Concrete web-magazine

6Mar/120

Peak Wealth

A lot has been written about the current global economic crisis, but it seems hard to comprehend what exactly happened to cause this massive cave-in of the financial sector. This is especially difficult where comprehension is obscured by ideological preconceptions. But there is strong evidence to suggest that this is indeed not "just another crisis", that the last years mark a fundamental turning point for capitalism rather than a temporary damage that will be overcome by future growth. And most definitely, it is not the result of personal or political failures. This crisis was, sooner or later, inevitable.

To understand this we must emphasize that capitalism is a highly dynamic mode of production, the most vivid of all economic models that evolved within human societies just yet. The need to accumulate profit through the purchase of labor and the sale of products to the very same populations that produce them creates an imbalance. Profit withdraws parts of the established currency from circulation and releases it only if more profits are hoped to be generated through the investment. Capitalism, as a consequence, needs to expand constantly or it will begin to expropriate its own population as people have to continue to consume, yet are unable to consume in dimensions needed to keep all actors on the market afloat. And every bankruptcy would worsen the outlook of the economy as it comes tumbling down.

Capitalism needs to expand - and it did so with force and ingenuity. Its expansion was, for a long time, a geographic expansion. Wherever the antiquated economic classes of the past could be neither transformed nor integrated, developing capitalism removed them through force. Imperialism spanned the globe driven by the perpetual need to explore new markets, to integrate new consumers and laborers alike. Every expansion - not just by conquering territory, but by transforming the local economies into a monetary-based one integrated into the global market - added new momentum to the global market. Until there was nothing left to expand into. The economic crisis that struck the world in 1929 was no accident of history, it was the end of classical capitalism. Following the division of the world between imperialist powers, the inferno they unleashed upon the world during World War One was the result of the ideology used to justify capitalist expansion taking on a life of its own to most devastating effect. The demand created by the rebuilding after the war and the excessive spending by governments at war bought capitalism enough time to last despite the partial loss of the Russian market - though arguably, it wasn't a quite important market to begin with.

Unable to match production and consumption, industrial capital fled into digital sectors as it had always done. This was nothing new and had caused crisis before, but in the past, Capitalism had recovered by cutting losses, removing those capitalists unable to compete from the market and then move on, expanding into new markets, integrating new human labor and finding new sources of wealth. None of the crisis that came before that day needed a fundamental change in how Capitalism operated to be solved. Black Tuesday and its fallout that lasted till after World War 2 had ended, however, did simply because capitalism had explored all avenues of territorial expansion by then. It wasn't until the governments of the capitalist center adopted the teachings of British Economist Maynard Keynes that capitalism managed to cope with it, even outshine its former self. And that despite the partial removal of more countries from the capitalist sphere, only tentatively connected to the sphere of capital accumulation any longer. The Eastern Bloc wasn't fully removed from the market, but it couldn't possibly be called thoroughly integrated either.

Keynesianism struggled as early as the 80s, but the Neoliberal alternatives did not bring about as fundamental a change to capitalist administration as Keynes had done half a century before when breaking the taboo of deficit spending and inflation. It is very enlightening that the crisis of the 80s, which was at heart already a debt-crisis of selected nations, did mark the end of deficit spending at all. Public debt kept increasing, because it kept the economy afloat. It futhermore offers the individual nationstates in competition for investments in a globalized market the option of artificially improving the attractivity and motion of the domestic market for such investments by speculating on future gains. One country taking advantage of this tool can force more countries to do so as well, considering that losing the competition in the short run means losing it in the long run as well.

Capitalism was kept afloat by a renewed period of external expansion and the continued internal expansion despite crisis brought about by the instable nature of this policy. The Soviet Union fell and its markets returned to the global market in full. China tentatively opened its borders for the flow of goods and capital, growing to become the Nr.1 industrial location of the planet. It was a massive, expansive growth on the global market, but one that had to lead sooner or later to a crash of unforseen proportions. That the bubble burst was unavoidable, that is the nature of bubbles, and as far as that is concerned, no bourgeoise economist would disagree. What is really concerning is, that the bursting of this inflated growth in different regions of the world was followed by defaulting of public debt spiraling entire nations into ruin.

What we witness could be no less than the limit of capitalist growth, unable to expand its inflated economies any further without destabilizing the entire world through repeated breakdowns. The gamble had always been to make debt to incite the growth of the market to the point that future revenue would pay that debt. But the truth is: this debt has become a substantial part of the growth of markets to the point that it needs to be infused permanently to keep the accumulation of profit going and to make reinvestment of these proits attractive. Capitalism has reached its heat-barrier and its ideologues have no solution to offer.

It is revealing that the most popular options for dealing with the crisis are either a financial transaction tax - which is not so much a revolutionary change but rather a sign of a weakened state turning against the financial markets during a time of increased distribution battles. Taxes are wholly inadequate to adress the problem at hand, because they merely redistribute, but can not be a source of further capital to be accumulated. Another popular option is the utopian debate about a "capitalism without growth", popular with LOHAS and other petit-bourgeoise green voters. A nonsensical vision of people without the slightest understanding of capitalism.

The irony here is that we may indeed be headed towards a capitalism without growth, at least without total growth on a global scale. It is, however, not what neo-conservative romanticists imagine in their daydreams: a stable system that maintains a steady level of overall acceptable wealth. Because capital accumulation must continue for capital itself to survive, capitalism under such conditions will begin to cannibalize itself. Entire companies will fail in the harsher market environment, while the competition on the labor market will lead to a expropriation of large populations through wage cuts, inflation and social cuts. The state will appear as independent actor using its authority to add further fuel through cutting spending and introducing new taxes to deal with the instability created by its own debt and to come out atop in the fierce distribution battles. A pauperisation cycle that will be accompanied by a series of market crashes that occur in ever-shorter periods.

This is a grim vision of things that may come. The defaulting of entire economies, as we are anticipating in Greece right now and likely in other nations to follow once this domino gets knocked out, will not be a value-neutral downsizing. It will not be a step back in history so the wealth can be accumulated once again. The periodical defaulting of economies and resetting to a point where capitalism was still able to expand internally is impossible in an environment where competitors will always capitalize on the misfortune of other market actors to ensure their own survival and prosperity. Crisis never hits the population equally hard. There are winners and losers, if by merit of smart actions or mere dumb luck. Periodical defaulting of debts would not be a solution to the internal limitations of capitalism. It would in fact speed up the lopsided accumulation of capital without perspectives for lucrative reinvestment.

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