Three Notes on the Current Crisis

1. Capitalism works by breaking down – The relation of crises to capitalism

The capitalist apologist view of the relation of crisis to capitalism is pretty clear. Crises are seen as undesirable, pathological or threatening to "business as usual". Crises are seen as an "external shock", as an exception to capitalist normality, which is growth.

Some critics of capitalism also see crises in a similar light – as the result of internal contradictions (i.e. pathology) and ultimately threatening the continued existence of the capitalist system. Many of the people who hold to this view (and they include both Marxists and non-Marxists) believe that there will be a series of ever-increasingly severe crises until "the final crisis" brings about the collapse of capitalism itself. We call these "crisis theorists". Note the similarity of their take on the growth/crisis relation to the apologist one.

1. Capitalism works by breaking down – The relation of crises to capitalism

The capitalist apologist view of the relation of crisis to capitalism is pretty clear. Crises are seen as undesirable, pathological or threatening to "business as usual". Crises are seen as an "external shock", as an exception to capitalist normality, which is growth.

Some critics of capitalism also see crises in a similar light – as the result of internal contradictions (i.e. pathology) and ultimately threatening the continued existence of the capitalist system. Many of the people who hold to this view (and they include both Marxists and non-Marxists) believe that there will be a series of ever-increasingly severe crises until "the final crisis" brings about the collapse of capitalism itself. We call these "crisis theorists". Note the similarity of their take on the growth/crisis relation to the apologist one.

By contrast, those of us who reject both capitalist apologetics and crisis theory see crises as neither external nor potentially terminal events for capitalism. Rather crises are a full and entirely necessary part of the capitalist system. Capitalism could not function without crises. Every period of sustained growth within capitalism is creating the conditions for the next crisis. But these crises are both internal and constitutive of capital. To answer the question posed on a recent SWP poster round our way – this is not the end of capitalism, it’s the means of capitalism.

To use an analogy. We recognise that within wars, the majority of participants spend the majority of their time being relatively inactive with the major threat they face being boredom. However, these long periods of tedium are episodically interrupted by (mostly) brief periods of death, destruction and chaos. Yet no-one attempts to say that these latter periods are somehow not part of the normality of war – exceptions or breakdowns in the war process.

Having said that, we need to move from the general constitutive relation between growth and crisis, to the particularities of the current crisis which, in terms of recent government actions alone (nationalisations, bailouts putting hundreds or billions or even trillions onto the public accounts of supposedly cash-strapped governments, etc.) is clearly of a different order (at least as far as the West is concerned) from the last crash (2001 internet bubble) or the proceeding ones (1997/8 crisis, 1987 crash, etc.). So we need to look at what is specific to the current crisis.

2. The global context

2.a. The imminent collapse of the Third Supercell

I have a nascent hypothesis of global level economic supercells, still at the intuitive rather than theoretical stage at the moment. Based on the metaphor of the large scale weather systems that breed hurricanes or tornadoes. I’m looking at this as contrasted to steady-state or homoeostatic flow systems, such as convection cells for e.g.

Possibly the first* supercell in this model would be the North Atlantic slave trade triangle. The end result of which is the (relative) depopulation of West & Central Africa, the growth of the North American colonies and the feeding of the industrial revolution in England. When this supercell breaks down it leaves England as the dominant industrial power.

The second epochal supercell is again North Atlantic. It’s the flow set up by WW1 of repayments by Germany to France & UK, then from these two to the US (to service debts) and then from the US back to Germany as credit. This breaks down into the depression and then WW2 (still heavily dependant on North Atlantic flow – both to UK & Russia). But the entire sequence breaks down with the dominant industrial power being the US.

The third supercell is Pacific, linking the US, Japan and, post-Nixon, China. With the passage to neoliberalism in the US and the turn to "socialism with chinese characteristics" in China under Deng Xiaoping, this supercell has assumed monstrous velocity and intensity.

Whether this supercell breaks down in this crisis or the next, the writing is on the wall, the end result is going to leave China as the dominant industrial power.

