By: Saral Sarkar
The current economic crisis that, roughly speaking, began in January
2008 and is, in July 2010, still going on, has shaken the world. Politicians,
economists, and publicists are using superlatives to describe it. It has been
described as the severest economic crisis since the Great Depression of the early
1930s. Seen superficially, similar, though not equally severe, crises have also
taken place in the past few decades. There have been share market crashes, bank
failures, crises in the finance market, credit crunches, strong recessions, state
insolvencies etc. I have described them in my book Die Krisen des Kapitalismus (2010). But the scale, depth and spread
of the current crisis has been so great, that all concerned got panic Many
observers feared for the survival of capitalism. The question came up: is it
only another crisis in capitalism, or is it the crisis of capitalism that Marxists, communists, socialists and other
critics of capitalism have been waiting for since long. At least on one point
all agree. Capitalism will never be the same again as it has been before the
crisis, i.e. unbridled globalized neo-liberal capitalism will henceforth be
bridled, more or less. That work has already begun.
I assume that the readers of
this essay are well informed on the main facts and events of the crisis. Here I
only intend to present a deeper and comprehensive understanding of the crisis and
do not want to repeat in detail the currently available superficial analyses
and speculations about the future perspective.
I. Superficial Explanations
Economists belonging to the various present-day schools of standard
economic thought did not differ much in explaining the crisis. Their
explanations, which I consider to be superficial, are surely also well known to
my readers. Nevertheless, I present below the main elements of their
explanations in order to show the contrast between them and my explanation.
(1) The main element in their
explanations is that the greater part of the huge number and amount of bad
debts that were the root cause and starting point of the crisis in the USA were
the so-called subprime mortgage loans.
Such loans were granted by commercial and mortgage banks to house buyers, who
in normal circumstances would not qualify for those loans because they were
people with low income and/or insecure job. Those risky credits were nevertheless
granted because of the faulty structure of the US finance market. The local
banks did not hesitate to give such risky credits, because they knew that they
would very soon sell them away to the huge mortgage banks (Freddie Mac and
Fannie Mae). The latter in turn issued securities based on bundles of such
subprime credits, which were sold to banks all over the world who wanted to
invest their surplus liquid cash for some profit.
(2) The Federal Reserve (the
central bank of the USA) kept the prime interest rate very low over a long
period and thus made it easy for banks to borrow from it huge amounts of money
and lend them further to undeserving borrowers as well as to speculators, who
were attracted by low interest rates. This is how a real estate boom and then a
bubble came up.
(3) Bankers were greedy. Since
a large part of their remuneration consisted of bonus payments, which depended
on results, they were extra keen to take risks – both in lending business and in
speculative transactions.
(4) There was too little
regulation of the finance and banking industry, and also the globalization of
the same had happened in an uncontrolled way. As a result of these two facts, a
huge amount of highly risky, highly complicated and barely understandable
securities were sold all over the world, mainly to banks
These elements do not refer
only to the situation in the USA, but also to the situation in most leading
industrialized countries.
I find these explanations superficial and unconvincing. No doubt, they
were facts when the crisis broke out,
but they do not give a satisfactory answer to the questions why the crisis
became so severe, so widespread and so long-drawn, and why it could not be
overcome as easily as the previous similar crises: the stock market crash of
1987, the East Asian crisis of 1997–98 and the crisis of 2001–03 (for details
see Sarkar 2010). They do not explain why the crisis is still persisting, and why
the outlook is still so gloomy.
Moreover, two of the facts are
really banal. That bankers were greedy does not explain anything, because greed
is an essential pillar of the capitalist economic system. All participants in
this system are expected to be greedy, more or less. And deregulation of the
finance industry is only an essential element of globalized neoliberal
capitalism, which is in place since the 1980s.
The other two elements were
indeed somewhat unusual. Bankers have always given some credits that were a
little risky, and some of such credits have always had to be routinely written
off. But this time, the extent of the
subprime credits was so huge that business could not go on as usual when in the
USA the housing boom ended, house prices began to fall and thousands of mortgagors
defaulted. The creditor banks could not, as before, recover their money by
selling off the houses.
The Federal Reserve's policy during the period
in question was also unusual. Generally, the Fed (and, in the neoliberal
capitalist regime, almost all central banks) starts tightening money supply as
soon as the economy starts heating up, which can be manifested as an above-average
inflation or the emergence of a bubble in the stock exchange or the housing
market. The usual instrument for this purpose is to cause the market interest
rates to rise, which it generally achieves by raising the prime interest rate.
In the period in question, however, the Fed let the bubbles continue to grow by
keeping its prime interest rate low.
Both the banks and the Fed
have been criticized for pursuing these unusual policies, which, according to
their critics, were the main causes of the severe crisis. But to blame the
crisis only on them is unjustified, it is an obstacle to finding the true
causes and understanding the true nature of the crisis
It has been reported that the
ruling politicians, in fact, wanted a real estate boom. Greed is not a
character trait of only bankers and speculators. Also ordinary people,
especially ordinary Americans, want to become wealthy. That belongs to the
so-called "American dream". And owning a house, as showy as possible,
is an ordinary poor man's way of becoming wealthy – especially because it was said
that house prices, unlike stock prices, can only go up. Politicians, naturally,
wanted to promote the fulfillment of this dream. After all, from poor to middle
class citizens made up the majority of the voters. Particularly the Democrats
had a special interest in pursuing this policy, because they thought workers
and other poor Americans belonged to the group of their (potential) voters. In
1997, the administration of the Democratic president Bill Clinton got a law passed
which made profit from selling real estate exempt from taxation. This
encouraged speculation..
But also the Republicans
wanted a real estate boom. President George W. Bush (2001–08) said he wanted every American to become a house owner.
Politicians in general, therefore, applied pressure on the banks, directly or
indirectly, to give housing credits to the poor.
