisis gets so bad, the profit rate gets so low, that the capitalists have to attack the workers and drastically cut their wages. The workers fight back to maintain the standard of living for themselves and their families-and, if possible, to improve it. This is good, but in itself, Marx said, it does not directly challenge capitalist exploitation as such.

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Nevertheless, their domination by the ever-increasing power of the capitalists worsens. Meanwhile, increasing productivity the increasing organic composition of capital continues to decrease the proportion of human labour which is needed in production. People lose jobs, which expands the reserve army of the unemployed, the pool of unemployed workers. Their poverty and misery does get worse over time, and threatens to pull down the standards of even the organised employed workers.

How is the tendency of the rate of profit to fall affected by the tendency toward oligopoly, monopoly, and even complete unification state capitalism? Clearly, productivity continues to increase, which raises the organic composition of capital, which should decrease the rate of profit. But does it? The giant firms can raise their prices and thereby their profits, without worrying that other capitalists will invest in their field and bring down the prices and profits.

Because of their monopoly position, they can keep out other possible competitors by definition; this is what makes their position a monopoly. Their monopoly or semi-monopoly position may be due to ownership of patents or to their huge size. It takes a great deal of capital to break into the US steel or auto industries which is why it took foreign giants to do it. Therefore the giant firms may get and keep a disproportionate amount of the surplus value produced in society. Which means that the weaker, smaller, firms are getting proportionately less the surplus value has to come from somewhere.

Another effect of concentrated and centralised big businesses is that they produce large amounts of surplus in one place. While the rate of profit may not be high, the lump sum of any one corporation will be large. This does not change the actual rate of profit, but it changes the effects of the declining rate of profit. A large, concentrated, sum of money can be used for further investment in a way that the same sum of money, scattered around in small firms, cannot. Large firms may also increase profits due to economies of scale in production.

However, as anarchists and other decentralists Borsodi, Schumacher, etc. For example, a centralised factory which produces all the wickets in the world may produce them much cheaper than would local wicket-making workshops. But the factory would have to import raw materials, machinery, and workers from great distances, and then to ship the finished wickets great distances. This creates costs which local production would not have.

These diseconomies of scale may be one factor in the splitting up of overlarge semi-monopolies. Whether the costs of distribution balance the advantages of centralised production has to be determined empirically, but rarely is. But technology has changed a great deal since then, and he did not calculate for regional production.

Also, monopolies and semi-monopolies are under less competitive pressure and therefore may be less inventive and productive. Monopolies tend to stagnation. On the one hand this produces less surplus value. On the other hand, by slowing down growth in productivity, it slows down the growth of the organic composition of capital and therefore of the fall in the rate of profit.

How this balances out is an empirical matter. But in the long run, the fall in the rate of profit cannot really be counteracted by other causes of stagnation. However, the most important effect of the growth of large concentrated firms on profit rates is its effect on the business cycle. If the cycle goes all the way through to the final crash as it did in , under oligopolistic capitalism the crash will be very bad indeed. The businesses are huge so their fall will be huge. They owe huge debts, to other companies and to the banks.

They employ large numbers. They buy and sell from each other as well as from many smaller firms. Their boards of directors overlap. So if any of them fall, the effect on the whole of the economy is enormous. The problem of getting an oligopolistic economy back up on its feet is also enormous. While classical bourgeois economists claim that an economic slump will always cure itself, Keynes argued that this was no longer automatically true.

In the age of semi-monopolies, he was right. It took a world war to finally end it see below. Therefore the capitalist class and its economists and politicians have determined not to let another Great Depression happen. Governments and central banks will do all they can to prevent another Depression. The usual methods are economic stimuli and subsidies, tax cuts, and monetary manoeuvres which decrease interest rates. Assuming these methods work, for a time at least, they may not completely banish the business cycle and its crashes, but they may modulate them, make them less disastrous. However, this has an unintended consequence.

Lesser downturns cannot do their historical task of cleaning up the capitalist economy. As the costs of doing business do not decline, so the rate of profit does not get a boost, counteracting its tendency to fall. The shallowness of the business cycle in the s, which bourgeois economists were so proud of, was preparing the way for greater disasters. Increasing wealth by non-market, or at least non-value-producing, methods never went away, even at the height of capitalist development.