2.b. The proletarianisation of China

The other side of this story is the big picture drawn by David Harvey (iirc?) that we have moved from a situation of 1.5 Bn of humanity as proletariat, mainly in the West, to one where we have 3 Bn proletarians, the bulk of that 100% increase being in the East, mainly the mass proletarianisation of the Chinese peasantry. Any attempt by the West to go for a return to Keynesianism (even were such a thing technically possible – a new gold standard? – see section on money below) is not going to take us back to the world of unchallenged US and European industrial dominance that the loyal British imperialist that Keynes was, worked so hard to preserve. Let’s face it, if the defence of western economic dominance of the globe was ever** one of the aims of neoliberalism, then it is one of the biggest own goals in history.

From a working class point of view, it now means that we have to overcome the geographic, cultural, linguistic and political barriers that separate the western working class movements from the Chinese and other eastern ones. Well, we always said, "workers of the world, unite", now we have to mean it for real!

3. The real subsumption of money

The other precipitating factor of the current crisis that makes it potentially epochal rather than periodic, is a technological revolution in money.

Money pre-dates capitalism by many centuries. At the birth of capitalism, although the new social system completely redefines people’s relation to money (the majority, base class is now unable to subsist except via money), the actual form of money itself remains unchanged (gold or silver specie, albeit increasingly represented by paper tokens). We can call this the "formal subsumption" of money. However as capitalism progresses, the link to pre-capitalist forms of money becomes harder and harder to manage. With the fall of the original Keynesian Bretton Woods system in 1971 with the US’s suspension of gold convertibility, the final link to pre-capitalist money is severed. The story of how the post gold standard world generates the rise of financial derivatives to manage the volatility created by this break is told in Bryan & Rafferty’s "Capitalism with Derivatives" upon which I based my own efforts on the same subject.

They posit that derivatives represent a new form of money, specific to the needs of capitalism. Similar to the concept of techology moving from the mode of formal subsumption to real subsumption in Capital.

But whether that means anything to you or not, IMO the post-Bretton Woods evolution of money has exposed the inadequacy of (all) our existing understandings of what money actually is, how it proceeds.

Analytical failings aside, the current crisis involves a breakdown of the current money system. It is partly a "system crash" in the computer sense of the term. The new money system is, after all, computer based. From a capitalist perspective, they have a technical fault to fix, as well the dual-headed political crisis mentioned above.

For us, it means that we need to create a theory of money that is fit for our purpose. After all, aside from the need to understand the dynamics of capitalism, if our aim is the abolition of the money system, we first need to understand what it is we’re abolishing in its functional sense as well as its political sense. The new, really subsumed, capitalist money is dynamic, rather than inert and inseparable from risk and credit. That is we need a theory of value that incorporates risk, credit and productivity dynamics through time that doesn’t get caught in circularity, given the role of time in the base definition.

A pretty big job for us, but I can’t see anybody else inclined to do it. Another case of Primo’s Levi’s "If not us, then who?"***

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* Well, OK, probably the first, small scale cell would be the Portugal – Madeira circuit (sugar, slaves, sailpower, etc.). Followed by the South Atlantic slave trade that took Africans to the Portugese and Spanish colonies in South & Central america – like i say, i’m not really at fully thought out theory stage yet.

** Arguably, neoliberalism was so following the money (and local class power) so blindly, that having this as a strategic aim may have slipped their mind – hence the belated realisation by the neo-cons that they better do something fast to have a chance at a New American Century. The fact their main strategy was to try and monopolise global oil reserves is, in a way, a kind of concession that maintaining industrial dominance was already a lost battle.

*** Apparently this is Primo’s reformulation of a quote from the Mishnah. I like the original so much, I’ll quote it here gratuitously:

"Avot 1:
13. He [Hillel] used to say: He who increases his name [=reputation], loses his name
And one who does not add, will perish.
And one who does not learn deserves death.
And one who makes use of the crown will perish.
14. He used to say: If I an not for myself, who will be for me?
And when I am for myself, what am I?
And if not now, when?"

"one who makes use of the crown will perish." Amen to that!