Arthur Bough’s letters (December 10 and December 18 2009), and his fuller version of the argument of these letters on his blog , reveal a fundamental misunderstanding of the nature of the CPGB’s discussion on the issues of the economic crisis.
To some extent this was the result of unclarities in Peter Manson’s brief report (December 3) of my opening on this issue at the November 29 CPGB aggregate. We had intended to transcribe and edit my opening for publication, but this was held up for various reasons. In fact in the December 3 paper we printed the opening I gave at the November 28 Hands Off the People of Iran annual general meeting on the policy of US imperialism. This argued that the decline of US world dominance, paralleling but different from the decline of British world dominance in the later 19th century, was the primary driver of international economic and political dynamics in the present period.
The primary purpose of my November 29 opening, upon which this article is based, was to stress both the real uncertainty of the immediate economic situation and the need to take seriously the arguments that what is involved may be merely a ‘blip’ and avoid staking all our political orientation on ‘slumpism’.
My personal opinion is that a ‘second leg down’ of the recession in 2010 – driven by concerns about state finances, leading to public expenditure cuts and other forms of withdrawal of liquidity which hold down consumer demand – is now more likely than not. However, I also emphasise both the level of uncertainty in all predictions, and that it is not the business of Marxists to hope for crashes and slumps to make our politics attractive; and that much of the left which does predict a severe crisis does so precisely in the hope that a slump will make their rather unattractive alternative to capitalism attractive. In reality, such a slump is more likely to benefit the far right.
In discussion comrade John Bridge criticised my opening as tending to reduce the problem with capitalism to that of cycles and to offer a cyclical theory of history more generally (this relates to my Hopi opening). It was in this context that he made the point that “it was not just a question of capitalism’s cyclical crises that ought to concern us, but the fact that it is a system in long-term decline”.
My reply to the discussion was to a considerable extent addressed to the question of the decline of capitalism and the meaning and limits of this idea. I address this question again at the end of this article.
Looking at the immediate indicators, there has been a rise in global markets over the last few months, and the general expectation is that the increase in unemployment will be reversed now that confidence has returned in the financial markets and the ‘real’ economy – there is some data indicating a rise in actual output. In theory UK output is still in decline, but whether this is accurate remains to be seen. There was a brief acute bout of nerves on the market following the Dubai government defaulting on its debts. But it is not clear if this is a complete default, and this is essentially a huge, but single property development which has gone bust.
The nerves caused by its collapse show the fear which exists amongst the investing section of the capitalist class that we are in a similar phase as 1929-31 – after the first crash, but yet to fall off the precipice, when the downturn hits the material economy and unemployment sky-rockets, masses of factories close, there is major deflation, etc. There is a perception among both Marxist and bourgeois economists that this is a possibility. At the same time there are those on both sides who argue this will not happen and that what has occurred can be compared to the market crashes of 1987, 1998 or 2001; a big financial crash, but one which capitalist states can manage by interventions to ensure liquidity.
It is important to be clear that having a Marxist methodology does not give us an answer to this question. Why this is the case can best be explained by looking at the attempts of Marxists to explain the current crisis as a minor financial bubble. Permanent Revolution takes this line, and a recent article by PR’s Bill Jeffries argues that the underlying trend is a massive recovery of capitalist profitability, which has continued since the fall of the Soviet Union in the late 1990s, and the rise of capitalist zones and foreign investment in China.
Capitalism goes into crisis because it runs up against limits to the profitable investment of capital, the consequence being that it shifts into speculative activities and the search for short-term liquidity. Hence there is an overproduction of fictitious capital (a bubble), leading in due course to a financial crash, which temporarily chokes commercial credit, resulting in depression and recession in the real economy. But Jeffries argues, broadly following Trotsky’s argument around long waves in the capitalist economy, that fundamental transformations in global conditions may allow for capitalist investment in new areas. Whether they take the form of new technology, a world-historical defeat of the working class or capitalism expanding into pre-capitalist countries, the new possibility of investment creates the conditions for a major revival in the profitability of productive industry and therefore a sustained expansion in investment. This does not do away with the business cycle, but mitigates the effects of it. The downturns are less acute and shorter, and the ‘up’ phases are stronger and more persistent. In PR’s view the fall of the Stalinist regimes and the market turn in China and Vietnam created the same effect as, in the 19th century, capital breaking into Africa or east Asia, opening up large fields for profitable investment.