Now it has returned with a vengeance. This newer primitive accumulation applies above all to the looting of nature. The ruling class acts like the capitalist management of a firm which sells its commodities for the equivalent of variable capital, constant capital, and the average profit. After selling its commodities, it should put aside money from the equivalent of the constant capital to eventually pay for new machinery and buildings when the old ones wear out. But instead, it does not.

It counts its equivalent of constant capital instead as part of its profit, thus creating what seems to be a larger profit than it is really earning. A part of its profits is really fictitious. Perhaps it uses some of the constant capital value to buy off the workers with higher pay counting it as variable capital. The day will come when its machinery will wear out. Then this seemingly prosperous firm will fail because it cannot replace the machines. The bourgeoisie of the US and the rest of the world should have been putting aside wealth to prepare for a transition from oil, coal, and natural gas to renewable energy.

It should have been paying to clean up the environment and preventing global warming. Instead it has been counting its wealth as profit and buying off a layer of the working class with an apparently decent standard of living. Meanwhile our whole civilisation is built on carbon-based fuels oil, coal, and natural gas. Not only our transportation system, but also our food which relies on artificial fertiliser and artificial pesticides, made from oil.

And there are all the things we use plastics and artificial fibres for from oil. But these are limited, non-renewable, raw materials, which sooner or later will run out-and meanwhile get harder and harder to get to. They pollute our foods, our land, our air, and our water. And they are causing global warming, which will cause a world wide catastrophe. Sometimes, when gasoline prices go up, liberals claim that the oil companies are deliberately over-pricing it. This may be immediately true, but in the long run, it is the opposite of true. Because the oil companies do not include the costs they will eventually need in order to reach hard-to-get oil or to develop new energy sources once current oil sources run low, they are all under-pricing the real costs of oil production!

The conservatives claim that to change to renewable energy and an ecologically sustainable economy would be difficult and expensive; the conservatives are correct. Nor is this looting of nature just a matter of oil and energy production. The oceans are being over-fished to extinction. Other species are being wiped out.

Capitalism treats the world as though it were an inexhaustible mine. Marx and Engels did not foresee all this; they expected a socialist revolution well before humanity got this close to the edge. But their tools help us to understand it. Not to mention the existence of pre-capitalist imperialism, such as the Roman empire or the Chinese empire. Marx wrote a fair amount about the imperialism of his time in his political writings and anthropological notebooks — especially about the British rule over India, China, and Ireland, the Dutch rule over Indonesia, the Russian rule over Poland, and the French attempt to conquer Mexico.

But he did not write much about its economics. Marx regarded foreign trade by the industrialising capitalist countries of Western Europe as an essential background to their development. Driven by the need to make profits, the original industrial capitalist regimes went abroad to exploit the labour force, the raw materials, and the consumer markets of poorer nations. Marx wrote that capital in the developed countries would take advantage of cheaper labour and the higher levels of exploitation in the poor nations.

The directly capitalist methods were tied up with primitive accumulation, the looting of local peoples of their wealth by force and fraud. Although formal colonialism the ownership of other countries by the imperial home countries is mostly over, the looting continues today, through investments, high-interest-rate loans to governments including by the IMF and the World Bank , unequal trade, control over international patents, etc. He saw it as laying the basis for industrialisation and modernisation in the poorer nations, a way to break them out of as he saw it the stagnation of pre-capitalist societies.

Yet he was aware of the suffering which capitalist imperialism caused among ordinary people, the destruction of harmless ways of life. He was sympathetic to anti-imperialist rebellions, as in India and China. Today it is clear that once capitalism reaches its epoch of decay, imperialism is a completely reactionary phenomenon. There are various Marxist theories of current imperialism, which I will not review in this introductory text.

Suffice it to say, that the giant semi-monopolies of the rich countries dominate the world market, driven by the need to make profits and accumulate value. As such they also dominate the poorer, oppressed, countries, in order to drain them of their wealth. To maintain their power, the capitalists of the imperialist nations can use the military forces of their national states to invade and occupy the weaker countries. Implicitly, they also use them to warn off rival imperialist states. This is most true for the rulers of the United States. In competition with other imperial states and needing to oppress poorer countries, the great imperialists have repeatedly gone to war with each other and with the oppressed nations.