It would however be wrong, if
one concluded from these facts that only narrow electoral considerations of
self-interested politicians led to the massive expansion of subprime housing
loans. It also made macro-economic sense. We have to remember that both in the
early nineties and in the early years of the new century, the USA suffered a
recession. The GDP growth rate fell from 3.5% in 1989 to -0,5% in 1991. In 2000
and 2001 the so-called new economy broke down. Along with a long-drawn stock
exchange crash, also the real economy suffered a recession, The GDP growth rate
fell from 4.4% in 1999 to just 0,8% in 2001. Between 2000 and 2002 the telecom
companies retrenched half a million workers. The official unemployment rate
increased from 4% in 2000 to 5.8% in 2002 (figures from OECD 2000, OECD December,
2004, and Brenner 2003). Confronted with this recession even the Republican
president George W. Bush had to take typically Keynesian measures to stimulate the
economy, which also started to recover in 2003–2004. A housing boom promoted
through subprime credits perfectly fitted such Keynesian efforts. It promoted growth
and employment at a time when more and more American companies in the
manufacturing industry were relocating their production in cheap-wage countries
or even closing up shop. Producing houses for Americans cannot be relocated in
cheap-wage countries, nor can they, unlike e.g. cars, be imported wholesale from
abroad. They had to be built in America. Moreover, a house is an essential
commodity. Yet, around 2006, observers started warning about a housing bubble
and soon thereafter, the market began to cool down.
II. Why Did the Housing Bubble
Burst?
It is too simplistic to say any bubble will burst sooner or later. It is
necessary to differentiate between a housing bubble and a stock exchange bubble,
which too burst in America in October 2008, i.e. after the former had burst.
It was said that in the first
seven days after the stock exchange crash, wealth amounting to 2.5 trillion
dollar was lost, and since the stock exchange peak of one year earlier, stock
owners lost 8.4 trillion dollar (Wall
Street Journal, 10.10.2008). But what does that actually mean? One says in
such cases, the wealth vanished into thin air. But in reality, nothing concrete vanished, no house, no car.
What vanished into thin air were only some numbers on paper, some zeros after a
digit. The 8.4 trillion dollar were only fictitious
wealth. A year before the stock prices peaked, the same stocks were valued
much lower. Only speculation had driven the market
value of the stocks upward. After the crash, what was in any case fictitious
wealth ceased to exist.
The real value of a stock ultimately
depends on how much demand in the market there is for the product(s) of the
company in question. In case the company has to be wound up for lack of
sufficient demand for its product(s), the price of its stocks can fall to zero.
Houses are however very concrete things with eminent use value. Generally,
there is no dearth of demand for them because almost all over the world
population is growing and people are desiring better housing (only particular
houses may not find any taker).
In our concrete case, the
subprime mortgage crisis in the USA, it is not as if the mortgagors lost the
desire to live in the houses they had bought on credit. They, at least the
great majority of them, were not speculators. It so happened that under changed circumstances beyond their
control hundreds of thousands of them could not service their debts any
more. When they defaulted, they were evicted by the creditor banks and the
houses were offered for sale, which set off a chain reaction leading to falling
house prices and a falling number of new houses being built. The crucial
question for understanding the present crisis is, therefore, why the ordinary
people who had bought houses on credit lost their ability to service their
debts.
When the crisis in the housing
market caused a contagion in the stock market, and the tumbling stock prices in
turn reduced, through the negative wealth effect, the borrowing capacity and
purchasing power of millions of stock holders, the total effect of this
downward development worsened the recession in the real economy, which,
according to American economists, had already begun in December 2007. Like houses,
cars, inter alia, are concrete things
with eminent use value. It is not as if Americans suddenly lost the desire to
own and drive big cars produced by General Motors etc. It was simply the case
that many people lost the ability to pay the high price of such cars, and
rising petrol prices increased the cost of driving them . They simply could not
afford such cars any more.
III. The Deeper Causes of the
Crisis
We then have to understand the changed
circumstances under which the ordinary people who had bought houses on
credit could no longer service their debts.
1. Limits to Growth
Despite several similarities, the present economic crisis differs from
the previous ones in one very important respect. The present crisis developed
and is continuing against a fundamentally different kind of background. Whereas the crises of the past were addressed
by the powers that be with a consciousness occupied by the belief that
limitless economic growth is possible – I call it the growth paradigm –, the
present crisis has broken out in an intellectual atmosphere and against the
background of a public discussion in which even the leading politicians of the
world and government leaders are greatly worried about the ecological balance
of our planet and the dwindling resource basis of industrial societies. Of
course, the authors of the first report to the Club of Rome, Limits to Growth, had forecast the coming
of such a situation already in 1972. But humanity could ignore this warning for
a long time. Now, however, many political leaders seem to have woken up. Thus, Al
Gore, the former vice-president of the USA, has made it his life's work to
motivate humanity to seriously try to stop global warming. And the new
president of the USA , Barak Obama, in his very first speech after winning the
election, on 4th November 2008, spoke of the "planet in peril".
The planet is in peril not
only because of global warming. The ecological balance of the earth is being
undermined since long, e.g. through progressive deforestation, especially
through the progressive destruction of the rain forests, through progressive
decline of biodiversity, through increasing environmental pollution of various
kinds.
The contraction of the
resource base of industrial societies is most clearly manifested in the fact
that oil extraction has, according to most experts, peaked or even crossed the
peak. That is why the price of crude oil, by far the most important resource of
modern industrial societies, had been rising continuously in the few years
before the present crisis broke out. In July 2008, it reached over $140 per barrel.
Also the price of other important resources – the energy resources coal, gas
and uranium as well as industrial metals like copper, zinc, iron and steel,
tantalum etc. – rose sharply. Even the prices of foodstuffs, for hundreds of
millions of people all over the world the main source of energy for recreating
their labor power, rose exorbitantly. After the recession began and deepened,
the prices of these resources fell again, but they never reached the low level in
which they were, say, in 2000. Today, in July 2010, despite the fact that the
recovery from the recession is very slow, crude oil price is fluctuating around
$80.
