By Anyang’ Nyong’o
Capitalism, as a mode of production and way of life, is in crisis today. The crisis manifested itself when banks, real estate investments and large monopolies and oligopolies came down as houses of cards in Great Britain and the US, industrial and financial capitals of the capitalist world.
Governments, which capitalists always want to be kept at an arm’s length when they share the huge profits they make, were urgently summoned to come to the salvation of capitalism. For the good job that he did to save capitalism, Gordon Brown nonetheless lost the sympathy of the ordinary Briton. He was quickly voted out of office as they did Winston Churchill after the Second World War. But why is capitalism so prone to major crises from time to time?
First, although under capitalism a lot has been achieved in terms of the development of science, technology, production of goods and services, communication and integration of the world into one global village, capitalism as a system is both irrational and unjust.
Imagine, for example, that maize and wheat, produced in great quantities and very cheaply in the US, can end up being thrown away because putting it in the market may cause prices to fall and hence lower the profits that farmers in the US make. Imagine, too, that the French farmers can easily pour their milk on the ground if the market won’t give them the price they feel they deserve. All this will happen when hunger is killing people in Misissippi or in North Africa just south of France.
The State can, however, come to the aid of capitalism to lessen its wastefulness and to limit the excesses of its irrationalism. For example, the US government can purchase excess wheat and maize from its farmers and sell it cheaply to developing countries as famine relief or an aid package. Similarly, the French government can also buy the excess milk and donate it to the NATO forces stationed in Europe as part of its contribution within the NATO arrangement.
But this kind of salvation of capitalism by the State cannot always save it when it faces major crises. Or if it does, the political ramifications on the rest of society can be far-reaching and even unpredictable.
Marx and Engels wrote that it is in the very nature of capitalism that it has to face periodic crises due to the tendency of the rate of profit to fall among capitalist enterprises, including monopolies and oligopolies of our times. The whole force behind any capitalist business is that it must make profit all the time. The more a capitalist makes profit the more he wants to make more, either by charging more for what he sells, or by acquiring other enterprises under his wing so that he faces less competition so as to make more profits.
Sooner rather than later, it becomes difficult to continue to get buyers or rent payers as prices escalate and people find little alternative but to default from buying or paying rent. The rate of self-expansion of capitalism, or the rate of profit, being the goal of capitalist production, also becomes the cause of its fall, unless the State interferes and injects new capital, or ‘empowers’ consumers with some resources with which to pay rent, consume services, or service loans.
Obama recently argued that the US auto industry had run into problems because it was too inefficient; it could not compete with the more efficient Japanese firms. It was using archaic technology, which was slow and could not produce cars as quickly as their Japanese counterparts. Hence the rate of profit in the US had obviously fallen over time, and US firms had come to a point where to just maintain their firms open, they had to borrow money and hope they will make profit.
To make it worse, the managers and chief executives of these firms seemed oblivious to the crisis as they kept consuming more and more from the enterprises, paying themselves huge salaries. When they could not make ends meet and started defaulting on their loans, Obama worked out a ‘bailing out programme’ in which the State injected huge sums of money to rejuvenate the capital and reschedule the loans.
The ordinary Americans argue that the State has never been that generous in bailing out ordinary citizens who cannot pay rents so as to enjoy living in good houses. Nor has the State succeeded in effectively taxing the huge profits that the banks make by trading with people’s money so that such taxes can be used to provide affordable healthcare for the people.
What this recent crisis shows is that the world is safer under social democracy than any other form of government. Social democratic government policies usually combine a particular tax system with a social policy that seeks to minimise income inequalities while enhancing productivity of labour so that enough wealth is created in the interest of both capital and labour.
A tax system, which combines a high rate of taxation on consumption and selective incentives for investments, is typical of the social democratic governments in the Nordic countries.
It will, therefore, not help for the US to be comfortable with the big firms and big banks ‘going back to normal’ after the Obama-led interventions. The whole system needs to be re-engineered along a social democratic model so as to avoid future crises as the rate of profit will still have a tendency to fall if these firms behave as if all is normal and business should be done as usual.
As Obama and Biden put emphasis on democracy and good governance as being generally good for global prosperity, a reading of the classics of social democracy and its ‘saving tendencies’ for capitalism may also be a must on their part. They will be more remembered if they enlightened US capitalism a little bit more on the fundamental changes needed in the US political economy so as to avoid such future crises.
—The writer is Minister for Medical Services