They have developed weapons of such awesome power that they could wipe out civilisation and perhaps exterminate life on earth. They did not prevent many smaller wars by the imperialists against oppressed nations. Now that the Cold War is over and the Soviet Union as such is gone, nuclear bombs are more widespread than ever before.

They are under the control of more, often unstable, governments, as well as the increasingly desperate imperialist states. This remains an extremely dangerous situation for human survival. The epoch of capitalist decline has a political effect. At its birth, the ideologues of capitalism developed the program of bourgeois-democracy. It was based on the nature of capitalism itself. All people were supposedly equal, free, atoms in the marketplace and therefore they should be free and equal citizens in the state.

Similarly, all citizens should be equal, with one adult person, one vote. This implied representative governments, land to the peasants, national self-determination, and freedom of speech and association. There should be no oppression or discrimination based on anything but lack of money. Of course, capitalism has never lived up to its promised program! Every expansion of democratic rights was won by the blood of the people fighting the capitalists. Yet over time, there was an expansion of bourgeois democratic rights and general freedom.

The right to vote was expanded in country after country. Absolute monarchies were replaced by either republics or, at least, constitutional monarchies. Slavery was abolished. And so on. The problem, as Engels and he came to see it, was that the expansion of capitalism meant the expansion of the working class. The bourgeoisie became more afraid of the proletariat than they were of undemocratic, authoritarian, rulers. A successful revolution against the feudal aristocracy would inspire the workers to continue the revolution into one against the bourgeoisie.

Increased democracy would be used by the workers to organise themselves against the capitalist class. This would threaten the bourgeoisie. In their Address of the Central Committee to the Communist League March , Marx and Engels drew the lessons they had learned from the defeat of the — European revolutions.

They concluded that the workers should support the liberal democrats against authoritarian states, but never trust them; they will sell out the struggle for fear of the working class. The workers should organise independently of the bourgeoisie, even of its most liberal wing.

Long cycles : prosperity and war in the modern age - Ghent University Library

In its epoch of decline, capitalism ceases to be a champion of even bourgeois democracy. To win stable, lasting, consistent bourgeois-democratic rights, it is necessary to go beyond capitalism all the way to socialist democracy. Marx and Engels noted the rise of the semi-autonomous bourgeois state, with a bureaucratic-military executive, serving capitalism overall but not directly controlled by the capitalist class. It is therefore assumed to be part of the Trotskyist program a variant of Leninism. Actually, permanent revolution was first raised by Marx and Engels. Trotsky and others picked it up later and elaborated on it.

He changed his views on this later, but the other Leninists never accepted his or any other theory of permanent revolution. After the end of the Second World War, most economists predicted a return to depression conditions. This included most bourgeois economists as well as almost all Marxist economists. This did not happen. In apparent contradiction to the theory of permanent revolution, fascism was overcome in Europe except for Spain and Portugal and bourgeois democracy restored.

Increasing numbers of colonised nations won their political independence. To most people, it looked as if any notion of capitalism being in decline was preposterous. Still there remained some problems. On the world scale, capitalism remained unable to industrialise the poorer nations. Even the Western European countries took decades to rebuild their prosperity. The imperialist countries continued to get into colonial wars the biggest for the US being in Korea and Vietnam. As mentioned, the existence of nuclear weapons was something to worry about.

The whole of the South was impoverished and held back by its vicious anti-Black laws. The unions abandoned their efforts to organise the South. Millions of African-Americans lived under a form of totalitarian repression. A right-wing anti-communist hysteria swept the nation, driving leftists out of the unions and out of employment, attacking freedom of speech and association. The economy as a whole still went through business cycles, from boom to bust, even if in a shallower, more moderate, fashion than before.

If, as I claim, capitalism has been in its epoch of decline, then it is necessary to ask some questions: What caused this post-World War II boom even with its limitations? Did it disprove the concept of the epoch of the decay of capitalism? My answer, briefly, is that what the Great Depression could not do to restore capitalism to apparent health, the world war could do. The Depression could not do enough to destroy the values of constant capital, but the world war destroyed constant capital itself — factories, machines, roads, buildings, and raw materials went up in flame all across Europe and Asia.

