World financial crisis - where to from here?

Today we need discussion of radical ideas more than ever. The Keynesian golden age might never have happened without the radical culture of working class “demand from below” emerging after World War II. Furthermore, the Marxist tradition, and other related traditions of critical theory, still have much to offer, even if in opposition to their historic Stalinist variants.

The time is ripe for a pluralist “reinvention” of the socialist and social-democratic movements. Criticising the dynamics of 19th Century capitalism, Marx identified several tendencies which remain today. We will consider two:

The rate of profit

A most important tendency of capitalism is that of the rate of profit to fall. As technology improves the productivity of labour, the “constant” component of capital rises in relation to its “variable” component.

Put otherwise, there is a rising “organic composition” of capital, comprising “the value of the materials and fixed costs”. 

This stands in contrast to the “variable” component, comprising of wage labour. Because any expropriated surplus comes from the exploitation of labour, the relative decrease of capital’s “variable” component causes the rate of profit fall. This dynamic is overcome by increasing the rate of exploitation- either directly or indirectly.

Wages can be cut as a proportion of GDP (Gross Domestic Product); or workers can provide for corporate welfare - taking collectively upon themselves the costs of education and infrastructure.

Similarly, social programs and welfare can be cut to provide scope for further corporate subsidy.

Overproduction

Another tendency noted by Marx is that of systemic overproduction: supply beyond demand. Here, the capitalist system is seen to be constantly expanding the boundaries of its markets: to maximise the realisation of surplus value.

Production is for profit: it is distributed in keeping with market dynamics - not directly in response to human need. But this process inevitably involves waste.

Despite production beyond the scope of realised market relations, the poor and needy go without - even while in relative terms there is “plenty”.

For a renewed social democracy

There are many lessons, here, for social democracy.

Importantly, falling wage share - in response to the “falling rate of profit” -contributes to lower consumer confidence, and a contraction of local markets.