World economy fundamentally unsound?

[cockneyrebel]

I know some people don't like these kinda articles (mk12 in particular!), but given what's going on I think it's worth looking at economics. Although this is a critique about the SP it applies to a lot of the left and is interesting in a wider setting than just the far left:

http://www.permanentrevolution.net/?view=entry&entry=1620

Every couple of months or so the Socialist Party (SP) re-assert the unsoundness of the world economy, so far this year, Lynn Walsh , Jared Wood and Peter Taaffe , have all proclaimed the immanence of the world recession, so with the recent turbulence in the world’s financial markets making such a prospect at least seem possible, the relief in their recent editorial “World Economy Fundamentally Unsound ” is palpable, as it finally appears the long awaited collapse of world capitalism, “could” be about to happen, if not “now” then… “a bit later.”...writes Bill Jefferies...

 

[cockneyrebel]

Particuarly liked this bit

So the recession will bite if not now then “a bit” later. It may only be gradual, but then again it may be sharp. And how long is a bit long? If I said I’d pop round to my Gran’s for tea and cake if not now then in a bit and had still not arrived nearly two decades later, she might well have grounds to complain. If I couldn’t make up my mind if I want a lot of cake or a little – she might well have grounds to tell me where to stick my cake altogether.

 

[Zeppo]

cockney - useful stuff. On the link to permanent rev, the response from Jason is I think the best way forward. Capitalism is not in crisis. As a system there will be growth and recession. There are immense contradictions within it but economic factors are in my view not directly linked to working class militant confidence. They are a factor of course but it is the victories however, small that can kick start more action.

The recent RMT, POA and possibly the CWU (although the latter may be sold short) disputes have where I work got more workers saying this is what we should do. I am in the PCS, I do not completely hold with the view there will be a massive autumn of unrest (I will be glad to proved wrong). However, there are green shoots that we are moving in the right (left) direction.

No point in waiting for the next recessio. As ever it is going to be down to hard work with people who want a change.

 

[cockneyrebel]

Actually that is a good response and don't usually do this but am gonna cut and past it:

Surely, if wages are falling and profits rising then that is far from a crisis for capitalism. Rather, it is good news for capitalism.

Of course there are minor crises here and there, and they do have the potential to spill over into a larger crisi but only when profits are threatened generally.

No one has a crytal ball but Marxist econmocs provides us with a general tool to look at general trends. The tendency of the rate of profit to fall is the key to understanding capitalism's inherent instability.

However, in the meantime what should we do? Various groups such as the SP and SWP often give the impression of waiting around for the next big crisis whulst assuring the faithful that it is imminent.

Bill has done a good job here of showing the incoherence of this position in at least the Socialist Party's recent offerings.

This is important not as some kind of inter-group sectarian rivalry but because as socialists all of us- in whatever group or no group- need to begin to understand the reality of capitalist economics in order to begin to change it.

There's no point saying the next big crisis is just around the corner if there isn't enough evidence it is- otherwise we risk looking like the boy who cried wolf or the millenarian sects always predicting the end of the world is nigh.

No our task is to patiently and sytematically build up the stregth of working class resistance, taking on battles, usign the right tactics to win, to paint the bigger picture as accurately as possible, to avoid demoralisation as much as we can.

Within this of course we do point to market madness and inequality and injustice- how PFI schemes cost more and cut services for example and how a Mental Health trust in Manchester is prepared to forcibly medicate patients and make them travel hundreds of miles to try to break a strike against cuts and privatisation.

Rising income inequality does not automatically mean crisis for capitlaism as night follows day.

But- and it's big but- if class conscious socialist militants can organise struggles out of this widening gap, not by promising false dawns but by patient systematic and hones hard work and if working class militancy can reach a critical mass then that is another reason why capitalism is shoring up its own contradictions and building its own grave diggers. Rather than waiting around though for the recession like it's the second coming we are actively engaged in building the tools- working class militancy as the spades or diggers- that will bury the cruel, outdated and fundamentally flawed way of conducting human affairs that even threatens our very survival as a species- capitalism- and begin to write a whole new chapter of human history of conscious, active and scientific human relations - socialism.