These price rises must not be
mixed up with the usual inflations of the past, which were triggered mainly by
excessively high wage demands of the working people (the so-called wage-price
spiral). As we know, for quite a few years now, the real wages and incomes of
most workers in all parts of the world are falling (or stagnating). These price
rises are also not being caused only by rising demand from China, India, Brazil
etc. If this were the only cause, a corresponding increase in supply by the
corporations of the respective branches of the mining industry could stop the
inflation soon. No, the main cause of the said price rises is the rise in the extraction costs of the most important
raw materials. These cost rises are being caused by the fact that the raw
materials in question must increasingly be extracted in geographical and
geological regions and layers of the earth which are getting more and more
difficult to access (think of extraction of oil from the bottom of the frozen sea
at the West coast of Greenland!). For such extraction activities, necessarily,
more and more energy and material
input is being made. In the case of extraction of energy raw materials, what is
most decisive is the energy balance,
i.e. the net energy made available at
the end of the process. We humans cannot change the geographical and geological
conditions. (for elaboration of this point, see Sarkar 1999, chapter 4, and
Kern 2010)
Also the environmental services
provided by nature for us are important resources for any kind of society: its
ability to absorb a certain amount of man-made pollution, its ability to
regenerate the fertility of arable land, the health services provided by clean
air and water etc. The costs of maintaining such resources in an industrial
society have also increased along with the costs of extracting important
resources like the ones mentioned above
The rising costs of extracting
or conserving these resources mean that less and less of them are available to most
people. Only those fortunate few, whose real incomes are rising or are not
falling despite these circumstances, can consume the same amount of these
resources as before. Nobody can know exactly how much of these resources are
being consumed by particular persons. But if one says that a person has lost
his job or is working only part-time, if one says that a person's real income is going down, then it is tantamount
to saying that this person is getting less and less resources, which include
the labor power and services of other people (e.g. that of a doctor or railway
workers).
This exactly is happening today
in most parts of the world. Even in Germany, one of the richest and
economically most successful countries of the world, the real income of the average working person is falling for several
years now. In 2006, just a year before the present crisis began in the USA,
German official statistics confirmed that since a few years earlier, real
standard wages in Germany had been falling (Frankfurter
Rundschau, 29.07.2006). Moreover, a large and growing number of workers are
finding only temporary and part-time jobs. On the situation in the USA in 2006
it was said by three authors that also there, the real wages of the majority of
the workers had fallen despite satisfactory economic growth (cf. Krugman 2006;
Luce and Guha 2006). The middle class felt this national-economic growth
personally as a descent down the social ladder. A trade union leader described
the material situation of workers as a "race to the bottom" – more
work for less pay, bad health care etc. But what roused his ire more was the
fact that the good jobs were being slashed and that highly qualified technicians
were being compelled to take up lowly jobs in Burger King, Wal Mart etc.(CNN,
3.09.2006; my personal notes.)
It should not, therefore,
surprise anybody that in 2007, in the USA, the housing boom came to an end and
home-owners began defaulting. It began with the subprime mortgagors, but soon
also the established working class and then the middle class started losing
their ownership homes.
Trade-unionists and all kinds
of leftists may blame the current misery of the working people on brutal
capitalist exploitation, on the weakness of the working class, on speculators
without any conscience, on greedy bankers, on globalization that has caused the
relocation of many production units in cheap-wage countries etc. Of course, at
first sight, all these explanations are partly correct. But on closer look one
cannot but realize that when, on the
whole, there are less and less resources to distribute because it is
getting more and more difficult to extract them from nature (think of oil
exploration at the west coast of Greenland!), then, even in a better capitalist
world with a strong working class, at best a fairer distribution could be achieved,
not more prosperity for all. It is now necessary to think in totally new terms;
a paradigm shift is necessary, a shift from the former growth paradigm to what
I call the limits-to-growth paradigm.
We can further explain the
matter in the following way: Workers in the broadest sense produce goods and
services by using resources (including energy resources), tools, and machines,
which are also produced by using resources. If due to diminishing availability
of affordable resources a growing
number of workers lose their job or are forced to work only part-time, then
they are producing no goods and services or less of them than before. Now, since
most goods and services are, in the
ultimate analysis, paid for by (exchanged with) goods and services, it is
unavoidable that these workers can get less goods and services from other
people.
We know that today, because of
a higher level of automation and rationalization, less (or less full-time)
workers are necessary to produce a given quantity of goods and services from a
given quantity of resources than, say, twenty years ago. It is possible to
employ more part-time workers for the same amount of production. That would
ensure a fairer distribution of the required quantity of paid labor among those
who can and want to work. But the capitalist system of production may
constitute an obstacle to this idea.
2. Illusion of Growing Prosperity
– False Indicator GDP
In his article referred to above, Krugman (2006) speaks of a
"disconnect" between wage stagnation, even fall in real wages, on the
one hand, and satisfactory national economic growth on the other. The term
"disconnect" seems to suggest that it is inexplicable, or that the
trade unions are too week to take advantage of the national economic growth. I,
in contrast, have said above that the limits to growth have been reached. This
is certainly confusing. So let me try to clarify the matter.
Just as it is possible that real wages are falling while nominal wages are rising, so it is also
possible that real national income is falling while real GDP is growing. Real GDP is generally
understood as a measure of a nation's prosperity. But, strictly speaking, it neither
measures a nation's real income, nor does it indicate a nation's level of
prosperity. What it measures is only the real value (i.e. value after
correcting the distortion caused by inflation) of all, and all kinds of, goods
and services produced in a country in one year. Of course, goods and services
produced but not exchanged through the market – for instance, the services of a
housewife given to her family – are not included in GDP because they are not
sold for a price. But they can be included, if one wishes to do so.
Statisticians could impute some reasonable value to them, estimate the total,
and add it to the official GDP. Then the same GDP will be expressed through a higher figure. That's all. But that is
not the point here.
Defensive and Compensatory
Costs
When one wants to think of real income, prosperity, wealth, wellbeing or welfare of a nation, and
not just of the formal GDP, one has to examine the nature of the goods and services produced. A large part of them do
not add anything to the income or wealth of a nation, in
contrast to those of an individual or individual firm. For instance, the work of
a soldier, who is getting paid although there is no war, the work of thousands
of people who are producing weapons, the work of doctors who are treating patients,
the work of those who are rescuing flood victims – such elements of the GDP
are, for the nation (in contrast to
the individuals involved, i.e. the soldiers, doctors, rescue workers etc.)
actually expenditures, not incomes or
additional wealth. They are costs.