These were rebuilt after the war with the most modern, productive, technology. Similarly the value of variable capital — the commodity labour power — went down with the massacres and social destruction of the war around the world. It took decades for the educated and skilled workers of Europe to regain their pre-World War I standard of living. In this case, though, capitalism also benefited from thirty years of working class defeats, of failures to make revolutions, and of successful counter-revolutions, with the horrors of Nazism and Stalinism.

That culminated in the period right after World War II, when social democratic and Stalinist parties held back working class struggles everywhere. The US economy was pumped up through the massive stimulus of military spending, far more than the New Deal had ever attempted. High levels of military spending continued after the war, both of conventional armed forces and of nuclear-armed missiles and bombers.

Concentration was increased on a world scale as international imperialism was reorganised. The British empire and the French, the Dutch, etc. The dollar became the dominant world currency. In the US, the war was followed by an expansion of debt and speculation, particularly in the fields of FIRE finance, insurance, and real estate. Meanwhile there was an explosion of the automobile industry, which expanded the steel, rubber, and glass industries, highway construction, and resulted in the construction of suburbia. These forces countered the long-run tendencies of stagnation and decline.

They did not run out of steam until the middle of the s. From to the mid 70s, the world capitalist economy began to slide downhill again with ups and downs , deeper into stagnation. Liberals wondered, if the state could spend so much money on war and preparing for war, why not get the same economic effect by spending funds on socially useful causes: healthcare for all, new schools, the natural environment, houses for the homeless, etc.?

In the most abstract sense, this could be done. However, there are class reasons why the capitalist state cannot provide vast funds for social purposes. Even in Western Europe, social services have been under fierce attack for some time, although they start from more benefits than the US population ever had. Quite simply, the capitalist class does not intend to let a large chunk of its collective profits total surplus value be handed over to the working class. This would cut down overall profit, and politically strengthen the workers. With more social support to fall back on, the workers might be more willing to strike and to demand higher pay.

Socially useful products, such as houses, food, medical care, etc. This would not do, from the viewpoint of the bourgeoisie. This is not why they have a bourgeois state! On the other hand, military spending is acceptable because it is a direct state subsidy to big capitalists. It does not compete on the market place no one makes nuclear missiles for private sale, not legally.

It channels value to some of the biggest corporations. I am focusing on the economic effects of military spending, but I do not deny that it does have its uses for the empire. The US does need materiel in order to invade little countries. But the economic basis of military spending becomes obvious every time the government considers adding new weapons or cancelling old ones. The companies which make them throw their lobbyists into high gear. They whip up the workers who make these products to demonstrate and organise.

The politicians from the areas where they are made and even from completely separate areas demand the construction of this product, just as their capitalist masters donors to their re-election campaigns tell them to. But armament spending has an inherent weakness. When tractors, for example, are produced, they can be used by farmers to grow things. If bulldozers are built, they can used in the following production cycle to make buildings. But what if the government pays businesses to produce tanks? Once in existence, the tanks either stay at home, producing nothing, or they are sent abroad, where they destroy things.

This is even more true for intercontinental nuclear missiles. Much value goes into making them, but they are not to be used and hopefully will never be used. Whatever their political or military significance, economically they are the same as paying people to dig big holes and fill them in again. Suppose the government decides to make some missiles. It has a fund of money, some from taxes ultimately from the pool of surplus value and most from borrowing selling bonds. It pays a capitalist firm to make them including what the firm counts as profit.

The firm buys necessary material constant capital , such as steel and machines. The firm hires workers variable capital to make the missiles. BUT while all this paper bonds, stocks in the arms company, money has increased and continues to circulate, there are no new products on the market! It is sick enough to think of an economic system which sustains itself in large part by preparing for mass nuclear death. It is even sicker to have an economy which sustains itself by effectually producing… nothing.

This is the epoch of capitalist decay. These represent past loans of money to the state, money which has been spent by now. Yet they can be bought and sold as though they were real. Marx goes further:. Nor are arms production or other forms of public expenditure the only creation of fictitious capital. When houses go up in price in a housing bubble but nothing new has been added to the housing, and there is no new real wealth , this is fictitious capital.

When oil is produced and the profits do not take into account the future need to pay for reaching hard-to-get oil, that is fictitious capital. Rent of land which has not been improved by human labour is fictitious capital. Wealth created by primary accumulation is fictitious capital. When there is speculation on stocks and bonds, with increasingly remote relations to the real economy which they supposedly represent, this is fictitious capital.