In this view the underlying condition since the late 1990s is one of long-term boom analogous to the period of capitalist expansion in the late 19th century, or the 1950s boom and capitalist realignment. Why did World War II open up the possibility for profitable investment? Because it broke up the British and French colonial empires, which to a large extent kept US business out of their colonies. The effect of British dependence on the US was that Britain had to hand over large quantities of overseas investments, to be passed on to US corporations, in payment for the arms which were supplied. Britain and France were also compelled to agree to the General Agreement on Tariffs and Trade (Gatt 1), which managed trade between the main capitalist powers, but centrally broke down the old imperial protection system and allowed US capital to dramatically expand into British and French territory.
Arthur Bough, an ex-member of the Alliance for Workers’ Liberty, has an alternative view which must be taken seriously, though he is an individual rather than representing a group, since he offers considered economic arguments. His argument draws on Kondratiev rather than Trotsky. Kondratiev argued that over the long term there was an (approximately) 50-year cycle running concurrently with the usual short cycle of booms and slumps of capitalism. In the first half of the cycle there are strong booms and weak recessions, and in the second half there are weak booms and heavy recessions. In Bough’s view the recessionary phase of the cycle opened in the early 1970s and closed in the 1990s, so we are about 10 years into the boom phase.
Kondratiev never offered a serious causal explanation of why there should be a long cycle, or why the periodisation should be 50 years. A variety of causal mechanisms have been offered ranging from technical innovations to long-range weather changes which affect harvests and hence food prices. None of them are really satisfactory.
The idea of fixed-period cycles is itself generally problematic. The short boom-bust cycle takes very approximately six to 10 years. Marx made some attempt to theorise this periodisation on the basis of the turnover time of fixed capital. That is, to simplify grossly, capitalists all buy machines and buildings at the same time, causing a forward push for a boom, then demand for these ‘capital goods’ necessarily falls and a downturn results until the fixed capital has to be replaced, triggering another upturn. There is correspondence between Marx and Engels where Marx is looking for evidence that the turnover of fixed capital accounts for the boom-bust cycle and so the latter can be reduced to a mathematical certainty. Engels – who was engaged in running a capitalist business at the time – denied the importance of this, telling Marx that capitalist decision-making was often based on guesstimates and back-of-the-envelope calculations.
There is an approximate regularity, and it is certainly the case that free-market capitalism cannot go longer than 10 or 12 years without a recession caused by a financial crash (if it is not triggered earlier by state action, as it was by the ‘demand management’ of the 1950s-70s). But talking about a range between six and 10 years is not the same thing as the ability to predict the date of crashes, and so on; there are many contributory factors in the determination of the cycle.
If this is the case with short cycles, why should there be a 50-year cycle over the long term? It is worthwhile pointing out that Kondratiev conceived the 50-year cycle based on 100 years worth of data – hardly sufficient to demonstrate a trend. In contrast, we know that the short business cycle has a considerable degree of regularity, including from the data going back to 1760s Britain.
This was Trotsky’s original criticism of Kondratiev – that there was not enough data to draw such a firm conclusion. Hence Trotsky’s ‘long waves’ were both less definitely periodised, and driven by aspects of the class struggle and capitalist expansion rather than ‘internal’ capitalist dynamics.
Both Kondratiev cycles and Trotsky’s long waves gained popularity among Marxist economists because of the long boom in the 1950s and 60s. In this period there was sustained material growth in the imperialist centres and colonial countries, as well as in the USSR and China, and there was a mitigated form of the business cycle: that is, neither booms nor busts ran away. It was a standard Marxist idea that with imperialism, capitalism had reached its terminal stage, and would tend to stagnation and persistent, repetitive crisis. That worked pretty well as a characterisation of the world between 1914 and 1948, but the question was how Marxists could explain the new stage of the 1950s and 60s. Long cycle theories came to be used to address this problem.
