Why has capitalism failed?

Date: Sunday 26th July
Time: 13:00 - 16:30 BST

Apologists for capitalism argue that it is the best, most-efficient system that could ever possibly exist. But the current period of crisis and chaos prove otherwise. Today, the COVID-19 pandemic has triggered an economic collapse that threatens to throw society back to the 1930s, sending the world into a full-blown depression. Clearly, something is rotten at the heart of the system. The advocates of Keynesian ideas - or modern varieties like Modern Monetary Theory - cannot provide a real solution to this crisis. Only the Marxist method can explain why capitalism has failed, and what the way forward is for humanity. Our speaker, Adam Booth, is a leading activist of Socialist Appeal, the British section of the IMT.

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Adam: Thanks very much to everyone watching today from around the world. And it’s a world that’s been turned upside down and inside out by the coronavirus pandemic. Like Alice from the famous novel, we’ve gone through the looking glass. We can see that the market system is in a complete catastrophe. The laws of capitalism have broken down. Production’s been paralyzed because supply has been shut down, but on the other hand, people are wary of going outside and therefore demand has collapsed as well. And so the famous “invisible hand” of the market doesn’t know which way to point. And we saw this earlier this year when for the first time in history, there were negative oil prices.

And governments have been forced to intervene on an unprecedented scale. First of all, to try and prevent a complete collapse of the economy, they’ve been paying wages for months in this furlough scheme to try and keep people in a kind of – or keep the economy in a state of suspended animation. But now, as the economy begins to thaw, the governments are still intervening on a massive scale to prop up the system. There’s been about eight to nine trillion dollars of state support for the world economy. Over four trillion in government borrowing and spending. It’s about 17% of world GDP. And almost another four trillion in tons of central banks buying up assets and creating new money. What’s known as quantitative easing, where the central banks buy up from the banks to help banks lend more, but also they’re printing money just to buy up government debt and allow governments to spend directly through just printing money, what’s known as monetary financing.

Now, in reality, the line between monetary policy and fiscal policy has completely dissolved. The central banks, which are supposed to be independent, have united with governments to try and prop up the imploding capitalist system. Interest rates were already rock bottom in most countries and now they’re negative in many places. They’ve done what they call a helicopter drop of money, where they print money and give it directly to people, to households. And big business, which has been going bankrupt, has been demanding and receiving huge bailouts, particularly the airlines. But even with all of these desperate measures, it’s not enough. The economy is still in freefall. It’s dropping faster and further even than the 2008 crash.

Now, we’ve seen a decade or more of very anaemic growth, of very weak employment, very minimal job creation. But even these weak, small gains have been wiped out overnight by the coronavirus crisis. The IMF is predicting a 5% fall in GDP worldwide this year, as a result, and that’s actually down from earlier predictions in April. The USA is predicted to fall by 8%, the EU and Britain by 10% each. In the UK, there was a 20% fall in GDP just in the month of April. And unemployment has skyrocketed across the world. It’s over 11% in the USA, with fifty million people claiming unemployment benefits, and it’s predicted to be over 15% in Britain by the end of this year.

The International Labour Organization predicts that 1.5 billion globally will lose their incomes as a result of this crisis and other charities have predicted a biblical starvation, what they call a biblical level of starvation, with 265 million facing famine and hunger. And all of this is without the effects of a second wave, which in reality, will just be a continuation of the first wave. The virus was never really under control. And for the working class, it’s not going to feel like a wave, but a tsunami – a tsunami of job cuts, of job losses, of attacks on working conditions.

Now some of the optimistic bourgeois commentators talk about a V-shaped recovery, but there’s many other letters in the alphabet. Some are talking about a W, because of a second wave and a second lockdown. Some talk about a Nike tick, going down and then gradually up over a long period of time. Some talk about a U-shaped, or even an L-shaped recovery. In other words, just a fall and then a long stagnation.

All of these ideas of a recovery are based on the idea that the disease will be under control and there will be a return to some sort of normality. In other words, they think that the crisis is simply one because of the pandemic and once the pandemic’s gone, the crisis will be over. In fact, some of the libertarian types think that this will be good for the economy. It will get rid of all of the redundant industries. They think there’ll be what they call “creative destruction”, where new industries emerge from the ashes of the old.

Now clearly, big business and big business politicians are pushing for a reopening, a rapid reopening of the economy, under pressure for the bosses to make their profits, putting profits ahead of lives. But we have to state very clearly – the world economy is not going to just bounce back. The pandemic’s going to leave a permanent scar on the globe. And that’s because when capitalism collapses, it doesn’t just go into some sort of pause mode. In fact what we’re going to see is that the industries that are temporarily shutting down and the workers that have been furloughed, many of these will never see the light of day again. And that’s because like the virus, economic collapse is also contagious.

The economy is not some sort of machine that can just be put into stasis and then revved up again at a later date. It’s not a yo-yo where you can just have it go down and then up at the will and the whims of politicians or policy-makers. There are some times when you do get recessions that occur like this, which represent a kind of business cycle, as they call it, a rhythmic breathing of the capitalist system. But this crisis comes on the back of a deep crisis in 2008 and a period – a long, long period of austerity. So it’s not going to be some sort of temporary, ephemeral crisis. We’re facing, what we call as Marxists, an organic crisis of capitalism. One in which all the accumulated contradictions within the system come to the fore.

The pandemic has certainly exacerbated the situation, but the thing is it has not caused the crisis. Rather, what it’s done is to accelerate all of these contradictions and all this crisis that has been brewing for some time. It’s brought all the tensions in the global economy to the surface, with a bang. And the reason the crisis is going to be so deep is all of these problems have been accumulating for decades. They’re problems that were not resolved by the 2008 crash or the subsequent years of austerity. What are these problems? Well, capitalism has been stumbling along for years on the basis of credit. You have what they call “zombie companies” that are stalking the land, that just survive on the basis of cheap money. We see that productivity growth and investment have been stagnant for decades. And while cash has been piling up in the hands of big business and the bosses, the rest of the world has been drowning in debt. You have what the bourgeois call “excess capacity” weighing down on prices and profits.