They are called "defensive costs" by economists who do not want to be
victims of an illusion.
When a house that has been
destroyed by a flood is replaced by a newly built one, then that is no addition
to the national wealth. Only the loss has now been compensated for. The energy,
materials and labor involved in this process are really costs. The same has to
be said of all repairs. They are called "compensatory costs". All
defensive and compensatory costs are included in the GDP. The 32 billion
dollar, that are estimated to be the cost of repairing the pollution-damages
caused by BP's oil spill in the Gulf of Mexico, will also be added to America's
and Britain's GDP in 2010. The GDP thus loses some of its value as an indicator
of prosperity.
In our context, the damages
caused by ecological degradation are more relevant, because they happen mostly
as a consequence of the same process that is supposed to be generating
prosperity, i.e. industrial production. In China, officials of the national
Bureau of Statistics estimated that
in 2004 the costs arising from ecological damages in their country amounted to
3% of the GDP of that year. They estimated that it would cost the country 106
billion euro to remove (or repair) the environmental damage. This sum amounted
to 7% of the GDP of 2004 (Financial Times,
8.09.2006) The report is a bit unclear. 7% of the GDP of 2004 may have been necessary
to remove the environmental damage accumulated over past years and not only
that caused in 2004. (My Chinese readers may do a little research and find out
the facts.) The point I want to make here is that all the glorious growth
percentages are not really growth in real income.
The huge damages that have
been caused in China this year (2010) by the extreme weather events– prolonged drought,
incessant heavy rain causing devastating floods and landslides – are most
probably results of global warming. How much it has cost China will be
estimated by statisticians only later. But it is safe to say now that these and
other similar costs would reduce the real
national income substantially.
But costs arising from single
events or in one particular year are not so important for our inquiry. More
important is the trend. In 1971, K.
William Kapp, the first scholar to study this phenomenon, thought that it is
necessary to enlarge the concept by adding to it the costs of damages inflicted
by industrial production on the social environment: costs arising from occupational
diseases, death, damage to health, physical and psychological suffering etc. due
to bad work conditions, all of which, like ecological damages, can also be
irreversible. Kapp came to the conclusion that "in spite of the problems
that … render estimating social costs difficult, it is justified to say that
the dangers to environment and the costs arising to society from that show,
both in absolute and relative terms, a rising
trend parallel to growth in production and consumption" (Kapp 1979: XIII:
retranslated).
Krugman (2006) wrote in his
article that in the USA, wage stagnation and falling real wages in spite of
satisfactory GDP growth began already in the 1970s. That was roughly also the
time when Kapp came to his above-quoted conclusion. Costs arising to society at
large must be borne by members of society. Since in capitalism the rich are
powerful and the workers are poor and weak, it is unavoidable that the workers
and the poor have to bear the greater part of such costs. Krugman wrote further
that the allowances paid by employers to their workers began to be reduced
already in the 1980s. The correlation between growing social costs and
stagnating or falling real wages is obvious.
In Germany, the country I know
better, a similar phenomenon can be observed today. To take just one example,
health care costs are rising continuously(a growing part of such costs arise
from mental and psychical sufferings.). While, on the one hand, employers are
refusing to increase their contribution to the statutory health insurance
system, pharmaceutical companies are refusing to reduce the prices of
medicaments, and doctors are regularly demanding and getting higher
remunerations, workers' contributions, on the other hand, are being increased
by law. That is part of the explanation for the falling real income of the
workers and the poor.
Let me finish this section
with a statement of the government of Great Britain, in which it presents a perspective
on the future and gives an example of defensive costs. It says that Britain
must reduce its emission of green house gases by 80% in the coming 40 years and
that it must therefore use more nuclear, solar and wind power. But then
citizens must be prepared to pay 300 pound Sterling more per head per year so that
the lights remain on (The Daily Telegraph,
28.07.2010)
IV. Obsolete Profound Crisis Theories – Marxist, Keynesian, Schumpeterian
If the readers realize that my argumentation presented above gives a
deeper explanation for the present-day crisis and for the fact that the world
economy is having great difficulty in coming out of it, then they must also
realize that all the other crisis theories that were formerly regarded as
profound, namely those of Marx, Keynes and Schumpeter, are now no longer relevant,
however illuminating they might have been in the past. Those theories were
indeed profound, although in parts wrong. But they were all conceived within what
I have called the growth paradigm. As
long as this paradigm was seen as an axiom, a self-evident truth, these
theories were valuable. But today the growth paradigm has become only a very
dubious belief, just as the Ptolemaic geocentric paradigm of astronomy became
obsolete after Copernicus convincingly presented his heliocentric theory of planetary
movements.
The earliest of these profound
theories, those of Marx and his followers, were propagated with strong
conviction by generations of socialists, communists and trade- unionists. Yet,
even before anybody spoke of the limits to growth, many doubts were raised
about the validity of the Marxist crisis theories – not only by establishment theorists,
but also by a few Marxists, Paul Sweezy, for example (see Sweezy 1942).
The more important among the Marxist
crisis theories consists of two interconnected statements: (1) that economic
crises regularly plague capitalism because the average rate of profit has a
tendency to fall and (2) that this is caused by the rising tendency of the organic
composition of capital. Marx and the Marxists thought that all new value is created by labor (variable
capital) only, and that machines and raw materials (constant capital) do not
create any new value. In this short essay it is not possible to go into the
details of the complex arguments (for which see Sarkar 2010, chapter 1 & 10).
Suffice it to say that this thought led to the failure to realize the
importance of availability of easily accessible, and hence cheap, natural
resources, especially energy resources, for the creation of wealth.