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During times of prosperity, it is taken for granted that the paper wealth represents real wealth and can be turned into real wealth whenever needed. Meanwhile the paper or blips on a computer screen is bought and sold, exchanged and rearranged, making everything look prosperous and profitable, despite the stagnation in the real economy.

Especially when the profit rates of the real economy stagnate or decline due to the falling rate of profit and the growth of monopoly , then there is pressure to make money by investing in ever-more fictitious capital. This refers to the increasing investments in loans and exotic derivatives.

What is true is that the banks have become semi-monopolies and are integrated with the rest of oligopoly-financial capitalism. In a downturn, suddenly there is a dash to turn the paper into real products, or to make sure that they do represent real commodities e. The need for goods and services which have been produced by socially-necessary labour reasserts itself, as the economy goes from fictitious value to real value. It turns out that there is much less value than there has been fictitious value. As in a game of musical chairs, a lot of capitalists have nowhere to sit.

A big crash, at the end of a business cycle, would clear away a lot of that fictitious capital. But the long prosperity which has modulated the cycle has prevented such crashes. Therefore the amount of fictitious capital — of debt and financial speculative instruments — has continued to increase to mountainous proportions, of government and private forms. This continues to put pressure on the system for a real, big, crash to re-stablise the system.

Marx divided the economy roughly into a Department I producing constant capital and Department II producing consumer goods. Mostly Department II provides for the working class variable capital. The workers need their food, housing, healthcare, and entertainment, in order to re-enter the cycle of production — that is, to go to work the next day.

The capitalists also consume commodities, of course. However, their gourmet meals, mansions, and yachts are luxuries; they do not re-enter the cycle of production, because the capitalists are not necessary for production. Marx treated this as a sliver of Department II, unproductive consumption.

It is distinct from the productive consumption involved in using up goods in the process of producing surplus value. The middle layers of society mostly work for the capitalists directly or indirectly and are paid for out of surplus value they do not create new surplus value. These are non-reproductive production , or unproductive consumption. Government arms production, fictitious capital, primitive accumulation, and financialisation went a long way to keep capitalism going after World War II.

The apparent prosperity lasted for about 30 years. Since then it has been downhill and getting worse. There is a reassertion of the underlying tendencies of the epoch of capitalist decay. That is what we are now living through and will continue to live through, I believe, until there is either a collapse of civilisation or a working class-led revolution. My reason for discussing the post-war boom was not to lead up to an analysis of the current economic crisis or to predict the future.

It was to demonstrate that the period of apparent prosperity did not contradict the concept of the epoch of capitalist decay. As previously quoted, Marx described a tendency of capitalism to develop larger and larger firms, in spite of counteracting tendencies toward breaking down into smaller units. The trends toward centralisation and concentration were due to accumulation growing larger , competition some firms beating other firms and absorbing them , the class struggle getting larger in order to better dominate the workers , and the use of credit and fictitious capital, among other factors.

Semi-monopolisation caused increasing intervention by the state in the economy, to support the giant firms. The overall trend, Marx noted, was toward a single, merged, firm he did not say whether he expected this trend to ever be completed. By implication, this did not end competition, since even a single national firm would be in the environment of the world market, in competition with other giant firms.

Engels thought this passage so important, that he repeated it when he took parts out of Anti-Duhring to make his pamphlet, Socialism: Utopian and Scientific. Rather than criticize Marx for things about the historical Marxist movement which they dislike, they blame Engels.

They claim to understand Marx better than did his long-time political partner and dearest friend! If true, this should raise questions about Marx; how come he could not explain his ideas even to Engels? Engels, after all, was a very bright person, even if not a towering genius like Marx. They reject the idea that dialectics should be applied to nature and physical science at all, rather than only to human society.

Unfortunately for their opinion, Marx is known to have read over Anti-Duhring and discussed all of it with Engels before its publication. Marx contributed a chapter to it — which he would hardly have done if he disagreed with major parts of it. The anti-Engelsian Marxists also blame him for the reformist development of the German Social Democratic Party and the other parties it influenced. By World War I that party supported the imperialist war and the monarchist government which waged it.

Perhaps, but only if we include that he had been unhappy with the rightward trends in the party for a long time, and said so. But he did not make a fight, hoping that the class struggle would straighten things out. On the other hand, it had been Marx who had advocated the policy of building working class parties to run in elections, independent of the bourgeois liberal and conservative parties.