And as the world market shrinks, protectionism is on the rise. World trade has been slowing down and countries have been looking to export the crisis elsewhere. And now we see that the world economy is stuck in a vicious circle. And that’s because one person’s income is another person’s sale. In other words, when workers are made unemployed, they lose their wages, and if they have no wages, then what they call “effective demand” goes down. If there’s no consumer demand, then also there’ll be no investment from big business. And less investment means less production. It means fewer jobs. And that’s the vicious cycle of capitalist crisis, you see.

And this is what we’re going to see in the period ahead as well – whole sectors of the economy being wiped out. Tourism, retail, leisure, hospitality – all of these are going to be changed forever, if they still exist at all. Commercial property prices are set to collapse. The oil sector and car manufacturers are facing an existential crisis. Airlines are practically falling out of the sky. And as these zombie companies begin to die, then banks will also see a wave of defaults that will put them in trouble as well.

And unlike the crash of 2008/2009, the crisis today is a truly global crisis. At the time of the last crash, you had China, which was able to keep growing because of Keynesian spending, government investment in spending. And this had a knock-on effect for the big oil producers, for the countries that make lots of raw materials. They saw their economies continue to grow as well. But look at the situation now. China is now also drowning in debt. Every country, including China, is looking to export somewhere else, but to whom? As demand everywhere falls, you’ll see again this rise of protectionism even further.

Now, comparisons with the Great Depression I think are no exaggeration. If anything, they’re an understatement. The world’s population, and particularly the world’s working class, is much bigger and stronger than ever. Much stronger than it was and larger than it was in the 1930s. And unlike the 1930s, or even 2008, the world economy is even more integrated now. And this means that the fate of all countries is intrinsically interlinked. So I think this is the perspective for capitalism in the years ahead. This downward spiral of Depression.

And it’s similar to what John Maynard Keynes, the English bourgeois liberal economist, identifies in the 1930s. It was this dynamic of Depression that he wrote about in his famous General Theory. Keynes started by criticizing his bourgeois predecessors. He attacked what he called the “laissez-faire” theory of economics. The idea that the market was perfectly efficient. He didn’t believe that there was such a thing as a long-run equilibrium, where the economy would all balance out. He famously said, “in the long run, we’re all dead”.

But this idea of the efficiency of the market, it came from a theory known as Say’s law, named after a French economist called Jean-Baptiste Say. And Say believed supply and demand would always match so that supply creates its own demand. In other words, for every buyer, there would be a seller. But in reality – Marx explained – in reality, because of money, because of credit and debt, this isn’t always the case. Wealth can be hoarded and consumers can buy without selling. And the same for businesses and investors. And it was Keynes, in his General Theory, who attacked this idea of Say’s law, and said that this is not the case. Buyers and sellers will not always find each other. And the economy would not always find the nice perfect equilibrium because of the invisible hand of the market.

But with these criticisms, Keynes was just regurgitating something that Marx had pointed out many decades before. But he was criticizing from a liberal perspective, not from a socialist perspective. Keynes’ ideas were aimed at saving capitalism, not overthrowing capitalism. He thought Marxists were dogmatists, whereas he was a pragmatist. And he suggested that governments should step in to save capitalism by making up for the lack of demand in the economy by providing public investment and creating jobs. And he thought that by doing this, you’d give workers wages that would boost consumption and in turn, investment, turning that vicious circle into a virtuous one, where the economy would restart and have life back in it again.

Now, the idea of Keynesianism became and is now synonymous with this idea of government borrowing and spending, what they call “deficit financing”. Now, Keynes thought that what should happen is governments should spend on socially useful things, like houses and roads and infrastructure. But he said, cynically, that as long as workers got money in their pockets, it didn’t matter what these infrastructure projects were doing. He said you could even dig up holes, bury money, and get people to dig the money back up again, as long as they got money into their pockets. In other words, he wasn’t bothered about whether things useful to society were being created, as long as workers were getting money, and therefore the economy was functioning.

In other words, it was all about saving capitalism, not about providing needs. And Keynes’ ideas were taken up partly within Franklin Roosevelt’s New Deal in the 1930s, where you had the building of things like the Hoover Dam and other big infrastructure projects. But the problem is, it didn’t work. The Great Depression continued all the way up until the Second World War. And in fact, there were repeated falls within the economy, including in America. And in the end, unemployment only came to a halt because of the war mopping up all the unemployed workers. And in fact, Keynes himself, after the Great Depression, was forced to admit – he said, “It is, it seems, politically impossible for a capitalist democracy to organize expenditure on the scale necessary to make the grand experiments which would prove my case, except in war conditions.”

In other words, the only way that Keynesianism could work was when you had a war going on, mopping up unemployed workers and investing in weapons, which is very ironic because Keynes saw himself as a pacifist. And in fact, another big irony is where you see the biggest Keynesian programmes today. The largest Keynesian experiment in recent years has been in China since 2008. Vast sums have been spent on infrastructure and industry by the government. But again, it has not helped. You’ve now got empty cities, what they call “ghost cities”, with no one living there. You’ve got roads that go to nowhere, bridges and railroads and things – like infrastructure that isn’t used.

And now, total debt in China is over 300% of GDP, double what it was before the crash in 2008. And it is exacerbated on a world scale, the excess capacity in all sorts of industries. Industries from steel to smartphones are now completely saturated. The market for these goods is completely saturated on a world scale. In other words, all of this Keynesian spending in China has just paved the way for an even bigger crisis in the future. And now, just like all the other governments in the world, the Chinese government is out of ammo. They’ve got no tools left to fight this new crisis.

And in fact, what you’re seeing is what they call diminishing returns. The more money they put in, the less effect it has. And again, it’s ironic that it should fall to the so-called Communist Party of China to carry out this huge Keynesian programme. Now, we would say that the Chinese Communist Party is not that communist and it’s not that much of a party, but nevertheless, Keynes, during his lifetime, he was avidly opposed to communism and socialism and Marxism. Keynes repeatedly emphasized that he was not on the side of the working class or the labour movement. In fact, he was quite explicitly and self-proclaimedly a part of the liberal elite. He stated that “the class war will find me on the side of the educated bourgeoisie”. And he saw his programme as being one of trying to save capitalism from its own contradictions. And this is also ironic, because today, it’s the left-wing leaders of the labour movement who are the most avid supporters of Keynesianism. They’ve completely abandoned socialism and just want to manage capitalism, as Keynes proposed.