Both Marx and Engels could
observe the ecological devastations caused by the industrial mode of
production. But in a famous passage in Capital,
Vol.1, Marx, attributed this to "capitalist
production", which saps "the original sources of all wealth – the
soil and the labourer" (Marx 1954: 506f.;emphasis added). One could
conclude from this that once capitalism is overcome, the problem would be
solved. Faith in the immense power of scientific and technological development
caused one to generally think that all material problems could be solved sooner
or later. That is why also Marx and Engels were not overly worried. Engels, who
even spoke of the "revenge" of nature, also wrote:
"… after the mighty
advances made by the natural sciences in the present century, we are more than
ever in a position to realize and hence to control even the more remote natural
consequences of at least our day-to-day production activities." (Marx
& Engels 1976, Vol. 3: 74f.)
So far as the resource problem
is concerned, in Marx's days, and also until a few decades ago, a shortage of important
natural resources was no serious topic of discussion. Nobody even thought of
such a possibility. So Marx and his followers had no reason whatsoever to
question the growth paradigm.
We, who are today observing
the massive oil spills in the Gulf of Mexico and the Yellow Sea near Dalian, and
the ravages of droughts, forest fires, and deluge-like floods in America,
Russia, China and Pakistan, all caused by global warming, and those who have
experienced the catastrophic blow-out of the nuclear power plant in Chernobyl
and the pesticides plant in Bhopal, can only shake our head in disbelief when
we read the sentences of Engels quoted above. But Marx and Engels lived in the
19th century. We cannot criticize them for not knowing things we
know today. However, we cannot forgive those Marxists, communists and
socialists of our times who have not understood yet that there are limits to
growth and that there are limits to the power of science and technology (for
the latter point see Sarkar 1999, Ch. 4 & Sarkar 2010, Ch. 10).
Another failure of Marx, Engels
and their followers was their refusal to accept the basic truth of the
assertions of Malthus on the population question. Marx considered Malthus's
essay to be a "libel on the human race". Engels wrote that "economic
laws are … [only] historic laws which arise and disappear". Engels and
Lenin declared that the limitless advance of science and technology nullified
the law of diminishing returns, on which one part of Malthus's theory was
based. (This summary of the views of Marx, Engels and Lenin is based on
quotations contained in Meek 1971). That population growth and falling or
stagnating per capita resource
availability, the most important of which is food and water availability, are
contributing to all aspects of the present-day crisis of mankind have today
become obvious. If the peoples of the world have to spend more of their income on
food and water – that is again the case in August 2010 – , then no wonder that
demand for other, less important goods cannot rise, and then also the present
economic crisis cannot end.
Another Marxist theory of
crisis in capitalism is the underconsumption theory, which can also be seen as
an overproduction theory. Keynes's crisis theory is similar to this. He too
sees the cause of recession, depression and, more importantly, secular
stagnation essentially in deficient aggregate demand. According to Keynes, the
more people in industrial societies become richer, the smaller is the
proportion of their income they spend on consumption, which consequently
discourages investment by entrepreneurs. His witty phrase "paradox of
thrift" is a call on the state and the people of rich industrialized
societies to consume more and save less. They can make debts and consume more
and pay off the debts later from future income that is then expected to rise. Unfortunately,
Keynesians of today still adhere to this policy recommendation. But how can
more income be generated in future if resources are declining and becoming ever
costlier?
Today, Keynes's theory as well
as the Marxist underconsumption (or overproduction) theory must be rejected on
two grounds. Firstly, they are not convincing as an explanation of the present
crisis. It is, since long, simply not true that the people in the rich
industrialized countries are consuming too little and saving too much. In the
USA, before the present crisis broke out, the savings rate had fallen to below
1 percent, and even workers and poor people had been, since long, indulging in
high consumption with borrowed money. As we have seen, they were even buying on
credit showy houses they could not really afford. The same had been the case in
all rich industrialized countries, although the savings rate had nowhere been
as low as in the USA. The crisis in the US housing market (2006/2007) did not
arise from overproduction of houses. All houses produced were also sold to
eager buyers.
Secondly, standard Keynesians
as well as standard Marxists have not realized even today that it is the high
consumption level of the peoples of the rich countries that is the main cause
of global warming and other ecological degradations and damages. Fortunately
for mankind, if it is not already too late, the resource crunch and the
resulting long stagnation in the world economy will mitigate the ecological
crisis a little. We have experienced it already. When, in the first half of the
1990s, industrial production almost totally broke down in the former Soviet
Union and the East European countries, their emission of green house gases and
other pollutants also went down. There indeed is a contradiction between the
industrial mode of production and the health of the earth's environment.
Schumpeter had accepted economic
crises and depressions as an integral part of the process of economic
development. Unlike Keynes, he did not recommend any policy for preventing
economic crises. On the contrary, he even thought they had a positive function,
namely that of "creative destruction", without which economic
development and growth of prosperity would not be possible. Present-day
Schumpeterians, therefore, see in the current crisis a great opportunity. They
hope that the "destructions" would start off a wave of creativity, a
wave of innovations pioneered by visionary and dynamic "entrepreneurs",
as Schumpeter had defined them. And that, they hope, would be the beginning of
a new "long wave", the first phase of which would be one of high
growth rates and rising prosperity.
They particularly address the
twofold problem with fossil fuels serving as the main energy basis of
industrial economies: the problem of their exhaustion (peak oil, rising prices)
and the problem of CO2 emissions as the main cause of global
warming. They believe that soon, thanks to further research and development as
well as to initiatives of dynamic entrepreneurs, renewable sources of energy –
solar, wind, biomass, geothermal etc.– would rapidly replace the conventional sources.
There is already much talk about the coming green industrial revolution.
In our concrete case of the
current crisis, when, about a year ago, the three great US car companies,
particularly General Motors, were in danger of going bankrupt, Schumpeterians with
their credo of creative destruction advised the US government to let them go
bankrupt. A German publicist, Thomas Steinfeld, wrote:
"Schumpeter helped us
realize that crises belong to capitalism just like wheels belong to a car. … In
the past, hundreds of great companies have perished, often with very bad
consequences for their employees. But then, till now, again and again, new
companies have taken their place. Then why should now a few companies get an
existence guaranty? And why particularly these ones, and why now?
