The Failure of Capitalist Production

[Workers-Control-Over-Prod]

Andrew Kliman's title for his most recent book is the above 'The Failure of Capitalist Production', focusing mostly around the Falling Rate of Profit. Contrary to him though, I want to present a case that it is not only a "Tendecy" for the Rate of Profit (of the production process) to fall, but a definite historical downward development with the increase of the productive forces.

*Since World War 2 the Capitalist State has been an important source of steady and huge investment into research and inventive centers, so i started the line roughly around this time. The Constant Capital (machines) has replaced Variable Capital (live Labor) to large degrees, VW for example has 97% of its capital costs in machines and only 3% on wages. The Rate of Profit of the Production process in the advanced capitalist economies has fallen near to zero now, and only an anti-capitalist, socialist economy can lead humanity forward.

I have here below taken the 5 year averages of industrial growth of the USA and drawn a rough line along the crest of the waves contrary to the trough, since, like Andrew Kliman; i suspect a rather stagnant capitalist global economy in the next few months as capitalist states will indebt themselves into oblivion, and maybe even go into hyper-inflation... but a general stagnation of the economy can be expected, hence the line along the crest.

We have been in a time of stagnation one could say, but only a stagnation because the Falling Rate of Profit of the production process has been below the financial interest rate since 10 years, causing slow capital investment in the production process and forcing the capitalist state into debt and subsidisation of the private capitalist economy. One can expect that by latest 2019 there will be a serious collapse of industrial output in the west leading to a deep Depression. Once the debts that have accumulated over the past decades of neo-liberalism collapse soon in the west (the Eurozone is already collapsing), one can assume that new governments (given their political orientation) will start the debt cycle again to support the private capitalist economy, subsidise corporations, those governments printing money like crazy once their debts run up, hyper-inflation to cheaply pay back those debts, or lenders stopping to lend to global Greece-type state insolvency. Either way, Capital is outgrowing its historical usefulness and the current capital process of production is meeting its end.

[seventeethdecember2016]

Very good research Comrade.

[Vladimir Innit Lenin]

The problem is, it's a result you'd expect to see. Industrialisation was a new concept: it brought great gains in terms of economic growth and rising incomes per capita, but also great recessions as the economy was essentially at the whim of the market, and we are familiar with the failures of the free market.

Nowadays, the developed countries (think USA, western Europe, Canada etc.) are largely de-industrialising, and so whilst your research is certainly accurate if one is analysing the industrial rate of profit, it actually misses out the fact that services play a big part in developed economies' profit rates today. Financial Capitalism - or the ability to essentially pluck money out of thin air by trading on all sorts of commodities, by rent-seeking and then making money on the insurance of rent-seeking and so on - would statistically speaking, I imagine, be responsible for a great deal of profit and economic growth in developed countries today, perhaps excluding net exporters like Germany.

I'd imagine that if you included the profits from financial services and the service sector overall (so you're including market research as well there!), and weighted it accordingly, then you'd probably find that the rate of profit isn't falling overall.

Of course, that's not to completely discount your research. Financial Capitalism, as it is essentially the work of solely the free market, is bound to crazy boom and bust cycles, and so the Capitalists will clearly want to shore up their actual ownership of the means of production, natural resources and so on, instead of trading profitably on them, so really for a more complete model you have to include the profit rate from resources plundered through imperialism and overseas war, overseas companies that put their profits into the US and so on.

It's really a minefield, but I commend you for your research thus far, I just feel it's not really telling the whole story and is too quick to jump to false conclusions.

[Workers-Control-Over-Prod]

Nowadays, the developed countries (think USA, western Europe, Canada etc.) are largely de-industrialising, and so whilst your research is certainly accurate if one is analysing the industrial rate of profit, it actually misses out the fact that services play a big part in developed economies' profit rates today.

I'd imagine that if you included the profits from financial services and the service sector overall (so you're including market research as well there!), and weighted it accordingly, then you'd probably find that the rate of profit isn't falling overall.

Well, the United States, nor any industrialised country, has been or is, de-industrialising. The United States accounts for producing 25% of the world's products.

The moving of manufacturing to low wage places, is a result of a higher rate of profit in those countries compared to the USA, but overall the United States is of course a huge industrial country, it is largely a myth that the USA is "de-industrialising", capital is just not growing the industrial production sector as much as it used to... explainable by the TFRP. While growth for american corporations has been globalised, the United States is still a highly industrialised country, i don't see quite what your point is.

"For 2009, "finance, insurance, real estate, rental, and leasing" accounted for $3.058 trillion in value added, compared to $14.256 trillion for the whole economy. That's 21 percent"

You see, this large part of the economy, the one of real estate, rental, insurance and finance, are dependent on the industrial economy and work around it; houses need lumber, houses need steel, concrete (and [re]investment into companies that produce the machines to produce wood, concrete, steel!) etc., bankers need companies, insurance companies need people with money. Besides this, the US has seen a huge growth in exports, going from 40,000(Million dollars) monthly exports in 1992 to 190,000(Million dollars) exports in 2012. It's just that the ratio of imports to exports has shifted slightly to a trade deficit, a result of falling profitability for capital to invest in the US.