And now, you’ve also got a new modern, kind of turbocharged form of Keynesianism, what they call “Modern Monetary Theory”. Now, in reality, this isn’t that modern, and it’s not that much of a theory. It’s basically a new kind of neo-Keynesianism with an emphasis on creating money rather than creating debt in order to finance government spending and stimulate the economy. Now, the MMT advocates say that governments that control their own money supply should just print money, create money, in order to spend on what is needed. They think that taxes are mainly there to try and control inflation and they want to try and manage demand in the economy by having what they call a “jobs guarantee”, the government providing jobs to manage demand and keep unemployment low. Now, all of this is fundamentally just the same ideas as Keynesianism. The idea that you can manage capitalism and stimulate the economy. Now both of these, Keynesianism and MMT, they think that they’re offering so-called “solutions” to the current crisis and to crisis in general. They correctly highlight that within these crises you have a huge underutilization of our resources in society. People are unemployed, factories are idle. Yes, they explain that you have this criminal underutilization of our productive forces and the MMT lot say that inflation’s not a problem because you have all of this excess capacity that can be utilized. And to a certain extent, they’re right. They’re correct. It’s true that the biggest fear of the bourgeois today is not inflation, but deflation. Because there’s this depression, this collapse in demand, and this puts a huge downward pressure on prices.

But the thing that Keynesianism and MMT never say, what they can never explain, is why have we got all of this crisis, all of this underutilization, all of this excess capacity? Why is all of this the case in the first place? So Keynesians and the MMT, all of these crises are just accidents that come out of nowhere. Keynes always said that crisis was just because of a lack of confidence, because of animal spirits. He thought it was all about just fear and uncertainty. But the point is that this uncertainty, this lack of confidence, it doesn’t appear out of nothing. It reflects a real, material crisis in the economy, and to understand why capitalism goes into these crises, we have to go into the ideas of Marxism.

Now, each crisis expresses itself differently. In the Great Depression, in the 1970s, in 2008, and now. Each of these crises had some sort of different trigger that set it to go off. With the Great Depression, it was the Wall Street crash and the fears on the stock market. In the 1970s, they thought it was an oil crisis because of the oil process going up that caused the crisis. In 2008, we were told it was all just because of subprime mortgages. And now, they say it’s just because of the pandemic. But none of these are purely accidental. Rather, it’s as we say in Marxism, “accident is a reflection of necessity”. In other words, the contradictions in the economy, in the global system, build up and express themselves finally in through these little accidents.

Marx explained that crises are inherent within capitalism because of the contradictions at the heart of the capitalist system, and the primary contradiction is what Marx called overproduction, and this is a contradiction that arises out of the relationships within capitalism itself because capitalism is a system of private ownership and production for profit. Now, to understand this, we can go all the way back to Capital and Marx’s economic writings. Marx explained that capitalism is a system of commodity production and exchange, or rather, where its commodity production exchange is generalized and universal. Commodities, Marx says, are goods and services produced for exchange and not for individual consumption. It’s production for a market, for exchange. And this existed before capitalism, but it’s under capitalism that this becomes generalized – that everything becomes a commodity. Everything can be bought and sold on the market.

Now, Marx explained that all commodities have a dual character. They have a use-value. They have some sort of utility to individuals, to society. But Marx says that you couldn’t just explain, on the basis of something’s usefulness, how it could be exchanged for something else. Because all commodities have different use values. They have different qualities, different characteristics. So you have to ask, what is it that determines the exchange-value of a commodity – how much of one commodity is exchanged for another? There must be some sort of common, universal yardstick that all things have in common that can relate them to each other. And Marx said that this thing that they all have in common – all commodities are products of labour. And he said that the value of a commodity is determined by the amount of labour time that went into it. But not just the individual labour of the individual worker, but what he called “socially necessary” labour time. In other words, there’s some sort of average amount of labour that goes into a commodity based on the current amount of technology, the current level of production and technology and science. And the individual producers, it doesn’t matter whether they’re less efficient, they have to be able to keep up with that current level of technology and productivity within society. Your commodity isn’t more valuable just because you’re less efficient and it takes you longer to produce it.

Now this idea of the labour theory of value was a big part of Marx’s economic theory and it was the basis for Marx being able to explain where profit came from. And it was this mystery – the origin of profit was a mystery to all of the bourgeois economists that came before Marx. They couldn’t explain the origins of surplus value because for them, they thought that profits just came from buying cheap and selling dear. In other words, the profits were all just a result of cheating and swindling. But Marx showed that the whole of society cannot get richer and wealthier just by one person robbing another. If you rob Peter to pay Paul, all you’re doing is distributing wealth. You’re not creating any new wealth, any surplus.

So Marx explained that profit had to come not from distribution and exchange, but from production, and from the fact that workers sell a very special type of commodity. They sell to the capitalists what they call “labour power”. In other words, Marx explained that this labour power was the worker’s ability to work for a certain period of time – for a day, a week, a month. The worker doesn’t sell their labour, their output, their work, they sell their ability to work. And this labour power, like any other commodity, also has a value. And it’s based on the same thing, on the socially necessary labour time required to produce this commodity. In the case of workers’ labour power, that means the value, the labour time, the socially necessary labour time, it goes into producing all the things required to produce and reproduce the working class. The shelter, the food, the clothing, the education, the healthcare – all of these are required to produce the working class and their families.

But the secret to profits, Marx explained, was that the value of this labour power was less than the value that the worker produces in the course of a day or a week or a month. In other words, as an example, in a working day of eight hours, the working class might take only four hours to produce the equivalent of their own wages and in the other four hours, they’re effectively working for free for the capitalist and producing surplus value. And that difference between what they receive in wages and the amount of value they produce in the course of a day, that’s where surplus value comes from. It’s the unpaid labour of the working class. So there’s no cheating that goes on here. Marx assumes that the capitalist pays a fair wage to the worker and the worker receives a fair wage from the capitalist. But even if this is the case, Marx explains, there still will be this production of surplus value by the worker.