At the end of his article, referring to the greatest worry of the car
industry, namely the supply and price of oil, Steinfeld wrote:
"Whole sectors of the
economy will now have to reinvent themselves. Politicians should not hinder
them in that process. … capitalism does not need any particular resource. It
needs just resources. Maybe it would not even need oil, but would be ready,
without any problem, to switch over, with the money earned in oil business, to
alternative energies if only the profit is satisfactory. In this complete
indifference of capitalism towards the materials entrepreneurs deal in lies a
lot of hope." (Steinfeld 2008)
I shall come back to this point further below.
V. The Current Keynesian
Dilemma
The way the governments of the major industrialized countries reacted to
the current crisis was typically Keynesian. It was not only that the central
banks poured money into the finance sector to provide urgently needed liquidity
to the banks and other financial companies, which had also been the case after
the stock exchange crash of 1987. This time the state too became directly
involved. It put hundreds of billions of dollar and euro at the disposal of companies,
which were in danger of going bankrupt, and also allocated billions for
spending (in the USA 790 billion dollar) in order to stimulate the economy and
thus avert a catastrophic recession. In some cases, the state, in effect, also
temporarily took over some large corporations which stood on the brink of
bankruptcy: e.g. Fannie Mae, Freddie Mac, the AIG and General Motors in the
USA, the Royal bank of Scotland in the UK, Hypo Real estate in Germany etc.
This has been usual practice
even in earlier decades, albeit at a smaller scale. This time, however, there
are two new and big problems: Firstly, the immensity of the amounts of money
thus provided raised fears of unacceptably high inflation, because much of the
money was newly created by the central banks (in old jargon, printed). And
secondly, this came at the top of already existing mountains of public debt. In
May 2010, to give only a few examples, the ratio of total public debt to GDP stood
in Germany at 76.7%, in the USA at 92,6%, in the UK at 78.2%, in Greece at
124.1%, in Japan at 227.3% (Süddeutsche
Zeitung, 19.05.2010).
A state can go bankrupt, although
it cannot be wound up easily like a company, especially if a large part of its
debts is owed to foreigners and if simultaneously its economy is in a bad shape.
This has happened many times in history, even in recent history. In the case of
Argentina in 2001, one could say it was an especially bad case of
mismanagement. But this time even Greece, a member of the EU and the Euro-zone with
their strict rules and regulations, stood in May 2010 on the verge of
bankruptcy and is still not out of danger. Because of too high public debt, 99%
of which are owed to foreigners, and bad economic fundamentals with a budget
deficit of 8.9% (ibid), the credit-worthiness of the country in the world
finance market was recently downgraded to junk status. Also the
credit-worthiness of Portugal, Spain and Ireland, who too are a member of the
EU and the Euro-zone, has been downgraded. They all have difficulty getting
their new state bonds sold and rolling over old bonds falling due for repayment.
They must therefore offer high effective interest rates.
All this means that states can
no longer spend their way out of a recession. They must cut spending in order
not to go bankrupt. But if they cut spending in a recession, they deepen it.
Spain, for instance, suffering from a deep recession with unemployment rate
standing at 20%, has thus been forced to cut public spending, because its
budget deficit, 7.3 percent, is too high (ibid) . But this has not helped her
in the world finance market. The rating agencies downgraded her
credit-worthiness again; this time with the argument that the massive cuts in
public spending dim the hope of a recovery from the recession.
This intractable dilemma has
led to a controversy between the policy makers of the USA, who want to pursue
the Keynesian policy of increasing public spending for some more time, i.e. until
a convincing recovery has started, and those of the EU, led by Germany, who are
afraid of the other, long-term consequences of growing public debt in the
member countries. They are especially worried about loss of investors'
confidence. The Europeans have now decided to pursue a policy of reducing
budget deficits. Keynesian economists are, so to speak, campaigning against
this conservative austerity policy of the EU. Paul Krugman, for instance, wrote
recently: "We are now, I fear, in the early stages of a third depression.
It will probably look more like the Long Depression [of 1873–1896] than the
much more severe Great Depression [of the 1930s]. But the cost – to the world
economy and, above all, to the millions of lives blighted by the absence of
jobs – will nonetheless be immense" (Krugman 2010). David Leonhardt wrote:
"The world's rich countries are now conducting a dangerous experiment.
They are repeating an economic policy out of the 1930s – starting to cut
spending and raise taxes before a recovery is assured … " (Leonhardt
2010). Another critic commented: if now many states simultaneously dig holes in
their budget, they will dig themselves together into a deeper hole.
The severe austerity measures
that have already been imposed on the Greek people have led to massive protest
demonstrations, violent riots and strikes that are further crippling the
economy. In Spain too there have been demonstrations and strikes. But the
majority of the people in these countries seem to understand that their
governments have no alternative, that they must tighten their belt. They are
only demanding that the necessary sacrifices be distributed fairly, that also
the rich bear their share of the burden of the austerity policy.
The American policy makers
are, of course, hoping that the worst will soon be over, that a strong recovery
and then an upswing will set in. But this hope of the Americans is unfounded. In
the middle of 2009, the US economy indeed started to grow again. But after
growing in the first quarter of 2010 at the annualized rate of 3.7%, it could
grow only at the rate of 2.4% in the second quarter.* And no new jobs were
created (Süddeutsche Zeitung,
2.08.2010). The unabated high unemployment (9.5% at the time of writing) have
disappointed all concerned.
It is now obvious that a
people cannot indefinitely go on living well by spending money they have not
earned. There is a limit to private borrowing. Similarly, a state cannot go on
stimulating the economy by borrowing and/or printing money. At some point, the
old public debts due for repayment cannot be repaid because would-be lenders
would not give new loans to a state the economy of which is stagnating or even
suffering from a recession. And if there is only modest and uncertain growth,
which is today, in July 2010, the case in several countries (there are a few
exceptions, e.g. China, India, Brazil etc.), the state cannot increase taxes
out of fear of stifling the growth, nor can it hope that the modest and
uncertain growth will generate enough tax revenue, so that new borrowing would
not be necessary. A modest growth, moreover, is not enough to create new jobs,
as the US data quoted above show.
