Five point draft plan for socialism!

Facing the crisis of the bosses falling profits and the destruction of many trillions of fictitious capital, workers have to mobilise to solve the crisis on our own terms.

The alternative is capitalist barbarism or workers socialism!

In order for workers to live, capitalism must die!


We are facing more than a crisis (which is the interruption of the flow of capital) and are now facing a global depression. Depressions function to destroy surplus capital that is unprofitable so that the surviving capital can be reinvested in production and realise a sufficient profit. What is being called the global finance meltdown is no more than this destruction of surplus capital to renew the conditions for profitable production. We are witnessing the wholesale devaluing of surplus capital that has created a massive speculative bubble in the last decades but cannot return a profit.

State nationalisations to rescue the bosses system

The central banks and the state treasuries of the major imperialist powers are taking responsibility for this process of destruction and restructuring of capital. This is to be expected. Capitalism has always made use of its state power to create and defend the conditions for capital accumulation -from the 'primitive accumulation' of conquest and plunder in the 15th and 16th centuries to conquest and plunder of state monopoly capitalism today. We live in the epoch of imperialism, in which finance capital -the fusion of banking and industrial capital - rules through the state machine to invade, destroy and plunder the world resources for profits.

Thus facing a massive crisis of devaluation, capital relies on the state to prevent its collapse and demise. The measures used by the US, EU and UK central banks to subsidise the losses of banks, including 'nationalising' them, are being done on behalf of the whole capitalist class in the general interests of that class (and not as some would say the workers). It is the general interest of capital as a class that the weakest capitals are bankrupted and that the strongest concentrate and centralise capitalist assets in larger firms. This destroys the vast supply of surplus capital that cannot realise a profit reducing capital stock to the level that it can be reinvested profitably.


Imperialist wars on the horizon

This is also true between nations. While it appears that the rescue operations are coordinated between the major powers, in reality the costs of the destruction of capital are being partly transferred from US based finance capital onto their rivals in the EU, UK and Japan. Further, the biggest cost is downloaded on to the weakest nations as the destructive process becomes global. The nations that will suffer most are those without real assets, productive investments, or huge sovereign funds such as the oil rich countries of the Middle East and Russia and China.

For example, the UK while a political ally of the US is paying part of the cost of the US subprime crisis and its own finance capital speculation in fictitious assets. As well as nationalising the 6 main commercial banks, Brown has used anti-terror legislation to freeze the assets of Icelandic banks in which UK state agencies, the police and local councils, have invested their funds. This will also have an impact on Russia which has just made a massive loan to Iceland. Thus Brown is seeking to download part of the cost of US and UK finance capital speculation in risky assets onto the people of Iceland and the people of Russia, and of course to UK workers.

Workers bear the cost of the depression

Clearly it is the working class that will bear the biggest burden of these bailouts and rescue operations of finance capital. Depression destroys not only surplus constant capital, but also variable capital. Variable capital is basically the value of labor comprising the total costs of the 'wage basket' - food, housing, transport, health, education etc. Loss of jobs and conditions drives down wages and allows bosses to reinvest productive capital in industry along with cheaper more exploited labor. But widespread loss of jobs, incomes, housing etc means that the process of destruction hits workers hardest and creates the conditions for the rise of anti-capitalist resistance.

So when the bosses talk about the destruction of "the system" they don't really mean the loss of trillions of surplus capital, they are talking about the massive anger and opposition to the effects of this on the working class that has the power to organise and bring down capitalism and replace it with socialism. Thus the attempts by the bosses' states to manage the crisis are directed almost entirely to the management of the impact of the depression upon the working class and the supression of organised anti-capitalist resistance.

The strategy of workers fightback is to expropriate the value they have produced

The value that is being destroyed so far is mainly fictitious capital (the paper assets that have no real value because they cannot be exchanged for commodities embodying the labor of wage workers). It is of no interest to workers to defend this fictitious capital that is invested in non-assets with no value from destruction. So the housing mortgages that are based on hugely inflated prices of land and housing should be cancelled. It is a good thing for this fictitious value to be destroyed so that homes can return to their real value. This is their actual value representing houses as commodities that needs to be defended.

• Mobilise to occupy homes, fight foreclosures, and build neighborhood union-based defence committees.

The big investment banks are the headquarters of finance capital. They are the repositories of money capital, that is, the value produced by workers in commodities that are exchanged for money deposited by the capitalists in banks. Much of their assets will be fictitious capital which is reflected in their massive losses.

The nationalisation of the surviving investment banks under workers control would not compensate their owners for bad assets. It means revaluing assets at their real value as a capital fund for investment in planned production. Commercial banks based on workers deposits would be nationalised and combined as a single state bank.

• Nationalise the banks without compensation and under workers control!