Now, this explanation for where profits came from revealed all of the dynamics of capitalism because it’s the drive for profits and the competition between the capitalists that forces them to invest in machinery, in technology, in development of science. Trying to push down their own costs of production in order to boost profits. And in fact, it’s only because of this that the capitalists invest. It’s only to make profits that capitalism sees investment.

And so to go back to the Keynesians and the MMT advocates, they’re completely utopian when they think that governments can stimulate the economy because the dynamics of the capitalist system are not set by governments and their spending, nor by the needs of society. Rather, the dynamics of capitalism are set by the ability of the capitalist to make a profit. If they cannot make a profit, then they will not invest. And that’s why we’ve seen, over the last decade or more, that all of the money printed and created has done nothing. Countries like Japan and elsewhere have conducted huge programmes of quantitative easing and creating new money, but still the economies there are stuck in a deep depression. Japan has been stuck in a depression for decades. And that’s because in capitalism, the majority of money is not created by the government in the first place. It’s not the money created that stimulates the economy, but the other way around. The majority of money is created by private banks because people come looking for loans to invest, to have mortgages. And when you’ve got a crisis in the system, that demand for money, for credit, collapses as well.

So it’s not enough to try and create money to stimulate the economy, as Keynesians or MMT advocates suggest. You can’t manage capitalism. As the famous saying from the labour movement goes, “you can’t plan what you don’t control, and you don’t control what you don’t own.” Now Marx also showed how this origin of profit, where profits came from – he showed how this leads to this inherent contradiction within the capitalist system. He said that crises are not simply because of a lack of demand. The problem is that under capitalism, workers can never afford to buy back all of the commodities that are being produced. In other words, it’s not underconsumption, as Keynesians and MMT advocates suggest. Rather, it’s overproduction that is the cause of crisis. And this is a very important thing to emphasise, because for the reformists and the Keynesians and the MMT, they think it’s all about distribution. They think you can regulate capitalism, you can tax the rich in order to give workers a bit more money and get around this problem. But Marxism puts the emphasis not on distribution, but on production.

The inequality we see around us is because of the private ownership over the means of production. Inequality is inherent within capitalism because profits are the unpaid labour of the working class. And crises are also inherent within capitalism for the same reason. So all of these – the crises, the inequality – they can only be tackled by tackling the question of ownership. Instead of trying to tax the rich, we need to expropriate the capitalists. Now it’s this – it’s the overproduction that is at the root of all these capitalist crises.

But this leads to a very interesting question – why isn’t capitalism always in crisis? Well, historically, the capitalists would reinvest their surplus in order to keep the economy going. In fact, competition forces them to reinvest their surplus into more productive industry and technology. It was this dynamic of competition that was what led Marx and Engels to say in the Communist Manifesto that capitalism had accomplished wonders far surpassing Egyptian pyramids and Roman aqueducts. They thought capitalism in its heyday was a very revolutionary system that helped develop the productive forces. And at the same time, the capitalists would try and overcome overproduction at home by looking for new markets abroad. And again, in this sense, Marx and Engels saw capitalism as a progressive system that had created a world market.

But all of these things, Marx and Engels pointed out, would just pave the way for even bigger crises in the future because by reinvesting their surplus into more production, into more technology, you were creating even more productive forces that would have to find an even bigger market. And eventually the world market will become saturated and you get imperialist conflict, like the First World War and the Second World War. And Keynesian programmes have the same effect as this, as we said in terms of the example of China earlier, creating huge productive forces in all sorts of industries, like steel, like smartphones, which flood the world market and create these tensions, create the rise of protectionism, create trade wars.

And so capitalists would also look, and have always looked, towards another solution. They turn to credit. In other words, lending workers money that they don’t have in order to artificially and temporarily extend demand and expand the market. But on the other side of the coin of credit is debt. In other words, all of this credit that’s been lent to households, to businesses, now it appears on the other side of the balance as a huge mountain of debt, and the investors will demand their pound of flesh. They want to get their money back, with interest. Now, in the 1970s, after the big crisis, the global crisis there, we saw a huge boom in credit worldwide, and this was to try and overcome a simultaneous attack on workers’ wages that was being conducted by governments – Thatcherism, Reaganism – to try and boost profits. In other words, as workers’ wages were being attacked, profits were maintained by lending workers money they didn’t have. And this was the cause behind things like the subprime mortgage scandal in America and the financial crisis that exploded in 2007/2008. In other words, when this bubble burst, that accident was reflecting all of the underlying crisis of overproduction in the economy. And ever since that, the bourgeois have been desperately trying to overcome this crisis and get out of it, employing the most extraordinary measures to try and get around the crisis.

But there’s been no recovery, no real recovery, since 2008. For the working class, in particular, there’s been no recovery. Inequality has grown and real wages have stagnated and even declined. Business investment and productivity growth have stalled. They talk about a productivity crisis. And this isn’t just since 2008, but for decades before, since the 1970s. Larry Summers, who is a former Secretary at the Treasury, he said that we’re in an epoch – what he called “secular stagnation”. Secular stagnation by Larry Summers, former US Treasury Secretary. Paul Krugman, who’s a kind of modern Keynesian economist, said that we’re in a permanent slump. And now, obviously, what hope there was of a recovery amongst the bourgeois has disappeared with the pandemic.

Now, at the same time, the ruling class, as I said, is out of ammunition. They’ve used up all of the weapons in their arsenal just trying to get out of the 2008 crisis. Interest rates, as I say, at zero or even negative, which means monetary policy is almost redundant. They’ve tried quantitative easing and creating new money. What this has done is just create volatility in stock markets and in asset prices. And if they keep printing money and keep trying to stimulate the economy that way, eventually there will be inflation. And as I say, at the same time, you’ve got this mountain of debt that now weighs down on demand and on the global economy. As a result of the pandemic, the IMF says that the global ratio of debt to GDP is now over 120%. But we have to emphasize that there’s no such thing as a final crisis of capitalism. The ruling class can always get some sort of recovery, they can always find a way out of the crisis, in particular, by making the workers and the poor and the youth pay in the form of austerity and attacks. This is what they’ve been trying for the last decade and this is what they’re going to try in the years ahead to try and claw back all this money that they’ve spent trying to prop up the system.