Now, it has still been growing, but pretty soon the overall five-year growth of the industrial output will in fact not only grow slower, but shrink, meaning the booms will not be able to outgrow the losses made in the busts! Economists have been very worried by the fact that this huge crisis we experienced in 2008, did not create a larger boom as it did, this trend will increase. This is the relevance of this trend of the TFRP that one can see on the graph.

[Workers-Control-Over-Prod]

You see, the moving of certain (easily movable) small scale industry out of the US has been a result of falling profitability, TFRP. American Capitalists didn't decide to spontaneously move around the world, there is active pressure to keep us profitability (to keep getting investment etc.), especially when increased productive forces mean capital won't invest in those companies unless they lower wage "costs".

The same thing goes for the Financilisation of Capitalism, the Rate of Profit of the Production Process has fallen below the financial interest rate, has been below this since the last ten years roughly, and resulted in the disproportional size of the financial sector.

*Here is the Rate of Profit for the production process of the United States, it is now at 2%. In Germany the Rate of Profit for the Production process is below 1%. The GDP growth of the US is at 2.2% this quarter while Germany's growth is at 0.5%.

[Workers-Control-Over-Prod]

What i am trying to demonstrate with the graph, is that the capitalist state which has invested so much wealth (quite obviously to compete with the socialist states in the world, the USSR scared the capitalists with its tremendous growth and innovation, being the first country to send a human to space etc.) into the increase of the productive forces, has taken over the role of the socialist state in fact, and that the current productive forces are near to completely making capitalism obsolete, incapable to reproduce, expand material wealth.

The thing one cannot be sure of, is how the capitalist state will respond. It has in the past four years, of course given trillions and trillions of dollars and euros to save the banks, but has consequently been forced by its ruling class to cut spending on school institutes or privatised them. This is a worrying sign. It might mean that the productive forces will once again be trapped by capital again, and the line i drew (hence, along the crest) be replaced by a more gradual line as capital will not invest into the productive forces as steadily and richly as the capitalist state.

If there however were to be another (hopefully socialist) planned economy such as the USSR, capitalism would be unable to keep up.

The next fifty years will see a highly unstable capitalist system, and if the debtor of last resort, the capitalist state, cannot deal with the situation (as in Greece); indebts itself to a point where lenders stop lending (as they are afraid the state wont be able to pay back that debt), we will see a world depression as never before. Socialism is inevitable, and am sure this century will see the profit motive being made obsolete by the increase of the productive forces.

[Rowan Duffy]

Well, the United States, nor any industrialised country, has been or is, de-industrialising. The United States accounts for producing 25% of the world's products.

The US has not deindustrialised in the sense of reducing total manufacturing output, in fact it has been almonst entirely monotonically increasing since the 1950s. The number of labourers involved in manufacturing has stagnated and shrunk, and a greater total consumption means a falling share in the market. This is not the same thing as deindustrialisation at all though. It is post-industrialisation. It's probably possible to increase the total share of production generated in the US by increasing worker productivity through a programme of intensive industrial production, but low wages in China have so far made the foreign option cheaper. It is very easy to imagine this process reversing in the not too distant future as labour becomes relatively more scarce in China.

[Psy]

The US has not deindustrialised in the sense of reducing total manufacturing output, in fact it has been almonst entirely monotonically increasing since the 1950s. The number of labourers involved in manufacturing has stagnated and shrunk, and a greater total consumption means a falling share in the market. This is not the same thing as deindustrialisation at all though. It is post-industrialisation. It's probably possible to increase the total share of production generated in the US by increasing worker productivity through a programme of intensive industrial production, but low wages in China have so far made the foreign option cheaper. It is very easy to imagine this process reversing in the not too distant future as labour becomes relatively more scarce in China.
The problem is capital raised from exports not being able to pay for its imports, which would result in capitalists outside the USA simply stop exporting to the USA when it becomes too unprofitable and US industry starves for raw materials putting the USA into the same crisis Japan was in during the 1930's.

Imagine if the Middle East stopped exporting oil to the USA simply because the cost to ship it there is not worth the market value of oil in the USA due to a collapsed US dollar.

[Zulu]

The capitalists may respond by launching the WW3 to bust the productive forces completely. Of course, they will hope to maintain some high tech hideouts for themselves. Then there will be chance for a world revolution again, but there needs to be a decisive and monolith vanguard to unite the people against the capitalists.

[Anarcho-Brocialist]

The capitalists may respond by launching the WW3 to bust the productive forces completely. Of course, they will hope to maintain some high tech hideouts for themselves. Then there will be chance for a world revolution again, but there needs to be a decisive and monolith vanguard to unite the people against the capitalists.
Revolution after ww3, which will likely cause nuclear war? Unlikely, due to the fact we'll all be suffering from tainted soil, radiation poisoning, unclean water, etc. If there is such a collapse, or threat of, that's when we should immediately attempt revolution. The need for a vanguard also would be debatable due to the fact we'll all perish if we do not destroy the bourgeois state.