It had been Marx who had declared that it might be possible for such parties to come to power peacefully through electoral means, at least in Britain or the US. He usually added, though, that such an event would probably be followed by pro-capitalist military rebellions. In fact, this was the biggest practical difference between Marx and Bakunin in the First International.

In my opinion, historical hindsight shows that the anarchists were right. I do not mean to argue here about dialectical materialism or electoralism. Nor do I deny that Engels and Marx were different people with different styles of thinking or writing. In fact though, since trusts were based on distinct companies which got stronger or weaker over time, they tended to eventually break up.

The more it proceeds to the taking over of the productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers-proletarians. The capitalist relation is not done away with. It is rather brought to a head. Engels was saying that the culmination of corporations, trusts, and monopolies, is state capitalism although he never actually uses the term.

He did not say whether he expected this to happen or was just describing a tendency. They are the state and as such the personification of capital. That is, they would exploit the workers in a capitalist fashion as opposed to the methods of feudalism, or slavery, or of some new class society. He expected that the bourgeoisie will still be there, living as stock-owning parasites, but not actually managing anything.

By contrast, Bakunin predicted that a completely statified economy would develop a new ruling class out of better-off workers and socialist intellectuals. They did not connect this to their writings on capitalist statification. They felt that these societies e. Under state capitalism, the proletarians will still be there not slaves or serfs but proletarians.

They will be selling their commodity labour power to the collective capitalist, the state, and will work to produce commodities, including more commodities than their labour power is worth, that is, surplus value. He did not comment on the continuation of competition internationally, between the national state capital and other capitals either similar state capitalisms or other sorts of monopolistic businesses. It is implicit, in my opinion. The trend toward integration of the state and the capitalist economy has long been observable.

Capitalist governments have owned railroads and other productive enterprises, even automobile factories or coal mines. Even now, when the right-wing anti-Keynesians have won hegemony over economic discourse, statism has not really ended. Meanwhile they are champions of increased police and military power for the state. But complete statification did not come through the merger of traditional capitalist monopolies.

In these countries weak bourgeoisies were overthrown, but the working class was also too weak to take power or, in the Soviet Union, perhaps, to maintain power. The powerless bourgeoisie he postulated had been wiped out. And the system covered itself in a pseudo-socialist, semi-Marxist, ideology, to justify itself and to confuse the population. Individual bureaucrats lived far better than did ordinary workers. They could not directly pass on their property to their children, but, by education and contacts, their children were guaranteed places in the bureaucracy. The state remained a capitalist state, a bureaucratic-military-centralised instrument of capital accumulation.

After the fall of the Berlin Wall in the democratisation of the old Soviet Union seemed inevitable. In the s Russia took a few drunken steps in that direction under Boris Yeltsin. But at the end of he resigned and handed power to Vladimir Putin, a former KGB operative who has since been both prime minister and president twice.

This postmodern tsar has destroyed the substance of democracy in Russia, muzzling the press and imprisoning his opponents, while preserving the show—everyone can vote, so long as Mr Putin wins. Autocratic leaders in Venezuela, Ukraine, Argentina and elsewhere have followed suit, perpetuating a perverted simulacrum of democracy rather than doing away with it altogether, and thus discrediting it further. The next big setback was the Iraq war. This was more than mere opportunism: Mr Bush sincerely believed that the Middle East would remain a breeding ground for terrorism so long as it was dominated by dictators.

But it did the democratic cause great harm. Left-wingers regarded it as proof that democracy was just a figleaf for American imperialism. And disillusioned neoconservatives such as Francis Fukuyama, an American political scientist, saw it as proof that democracy cannot put down roots in stony ground. A third serious setback was Egypt. But the euphoria soon turned to despair.

Mr Morsi treated democracy as a winner-takes-all system, packing the state with Brothers, granting himself almost unlimited powers and creating an upper house with a permanent Islamic majority. Along with war in Syria and anarchy in Libya, this has dashed the hope that the Arab spring would lead to a flowering of democracy across the Middle East. Meanwhile some recent recruits to the democratic camp have lost their lustre. Since the introduction of democracy in South Africa has been ruled by the same party, the African National Congress, which has become progressively more self-serving.