But the result of this is it’s going to provoke a revolutionary wave, a backlash amongst the working class. Already, we can see this with the revolutionary movements that have broken out across the world over the last year. And our task is to intervene in these movements, to fight and struggle as part of this mass global movement and use the ideas of Marxism and Marxist economics to explain that we cannot patch up the capitalist system. We cannot patch up capitalism. It must be overthrown. Thank you very much.

Interventions

Nelson: Comrades, I’d like to talk about economic crisis, its effects of consciousness, and reformism. Coronavirus has triggered the worst economic crisis in capitalism’s history. There is no going back to the conditions of previous periods and the development of world capitalism has been moving towards this situation for decades now. Capitalism has reached an impasse and is no longer able to develop the productive forces and when the productive forces cannot move forward, society is inevitably thrown back into crisis. There is a clear link between crisis and consciousness and workers will increasingly draw radical conclusions. The past ten years of crisis and austerity has had a profound impact on the consciousness of workers across the world and the period we are currently entering into has significant implications for consciousness in all countries. As Trotsky explained, it’s not necessarily the boom or slump themselves that change consciousness but the shift between boom and slump.

Reformists always like to talk about past periods of capitalism. The post-war boom of the 1950s and 60s was a unique situation and the conditions that led to this boom will not be repeated. The defeat of the revolutionary wave across Europe and the victory of Stalinism after World War II blocked the road to revolution for workers across the world. The destruction of the productive forces gave capitalism space to recover and expand. New areas of technology, the expansion of world trade, and massive inflationary spending programmes like the Marshall Plan were used to expand capitalism.

This economic boom laid the foundations for a strengthening of reformist ideas within the labour movement whilst Marxism was pushed back. These are the key reasons for the weakness of Marxism in these decades within Europe and America. A relative trickle-down of wealth was indeed possible on the basis of capitalism during this period. There was a comparable situation in the 1990s and the 2000s, which followed big defeats of the working class across Europe and America, such as the miners’ strike in Britain, the Fiat strike in Italy, and the PATCO strike in America. Left reformism, which was growing in the crisis of the 1970s, was replaced with outright degeneration of the mass organizations of the working class combined with a general shift to the right. The reformists clung to the bourgeois class and completely supported cuts and austerity.

A relative period of growth was enjoyed by capitalism in these years, but this growth was mainly based on exploiting the working class even more. There were minor reforms granted, although these were not substantial. The 1990s and the 2000s were not, however, a genuine capitalist boom. Real wages remained stagnant in this period but certain things, like the expansion of credit, allowed for the illusion that things were getting better. People had enough money and credit for mortgages, for example, but the expansion of the credit and financial system only increased the contradictions within capitalism, however, and it paved the way for the 2008 crisis.

We are entering into a new stage in the history of capitalism which will be completely different to these previous periods. There is no basis for a V-shaped recovery. The outlook is of prolonged crisis and depression but at the same time as this, the working class has never been larger or stronger. The global workforce has increased by tens of millions over the past few decades and formally privileged layers in society have become completely proletarianized. Every shade of political idea is ultimately tested by events and there is no longer any room or any basis for reformism in politics. We have already seen a sharp polarization to the left and to the right across Europe.

Even the more intelligent representatives of the ruling class are making desperate pleas to the capitalists to address inequality or face revolution. All the reformist labour and trade union leaders, all they want to do is go back to the way things were. They’re so illusioned in the idea that the crisis is temporary. This acts as a break on the consciousness of the masses. Left reformist leaders may be propelled into power but the point is that there is no economic basis for a left reformist programme. Capitalism must continue to attack wages and conditions and no meaningful reforms can be granted. In advanced capitalist countries, despite the crisis of the last ten years, many workers are used to having reasonable living standards. This will completely change, however. Workers will be forced into defensive struggles. We should not be mechanical, however, but we should recognize that despite – we should recognize that because we are in an economic crisis, it doesn’t mean that revolution will happen everywhere, but the class struggle will take place sooner than we think. Thank you.

Franco: Hi comrades. As Adam already explained, the central question is the one of overproduction and the crisis of overproduction was not provoked by the collapse of the demand which followed the lockdown. It is true that COVID and the lockdown, without any doubt, have deepened the crisis but already before the pandemic, there were clear symptoms of overproduction in all the main economic sectors. Let’s look for an example at the automotive sector. Already the years 2018 and 2019 have been closed with a negative sign, both in the production of cars and in the sales. Or, let’s look at the steel sector, which has faced for years a problem of overproduction, of overcapacity, with an excess in the global production of hundreds of millions of tonnes of steel and the same is true for the more technologically advanced sectors. For example, in the sector of smartphones, both in 2018 and in 2019, there were a decrease in the sale of smartphones. What concerns the sales of personal computers, in 2019, there was a slight growth in the sales but then there were seven years of steady decline and the sector analysis, already before the pandemic, foresaw five years of steady decline in the sale of personal computers. Finally we can have a look at the energy sector. We all have seen the price of the oil barrel going below zero but already before the pandemic, there was a clear overproduction in the energy sector, production of oil and gas. From an oil-importing country, the USA had been transformed in an exporting country. That means that the production of energy is far higher than the energy requirements and that the oil producers are in competition with each other to gain new market shares and to get rid of the surplus of production. And let’s not forget that at the beginning of the pandemic, there was a real oil war between Russia, Saudi Arabia, the USA – everyone against each other. And so if we look at these figures, it is clear that there was a market saturation of all these markets already before the pandemic. The lockdown and the decrease of the demand have only exacerbated this situation.

And I would also like to say something about the recovery. A recovery that is continuously postponed. At first, they said that the recovery would come in the second part of 2020. Now, they say it will come in 2021, and probably in 2021, they will postpone it again. Nonetheless, the economic experts talk with a lot of optimism of some encouraging figures in the economy. They talk about a famous bounce after the fall. It is clear that after so deep a fall, we cannot exclude some bounces in some countries or in some sectors, in particular, where the lockdown is over. But this, that can tell us much about the real state of the economic system.

