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The Crisis of Capitalism and How to Solve it

Friday 18 November 2011, by mond


In order to solve the crisis we need to understand its nature first.

When we talk about crisis today, most people think of the “financial crisis” and often forget about the fact that there is an even bigger problem: the destruction of our environment, global warming and the exhaustion of fossil fuels and other sources, etc. Since these problems are in fact tightly connected, lets start with the so called “financial crisis”:

A lot has been said about how the banks and how the financial system is the problem. Often people even accuse the managers of those banks and and complain about their perceived “lack of moral” and about their “greed”, etc... But the problem is not some individual wrong doing. The problem is the system itself. And it is not just the financial system: It is first and foremost the real economy.

The current crisis, like so many before, is a crisis of overproduction. Well in the age of “just-in time” production there is not a direct abundance of goods but the production capacities are much higher then the demand.

Thanks to the technological and scientific developments our productive forces are now on a level where, with very little human afford we can produce much more then we can consume. So the shelves on the supermarkets are filled with crap that no one wants. Who need HD-3D-TV? Is there anyone who really uses the video-telephony features?

And there is an additional problem with the capitalist system: The intrinsic need for growth: Most of the profit that has been made by exploiting workers and nature needs to be reinvested. If one invest € 100 he wants to make 120 within some period of time and from there he wants 144, and so on.

In order to invest these money new industries need to be built. But since the markets were already saturated there was not much opportunity to invest into real economy. But actually most capitalists did not worry much about this problem. They brought there profits to the bank and wanted them to invest it where ever they thought it would be profitable. Due to the lack of real companies that would build useful goods and services the banks simply invented some “virtual” investment opportunities. As anyone with a basic marxist education know: Value can only be derived by exploiting labor and nature. So it was clear that all the profits that these financial constructions where making where only fake and that the scheme would have to collapse sooner or later.

Now are not there any real opportunities for investment left? Well in former centuries the surplus money would often be invested into expansion into other regions of the world: Colonialist and imperialist exploitation of other countries. But today almost the whole globe is under the capitalist regime so there is not much room for expansion left. So in the last decades capitalism tried some “inward” expansion: Bringing parts of our life under capitalist control that where not dominated by it before. E.g.: the leasure and tourism industry or the attempt to exploit our human relations via social networking sites, so called “intellectual property”, etc, ... But there is a limit to that kind of “inward” expansion as well.

One other opportunity for investment is when an artificial demand for products is generated by the destruction of existing goods: E.g. war, advertizement, environmental damage. At least with war and environmental damage the potential for growth is still there: As long as we destroy enough there is always a need to rebuild it. Unlike the advertizement for the HD-3D-flat TV, if basic necessities of life are destroyed there is a real need for rebuilding them.

It is rather likely that some capitalists will see war as the easiest way for making some cheap money. Fortunately the capitalist world of today is also highly interconnected so that war is not as likely in the “developed” nations. What we can see today are wars that are fought in less developed nations, preferable those where a lot of oil and other natural resources can be found.

Now there is one possibility for left for expansion: There are about 3 billion people who have to live on 2$ or less and about 10 million starving each year. There would be plenty of room left to deliver goods and services to those. But unfortunately the capitalist system does not see them as consumers as they have no money. So capitalism will rather let them starve then giving them some of our abundance of our products and services.

So we see: Our 2 problems: the “financial crisis” and the environmental destruction have the same root: the need for growth that is inherent to the capitalist system.

So after all these analysis it should not be very hard to draft a plan for mastering the crisis, shouldn’t it?

Well the short and easy answer would be of course: abolish the capitalist system. But this would only provoke just more questions: How to abolish and and moreover: what system should replace it.

But before we derive some solutions lets first look at some of the usual solutions that people find that are simple stupid and wrong:

The “greedy banksters” are the problem. This is wrong in 2 ways: first: when we focus on things like “greed” then the problem is formulated as a moral problem. If this would be the problem then the solution would be to demand some “moral purification”, ethical codes for doing business , etc, etc.. As we can see from above: If the inherent growth is the problem, then any ethical rules will not help. In the best case it might just help to mitigate the problems, in the worst case the “smooth” growth will just leas us to banging into the next crisis even faster. The second thing that is wrong with the “greedy banksters” hypothesis is that there is the focus on the banks. And this leads to ignoring the “real economy”. But the banks to not blow the carbon dioxide into our atmosphere and neither do they produce much of the profits: the profits come from the exploitation of labor and nature. This is mostly done in the real economy.

