Socialist Party books and pamphlets

Capitalism in Crisis

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Marx was right

The current crisis is not just caused by the greed of the City financiers or even the domination of finance capitalism.

The deeper root cause is the very nature of capitalism itself. Brown's claim to have "abolished boom and bust" must now be deeply embarrassing to him. It is a sign of his total incomprehension of the system that he lauds that he was ever foolish enough to say it.

Karl Marx described the fundamental flaws of capitalism over 150 years ago. These include the antagonism between the social, collective nature of production, on the one hand, and private ownership of the means of production by a tiny handful of billionaires; and the antagonism between the world market and the limitations of the nation state.

Capitalism is based on production for profit and not for social need. Crucially, Marx explained that the working class can never buy back the full product of its labour, because workers' wages represent only a portion of what they produce.

That part of the product which goes to cover the workers' own subsistence is called the 'necessary product'.

What the worker produces over and above that is called 'surplus product'. The momentum of capitalism is maintained by ploughing part of the surplus back into production. But profits come from the unpaid labour of the working class. When profits increase and are invested in new capital equipment, at a certain stage this must be used to produce more consumer goods.

Yet workers do not receive enough wages to buy back these 'consumer goods'. This leads to economic crisis. Over recent decades capitalism attempted to overcome this problem by injecting credit into the economy in order to prolong the boom beyond its 'natural' limit.

Millions of us have managed to buy consumer goods on plastic, or by re-mortgaging our homes.

This, however, has now turned into its opposite. The credit crunch has bitten and reality is being revealed - that the working class is less able to buy back the goods it produces as a result of the neo-liberal era.

Capitalism in the last period has made unprecedented profits by driving down the 'necessary' product - wages - thereby increasing the 'surplus' product - profit.

Factories have been moved abroad in order to take advantage of cheaper labour. Super-exploited migrant labour has been used as a means to hold down wages in those service sector jobs that cannot be moved abroad.

The health service, welfare benefits, pensions and all the other elements of the 'social wage' have been ruthlessly privatised and cut back.

The result is that in the US, for example, wages are now the lowest share of gross domestic product (GDP) than at anytime since 1947, while profits were, until the recent crisis, at an all time high.

A similar situation exists in Britain.

Despite making the highest rates of profit in history, the parasitic nature of twenty-first century capitalism is revealed by the fact that it has not been ploughing that surplus into production.

Greater profits have been available to the capitalists through gambling on the world's stock markets than by investing in producing commodities.

And for capitalism the only rule is, 'do what makes a profit'.

Now the recession is biting. Workplaces are already closing and factories are on short time because the goods that they produce cannot be sold in sufficient quantities - at least not at a profit.

A 'classical' crisis of overproduction, as described by Marx, is now developing.

What a condemnation of capitalism that it is not able to fully utilise the science and technique it has brought into being because it is not profitable to do so.

Billions of people still lack the basic necessities of life but, because they lack the funds to purchase them, capitalism has no interest in providing them.

The current recession will not continue indefinitely, although it is likely to be prolonged. At a certain point sufficient capital will have been destroyed that those companies that survive will begin to make profits again.

Until that time no amount of government bailouts will make the capitalists increase investment.

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