Turkey, which once seemed to combine moderate Islam with prosperity and democracy, is descending into corruption and autocracy. In Bangladesh, Thailand and Cambodia, opposition parties have boycotted recent elections or refused to accept their results. All this has demonstrated that building the institutions needed to sustain democracy is very slow work indeed, and has dispelled the once-popular notion that democracy will blossom rapidly and spontaneously once the seed is planted.

Western countries almost all extended the right to vote long after the establishment of sophisticated political systems, with powerful civil services and entrenched constitutional rights, in societies that cherished the notions of individual rights and independent judiciaries. Yet in recent years the very institutions that are meant to provide models for new democracies have come to seem outdated and dysfunctional in established ones.

The United States has become a byword for gridlock, so obsessed with partisan point-scoring that it has come to the verge of defaulting on its debts twice in the past two years. Its democracy is also corrupted by gerrymandering, the practice of drawing constituency boundaries to entrench the power of incumbents. This encourages extremism, because politicians have to appeal only to the party faithful, and in effect disenfranchises large numbers of voters. And money talks louder than ever in American politics.

Thousands of lobbyists more than 20 for every member of Congress add to the length and complexity of legislation, the better to smuggle in special privileges. All this creates the impression that American democracy is for sale and that the rich have more power than the poor, even as lobbyists and donors insist that political expenditure is an exercise in free speech. Nor is the EU a paragon of democracy. The decision to introduce the euro in was taken largely by technocrats; only two countries, Denmark and Sweden, held referendums on the matter both said no.

Efforts to win popular approval for the Lisbon Treaty, which consolidated power in Brussels, were abandoned when people started voting the wrong way. During the darkest days of the euro crisis the euro-elite forced Italy and Greece to replace democratically elected leaders with technocrats. A project designed to tame the beast of European populism is instead poking it back into life. EVEN in its heartland, democracy is clearly suffering from serious structural problems, rather than a few isolated ailments.

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Since the dawn of the modern democratic era in the late 19th century, democracy has expressed itself through nation-states and national parliaments. People elect representatives who pull the levers of national power for a fixed period. But this arrangement is now under assault from both above and below. From above, globalisation has changed national politics profoundly.

National politicians have surrendered ever more power, for example over trade and financial flows, to global markets and supranational bodies, and may thus find that they are unable to keep promises they have made to voters. International organisations such as the International Monetary Fund, the World Trade Organisation and the European Union have extended their influence. There is a compelling logic to much of this: how can a single country deal with problems like climate change or tax evasion?

National politicians have also responded to globalisation by limiting their discretion and handing power to unelected technocrats in some areas. The number of countries with independent central banks, for example, has increased from about 20 in to more than today. From below come equally powerful challenges: from would-be breakaway nations, such as the Catalans and the Scots, from Indian states, from American city mayors. All are trying to reclaim power from national governments. The internet makes it easier to organise and agitate; in a world where people can participate in reality-TV votes every week, or support a petition with the click of a mouse, the machinery and institutions of parliamentary democracy, where elections happen only every few years, look increasingly anachronistic.

Douglas Carswell, a British member of parliament, likens traditional politics to HMV, a chain of British record shops that went bust, in a world where people are used to calling up whatever music they want whenever they want via Spotify, a popular digital music-streaming service. The biggest challenge to democracy, however, comes neither from above nor below but from within—from the voters themselves. Democratic governments got into the habit of running big structural deficits as a matter of course, borrowing to give voters what they wanted in the short term, while neglecting long-term investment.

France and Italy have not balanced their budgets for more than 30 years. The financial crisis starkly exposed the unsustainability of such debt-financed democracy. With the post-crisis stimulus winding down, politicians must now confront the difficult trade-offs they avoided during years of steady growth and easy credit. But persuading voters to adapt to a new age of austerity will not prove popular at the ballot box. Slow growth and tight budgets will provoke conflict as interest groups compete for limited resources.

To make matters worse, this competition is taking place as Western populations are ageing. They will increasingly have absolute numbers on their side. Many democracies now face a fight between past and future, between inherited entitlements and future investment. Adjusting to hard times will be made even more difficult by a growing cynicism towards politics.