While comrade Bough’s argument is over-dependent on the dubious long waves of Kondratiev, Permanent Revolution’s argument has a considerably stronger basis: what happened in 1989-91. The Stalinist regimes were half-inside the capitalist economy; their purchase of higher-tech production equipment from the west gave a significant stimulus to ‘department I’ (capital goods) industries, with the usual multiplier effects for the rest of the economy. They also sold raw materials on a large scale to the capitalist economies. So, although the domestic relations of production in the USSR, etc were not straightforwardly those of capitalist production, the productive activity of those countries was in a contradictory sense part of the capitalist world economy.
In that sense, the breakdown of those economies and in particular that of the former USSR was the equivalent of an enormous bankruptcy. A fundamental part of the Marxist theory of cycles and crisis is that at the end of the boom period over-investment of capital occurs, and in order to clear this, particularly in certain sectors, a wave of bankruptcies is necessary. This is the crisis phase of the cycle and opens the way to new growth by devalorising a section of capital. From that point of view, it is correct to say, as Permanent Revolution does, that in this period we saw an enormous devalorisation of fixed capital – factories, etc – in the formerly Stalinist states. This devalorisation and reduction in barriers to trade opened the way for a substantial increase in potential capitalist investment, considerably so in China and Vietnam, but also in eastern Europe.
The fall of the Soviet Union and semi-marketisation of the eastern regimes should, therefore, in theory have paved the way for a prolonged period of capitalist growth. However, as pointed out by other Marxists, including Hillel Ticktin and István Mészáros, there was so much standing overcapacity in the capitalist economy that it is not clear if the collapse of the Stalinist economies provided that much of an opening for new profitable productive investment. Unemployment and underutilisation of capacity still afflicted the western and ‘southern’ economies. Though money profits rose after 1989, this overcapacity and underutilisation persisted through the 1990s. It remained the case that there were factories in the US and Mexico running at 60% of their capacity. So it is not clear that the fall of the Stalinist economies provided a real help in dealing with this overcapacity. In the ‘third world’ countries, production has shifted around more from one location to another: for example, from Latin America to China.
It is not clear that if we crunched the global numbers they would show an actual increase in total productive output, as opposed to goods being cheapened by major reductions in global average wage costs. What is clear is that in many peripheral countries there is endemic mass unemployment. Indeed in the core capitalist countries there is both endemic unemployment and underemployment in productive industry. The real level of unemployment is masked in a variety of ways. In the UK, this has been performed by transferring workers to sickness benefit, by the increase in training schemes and by expansion of higher education. The latter has not been undertaken because of a growing demand for highly skilled labour – overwhelmingly the demands of capital are for part-time, casual labour: flipping burgers, fruit picking, cleaning and so on. It has almost entirely been a device to mask unemployment.
The state also runs what are effectively white-collar job-creation schemes, duplicating work and multiplying bureaucracy. Local councils, for example, employ significant numbers processing claims for housing benefit, mostly from tenants in council housing. They also employ significant numbers to chase those tenants to pay their rent, which is, under legislation introduced by the Conservatives and continued by Labour, theoretically based on ‘market values’. It would actually be cheaper and more efficient for the council to lease the houses rent-free to benefit claimants, or to equalise the values of the rent and housing benefit. Housing benefit is a pure recycling of notional money as a way to keep clerical staff in work.
Projects like this and NHS marketisation create many a form-filling job for white-collar staff and managers. Privatisation has produced a series of regulatory quangos, and also multiple companies with their own bureaucracies and staff duplicating the same functions. In the case of the utility companies we have infrastructure monopolies (Transco and the electricity distribution companies) providing ‘services’ to a series of pure rentier/speculator companies running their multiple billing departments. The value of such companies is not based on any fixed capital or control over infrastructure, but on artificially created markets in gas or electricity futures – another form of fictitious capital.