 

[nightbreed]

As Peter Taaffe will probably explain to you , Perspectives are not tablets of stone, they are conditional. Certain factors might or might not come into play.The job of the Marxist tendency is to analise how things are not how we would like them to be etc.
So there.

 

[cockneyrebel]

As Peter Taaffe will probably explain to you , Perspectives are not tablets of stone, they are conditional. Certain factors might or might not come into play.The job of the Marxist tendency is to analise how things are not how we would like them to be etc.
So there.

 

[articul8]

There are several problems with this article, not least this paragraph:

In the end the growth of US consumption depends on the growth of US production, which in turn depends on the growth of US profitability. If profits are rising, capitalists expand production, more workers are hired, more wages are paid, more profits are made and demand or “consumption” rises.

Given the later explanation of the growth of profitability on the expansion of production esp. in China/India, how can you say that US consumption depends on production in the US - as opposed to the return on capital made by US investors from increases in global production?

Plus the "in the end" is no more persuasive than the SP's "in the end" there will be a recession. Patterns of consumption have multitple determinants and can be significantly effected by constraint on credit, income, and even something as intangible as 'investor confidence' - OK these operate in the context of trends in profitability, economic growth/ expansion in production-but this leaves room for all kinds of variables in between.

Ultimately, if the operators in the city don't fully understand the extent of exposure to bad sub-prime debt, how the hell are socialists expected to determine the exact extent and timing of any future recession?

 

[fanciful]

It obviously depends on both. Half US profits are now earnt abroad. Given that those profits continue to grow very strongly it seems unlikely they'll be a US recession.
And the use of "in the end" in this context means "ultimately", it's not suggesting a time scale as the SP do when they say capitalism will collapse "in the end".
It means that ultimately, the level of demand depends on the level of production, which depends on the level of profit and this is true whether capitalism is collapsing or booming. Patterns of consumption "ultimately" depend on patterns of production, i.e. how much profits a capitalist yields, how large the bonus of an executive is, the level of wages and employment etc. they may vary due to whimsy at any given moment, but only within very strict limits, people cannot "ultimately" spend more money than they have for any length of time as the present credit crunch proves.
It'll obviously take a while before we know the full extent of the credit crunch, the IMF for example are about to downgrade their estimates for next years growth as a result, but that's not the same thing as saying they'll be a recession.
In fact when you read the SP article closely it says nothing at all. On the one hand it predicts that a recession is likely, if not now then in a bit. Then it says well maybe not in a bit, and it doesn't know how deep it'll be anyway. And if you don't know that how do you know it'll be a recession - a shallow recession is a contradiction in terms.
On the estimates of the exposure to the sub-prime debt, the main issue as I see it is that the financiers do not know who owns the debt, and who therefore has liability, there seems a fair consensus about how much it is up to around $300 bn max. This can be worked out fairly easily by estimating losses based on the numbers of defaults.
Socialists to be sure can't know the ins and outs of all the numbers, all the more reason then not to be always predicting a recession is likely if not now then in a bit.

 

[phildwyer]

The world's economy is indeed fundamentally unsound, because it is based on the false proposition that there is a thing called 'money.' In fact there is no such thing. One day, probably quite soon, everyone will realize this. You might think this will be a good thing, but actually it will not. Why? Because the people who claim to 'have' this alleged 'money' will kill everyone else. Strange but true.

 

[Backatcha Bandit]

The world's economy is indeed fundamentally unsound, because it is based on the false proposition that there is a thing called 'money.' In fact there is no such thing. One day, probably quite soon, everyone will realize this. You might think this will be a good thing, but actually it will not. Why? Because the people who claim to 'have' this alleged 'money' will kill everyone else. Strange but true.

Ain't that the truth.