What will be the intensity and the extent of these bounces? We have some indications to it. Recently, Trump has boasted because in the last months, employment in the USA is increasing again. It is true that in May and in June, there was a bounce in the employment figures in the USA and around seven million jobs were recovered. The problem is that only in the month of April, more than twenty million jobs were lost and the last figures say that the request for the unemployment benefits are increasing again. Also in China, they have been talking about a so-called “bounce”. It is true that in the second quarter of 2020, there has been a growth in GDP and in production but this bounce, this growth, followed a collapse in the previous period and this growth was the result of the Keynesian politics that Adam described in his leadoff. Politics of debt and public investments in infrastructure. New airports, new railways, and so on. But all the problems of Chinese economy are still there. For example, consumptions keep decreasing and we know that the decrease of internal consumption cannot be compensated through exports because a commercial war with the USA has deepened and the protectionist measures are reducing their effects because the commercial war with the USA has deepened and the IMF foresee for 2020 a decrease in world trade of 12%. There was a bounce also in the oil price, which after coming below zero, increased again, in particular, because China benefited from the period of low crisis to accumulate results. But now, the storage deposits are full and the demands are decreasing again. China is beginning to sell back the oil it had stored, which demonstrates that the problem of overproduction is still there. It is clear that these kind of benefits have a very limited effect and more importantly, they don’t remove the basic contradictions. They don’t remove the problem of overproduction in all the decisive sectors.

Trotsky explained that economy never develops on a straight line, but with a big zag with a continuous upturning of boom and slumps. There are, nonetheless, epochs of ascending curves of capitalism that are characterized by prolonged and intense booms, upturning with short and soft crisis. An epoch when the curve of capitalist development is descending is characterized by stages of growth that are short and weak, upturning with a prolonged and deep crisis. Today, we find ourselves in the descending curve of capitalism, we have been since 2008. A very profound, a very deep crisis, which was formed by a period of weak recovery. A weak recovery which was like a continuation of crisis, and today we have a new deep collapse, which will be followed by bounces which will be weak and very, very unimportant. We must expect a prolonged period of economic decline, which will have dramatic consequences for billions of people all over the world. In front of all this, it is not possible to limit to fight against these demands and effect. It is necessary to remove the cause of all this – capitalism. The fight for socialists is not a simple aspiration to a better world, but an extremely concrete necessity. Thank you.

Jonas: Thank you. Greetings from Denmark and thank you for a very interesting leadoff. I just want to touch upon one aspect of this broad subject. Now, in general, when analysing different phenomena, there’s a natural tendency to overestimate the short-term effect and underestimate the long-term. And this is, I think, also the case with the bourgeois commentators in regard to the current crisis. The global shutdown meant an instant fall in consumer demand and a collapse of historical proportions and if the pandemic indeed was the only problem, then there would not be a too big problem. The nation-state could simply shut down, press pause, while compensating the businesses and workers and then reopen the economy to a V-shaped recovery. But as Adam and the other comrades have explained, the fundamental cause of all crisis is overproduction, and because of this, you should think that that would mean that a crisis of overproduction would break out in the form of insufficient demand for consumer goods. But Marx explained that this is not the case.

Rather, the crisis reveals itself in a decrease in the reproductive process of capital. That capital gets stuck, so to speak. And that the real investment of the profits in new and expanded production is stopped. Now, the sad thing is, I think a general decrease in this reproductive process of capital has been going on for decades, punctuated in different crises. Central banks and governments have many times tried to stimulate investment by credit and “free money”. They did this after the dot-com crisis in the beginning of the 2000s and after the financial crisis in 2008. And while it did stabilize the economy, instead of investment flowing into production, it flowed into share buybacks, leveraged buyouts – a speculative orgy, basically, and we saw what some call the [inaudible] of everything.

All the while, the contradictions were just piling up in the system. From this, I think we can also see the initial collapse in the world economy due to the collapse in individual consumption, although it was enormous, was really just a trigger. It stopped the cash flow to these highly indebted economies causing insolvency. But the real, most structural crisis is only accelerating now. The crisis in industry. So, I’ll distinguish, should not be overwhelmed by this enormous scale of the immediate explosion of the crisis. We should not overestimate the short-term effects and underestimate the long-term effects.

And what are these? In the last decades, the decaying capitalism was at different times given new room to expand. The fall of the Soviet Union, and the Eastern Bloc’s violent introduction into the world market in the beginning of the 90s, and also China’s ascension into WTO in 2008 and integration into the world market. Sorry, in 2001. These were events with extremely big potential for profitable investment. But now, it’s like there’s no more room to expand on. The whole globe is gripped by the crisis. And this also means that instead of actively integrating and expanding the world market, we will see the opposite taking place – that any one country can only export its way out of the crisis at the expense of the others. They can only do this at the expense of the others. So this is reflecting itself in an explosion of protectionism and a collapse of the so-called liberal world order. And in an entire epoch, this will be a massive break on the expansion of capitalist production and capitalist accumulation. So what we see is that capitalism has gone from being a relative break on the development of the means of production into an absolute break on the development of the means of production. This protectionism, I think, will be a real long-term effect which will define the next epoch that we have now entered. A period with simply the beginning of the 20th century more than our immediate past. And we have to remember, as Marxists – that was a period of intense class struggle and where there were not one, but many chances of overthrowing capitalism. And this means that we should all step up to this situation. The world doesn’t wait for us and the class struggle doesn’t wait for us. We have to do our best to study Marxism and learn from the last time that capitalism was in an existential crisis and make sure that the opportunity in this new epoch is used to the full. Thank you.

Rob: Hello comrades. Well, it’s quite clear that as was said in the opening session that the world is on fire, you know, economically, politically, and socially, and that the bourgeois governments are desperately running around trying to extinguish these flames. But it’s not looking too good for their point of view. There’s clearly a lot of fear among the serious representatives of the capitalist class. For instance, a few years ago, Mark Carney, the Governor of the Bank of England – he warned that capitalism was recreating the conditions of the 19th century – of mass unemployment and increased exploitation – and that these conditions would once again give rise to the ideas of Marx and Engels.