If there had been a real global rise in the real rate of return of productive industry post-1989, one would have expected to see a substantial expansion of capitalist operations in Russia and eastern Europe, but in reality this has been quite marginal. When the US took power in Iraq, one could have expected huge investments by US capital flowing into Iraq, as when Britain took over parts of India. On the contrary, what we have seen is capitalist firms pretending to invest in Iraq as a way of stealing money from the US government – and the Iraqi government to the extent that it has to pay for reconstruction – for fraudulent construction projects.
If Permanent Revolution’s theory is correct, capitalists should be showing confidence that investment in material productive activities will yield above-average profit. They are not behaving this way; indeed predominantly their attitude is that material production will yield no profit, or not an adequate one for the investment, compared to ripping off the state through PFIs, through financial speculation and so on. Their behaviour would indicate they do not believe the rate of return on material production to be high enough to support a sustained expansion in the material productive economy. This is not the 1930s. But it is also not the 1950s.
Is it the case – as Permanent Revolution, Arthur Bough and Michel Husson, among others, argue – that there was a rise in the underlying global rate of profit in productive activities from the late 1980s? It is at least arguable that the statistics used to judge this are so contaminated by unproductive activities that what they reveal is not movements in the rate of profit in productive activities, but simply the ability of the US and the financial services sector to rip everyone else off to a greater extent. Aggregate GDP and profitability figures include the activities of lawyers, accountants, business consultants and the like; and these do not represent new production of material surplus, only the redistribution of surplus.
The point is that PR’s theory is a tenable one, but whether the available evidence really supports that theory is highly debatable. Some economists like Andrew Kliman have attempted to ‘get behind’ these figures, and drawn the conclusion that profitability was high in the 1950s and 60s, then declined and has remained at a low level since. Part of the problem with this approach is that it relies on statistics on productive output by sector (which can then be used to disaggregate the productive and unproductive sectors) which are only published every six years. So it is possible to explain events half a business cycle ago, but impossible to predict future movements in more than the broadest outline.
The view that we are in a phase of long-wave expansion triggered by 1989-91 is on its face theoretically tenable, but appears empirically problematic unless the ‘world economy’ is treated as merely an aggregate of the national ‘advanced economies’ and marginalist aggregate and average statistics, which fail to differentiate productive from unproductive activity, are taken at face value. Why?
My own take – for what it is worth, which is limited – is that the ‘long wave’ phenomenon reflects at least partly the shift between the positive effects of an ascendant world-dominant capitalist state (as creating fairly stable world money and ‘order’ conditions for global trade and productive expansion) and the negative effects of a declining world-dominant state (as exacting financial and other tribute from rising countries and protecting exhausted sectors of its own industry). On this basis a new phase of long-wave capitalist expansion like the 1950s is possible, but depends on the overthrow of the military power of the USA by capitalist rivals and the creation of a replacement world-dominant power: ie, a new 1914-45, which is not on the immediate agenda.
Hence, though in other respects the conditions exist for a new phase of capitalist dynamism and progress, what we actually get is a succession of bubbles and crises against a backdrop of endemic overcapacity and inability of capitalism to break beyond the auto/aerospace/petrochemicals economy. The other side of this coin is increasing irrationalism in politics and the persistence and deepening of the export of death and destruction in the form of the ‘war on terror’.
PR may be right or wrong. But why does this matter? Of course, it matters to Marxists whether or not we are entering a big depression, but it is not vital for us to know the exact time or place that crisis will hit first. The fundamental points of Marxism’s critique of capitalism and bourgeois political economy are, firstly, that cycles are unavoidable and there will be booms and busts – no amount of management will do away with the business cycle. Secondly, that free markets spontaneously tend towards radical inequality – the concentration of wealth in the hands of an increasingly small number and the relative impoverishment of an ever larger number of workers and petty proprietors. Whether the current crisis is another great depression or another short-cycle financial crisis like those of 1987, 1998 and 2001 but on a larger scale is completely immaterial to these facts about capitalism.