The productive capital invested in industry only survives on the basis of massive state subsidies as well as at the expense of workers who have lost jobs, decent wages and benefits. The sub-prime crisis which triggered the meltdown of fictitious capital originated in the attacks on workers living standards so that they could not afford their mortgage repayments.

• Occupy and demand the nationalisation without compensation and under workers control of all industrial corporations and big landlords!

The workers' fightback needs to be mobilised by transforming the exising organisations of the labor movement, the unions. However, the leadership of such unions are reformist and will defend the reformist policies of social democracy to meet the bosses attacks on workers. Thus it will be sufficient for them that the unions subordinate their actions to voting for political parties that promise to manage the nationalisations of finance capital "in their interests". This is a lie and a fraud. Nationalisations must not be paid for by workers and must be under their direct control.

• Workers Democracy: for rank and file control of the unions and all organisations of the workers to implement the demands for nationalisations under workers control!
  

The fight for workers democracy in the unions means breaking the rank and file from the reformist leaders who preach bosses democracy and prop up the capitalist class. In the US they are the AFL-CIO backers of Obama. In Latin America they are the reformist left that politically supports the Bolivarian regimes of Chavez, Morales, Lula etc. In NZ they are the CTU that politically supports the Labour Party. [on the Crisis of Monopoly State Capitalism in NZ]
To make this break it is necessary to build a revolutionary workers party on the tradition of Marx, Lenin and Trotsky in the vanguard of the union movement.

• Build a revolutionary Leninist-Trotskyist party in the vanguard of the labor movement!
  

Marxist analysis of the current crisis - a draft outline

Draft for discussion and comments please.

Blame deregulation?

Most of the left commentary on the current credit crunch blames the US government for deregulating the finance sector. They point to the freedom that banks and mortgage firms had to lend money to people with no assets and insufficient income on the strength of rising property values (should be prices - see later). The result was overinflated prices that had to come down when the economy slowed and peoples' incomes fell so they could'nt service their debt. Not only that, but these banks bundled these mortgages into packages which they onsold so that the debt bubble spread right across the finance sector to some of the biggest investment banks like Lehman and Wachovia. Result, deregulation leads to speculation across the whole finance sector, and then ultimately to bad debts. Crash.

As proof commentators point to countries where stronger regulations prevented a housing bubble. Like France. Interesting case, since France has for over a hundred years been considered a rentier state. That is, it speculates OUTSIDE France. The point of this should be come clear below. Another instance is Sweden where a similar debt write down resulted from deregulation but was solved by nationalisation.

What's wrong with this scenario? Speculation doesnt result from deregulation. Speculation causes deregulation. In fact what happens is that an overproduction of capital in industry creates a surplus fund of capital that has to look elsewhere for a profit. If it is not invested to make a profit is looses its value. Since it cannot do this in production it has to do it unproductively in speculating in assets so it ensures that the government (which after all is the 'committee of the ruling class') allows it to do so. The result is overproduction of capital that engages in unproductive speculation in the value of already produced commodities. It is easy then to see that this does not create new value but instead speculates in the rise and fall of existing values (eg houses).

But why this overproduction in the first place?

Overproduction of capital results from a falling profit rate such that capitalists cannot be sure of getting a reasonable return on their investment. This happens in capitalist economies in a cyclical fashion. Big investments of new technology makes labor more productive by increasing the rate of exploitation {s/v - the amount of surplus value over the value of the wage roughly speaking). Workers can produce more commodities in a given time, so the labor time required to produce each commodity is less, and its value and usually its price is less. Capitalists make these investments then so they can produce more efficiently and cheaply and take a larger share of the market from their competitors. Capitalist growth is getting a larger share of the market, usually by these means, but not always (eg Iraq).

However, while this succeeds up to the point when the competitors make the same investment to catch up, it also carries a down-side. This is the fact that the more capital spent on what Marx calls constant capital which does not add value - plant, machinery, raw materials to make labor more competitive - relative to variable capital -wages of workers who do produce new value - then the organic composition - the proportion of constant capital to variable - rises, so that the rate of surplus value must rise faster to realise an adequate profit p = r/c+v (where p is profit, r is rate of exploitation (s/v) and where c is constant and v variable capital).

Marx calls this tendency for the rate of profit to fall (TRPF) the most important law of political economy. It is a general tendency and can be partially offset by counter-tendencies that reduce the price of c and v by various means among which are investing surplus capital abroad in colonies and other countries. Lenin later called this export of surplus capital imperialism.