[Workers-Control-Over-Prod]

Revolution after ww3, which will likely cause nuclear war? Unlikely, due to the fact we'll all be suffering from tainted soil, radiation poisoning, unclean water, etc. If there is such a collapse, or threat of, that's when we should immediately attempt revolution. The need for a vanguard also would be debatable due to the fact we'll all perish if we do not destroy the bourgeois state.

Yes, but World Wars are not announced as such. If Iran is attacked and the US government and NATO countries make the same mistake as during the Vietnam war of letting people protest and gain information, I.e. doesn't become a solid totalitarian society; it will still be difficult to mobilize class consciousness. In my opinion, the goal during a World War scenario (Russia vs NATO, USA vs China or any western country) would have to be sheer vanguardist organization, Maoist, Red Army guerilla fighting of the capitalist state and focus on war tactics and taking forced control of wye capitalist states war machinery/factories. During such a rogue capitalist situation, only thing called for is guerilla war; no war but the class war. France 1789, if you know what I mean...

[ckaihatsu]

Revolution after ww3, which will likely cause nuclear war? Unlikely, due to the fact we'll all be suffering from tainted soil, radiation poisoning, unclean water, etc. If there is such a collapse, or threat of, that's when we should immediately attempt revolution. The need for a vanguard also would be debatable due to the fact we'll all perish if we do not destroy the bourgeois state.


The social conditions required for a world-war-three would only *press* the political question to the forefront, long before the implementation of anything world-destroying -- would the workers of the world fall for the old nationalist chestnut *again*, or would they *not* want to risk giving way to an international bourgeois nuclear war, and instead assert their proletarian right to veto war production -- ?

[ckaihatsu]

The social conditions required for a world-war-three would only *press* the political question to the forefront, long before the implementation of anything world-destroying -- would the workers of the world fall for the old nationalist chestnut *again*, or would they *not* want to risk giving way to an international bourgeois nuclear war, and instead assert their proletarian right to veto war production -- ?


Actually, in light of what's been going on with Libya, and now Syria, we may as well say that there's a "soft" world war already in progress:








There's nothing to "sort out" -- you're sounding as bad as any NATOist who wants to intervene on "humanitarian" grounds....

Syria is the cutting-edge of bourgeois geopolitics -- there's nothing else going on by which Western governments can justify their existence.

[...] It's *already* an *international* civil war, using Syria as their arena.


What this means for politics is that there's no middle ground anymore -- if a leftist isn't for a nation's own self-determination, *at least*, then they're effectively siding with NATO, and that certainly isn't leftist in any kind of way.

[La Comédie Noire]

I think what we are going to see is starvation in the third world and stagnation in the first world. One a living hell and the other an interminable purgatory of low wage service jobs and chronic unemployment.

[Workers-Control-Over-Prod]

I think what we are going to see is starvation in the third world and stagnation in the first world. One a living hell and the other an interminable purgatory of low wage service jobs and chronic unemployment.

I agree with what you said, but i would turn it on its head: The west will plunge and the developing nations will slow down.

[Teacher]

This was a great book and I'm glad I finally got around to reading it.

I think Kliman is right about almost everything. This book gave me a better understanding of the difficulty even gathering accurate empirical data about economics (much less finding a theory to explain that empirical data). Kliman makes a great case, however, for the relevance of Marx's analysis to the current crisis.

I found his take-down of so many other Marxists to be honestly kind of depressing. It makes me realize how much in the minority Marxists are, even on the left. Many of the people who call themselves "Marxists" are in fact Keynesians with Marxist sounding rhetoric.

I found his description of solutions and criticisms of existing socialist states to be a bit more problematic than his discussion of capitalism, but this was not a major focus of the book. I think Kliman is a "Marxist humanist" and a follower of that woman who was Trotsky's secretary (I forget her name).

[Teacher]

Probably the part I found most interesting/surprising was his analysis of economic inequality,and his assertion that workers share of the economy is actually the same as it was decades before neoliberalism. His data seemed pretty convincing. It's really interesting that the whole discussion of inequality has dominated so much of the left and even mainstream political debate but if Kliman is right, the data doesn't really support it.

[Lynx]

Wage share has been dropping according to the NYTimes.

[Dunk]

I just ordered this book. I'm really looking forward to reading it.

[aquaruis15000]

You guys are blowing my mind. If the dude who made the graphs is really from Germany and not a native speaker than I feel even worse, cause I am one and I couldn't come up with that kind of poignant stuff. Glad someone knows what the hell is going on!

[Workers-Control-Over-Prod]

I just ordered this book. I'm really looking forward to reading it.

Yes, it is good, as far as economic books go :p