Voter turnout is falling, too: a study of 49 democracies found that it had declined by 10 percentage points between and Meanwhile the border between poking fun and launching protest campaigns is fast eroding. And in a quarter of Italians voted for a party founded by Beppe Grillo, a comedian. All this popular cynicism about politics might be healthy if people demanded little from their governments, but they continue to want a great deal.

The result can be a toxic and unstable mixture: dependency on government on the one hand, and disdain for it on the other. The dependency forces government to overexpand and overburden itself, while the disdain robs it of its legitimacy. Democratic dysfunction goes hand in hand with democratic distemper. The Obama administration now seems paralysed by the fear that democracy will produce rogue regimes or empower jihadists. And why should developing countries regard democracy as the ideal form of government when the American government cannot even pass a budget, let alone plan for the future?

Why should autocrats listen to lectures on democracy from Europe, when the euro-elite sacks elected leaders who get in the way of fiscal orthodoxy? At the same time, democracies in the emerging world have encountered the same problems as those in the rich world. They too have overindulged in short-term spending rather than long-term investment. Brazil allows public-sector workers to retire at 53 but has done little to create a modern airport system. India pays off vast numbers of client groups but invests too little in infrastructure.

Political systems have been captured by interest groups and undermined by anti-democratic habits. Democracy has been on the back foot before. In the s and s communism and fascism looked like the coming things: when Spain temporarily restored its parliamentary government in , Benito Mussolini likened it to returning to oil lamps in the age of electricity.

Things are not that bad these days, but China poses a far more credible threat than communism ever did to the idea that democracy is inherently superior and will eventually prevail. The elite is becoming a self-perpetuating and self-serving clique. At the same time, as Alexis de Tocqueville pointed out in the 19th century, democracies always look weaker than they really are: they are all confusion on the surface but have lots of hidden strengths.

Being able to install alternative leaders offering alternative policies makes democracies better than autocracies at finding creative solutions to problems and rising to existential challenges, though they often take a while to zigzag to the right policies. But to succeed, both fledgling and established democracies must ensure they are built on firm foundations. THE most striking thing about the founders of modern democracy such as James Madison and John Stuart Mill is how hard-headed they were.

They regarded democracy as a powerful but imperfect mechanism: something that needed to be designed carefully, in order to harness human creativity but also to check human perversity, and then kept in good working order, constantly oiled, adjusted and worked upon. The need for hard-headedness is particularly pressing when establishing a nascent democracy. One reason why so many democratic experiments have failed recently is that they put too much emphasis on elections and too little on the other essential features of democracy.

The power of the state needs to be checked, for instance, and individual rights such as freedom of speech and freedom to organise must be guaranteed. The most successful new democracies have all worked in large part because they avoided the temptation of majoritarianism—the notion that winning an election entitles the majority to do whatever it pleases. India has survived as a democracy since apart from a couple of years of emergency rule and Brazil since the mids for much the same reason: both put limits on the power of the government and provided guarantees for individual rights.

Robust constitutions not only promote long-term stability, reducing the likelihood that disgruntled minorities will take against the regime. They also bolster the struggle against corruption, the bane of developing countries. Conversely, the first sign that a fledgling democracy is heading for the rocks often comes when elected rulers try to erode constraints on their power—often in the name of majority rule.

Foreign leaders should be more willing to speak out when rulers engage in such illiberal behaviour, even if a majority supports it. But the people who most need to learn this lesson are the architects of new democracies: they must recognise that robust checks and balances are just as vital to the establishment of a healthy democracy as the right to vote. Paradoxically even potential dictators have a lot to learn from events in Egypt and Ukraine: Mr Morsi would not be spending his life shuttling between prison and a glass box in an Egyptian court, and Mr Yanukovych would not be fleeing for his life, if they had not enraged their compatriots by accumulating so much power.

Even those lucky enough to live in mature democracies need to pay close attention to the architecture of their political systems. Some countries have already embarked upon this process. A few states have introduced open primaries and handed redistricting to independent boundary commissions. Other obvious changes would improve matters. Reform of party financing, so that the names of all donors are made public, might reduce the influence of special interests.

The European Parliament could require its MPs to present receipts with their expenses. But reformers need to be much more ambitious. The best way to constrain the power of special interests is to limit the number of goodies that the state can hand out. And the best way to address popular disillusion towards politicians is to reduce the number of promises they can make.