Early Keynesians had even
hoped that growth brought about through implementation of their recommendations
would generate so much tax revenue that also accumulated past debts could be
paid off or at least reduced. But their recipes work only if real growth potential was earlier
remaining unutilized. That is no longer the case today. They were (today's
Keynesians still are) totally unaware of the limits to growth and the defensive
and compensatory character of much of GDP growth. They did not face them in
their days. Today, however, we can not only see these limits, but are also
feeling the pinch. Of course, there have been some cases of prosperous and
newly prospering countries that could in some years boast a balanced or even a
surplus budget, but there is no case of accumulated public debts having been
fully paid off.
There is, of course, a
difference between the USA and Greece. Because the USA is by far the largest
economy of the world and because the US-dollar is the number one world
currency, it will be able to attract people with money to invest, who will for some
more time buy US state securities. And because Greece does not have a currency
of its own, it cannot solve its problems by devaluing its currency or by simply
printing new money. The USA can do both. But even the USA will one day face the
problems that Greece is facing today. (For a detailed discussion and my critique
of Keynesianism see Sarkar 2010: Ch. 3, 5, and 7.)
VI. Perspective
Let us now try a little intelligent speculation on the shape of things
to come.
As I have argued above, in the
ultimate analysis, it is the limits to growth that are today preventing the
world economy from coming out of the present crisis. Since the objective limits
to growth cannot be overcome, it is most likely that the rich industrialized
countries would suffer from a long period of stagnation (anemic growth or no
growth) like Japan in the 1990s. I am not saying here anything very new. Even
many establishment economists are nowadays saying that. For the immediate
future, some economists are even seeing the danger of deflation (International Herald Trubune,
7.08.2010), which is worse news for the economy than inflation. In Japan it is
already the case, and policy makers don't see any option for them to utilize (Süddeutsche Zeitung, 3.07.2010; International herald Tribune, 24.8.2010).
Of late, among economic experts, the number of "doomsayers" is
increasing and they are being seriously listened to (Thomas Jr. 2010). The
difference is that while these experts are mostly speaking of a decade or so of
stagnation, I think it will be a continuous contraction until at some point a
steady state will have been reached. That is the logic of limits to growth.
Those who do not explain the present crisis with this logic, i.e. those who
think that a clever mix of various policies could ultimately overcome it, they
are naturally looking forward to a new long period of growth and prosperity.
Many among them, the
optimists, are hoping that soon a new "green" industrial revolution
will begin that will generate a strong economic growth, which will be sustainable
– both ecologically and in respect of resources. If that hope materializes,
then not only would the present crisis be over, but capitalism would also get a
very sound basis for eternal growth. For then there would be no problem any
more with energy supply and availability of other resources. After all, the sun
will shine for a few billion years more and give us everyday, gratis, 15000
times as much energy as the world consumes today, a great part of which is claimed
to be already economically usable. And with this much renewable energy
available, nearly 100% recycling of all materials could be possible.
In two of my books (Sarkar
1999 & 2010) I have presented my arguments for not sharing this hope. They
cannot be repeated here, But three facts can be mentioned that strongly indicate
that the powers that be also cannot share this hope: Firstly, nowhere is any
great effort being made to recycle all waste materials, except in very poor
countries where labor is damn cheap, and except in case of the very highly
priced metals gold and silver. On the contrary. For example China, not a rich
country as a whole, is making great efforts for several years now to build up
in Africa and Australia a solid source of all kinds of minerals. To use the
title of a book that appeared in 1975 in German, the planet is being plundered.
Secondly, despite all the din about renewable energies, massive investments are
being made all over the world to build conventional power plants including dangerous
nuclear ones. And the search for oil and gas is being extended to deeper and
deeper ocean bottoms including at the North Pole. Thirdly, the giant oil
company BP, which for some time changed its name to "Beyond
Petroleum" in order to say that it is beginning the transition to
renewable energies, has now decided to bore for oil in the deep waters near the
Libyan coast instead of building solar power plants in the Libyan desert. And
that soon after the oil spill catastrophe in the Gulf of Mexico.
This being the situation
today, there is little probability that Obama's big talk of last year about the
USA coming out of the crisis stronger than before will come true. It is proving
more and more to be empty talk. I have mentioned above the job crisis in the
USA. The growth rate in the second quarter of 2010 has fallen short of the minimum
growth rate of 2.5%, that, according to US economists, is necessary to just
hold the unemployment rate constant (Süddeutsche
Zeitung, 5.08.2010). How high
must the growth rate be to reduce the unemployment rate, say, by half? What is
worse, the job crisis is threatening to become also a bad social crisis. 6.6
million Americans are looking for a job, without success, for more than 27
weeks. They are defined as the long-term unemployed. About one million of them
are unemployed for more than 99 weeks, the limit after which the state stops
giving them any aid. These people will now become destitute. Many of them will
land on the streets (Süddeutsche Zeitung,
5 & 7.08.2010).Also the finance industry has not yet overcome the crisis
fully. In the first seven months of 2010, another 103 banks, albeit smaller
ones, went bankrupt. This leads to big banks becoming bigger. This shows that
the government has failed to attain its declared goal not to allow any bank to
become too big to fail. All in all, today, the spectre of a second financial
crisis and a double-dip recession is haunting both America and Europe.*
Also in Germany, the much vaunted
welfare state is on the decline. I have mentioned above the higher health
insurance costs that working people have to bear alone. As for the unemployed,
the poor and people with low pensions, several benefit payments to them have
been cut or are being proposed to be cut. For example, it has been proposed by
politicians that unemployed people who get their accommodation paid for by the
welfare office must now accept a smaller (up to 25 square meter only) apartment
than the 48 square meters they are entitled to at present. This can be easily explained
in macro-economic terms. The gross profit expectation of business (e.g. that of
Deutsche Bank) is at present 25%. If real GDP grows at the rate of only 2% and real national income – after deducting the continuously rising defensive and
compensatory costs (see section III.2 above) – not at all or at a still lower
rate, then the aspirations of business can only be fulfilled by depriving the
poor and the weak.