Of course, many of these strategists of capital are in self-denial. The other day, the editor of the Financial Times stated emphatically this was not a crisis of capitalism. But they’re very bewildered. They don’t know what’s happening. Take, for example, one individual. A professor, Eugene Fama. And Professor Fama was well known because he was one of the originators of this theory of efficient market hypotheses. And he’s a – after all, he’s a Nobel Prize winner in economics. And his theory was “well, leave markets well alone and things will be fine.” Of course, this theory, so-called theory, was completely discredited by the collapse in 2008. And he was completely disorientated. He was a bit like the Catholic priest who just discovered that God doesn’t exist. And he was asked the question “What causes these crises?”.And he answered, I quote, “We don’t know what causes recessions. I’m not a macroeconomist, so I don’t feel bad about that. We’ve never known. Economics is not very good at explaining swings in economic activities.” So what an admission. How bankrupt can you be?

But all these bourgeois economists are agreed on one thing – that they deny that there is an inherent crisis of the capitalist system. If there is a crisis, then it must be due to bad policies or pandemics or oil crises. It’s some malfunction, but not the capitalist system. And of course, today, they are pouring trillions and trillions of dollars into the economy, not in a completely confident way, but out of panic and desperation. And the point is well, will this work? And if you’d be honest, they don’t know. They have no idea. Just like they didn’t know in 2008 when they launched the quantitative easing programme. All they knew is that it’d flood the system with cash. Of course, this excess cash, this cheap money, wasn’t put to productive use, as we know. Well, why should they invest, for instance, when there’s excess capacity? There’s too much industry, anyway. Far better to employ the money for speculative purposes. And that’s exactly what they did. This money was used for speculation.

But now, paradoxically, the system has become reliant on this cheap money. They can’t get enough of it. But even despite that, as we know, the last ten years was the longest and most protracted – weakest recovery, so-called, in history. And now we’re heading for a deeper depression. Adam mentioned the Great Depression of the 1930s and there the slump, which began in 1929, lasted three and a half years. And then you had a recovery, which was called the Rooseveltian recovery. But we must understand that the slump of the 1930s, the early 30s, didn’t cause the depression. The depression was caused by the trade war that followed it. The motto of every capitalist country was “every man for himself”. And this resulted in a tit-for-tat tariff war, which resulted in a collapse in world trade, which meant a depression. And Roosevelt’s New Deal was an attempt to solve this problem, particularly the mass unemployment in the United States and that was based on a mass programme of public works. In effect, it was Keynesian policy – spending in order to stimulate the economy.

And there was a recovery between 1934 and 1937. But this was not due to the New Deal, as was said. It was due to the normal cycle of capitalism. Even in depressions, there are ups and downs in the economy. There are even partial recoveries, as was the case in the 30s. You know, a depression does not eradicate the boom and slump cycle. It can suppress it. But still, it has an effect. But these recoveries don’t last. They peter out.

So did the New Deal succeed, as Adam asked? And we can see from the figures what happened. Unemployment in America in 1936 was 17 million. Unemployment in 1939 in the US was 17.2 million. As Adam explained, the depression wasn’t solved. The New Deal didn’t – wasn’t a solution to the problem. And it seems a bit – a lot of illusions these days about the New Deal, particularly in the reformists. They look back at America, “Oh, the New Deal. That was really good.” In fact, some of the left have adopted it, the Green New Deal.

But the New Deal was a failure. It took the Second World War and the devastation of World War II in order to end the depression. And this current depression, which we’re entering, is also going to be very, very protracted with ups and downs, that’s quite clear, but certainly, they can’t find their way out of the crisis on the basis of world war. That’s ruled out. Otherwise, they’ll destroy the planet with nuclear weapons. It’s impossible. And therefore, the crisis is going to become internalized. It’s going to become exacerbated even more. And exactly as Trotsky said, this is the death-agony of capital, the protracted death-agony of the capitalist system, which the ideas of Marxism will once again have an echo in the working class and revolution will be on the order of the day. We repeat the words of Mark Carney, the Bank of England Governor. The conditions of capitalism are being recreated such that the ideas of these revolutionaries will become popular again. It’ll be a time for revolution. It’ll be a time for the ideas of Marx and Engels. And I say hoorah, hoorah for that! As far as the bourgeois economists are concerned, well they can, as we say in English, they can stick it in their pipe and smoke it. Thank you very much.

Sum up

Adam: Thank you for all the contributions. The topic is obviously a very large one and a very relevant one. And I think Nelson summed up the situation very well in his contribution at the beginning when he highlighted the fact that for us, the main concern when we discuss economics – our main concern is not about economics as an abstract, academic discussion, but because we want to understand the world around us, understand the situation, the economy, primarily because we want to understand the impact on consciousness that this crisis will have. As Trotsky said, theory is the advantage of foresight over astonishment. We need to be able to understand the line of march, the general epoch that we’re in and as Nelson summarized, the epoch we’re in is not one of reforms, but an epoch of counter-reforms, of cuts, of austerity, of attacks. A very different epoch from the post-war boom or even the 90s.

Now, I’ve seen that there’s been a lot of discussion in the Eventtia chat, in the conference chat function and people are debating the question of universal basic income, which again is kind of another turbo-charged form of Keynesianism. The idea that you will tax the rich and then give everyone an income no matter what, an unconditional bit of money. Some people used to tie this to the idea of automation. They’re saying that if workers are going to lose their jobs and be replaced by machines, then they should get an automatic bit of money. Now, the demand has come back because of the crisis, because of the pandemic and the fact that there’s mass unemployment, again, people are demanding the idea of UBI in relation to that.