Permanent Revolution’s argument is a negation of that of the Workers Power group from which PR came. WP argues that capitalism entered its terminal phase in 1914, and that the working class needs to create a state like the early Soviet Union, complete with the dictatorship of the party and the dictatorship of the leadership over the party. In this view, the more there is economic chaos and war-induced recession, the more workers will move into action. The Transitional programme is the other side of this coin: people will move into action based on immediate economic concerns, not a vision of an alternative future, and revolutionaries can lever them, step by step, through wage demands, etc, then soviets, into taking power. Without the masses having the idea in their heads that the parliamentary regime is corrupt and unacceptable or that it is possible to institute an alternative socialist order. Without a prolonged period of building up forces, delegitimising the existing state regime and spreading the idea that an alternative system is not just better than capitalism in the depths of recession, but better than capitalism in its boom phase.
The consequence of this strategy is that it becomes essential to predict, as Workers Power does, an enormous slump, which will bring with it street violence, mass strikes, the formation of councils of action and so on. In this situation the small group (whether it be WP, the Spartacists or indeed the Socialist Workers Party) can manoeuvre the masses into taking power. For these groups crisis is fundamental because it leads to the only conditions – if their theory of capitalism is correct – in which masses of workers might conceivably be desperate enough to think it would be good idea to give all power to the central committee of the SWP (or the equivalent ‘Leninist combat party’ group of your choice).
The method is the same; the small cog driving the bigger wheel; the enlightened vanguard vested with dictatorial powers. It is only when crisis gets so severe as to totally dislocate the capitalist economy that it is plausible that broad masses of the working class would consider this a serious alternative to capitalism. Even under these conditions it seems dubious. In a sense we can see this in the failure of the revolution in Germany, in Luxemburg’s critique of the Russian Revolution and the split in Comintern in 1921. The majority of the west European working class did not view the regime in Moscow as representing a superior alternative to capitalism – in spite of World War I, the acute economic contradictions following it and, in the case of Germany, in spite of the brutality with which Noske, Ebert and Scheidemann in alliance with the military right suppressed the radical wing of the workers’ movement.
Because the strategic conceptions of the far left stake everything on slump, there actually develops a desire for it. Crisis is transparently irrational – because of overproduction and overinvestment, people are laid off, reduced to poverty and starved. Too much wealth produces poverty. But actually wanting to experience slump conditions is an irrationality of its own sort, certainly if our aim is the self-emancipation of the working class majority, rather than a coup d’etat by the central committee of your choice.
To return to the present economic situation, the only possible thing to say is that it is uncertain. It may be that the fiscal stimulus from the Bank of England will be enough to re-inflate the financial bubble, at least in the core economies. If that happens there will still be acute crises in the periphery economies, examples of which we have seen already, including the instability in Ireland and eastern Europe.
Each past cyclical bust -1987, 1998, 2001 – has had severe consequences for some periphery countries, like the Argentinian crisis in 2000-01. Millions lost their savings, banks closed, and the country still has many cooperatives formed by factory occupations, such was the acuteness of economic dislocation. Ireland has seen a mass movement spring up. Even if stimulus packages were enough to re-inflate the bubble in the US, western Europe and perhaps China, this would still be at the expense of major recession in several peripheral countries.
It is also possible that a more severe recession will hit the core economies some time this year. If David Cameron were elected and introduced massive cuts in public expenditure, that would probably trigger a severe material recession. Actually doing what has been promised, to sack vast numbers in the public sector, cut local government funding and attack pensions and benefits, would sharply reduce consumer demand, undermining the service sector and triggering serious material recession.
Which way things will go we cannot know, though it seems unlikely that we are in a long boom and this is just another minor recession without consequences. If states have succeeded in re-blowing the bubble, we will see deepened instability in the peripheral countries; the core will be protected, but only for another four to eight years. There will be another upswing, but this will be dependent on liquidity and hence followed by a more severe version of the 2008-09 financial crash (just as 2008-09 was more severe than 2001, which was more severe than 1998, which was more severe than 1987).