Jumping to the present situation

It's clear that the US economy experienced a TRPF in the 1970s from which it has only partially recovered. This explains the export of capital in the last 30 years to many other countries to find the cheapest raw materials and labor as well as new markets and make bigger profits than was possible at home. Despite breaking down resistance to US FDI by the IMF, World Bank etc, capital export did not provide an outlet for all the surplus capital. It had to find new outlets by speculating in unproductive areas such as housing (not construction which is productive, but finished houses), commodities, and all sorts of other fictitious 'instruments' such as the futures market. None of these markets created any new value, all they did was to speculate in the movement of the prices of these already created values, so that their prices went up and down according to supply and demand. This is what many have referred to a the casino economy.

In any other country than the USA, the casino economy would not have grown to the extent that is has. This is because the value of the dollar would have collapsed and the US economy stagnated. Normally the value (price) of a currency such as the US dollar results from demand for actual real commodities produced in the USA. Those commodities have to be paid for in dollars so there is a demand for them. However, with the real productive economy stagnating, and surplus capital going offshore and into speculation, the declining dollar was artificially maintained by pegging it to the price of oil. Most of this oil is produced outside the US. Normally it would have to be paid for in the currency of the producer country. But the US was able to get agreement from most of the oil producers that dollars should be the currency for oil sold on the world market. In this way the downward pressure on the US dollar caused by its stagnating domestic economy was artificially boosted by the rising demand for oil internationally. In this way the US turned the world economy into the equivalent of the US domestic economy.

How is this connected to the property boom?

Well, with billions of petrodollars held by the oil producers and in demand by the oil consumers, the US could run a balance of payments deficit where it imported much more than it exported, and borrowed much more than it lent. In fact it became the No 1 world debtor nation to creditors like Japan, China and the EU. It could maintain huge military expenditures, subsidise its agriculture, and allow its industry to go into decline with no incentive to make it more competitive. The housing boom was an extension of the US as a debtor nation. Since the US could import much more than it could export, and workers could get access to this credit, this carried over to the consumption of housing as well. US banks as well as EU and Asian banks all loaned money in the construction and housing sector on the basis of a growing demand for housing which caused a boom in house prices. All was well until the protection of US industry itself was blown by the FDI of Asian and EU firms in production within the USA.

The introduction of more competitive plants inside the US - notably Japanese automakers - which were highly automated and undercut the cost of production of US commodities, brought about the collapse of US industry including the laying off of multitudes of workers who also lost pensions and health benefits. This is what brought an end to the speculative bubble in housing. Workers could no longer afford to pay their inflated mortgages and so the property market began to collapse and with it the huge edifice of debt now spread right through the international banking system. The sub-prime crisis spread to the credit crunch to the crisis of "the system" as George Bush calls it. So the bailout, by whatever name, is to get those bad debts off the balance sheet to allow the banking system to restore its confidence (to make profits) and start loaning capital again.

So it is a crisis of the whole "system" not just the banks. In fact the US has been able to postpone its "system crisis" by living off the rest of the world. That world is capitalist and is continuing to produce value and profits. In fact the US capitalists are benefiting from massive profits overseas (around half of its total profits). But more important, the health of the capitalist system outside the US, and the growing share of US profits in that, has finally disciplined the US ruling class and forced it to revalue its overvalued domestic economy. Thus as the world grows tired of propping up the US dollar and begins to sell oil for Euros etc., the US will have to restore the competitiveness of its exports to maintain the value of the dollar. The foreign plants inside the US have forced a reinvestment of productive capital into new high tech sectors so that US exports are now increasing. The auto industry has just got $60 billion from Congress to re-tool so it can compete with the Asian and EU automakers. Excess capital that is being destroyed by the collapse of the housing bubble will be taken off the books of the surviving banks and they will now begin to invest their capital in a revived and renewed US domestic industry.

Solving the crisis on the backs of workers - or not

So far from this crisis being caused by speculators freed from state regulation, it is caused by the lack of competitiveness of US domestic industry pushing surplus capital into speculative assets that have now proven to be valueless. This bubble maintained the fiction of value because of the role of the US dollar as world money enabling the US to live as the No 1 debtor nation. What brought this bubble to an end was not the deregulation of the banking sector, but deregulation of FDI flowing into the US economy. With the entry of FDI from Asian and the EU, US plants were uncompetitive and have been forced to restructure and retool. Along with this we see the restructuring of the labor market to re-assign labor to the competitive industries or into the reserve army of labor. Part of the historical re-adjustment of workers' living standards has been the collapse of inflated housing prices. The tent cities springing up everywhere prove that this new phase of US capitalist development has broken down the artificial barrier between the protected US economy and the rest of the world. US workers living standards are now sinking to the world level. The capitalists in the rest of the world will no longer allow the US ruling class to live at their expense. The inter-imperialist rivalry between imperialist blocs is hotting up. It's now up to US workers to join forces with workers everywhere to refuse to let the ruling classes in every country live at their expense. [See next post on 5 point draft plan for socialism]