Monday, March 9, 2015

Structural crisis and the outlook for capitalism

Nick G

A reader has sent us the following question:


Lenin has said that until capitalism is overthrown by the conscious exertions of the working class, it can recover from even the deepest crisis. I would like to know whether it will also recover from the present crisis which is regarded as structural one that socialism must replace it. What are the main reasons that capitalism cannot survive this time?



From time to time questions are raised about the ability of the capitalist system to recover from economic crisis.  Capitalism overcame the 1930s crisis through war and the re-division of the world.  However, the post-Second World War years also saw the birth in many nations of independence from colonialism and the establishment of socialist states led by Communist Parties in Eastern Europe, China, South East Asia and Cuba.  These developments showed that where the workers and their allies are organised with leadership from a political party striving to apply Marxist-Leninist principles to their own countries’ material conditions that progress for workers beyond capitalism’s boundaries can be made.

However, capitalism fought back to destroy the Soviet Union and enmesh other independent countries back into the world imperialist economies. This gave imperialism “new life” on a world scale with new sources of cheap labour (eg Eastern Europe, China) and new markets for the export of capital.  This in turn though gave rise to a severe downturn in economic conditions for the working classes of the imperialist “headquarters” of the USA and western Europe.  Overproduction on a global scale soon asserted itself which limited capital rate of growth and rate of profit.  The economist David Harvey says that capitalism needs compound growth of 3% per annum to prevent stagnation and the tendency towards crises like the 1930s Depression.  Since the global crisis of 2007-08, world capitalist growth and forecast growth is nowhere near the required 3% according to Harvey.

The particular character of the 2007-08 crisis as a global financial crisis has its roots in the dominance of finance capital over industrial capital that had become firmly established in the early 1970s.  The removal of political barriers to the free flow of finance capital, and the spur given by that to the emergence of digital technologies at its service, led to a wave of intellectual creativity that saw intricate and seemingly impenetrable financial instruments develop at an unprecedented rate.  The most obvious sign of the changes wrought by the domination of finance capital in the new era was the channelling of massive quantities of surplus value in the form of investment capital away from fixed capital assets and wages and salaries, that is, away from productive capital, and into the speculative pursuit of paper profits, that is of fictional capital, tied up in derivatives, CDOs and other financial instruments.  So profound has been that diversion of capital that the manufacturing industries of the developed capitalist countries have been decimated and the value of global derivatives is estimated by the Bank of International Settlements as hundreds of times the value of global Gross Domestic Product.

This has led to a long term decline in GDP that seems, to this point in time, to be irreversible.  The average annual growth rates of global GDP by decades over the period of financialisation, taken from World Bank sources are:

1960s             4.90%

1970s             3.93%

1980s             2.95%

1990s             2.70%

2000s             2.58%

2011-13         2.40%


We can accept that the economic changes of the early 1970s constitute a new stage in the development of capitalism in so far as there have been significant structural changes to the circulation of capital compared to the period before the early 70s. 

The problem for us with certain advocates of what is called the “structural crisis of capitalism” is that they seem to deny the law of the uneven development of capitalist growth.  Reference should be made, for example, to the work of István Mészáros and his influence over people like John Bellamy Foster and the writers for the progressive US Monthly Review.  Mészáros argues that capitalism has moved beyond the era of cycles, and had entered a new, never-before seen phase of structural crisis characterized by a depressed continuum that would confine the previous cyclical phase to history. Although there would be changes in the epicenters, the crisis has shown itself to be enduring, systemic, and structural.  The GDP figures cited above lend a certain credence to this view of a depressed continuum no longer subject to any law of uneven development.

But we are not yet convinced that those changes have negated the cyclical nature of capitalist crisis, not its capacity to recover from crisis through a combination of inter-imperialist contestation for markets and sources of cheap labour, or even, perhaps through the application of new technologies to exploit the resources under the oceans which together comprise a larger part of the earth’s surface than its land masses.  Offshore oil and gas exploration and drilling may yet unlock even greater exploitation of mineral and other resources below the seas. 

It is wrong, we believe, to equate the “depressed continuum” of a “structural crisis” to an inability for capitalism to find new avenues for growth.  This is important for how we visualise the development of the revolutionary movement for the replacement of imperialist control by national independence and of capitalism by socialism.  We adhere to the Leninist proposition that capitalism can only be overthrown by the conscious efforts of the working class.  By “conscious efforts” we refer to the need for an advance detachment of the working class, organised in a party armed with the theoretical knowledge and methods of Marxism-Leninism.  It still remains the task of the vanguard party to organise the people for the overthrow of capitalism.  Even if we accept the “structural crisis” view of capitalism in the present era, we do not believe that socialism can or must replace it without the conscious efforts of the people as a revolutionary movement in a revolutionary situation. To deduce from a “depressed continuum” of economic decline that a socialist alternative is inevitable runs the danger of disarming the people and denying the historic truth, expressed in great simplicity by Chairman Mao, that “Everything reactionary is the same; if you don’t hit it, it won’t fall”.

The political superstructure of modern day imperialism has moved very much to the Right through the neo-liberal agenda created to serve the ascendancy of finance capital.  The policy directions of neo-liberalism have aroused significant opposition from the people and must now be pursued by more openly repressive measures on the part of the state.  The revival of neo-Nazi parties, most obvious in parts of Europe, is an additional threat against the growing movement of the people.

What we can be certain of is that the much-trumpeted decline of the nation state that was said to have accompanied the emergence of a globalised economy has not eventuated.  Global corporations operating beyond national boundaries and owing no particular allegiance to any one nation state were said to have made Lenin’s analysis of imperialism out-of-date.  However, the globalisation of imperialist finance capital, in circumstances of long-term decline and stagnation, make the imperialist nation state an even more important weapon for the struggle and competition of global corporations to push each other out of the way in the search for declining growth opportunities.  The rivalry between individual countries to outstrip each other, to muscle in on each other’s territories and markets, becomes more acute under conditions of economic decline.  The predatory and bloody nature of imperialism has not changed, and local wars and persistent attempts at “regime change” are a characteristic of our age.  The danger of war between competing home bases of imperialist finance capital remains.  In this respect too, the so-called “structural crisis” of capitalism has not changed any of the fundamentals of Lenin’s analysis of imperialism.

From all of this it follows that we must give priority to building a revolutionary party of Marxist-Leninists in Australia.  The working class needs such a party for the long struggle needed to hit imperialist control of Australia and to force capitalism, despite whatever means it may find to retain its resilience, to give way to socialism.

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