Carry trade unwinding, all those CDO timebombs blowing up, China dumping US$, Wheat prices rocketing and Energy going through the roof...

Not looking too healthy, is it?

Whatever - if you're into spectating the collapse of Capitalism in all it's glorious details (and you have a twisted sense of humour), give Max Keiser a read.

Better yet, listen to his shows on KarmaBanque - the most accurate (and potty-mouthed) market analysis you're likely to find.

I honestly don't think there's much to be gained from 'Marxist' analysis regarding economics - for the simple reason that Marx made a fundamental omission in his work, in that it never appeared to occur to him to examine the nature of what 'money' actually is - a point on which I believe you agree, Phil?

 

[phildwyer]

Ain't that the truth.

Carry trade unwinding, all those CDO timebombs blowing up, China dumping US$, Wheat prices rocketing and Energy going through the roof...

Not looking too healthy, is it?

Whatever - if you're into spectating the collapse of Capitalism in all it's glorious details (and you have a twisted sense of humour), give Max Keiser a read.

Better yet, listen to his shows on KarmaBanque - the most accurate (and potty-mouthed) market analysis you're likely to find.

I honestly don't think there's much to be gained from 'Marxist' analysis regarding economics - for the simple reason that Marx made a fundamental omission in his work, in that it never appeared to occur to him to examine the nature of what 'money' actually is - a point on which I believe you agree, Phil?

Hang on, he said it was alienated labour-power. What am I missing here?

 

[Johnny Canuck3]

The world's economy is indeed fundamentally unsound, because it is based on the false proposition that there is a thing called 'money.' In fact there is no such thing. One day, probably quite soon, everyone will realize this. You might think this will be a good thing, but actually it will not. Why? Because the people who claim to 'have' this alleged 'money' will kill everyone else. Strange but true.

Money has value, so long as people agree that it has value.

 

[nightbreed]

I honestly don't think there's much to be gained from 'Marxist' analysis regarding economics - for the simple reason that Marx made a fundamental omission in his work, in that it never appeared to occur to him to examine the nature of what 'money' actually is - a point on which I believe you agree, Phil?

Doesnt Marx do this here?

http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm

 

[butchersapron]

I honestly don't think there's much to be gained from 'Marxist' analysis regarding economics - for the simple reason that Marx made a fundamental omission in his work, in that it never appeared to occur to him to examine the nature of what 'money' actually is - a point on which I believe you agree, Phil?

What?!!! Apart from all those texts on money of course. The section on finance and credit in Capital V3, the opening sections of Capital V1, a massive section on money in the grundrisse (as long as most books) and a year long series of articles on the just this in the mid-1850s, plus various other texts throughout his life.

You might want to read the book by Suzanne de Brunhoff Marx on Money or the brilliant and influential Sergio Bologna article Money and Crisis: Marx as Correspondent of the New York Daily Tribune, 1856-57 or The Political Economy of Money and Finance by to fill in the gaps.

I actually agree that looking at the economy in the way that PR and other orthodox marxists do, as some autonomous machine operating to its own objective immanent laws is useless - there are other approaches that take a far wider views and have made the connection between w/c action and 'economic' crisis or developments, that the w/c and it's actions are actually the driving force of the economy, not the other way around. I'm not sure where the things you reccomed fit into that though.

 

[nino_savatte]

Money has value, so long as people agree that it has value.

People, that is to say the ordinary person in the street, do not ascribe a value to money, that is done for them by the state.

 

[riglet]

Marx made an excellent critique of Capital. What he didn't do is provide a credible alternative. The Trotskyists tell us that with proper political control (e.g workers democracy) the planned economy will work. This is patently untrue as the political control of the economy cannot compensate for its static nature.

It is time the orthodox Marxists move on from trying to cram todays reality into the Russian Bolsheviks programme for power of 1917. Wider dialogue and real community as against tribal warfare.