Now some words about another wrong solution: The redistribution of wealth. Well, it is not that wrong. Sure we need a different distribution of wealth: there are 10 million people dying this year because they can not afford food and medicine, etc.. But there are 2 problem when we focus too much on the “redistribution of wealth” issue: first: When we redistribute wealth but do not change the system we would not solve much of our problems at all. We would still have inherent growth and the crisis that come with it and the destruction of our environment. And there is another problem with the the focus on “redistribution of wealth”: it suggest that these is a zero-sum game: that we need to take form the rich in order to give to the poor. And this creates some resistance among the rich: they think we want to take what they think belongs to them. But changing the system is not a zero-sum game: We all have something to gain: When we do not destroy our environment it is better for all of us, even for the rich. When we stop doing unnecessary work that has no real benefit for mankind (war, advertizement, etc..) and focus only on the work that is productive we could all gain enormous amounts of free time to spend with friends and family or some leisure. Well ok: the rich already have that time since they can earn money without working but then we all could gain that privilege to some degree. So there would be much to gain for everyone even without much redistribution.

The luxury life of the rich creates some carbon footprint but otherwise has the advantage that all the money that they spend on consumption does not get re-invested and thus at least does not contribute to the destructive growth.

The problem with the wealth of the rich is where they invest it into the economy: This causes the need for growth and allows them to command others without having any democratic legitimation to do so.

Okay, back to our solution: Instead of painting some far fetched utopia lets think about some steps that would bring is to the right direction:

  • Since there is an overproduction we need to work less. We need strong laws that would limit the weekly work hour and the lifetime work (e.g. by reducing the age of retirement, etc..). We produce so much crap that we do not need. If we would limit the time that one is allowed to work then the capitalists would have to restrict their production to what people really need. Of course this is unpopular among the members of the capitalist class because limiting the time of labor limits the profit in the exploitation. But this is what we want: less profit - less growth - less crisis. And with less work there comes less wasting or resources. So this solves both problems at once. Of course people will pretend that this is not possible: because it creates an incentive for capital to move the production to places where there is no strict limitation of working hours. Yes: this is a problem: So the reduction needs to be made on a global scale and in a coordinated way. the G20 could easily do it if they wanted. (Hey the make a lot of unpopular decessions - e.g. the ACTA - why not do something that makes sense? This would be an extremely easy solution - if it where not for the fact that the ruling class in the G20 have bought our political system and the people in power are either idiots or are corrupted or both.
  • We need a basic income: This also help reduce the motivation for work and it helps to reduce the dreadful growth. It give people some economic freedom to do what they really want: and this is often much more helpful then the crap that the capitalists command them to produce. E.g: Think about what the free software movement has accomplished, or wikipedia, etc.. How much more good things could be created if people had more economic freedom to do useful things? And when some capitalist still wants you to work for him then he needs to pay higher wages. So this also cuts into profits and thus again reduced the dreadful growth.
  • Millions of people are starving each year. So we really need some redistribution of wealth. Maybe in the form of a global basic income. The poorest would profit most from this. While this would lead to some growth in the less “developed” this growth would not be an exponential one and with the basic income it would also be a healthy growth: people could use their newly gained economic freedom there as well to produce useful things. Once they would reach the same standards of living as we have in the richer countries there would not be any more need for growth. While some people think that our planet has not enough resources for all to live a good life: If we stop producing all these useless crap that we produce now and focus on the important things in life then there would be no problem.
  • While a significant reduction of working hours would already give a lot of motivation to stop producing unnecessary crap, there is also a need to restructure the rules of our society that give motivation for producing this crap in the first place.
    • So called “intellectual property rights” are a good example of how absurd the capitalist system really is: Capitalism can only trade what is rare. But knowledge and information can, today, be reproduced almost without cost. So in order to keep this rare the capitalist system has create an arbitrary scarcity of these goods. This is done by copyright, patents and other so called “intellectual property” laws. While those laws are not new we see an aggressive extension of these laws, driven by the industries that would otherwise be completely obsolete as they are not producing anything useful. So we would need to change that rules and drop the artificial monopolies that we grant to those companies today.
    • An other big waste of resources is advertizement. Not only is it not useful but it is extremely harmful: Advertizement create artificial demand. It is here to create dissatisfaction with your life and suggest that you need to buy more products in order to be happy again. Thus advertisement drives the dreadful growth. But there is no need to ban advertizement: All that would be needed would be to relax trademark protection. Without trademark protection a lot of advertizement would become useless: No Logo!

So in theory the solution would be simple. Nothing that the leaders of the G20 could not decide to do if they wanted to. Starting with some reduction of the working week and some form of basic income and some changes in IP law.

But what we are seeing is that we are going in the complete opposite direction: Instead of reducing the working hour those people install austerity-programs. Instead of reducing IP law we have ACTA and now SOPA, etc..

So either these politicians are idiots or they are corrupt, or both. Well our whole political system is deeply corrupted. Up to the point where most of the corruption has been made legal by these people.

So while the solution could be so simple it seems it is not. So the first thing to do should be do (re-)install some form of democracy.

Franz Schäfer, November 2011

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