Tag Archives: Economy

Boom and Bust – the Capitalist Curse

by Barry Weisleder

Prime Minister Justin Trudeau is basking in the reflected ‘glory’ of the Canadian economy. The GDP is up. Unemployment is down. Housing starts are on an upswing. However, before popping a champagne cork, consider the following. The growth in exports is weak. Trade is in deficit territory. Wage improvements are the slowest since 1998. In fact, the past 40 years have seen a virtual wage freeze, except for the top 1 per cent of the people, each of whom makes more money in a day than most workers do in a year.

In order to pay their bills, millions of working people go into debt. This is encouraged by low interest rates, and by a selfish desire to eat and sleep under a warm roof. More about debt in a moment, but first…

Do the ups and downs of the so-called free enterprise economy seem like a merry-go-round (except for the merry part)? Well, that’s due to the very nature of the market economy. Despite the fact that giant monopolies dominate it, the system is chaotic, unplanned and quite irrational. It puts human needs at the bottom of the list, well below profit, the so-called bottom line. For proof, just look at how bankrupt firms, like Enron, Stelco, Target and Sears, treat their retired workers.

Capitalism is characterized by generalized commodity production. That means production for profit, not for use. When sales of goods and services slow down, assembly lines slow, or grind to a halt, and workers are laid off. Is that because there is no work to be done? No. It’s because too many commodities were produced to generate high profits. Viola! An overproduction crisis occurs. Often, it involves the overproduction of useless things. Bombs, not homes. Industries are periodically over-capacity. Machines sit idle. Workers’ incomes decline, many to the point of impoverishment and desperation.

Over-production crises are a mainstay of capitalism. The decline in the rate of profit is also a feature of the system. It results from the growing reliance of capitalism on machines, increasingly on robots. The rate of exploitation of labour can be increased. But machines cannot be squeezed to produce more surplus value (profit).

The threat of workers’ revolution prompted some 20th century liberals to propose ‘solutions’ to these deep-seated problems. One experiment, proposed by British economist John Maynard Keynes, seemed to work for a while. Government expenditure (based on tax revenues, deficit spending, and some money-printing) created public projects, social services and jobs. But a by-product of such currency creation, deficits and public spending is inflation. Inflation can quickly get out of control. Eventually debt mushrooms, and becomes bad debt. Then the bubble bursts. Remember 2007–2008? Of course, the government comes to the rescue… to the aid of the biggest banks and corporations – not to the rescue of heavily indebted workers.
Is there any ‘conventional’ way out of the boom-bust syndrome, given the physical limits of global resources and the world market?

Yes. But it’s very risky and very bloody. Imperialist war destroys the competition. It also kills millions of people and devastates the natural environment. Conquest by war lays the basis for a new round of capital accumulation and production for profit. This works like a charm for the ruling rich if wages and benefits are slashed as a result of the smashing of workers’ parties and labour unions by fascism and war.

Some countries, due to exceptional circumstances, can avoid one or another aspect of the destruction. But no capitalist country can escape the booms and the busts, the very temporary nature of the ‘solutions’, and the persistent social misery of poverty and injustice.
There is only one way out of this mess, that is, in the interests of the working class and the dispossessed. Break the stranglehold of monopoly capitalism! To do that it is necessary for working people to take hold of the commanding heights of the economy (not the corner grocery store or barber shop, but the big banks, mines, mills and factories) and run it according to a democratically decided plan. The notion, entertained by some liberals and social democrats, that capitalism can be ‘regulated’ to be in harmony with nature, and to put an end to periodic crises, is pure illusion. Nationalization of a few large firms (with or without compensation, with or without workers’ and community control), will not be sufficient to break, permanently, the dynamic of private capital accumulation and the anarchic organization of production. Only public ownership and a planned economy can replace the waste and brutality of capitalism with a cooperative commonwealth.

Canada is not presently on the verge of an economic transformation. But that day is surely coming as capitalism continues to wreak havoc on people and the environment. Radical change will be hastened as socialists step up efforts to explain the necessity and viability of it. Hopefully, the transformation will occur before catastrophic climate change makes political action a tragically belated, academic exercise. As Rosa Luxemburg famously observed, “Socialism or barbarism” is the choice facing humanity.