 

[fanciful]

Yes the idea that Marx didn't have a theory of money is pretty laughable, he deals with it at the beginning of Volume 1.
I don't think PR do abstract from the class struggle.
On China dumping US bonds, this is interesting, tho not really news there were reports that China had begun this back in June;

"China recognises that its fortunes are heavily dependent on its overweighting in US dollar assets. Hence it has decided this year to begin quietly diversifying away from US Treasuries in order to both diversify its risk and to obtain greater returns from other currencies and asset classes…. the data showed that China had indeed become net sellers of US Treasuries for the first time since October 2005. China net sold a value of US$5.8 billion, which brought the extent of its holdings down to US$414 billion…. "
Source: fnarea.com 22/6/07

It's part of the shift of China into higher interest paying FDI, underlying its transformation into an imperialist power. According to the Economist 3 of the top 6 companies in the world according to market capitalisation are now Chinese, or 6 of the top 25.
Again this would suggest that the current financial turbulence isn't a sign of the immanent collapse of capitalism but in part a repositioning of Chinese assets.
It is to be expected any that as the business cycle reaches its peak this year of next year that there will be an increase of financial speculation.
The problem with all these discussions on the left is you can't really have a serious debate about the likelihood of anything as the question is always posed in terms of collapse or otherwise. The truth is capitalism doesn't collapse that often, it is a pretty unusual state of affairs, and unlikely to be happening now.

 

[riglet]

The truth is capitalism doesn't collapse that often, it is a pretty unusual state of affairs, and unlikely to be happening now.[/QUOTE]

Exactly. Reform not Revolution.

 

[butchersapron]

People, that is to say the ordinary person in the street, do not ascribe a value to money, that is done for them by the state.

I don't follow what you mean here nino? Are you saying that state somehow sets the level of socially neccesarry labour for various commodities? Have i misread you?

 

[Backatcha Bandit]

Doesnt Marx do this here?

http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm

Well, no, I don't think he does.

Indeed, the opening paragraph highlights what I'm getting at:

The first chief function of money is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value.

It's this notion that 'money' is 'qualitatively equal' to the commodities that it is supposed to merely represent that I find issue with.

It clearly isn't. It possesses a *magical* quality that renders it qualitatively different from that which it is assumed to merely represent, in that it is not subjected to atrophy of any kind (indeed, through the mechanism of usury, quite the opposite).

What Silvio Gesell termed 'Rats, moths and rust'.

Why I think this is of fundamental importance is that this *magical* quality is what defines the nature of the 'system', what it is, what it does.

It dictates the functioning of the 'machine'. A fundamental systemic driver that ensures that wealth is accumulated by the wealthy at the expense of the non-wealthy.

Until this systemic fault is addressed, I can't see how any amount of 'tinkering with the controls of the vast machine' of 'economics' will have any real effect on what it actually does.

For that reason, I don't think that Marxist thought actually presents any real threat to the status quo. Perhaps this is why everyone's heard of Marx but not Gesell.

-

Thanks for the links, BA.

The closest Bologna appears to get is with:

Although he only seems to touch on it, here Marx puts his finger squarely on the central problem: the problem of the relationships between money as a particular commodity and money as capital.

Which I feels falls short of the mark - I don't see any evidence of an inquiry into the fundamental qualitative difference between 'money' (as either commodity or capital) and commodity (as in 'wheat' or 'product of labour').

Please do point out if I've missed something you feel addresses the point. You're obviously much better read than myself, so it's quite likely I've missed something that would answer my question.

I actually agree that looking at the economy in the way that PR and other orthodox marxists do, as some autonomous machine operating to its own objective immanent laws is useless - there are other approaches that take a far wider views and have made the connection between w/c action and 'economic' crisis or developments, that the w/c and it's actions are actually the driving force of the economy, not the other way around. I'm not sure where the things you reccomed fit into that though.

Well, my approach is actually more from a cybernetic perspective, in that I see a 'complex system' with it's various mechanisms, actors, feedbacks etc. that will perform a function, the outcome of which is predefined, inevitable.