Comrade Bridge is correct to say that capitalism is in decline. Contrary to comrade Bough, this statement has absolutely nothing to do with Lassalle’s “iron law of wages”, with the idea of a secular tendency for the working class to be impoverished, with the Zusammenbruchstheorie (theory of collapse) criticised by Bernstein and wrongly defended by some of his opponents, with Soviet narratives of “the ‘crisis’ and the ‘crash’”, or with Trotsky’s ‘death agony’. Conversely, however, in my opinion when we understand capitalist decline correctly, the fact that capitalism is in decline has only limited implications for the diagnosis of the present economic conjuncture.
Social orders or forms of class rule – the slave-based urbanism of antiquity, feudalism, capitalism – are over historical time replaced by radically different social orders and forms of class rule. That is to say that each individual social order as such rises and declines. We have no reason to suppose that capitalism will be uniquely persistent.
To say that a social order or form of class rule is rising is to say that it plays an increasing role in organising the society’s productive activity and shaping its structure and self-image, replacing any prior social order. To say that it is declining is – obviously – the reverse: that it is decreasingly able to organise the society’s productive activity, that it decreasingly shapes the society’s structure and self-image, that it begins to be displaced by other forms of social order and to lose its legitimacy.
The phase of decline is characterised by statisation. The Roman empire, which artificially created and subsidised cities to keep them alive and attempted to intervene against the potentes, making the free peasants into private clients, represented the decline of the social order of classical antiquity. European monarchical absolutism and the analogous Tokugawa shogunate were forms of the decline of feudalism.
Like certain sorts of coral atolls, social orders may enter into decline at their historical centres even while they are spreading geographically. This is clearest in the case of feudalism. Feudalism was at its apogee in western Europe in the 11th-12th century, but already facing challenges from the rising proto-bourgeoisie and in decline at its core from the 13th century; but it continued to expand geographically both in eastern Europe and in the last phase when as it were ‘neo-feudal’ societies were created by the Spanish state in Latin America in the early modern period.
To say that capitalism is in decline is to say that it is in an analogous phase: declining at the core, while continuing to expand at the periphery at the expense of subsistence and artisan production, forms of feudalism and other pre-capitalist societies. At the core the decline began in the mid-19th century. The rise of the organised workers’ movement, beginning with Chartism and the early trade unions, led to concessions to the working class which had to be organised by the state. The biggest of these concessions was the extension of the suffrage.
This has involved the rise of a different organising principle of society: that of conscious, collective social decision-making: expressed in a distorted form in the form of the growth of state provision and regulation at the expense of market provision.
Meanwhile, the concentration of capital has the result that in several sectors there are firms which are ‘too large’ to be allowed to go bust, and that there are whole sectors which, like transport and agriculture, require permanent subsidies – again resulting in the extension of the capitalist state and of statised capitalism at the expense of the capitalist class in its proper sense.
And the extension of mechanisation has the result that capital needs a more educated proletariat and more extensively educated specific sections of the proletariat. As this extends, the underlying rationality of entrepreneurial ‘one-man management’ – that is, of the social-hierarchical division of labour – declines. This, too, is expressed in distorted forms (the corporate institutional bureaucracies mimic the state bureaucratic hierarchy).
It is also expressed, paradoxically, in the fragmentation of the left: there are too many people who are perfectly capable of serving on central committees, as full-timers and so on for the organisation run by long-serving career ‘professional revolutionaries’ to make sense as an organisational form; the result, given that the leaders cling to their positions and control and mimic the state bureaucratic hierarchy, is the proliferation of ever smaller and smaller splits (far worse than – for example – the divisions of the British far left before World War I).
The feudalism which Spain exported to Latin America was not the classic feudalism of the central middle ages, but the statised feudalism of the absolute monarchies. In the same way, the capitalism which has expanded geographically at the expense of pre-capitalist social orders and of Stalinism is not the ‘classic’ form of capitalism, but ‘mixed economy’ and corporate, statised capitalism.