Now, obviously as Marxists, we would fight for every reform, for every gain for the working class, but we need to bear in mind what Nelson said, that we’re not in an epoch where reforms are going to be afforded by the capitalist class. Any reforms that the capitalists do grant will be on the back of enormous pressure by the working class, enormous struggles, and not because of any benevolence by the capitalists or bourgeois politicians. The only way that we’ll extract genuine reforms from the capitalists is if they fear that they’re going to lose everything. Because at the moment, even before this crisis, already all the reforms of the past were being under attack and taken away. Even the reforms that were won in the post-war period were under attack and threatened. And things like universal basic income and Keynesianism and MMT, they don’t try to fundamentally challenge the cause of the crisis in the first place. They’re constantly trying to attack the symptoms of the problem, but never the disease. But yes, things like UBI, they don’t fundamentally challenge the dynamics that we see at the moment, the failed dynamics of capitalism. They do nothing to change the relationships of power that exist, of exploitation and overproduction that you see under capitalism. In other words, if you give everyone this – even if you gave everyone this money under universal basic income, where would it all end up? You would still get rents being paid to landlords. Sky-high rents, rip-off rents to big landlords. The supermarket bosses would carry on making huge profits from scarcity, from the surge in demand. The shareholders of the big fossil fuel companies would continue to profit off of polluting the environment.

And it highlights what – something Marx said to the reformists and the social democrats of his day. If you read his ‘Critique of the Gotha Programme’, he argues against the reformists of his time. He says all you’re ever doing is confusing things by obsessing about distribution, whereas he says the inequality we see is the result not of wealth being unevenly distributed but because the means of production are unevenly distributed. In other words, the way to get rid of inequality and unemployment – the way is not to redistribute wealth, but to take over the things that produce wealth in the first place. Take over the means of production. Again, it’s a question of ownership, common ownership, and that’s the way to get rid of inequality.

And it really highlights, again, what some of the other contributions have talked about in terms of the constantly attacking the symptoms rather than the disease. Rob talked about how we are in this epoch of senile decay and the death-agony of capitalism and Franco talked about the symptoms we see in terms of all the overproduction that was already there before this crisis. And there’s many symptoms of this. The productivity crisis, the low investment from big business, the massive excess capacity in all these industries. The fact that in corporations right now, big corporations actually have mountains of idle cash that they could invest but they don’t. And as Jonas said, what you see instead is an ‘everything bubble’. In other words, just speculation in all sorts of different assets instead of real production – in real investment in real production.

And that’s the thing – the reformists and the liberals, they’re always trying to attack these symptoms but never the disease. They think you can somehow change the nature of capitalism and change the nature of capitalists. But Marx explained that it’s not about the individual subjective will of the capitalists but rather he said that the capitalist is capital personified. In other words, the capitalists are driven to constantly invest and reinvest their profits and to drive down wages and pollute the planet to make more and more profits. And this is the dynamics of capitalism.

These are the laws and the logic of capitalism. If you accept these laws and logic – if you accept capitalism, sorry, you have to accept the laws and logic of capitalism which demands austerity in these times of crisis. Austerity is not some political subjective choice. Austerity is the result of capitalism in crisis. It is the logical result of this system, this senile system, going into crisis. And our understanding, our task, is to understand these laws of capitalism that appear mysterious to us. It seems to be something that only people with very grand degrees or jobs in the city of London are allowed to really understand. Marx was trying to strip away this mystery and uncover the real objective laws underneath the capitalist system.

And as Jonas said, the profit system, the capitalist system, it requires motion. It requires capital to be dynamic and to be circulating. Capital, Marx said, was value that was looking to self-valorise, to make profit. Money looking to make more money. And so these laws, these laws of motion of capitalism that Marx uncovered – you see, as Jonas said, that these laws of motion mean that capitalism cannot just be paused. It cannot be put in this state of suspended animation. But if we understand these laws, then we can fundamentally change the system. We can replace them with a new set of economic laws. We can replace the laws of competition and of profits and of accumulation. We can replace them with laws of socialist planning, of nationalization, of workers’ control. And as Jonas said, with those kind of laws in place, with that kind of economy, we could have handled this pandemic. We could have taken it in our stride.

Right now is not even the real crisis, as many of the comrades said. Right now is just the calm before the storm, in many respects. Right now, the whole economy is on life support. But the real question is what happens when you take the life support away? It’s in those periods, it’s when we take the life support away that we see the real fragile state of the capitalist system.

Trotsky talked about the curve of capitalist development. He said that there were – you could see the booms and slump cycle of capitalism as like the rhythmic breathing, the pulse of capitalism. But he said that these pulses, this breathing, you could see it overlaid on top of a long-term curve of capitalist development. And he said that in capitalism’s youth, the booms would be long and the slumps would be short and shallow. But he said there were fundamental turning points in history that changed the curve of capitalist development. Revolutions, counterrevolutions, wars. And the pandemic is such a turning point, as well. It’s coming on top of, as I said, the crisis of 2008 and even the one of the 1970s. The end of the post-war boom was a big turning point on the curve of capitalist development. It’s become very clear now that we’re not in a period of capitalist youth and vibrancy anymore, but as Rob said, we’re in an epoch of senile decay, of capitalist decline. And in these periods, Trotsky said, the booms become very brief and very shallow and the slumps become protracted. And this is what you saw with the idea of permanent slump or secular stagnation that I said at the beginning.

And what the pandemic has done is to reveal all of the frailties, the fragility of the system. In fact, you could make an analogy with the pandemic and with the virus itself. We know that coronavirus is a much deadlier disease for people who are already frail or who have a pre-existing condition. Well, capitalism is such a fragile and frail system. A healthy, young, vibrant system like socialism would be able to take this pandemic in its stride. It’d be able to plan where the resources, the productive resources, when – it’d be able to shut down bits of the economy without causing unemployment. And with the pandemic, we see the callousness of the capitalists. They say that the elderly and the frail and the vulnerable should be left to die – the herd immunity, the Malthusianism – so that they can save their decaying and decrepit system. Well as Alan said yesterday, we say that it’s capitalism that must die so that the rest of us can live. So that all of us can live a decent life with harmony with the environment and the planet that capitalism is also destroying. And that will only come on the basis of a socialist planned economy. That’s what we’re fighting for. And only the ideas of Marxism can help us get there. By understanding the world in order to change it along revolutionary lines. Thank you.