It does what it's designed to do, it can do no different.

Utilising the language and ideas of people such as Dana Meadows, what I see as necessary to alter this predetermined outcome (rich get richer, poor get poorer) is what she termed 'transcending the paradigm'.

This probably sounds a bit 'airy-fairy' and I could probably put it better, but perhaps a practical example with reference to the subject can be found in such things as 'The experiment of Woergl' and 'Schwanenkirchen'.

I'd appreciate your thoughts on the above.

 

[Blagsta]

I think you're misunderstanding Marx. My understanding is that Marx is saying that money is the symbol system we use to draw an equivalence between commodities that are qualitatively different to each other. It's no more "magical" than any other abstracted symbol system.

 

[nightbreed]

The truth is capitalism doesn't collapse that often, it is a pretty unusual state of affairs, and unlikely to be happening now.

Exactly. Reform not Revolution.[/QUOTE]

Reform?

Er, the Capitalists say no.

 

[fanciful]

Money is a measure of the exchange value of commodities - all commodities have two qualities their usefulness or use value all of which are qualitatively distinct and their exchange value or price, in other words the proportions in which they exchange e.g. two cats for a dog, one horse for a table etc. Marx says what do all of these different use values have in common separate from their specific usefulness and he answers - labour.
The amount of labour a commodity takes to produce, its socially necessary labour time, forms its cost of production and this determines the proportions in which commodities exchange.
In undeveloped systems of commodity exchange a variety of commodities have acted as "money", shells, silver, cows, or whatever but as commodity production develops gold supercedes all these other forms of "money".
So gold becomes the universal equivalent, the symbol of value, the one commodity in which the price of all other commodities, i.e. the proportions in which they exchange is represented.
Money is itself a commodity - therefore Marx certainly didn't go into the distinction between money and commodities as money and commodities as money is a commodity, it too has a price - the cost of production of gold.
Money isn't qualitatively equal to all the commodities it has to represent gold does not equal cow or banana, they are qualitatively distinct, but gold can nonetheless represent the price of cow or banana, i.e. their cost of production, the amount of socially necessary labour time incorporated into them during the production process.

 

[riglet]

Exactly. Reform not Revolution.

Reform?

Er, the Capitalists say no.[/QUOTE]


Nonsense

 

[muckypup]

capitilism is founded on the abundant availablity of super cheap energy, primarily oil. The supplies of which are peaking (see peak oil). Without cheap oil, economies cannot grow.

Without growth the monetary system collapses, as money is linked to growth. Paper currency is circulated in the form of debt. The interest on debt must be serviced by increasing debt.

There are monetary reforms under way, and advocates call for interest free currency which is localised.

 

[nino_savatte]

I don't follow what you mean here nino? Are you saying that state somehow sets the level of socially neccesarry labour for various commodities? Have i misread you?

I'm referring to the filthy stuff. It is the state who determines which notes bear which denominations. Currency is designed, controlled and regulated by the state or by an agent acting on its behalf (BoE, the Scottish Banks etc).

 

[muckypup]

banking has been privatized, even the bank of england is a private entity.

 

[Prince Rhyus]

You don't need to be a Marxsky-ite-Trotskeeismist to deduce that the world economy is fundamentally unsound.

The pollution alone tells us something's not good. The effects of climate change are already affecting the world economy and things don't look like easing up soon. The symptoms of climate change tells us the world economy is fundamentally unsound.

 

[nino_savatte]

banking has been privatized, even the bank of england is a private entity.

That acts on behalf of the state.

 

[nino_savatte]

You don't need to be a Marxsky-ite-Trotskeeismist to deduce that the world economy is fundamentally unsound.

The pollution alone tells us something's not good. The effects of climate change are already affecting the world economy and things don't look like easing up soon. The symptoms of climate change tells us the world economy is fundamentally unsound.

Innit? The western capitalist economies thrive on consumer debt, that can't be a good thing.