20 October, 2014

The Unsolvable Problems of Capitalism

 The Answers are NOT within it!

On what economic basis can a society be constructed and maintained?

My western country is a capitalist society, which is based upon investment, by people with the reserves (wealth) to do it, into enterprises both big and small. The incentive for doing this is that the investor will “own” a piece of the company that has been invested in, and will therefore receive a proportion of its dividends (profits) annually. Also, the holder of the “share” can sell its investment to someone else via the Stock Exchange, and if your (i.e. the investor’s) company is doing well, you can make a profit on that too!

There is NO alternative to this method within capitalism. And, the problem always is, “How does the investor come by the wherewithall to invest?” Well, the present day answer is that they got it from other, prior investments – both in dividends (profits), or in selling other investments for more than they paid for them (profits). Capitalism feeds upon itself, but only, ostensibly, via private entrepreneurs, who fund its development, and thus “kindly provide jobs" for the working classes.

In the modern world the old small-scale production is simply not good enough. It is too expensive! Large-scale production will produce cheaper goods, but will necessarily also require large amounts of initial investments to even get started.

Now, of course, the question of where the very first investments came from before sufficient was available in profits or dividends was, indeed, a major problem. It was called Primitive Accumulation, and has been dealt with very well in a prior SHAPE Blog posting (February 2012), as well as in SHAPE Journal Special Issue 22 (in July 2013)

But, we must also address today’s ever-present problem, of sufficient available investment to keep the “immense pantechnicon moving”. For, it gets harder and dearer to set a new production in train, while at the same time older companies are less and less able to compete with those equipped with the latest facilities.

This is unavoidable due to the Declining Rate of Profit – recognised in the 19th century, and still in evidence today! It is, of course, caused by the incessant necessity for technical advance, in order to be cheaper than your competitors. So, not only in new start-ups, but also in updating and improving your equipment, the need for more investment is always arising.

Indeed, the demand actually outstrips the supply, so companies have also to borrow money at high rates to fill the gaps, and this takes the rate of interest that has to be paid OUT of the hands of the borrowers, and into those of the lenders. And these could only be the Banks!

The source of the Banks’ funds will be the wages and savings that they hold for literally everybody. The lender’s main criterion will be, “Will the borrowers continue to be able to pay the necessary interest?”, while a secondary one will be, “Will they, in the end, also pay back the loan?” If the lenders are satisfied with the answers, they will lend the money, sometimes even if the chance of a full repayment isn’t totally assured – but, of course, in such circumstances, the interest rate charged will be upped accordingly!

Now, usually, when a loan comes up for repayment, the loaned-to company simply borrows elsewhere to pay off the past loan, and the new lenders use the same criteria of ability-to-pay in deciding to forward the necessary amount. BUT, this method is NOT based upon true intrinsic values!

More money is loaned than will ever be repaid at the equivalent value, so the debts are extended ever further into the future. The consequence of this is Inflation!

Money values actually continually decline. In fact, it is a very important part of maintaining the capitalist system: for it affects the different classes selectively. As will be shown, it is very advantageous to the capitalists, as their financial mechanisms keep their values in an advantageous balance, but it is quite the reverse to workers, for the latter only lose by inflation.

NOTE: Good indicators are House values! My current home has risen in value from when I bought my first to now by a factor of 100. Is that mostly reflecting intrinsic value, or is it Inflation?

Now, think what this means in terms of loans and investments! What was borrowed and the interest payable will inevitably SHRINK due to inflation, for it involved borrowing at old values, and is increasingly paid off (with interest) at the new decreased values. So, capitalism depends upon Inflation to keep going!

NOTE: Indeed, the opposite possibility, that of Deflation would mean that both interest and even the final repayment value would be much more that what was initially borrowed. Capitalism would collapse!

Also, without the rich investors Capitalism also couldn’t work!

So let us inspect some downright lies.

How does inflation affect Working People? Looking at the current situation we see inflation going up much faster than wages: it makes them constantly poorer, while their masters pay old dues at the new lesser values. They actually gain doubly! For their loans decline in current values, while their workforce becomes ever cheaper! The situation fulfils their needs perfectly: they can overcome the devastating, if temporary, reinstatement of real value, in a depression or slump, by making the Working class pay for the subsequent re-build!

Now, if you think about the past and present methods of Imperialism and Globalisation, it is clear that they were all followed in order to pay less! For, what they were doing was exporting their problems to what was called The Third World would certainly enable that saving. But, in the end, even that was to some extent terminated as the Third World rose up and Empires melted away! 

The biggest and most recent solution was to bring the Socialist countries back into the capitalist fold by showing sections of those populations (those who could, in the right conditions, become rich) just how well they would do under capitalism. And it worked - for a while at least!

China is the best example. It provides goods cheaper because its workers are paid less. But now, both Russia and China are becoming not only markets and sources of cheap labour, but competitors in the capitalist stakes. Why do you think capitalist Russia is such a bogey?

The Arab Spring and current upheavals in the Middle East are other examples of the exploitation. And, in consequence, local populations are correctly blaming Western capitalism for their problems, and not only rebelling against their imposed, dictatorial leaders, but also increasingly mounting an assault upon the real behind-the-scenes manipulators – the western capitalists. It is no wonder that the current alliance against the Islamic State, as well as the USA, also significantly includes the reactionary regimes in Saudi Arabia, United Arab Emirates, Bahrain, Qatar and Jordan. What an amazing mix! Are they really in it for humanitarian or moral reasons? You know that cannot be true!

Yet, the Sunni version of Islam, which is claimed to be the Islamic State’s motivation, is the same as that in Saudi Arabia, and of the rulers of Bahrain, regularly acting against their own Shia people. Why would these reactionary regimes line up with the capitalist west?

By the way, it is interesting who does the work in these oil-rich Arab countries? It isn’t the indigenous inhabitants, but brought in labourers from elsewhere without any legal or representational rights.

So, who or what can oppose these collections of parasites?

It isn’t this or that religious group, or anyone else on moral grounds, but only the committed socialists who are for the Workers in all countries, and fight for the End of Capitalism, and its worldwide exploitation and even interventionist wars but only in their constant pursuit of even more Profit! 

No comments:

Post a Comment