Max O.
The recently announced national account
figures for the September quarter saw Australia's GDP (Gross Domestic Product)
shrink by 0.5 per cent. This is the result of a fall in business investment (of
9.7 percent in the last 12 months), a collapse in effective demand, reduction
in government spending and the decline in the building industry.
The annual growth rate fell from 3.1 to 1.8
percent, this at a time when official interests rates are at an all time low of
1.5 percent. Australian capitalism's economic slump is the result of the long
term price deterioration in the country's dependency on exporting commodities.
After the last official recession in 1991 the
Australian economy has contracted three more times - in 2000 when the GST was
introduced, the 2008 Global Financial Crisis (GFC) and the 2011 Queensland
flood devastation. There is no end in sight for the current economic stagnation
because investments by business continue to fall, creating a crisis of
confidence in the stability of capitalism.
For Treasurer Morrison and business groups
the solution is in the mantra of reducing company tax (from 30% to 25%) and
government expenditure in the coming years. All this will achieve is a $50
billion tax reduction for corporations with no guarantee that this boost to
their profits will revive investment and increase employment.
Contradicting this bourgeois economists then
point out that household consumption has fallen since the beginning of this
year in Australia and is the major worry for the faltering economy. Capitalist
economies have depended on debt-driven household spending to power their
growth. In the decade prior to the 2008 GFC household consumption grew 3.95
percent annually, then after the crash it fell to 2.5 percent.
The chances of the Turnball government
turning around the budget deficit (currently at $40 billion) to a surplus, by
2021 are next to nil. The credit ratings agencies and finance capital are now threatening
a down grade in Australia's triple A credit rating.
The day
of reckoning demands that huge amounts of capital need to be destroyed
Eventually they will demand a day of
reckoning and further austerity measures to be implemented of the severity that
has been witnessed in Europe. Despite all the ingenious innovations and
productive power of capitalism it has a feature that is its undoing: it suffers
from recurring economic crises making it an inherently unstable system.
The world economy is experiencing a long
depression due to what Marx explained is the falling rate of profit and a
colossal rise in debt. Presently capital is incapable of returning profit rates
and has the problem of excess capacity, consequently it cannot get out of this
depression. There are essentially two choices for a recovery from the present
depression, either through the wiping out of useless investments and assets
through bankruptcies, closing down of plants etc to restore the rate of profit
which will entail a massive rise in unemployment and misery for those
unemployed or by the overthrow of the capitalist system and its replacement by
a socialist mode of production (which does not suffer from chronic depressions)
whose purpose is to fulfil people's needs.
The current depression which occurred with
the GFC in 2008 was detonated by the massive growth of fictitious capital that
ultimately disintegrated when the ratio of household prices to household
incomes could not sustain real value expansion. However this detonation was not
the cause, it was the symptom of the overall cause of the crisis which is the
law of the tendency of the rate of profit to fall and accompanied by a crisis
of overproduction.
In the history of modern capitalism there
have been three depressions. It is important here to make the distinction
between recurring recessions or slumps from depressions.
The first being the Long Depression of
1873-97, the second being the Great Depression of 1929-39, and now arguably the
third of 2008-? These depressions all began with major slumps: 1873-6 slump
started off the Long Depression; 1929-32 slump started off the Great
Depression; and the 2008-9 for the current depression.
Depressions are the result of a combination
of descending phases in the cycles of capitalism. Each depression occurs when
the cycles of technological innovation have reached their completion and
flooded the economy. It occurs when commodity prices and world production slide
downwards, going from inflation to deflation. It occurs when the cycle of
infrastructure investment and construction has declined. It occurs when the
rate of profit falls together with excess capacity of production. The
combination of these diverse cycles has a pattern of happening once every
seventy years.
Each
depression never recovers from the economic devastation it causes
Whilst in each of the 1873-97 Long Depression
and the 1929-39 Great depression there were both economic decline and some
growth, the recovery was never enough to nullify the devastation of the early
slump, and further slumps ensued.
In all likelihood the world is in the early
stages of a third depression. Predictions are that it will be a long depression
and more difficult than a great depression.
As Marx said many years ago the problem of
capital is with capital itself. Capitalism may well emerge out of its long
depression, however the time of its approaching historical extinction is
getting closer.
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