In a certain sense, the decline of capitalism is most sharply expressed in the difference between the later 19th century decline of Britain as a world-dominant power and the decline of the US. The first involved Britain – and the other European imperialist powers – exporting population on a large scale to their global empires in an endeavour to create a form of order in the colonies which would serve the metropolitan society. (I do not mean by this to prettify the results of the European colonial empires; the observation is simply that the colonialists did seriously attempt to govern their colonies and protectorates.) Conditions for the working class and middle class in Britain were unpleasant enough to support this process, while the empire was, for Britain and other imperialist states, a source of domestic political legitimacy.
The decline of the US is sharply contrasting. The concessions made by US capital to the working class mean that the US continues to be characterised by large-scale net immigration. Its imperial role is a source, not of domestic political legitimacy, but of domestic political illegitimacy. The overseas operations remain acutely sensitive to US casualties – the ‘Vietnam syndrome’. The result is that the dominant form of US overseas intervention is not to impose any sort of order on the target state, but to impose destruction and chaos. In terms purely of weaponry, metropolitan population and domestic production capacity, the US has more war-fighting power than the British empire ever had: but its decline has set in more quickly than British decline and it is, at the end of the day, weaker in decline than the British empire was.
Decline and crisis
The arguments for seeing capitalism as in decline presented here are arguments in the long term. The analogies should make this obvious: the Roman empire was a form of decline, but lasted for another 500 years in the west and more than 1,000 in the east; feudalism was in decline from the 13th century, but the decisive capitalist breakthrough did not happen till the 17th, or, indeed become Europe-wide until the 19th.
Of course, capitalism develops more rapidly than feudalism (which developed more rapidly than the slave-based urbanism of classical antiquity). We may therefore not unreasonably expect it to ‘burn out’ more rapidly too. But it would be most unwise to use this as an argument that capitalism must be in terminal decay now.
The crisis of 2008-09 is in a certain rather limited sense the product of capitalist decline. This sense is that the immediate trigger of the crisis was financial instruments built on subprime mortgages in the US; and subprime mortgages in the US were a part of the system of controlling the US working class through material concessions, the apogee of the policy of ‘property-owning democracy’ and in a sense the moment at which this policy flew too close to the sun and its wings melted.
Indeed, the more general credit bubble was in part the product of the efforts of the US and other core capitalist states to stave off a crisis which should have produced a more or less severe recession in 1998 by pumping liquidity into the system. If we ask why the recession could not simply be allowed to proceed, the answer is that it was politically unacceptable. It was politically unacceptable because credit expansion and the ‘property-owning democracy’ was the primary means of managing working class expectations after the ‘social-democratic consensus’ was abandoned in the 1970s.
More deeply, however, the failure to break through to a new regime of productive investment is the product not of capitalist decline as such, but of the decline of the USA as a world-dominant power and the specific forms that this decline takes. I do not think that the decline of capitalism as such has proceeded so far that it is excluded that the US can be replaced by a new world-dominant capitalist power, allowing a new long wave of productive growth. The problem is rather the costs of replacing it – namely that the military power of the US has to be broken: the world has to go through another experience of global great-power war like 1914-18 and 1939-45 – and hope that this does not end in the US, in its Götterdämmerung phase (twilight of the gods; the Nazis in 1945), unleashing its nuclear arsenal.
We are as yet some way – probably decades – away from this threat, though the immensely destructive character of the US invasion of Iraq and the millenarian fantasies of the US right already tell us that it is a real one. The idea of a peaceful transfer of power from the US to some other capitalist force (or to a reformed United Nations) is utterly illusory. The only real alternative is if, before the point of global war, the working class can begin to act politically and on at least a continental scale to project its own power as an alternative to capitalist class rule.
We are as of now a long way from this possibility. Hopefully, the workers’ movement will manage to catch up before the processes of US decline reach their end-point.