Kevin Rudd’s 2020 summit should be a bit of hit and giggle. There’ll be a few hits (I do hope Brendan “Stealer” Nelson is going) and a lot of giggles.
Will there be any new ideas? I doubt it - just a smug group of invitees whose grundnorm is profit, profit, profit.
There will be disagreements among participants about how best to increase profit rates. But the “fundamentals” will be the same, no matter who the attendees are. Not one person there will challenge the moribund idea that production should be for profit. Not one will suggest we re-organise society so that production occurs to satisfy human need.
Capitalist economies are a bit like a dodgy shower. You fiddle with the taps but still it runs hot and cold, hot and cold. Eventually all you have is cold. Then the water dries up. Welcome to capitalism.
Why this cycle? Booming sectors attract more and more investment as the hyenas of capital imagine continued and ever increasing profits. Because the market is not democratically planned, there is over-investment and over production. Goods remain unsold. Workers are sacked. A slump starts.
But that's not all. There is tendency for the rate of profit to fall. Workers create the wealth in our society. Competition forces capitalists to reinvest profit in more and more machinery at the expense of labour. The amount invested in machines grows at a greater rate than in labour, the source of profit. As a consequence the rate of profit falls, all other things being equal.
Studies show that in the 60s in Australia the general rate of profit was about 24 per cent. By the mid 90s the figure was 16 per cent. All capitalists and their governments want to restore profit rates to the levels of the 60s. They do this through a number of mechanisms - lengthening the working day, cheapening necessities for workers, driving down wages and conditions, destroying capital through wars and slumps to name a few. These are the sort of ideas that will predominate at Rudd's 2020 summit, many in a disguised form.
What's happening at the moment in the international economy?
The IMF predicts world growth this year will fall from 4.8 per cent to 4.1 per cent, mainly due to the US slowdown. The US is the key. It produces about 20 per cent of world GDP.
Major American banks have declared massive losses. The financial system is in crisis, with institutions not lending to each other: they simply don’t trust other banks to repay interbank loans. This is no small deal since these loans keep the international financial system afloat.
The sub-prime loan crisis is partly to blame. Sub-prime loans are mortgage loans to people with low or no wages and no assets. One variant was called the ninja loan - no income, no job, no assets.
Because profitability has been falling or stagnating in other sectors of the economy, and because the world has an oversupply of capital (only in capitalism could such a situation exist where one billion people are starving!) various finance capitalists developed these high risk but potentially high return loans.
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