The situation of the welfare
state is equally bad, if not worse, in the other countries of Western Europe.
One observer, Steven Erlanger, writes:
"Europeans have boasted
about their social model, with its generous vacations and early retirements,
its national health care systems and extensive welfare benefits, contrasting it
with the comparative harshness of American capitalism". But now, he
continues: for western Europe, "the lifestyle superpower, the assumptions
and gains of a lifetime are suddenly in doubt. The deficit crisis … has also
undermined the sustainability of the European standard of social welfare, built
by left-leaning governments since the end of World War II (Erlanger 2010).
This is not an ephemeral phenomenon. As to the future, Erlanger
concludes: "The deficit crisis in Europe spells doom for the welfare
state" (ibid). I agree. To take a concrete country as an example, Spain,
reporter Sebastian Schoepp writes: "The crisis has spoilt their wish to
beget children. Compared to the previous year, the birth rate fell in 2009 by
five percent. Three out of ten Spaniards look without hope into the
future" (Schoepp 2010).
There is also one good news,
for the Germans. In the last one year, Germany has recovered much lost ground
in the area of exports and the further prospects, at least in the short term,
are now very good. But in the media reports and comments celebrating this
strong recovery two facts had also to be mentioned: Firstly, Germany's strong
export-driven recovery is taking place at the cost of its EU partners. The
French Economy and Finance Minister recently reproached Germany for letting its
economy grow at the expense of its neighbors. Subsequent data corroborated her criticism.
In contrast to Germany's strong recovery – the GDP grew there in the second
quarter of 2010 by 2.2% – the economy of the whole euro-zone grew in the same
period by only 1%, that of France by only 0.6% (Süddeutsche Zeitung, 14.8.2010). Secondly, the leaders of the
German economy are worried about the world-wide shortage of raw materials (Süddeutsche Zeitung, 10.08. 2010). What
should be added here is that while the German managers are again looking
forward to better business, especially abroad, and while the share market index
is rising, private bankruptcies are also rising. More than six million Germans
are recognized as too heavily indebted (Süddeutsche
Zeitung, 23.6.2010).
Up to now I have concentrated
my attention mainly on the rich industrialized countries. The picture is the
opposite in some newly industrialized countries: China, India, Brazil etc. The
growth rate in these countries is very high. But we should not forget that much
of it has been possible because, since long, labor-intensive industries are
being relocated from the rich industrialized countries to these low-wage
countries. China has been (and still largely is) the "factory" of the
world, India the back-office. Part of the prosperity of these countries is only
the result of a zero-sum game. Moreover, the reason why the Chinese economy is
booming despite the stagnation in Europe and America, its main export market,
is the great real-estate bubble, which has been created by the state through
its 450 billion euro stimulus packet at the height of the crisis and which is
now threatening to burst (cf. Wagner 2010). Moreover, nobody thinks here of the
horrendous social and ecological costs of growth, although they cannot be
hidden. Only the recent prosperity of Brazil is not much dependent on these
phenomena. Brazil is a vast country with a (relatively) very small population, an
enormous area of fertile land and enormous natural resources. That is an
exception.
The social costs of the of
prosperity of the middle class of China and India are escalating and manifesting
themselves in some or the other kind of class struggle. In China, for several
years now, it has taken the form of local revolts, sometimes violent, against
the authorities and the entrepreneur class. Recently, it has also taken the
form of some (till now) successful strikes for higher wages. But it also took
the form of physical violence against doctors in hospitals where poor patients were
neglected (International Herald Tribune,
10.08.2010), and even deadly attacks on school children of the urban middle
class, presumably perpetrated by losers in the struggle for existence. Some
recent cases of suicide of frustrated factory workers may also be interpreted
as a form of protest against the prevailing situation.
In India, in a large underdeveloped swathe of
the country, called by the media "the red corridor", "Maoists",
i.e. the ignored or exploited local people, who are moreover being threatened
with eviction from their land, have taken to arms and are fighting against the
state. In the more peaceful regions of the country, in the last ten years or
so, about 200,000 bankrupt small farmers committed suicide. In Bangladesh, the
country with the cheapest labor, textile workers, who produce garments for the
rich of Europe and America, have had to resort to violent strikes to get a
slightly better deal.
VII. Conclusion
It is now time to come back to the question whether this is just another crisis in capitalism or the crisis
of capitalism. Already in October
2008, in San Francisco, an international conference of some selected left and liberal
intellectuals discussed the question: will capitalism be soon over? In the last
quarter of 2008 and a few months thereafter, due to the severity of the
international financial crisis then, it seemed to many that capitalism might
breakdown, others thought it would not be able to recover from this crisis. I
was not convinced. I argued, its financial system is only one of the more
important mechanisms through which
capitalism functions, it is not the system's foundation. A defect mechanism can be repaired, but not an irrevocably
eroding foundation. If the foundation remains strong, the system will survive.
The foundation of today's capitalism is its material resource base. And I think
it is eroding fast and irrevocably.
The manifestations of class
conflict mentioned above – including those in Greece and partly in Spain – hearten
traditional Marxists and communists. But they do not yet understand that this
crisis is not simply the crisis of capitalism. It is the crisis of
industrialism altogether, in whichever socio-political frame it might be packed.
Happily, it is also dawning on some of them that they cannot simply hark back to
the good old conceptions of communism or socialism. The severity of the ecology
crisis and the limits of resource availability cannot be denied by them any
longer. And some among them are no longer convinced that further progress of
science and technology would enable mankind to carry on with the quest for ever
more prosperity through the development of "green" technologies. They
now feel compelled to make the necessary adjustments in their theory as well as
in their practical politics. They now call themselves eco-socialists, sometimes
eco-Marxists. I welcome this development very much.
It is beyond the scope of this
essay to present the views of the eco-socialists (other than me) and
eco-Marxists. There are, moreover, different degrees of ecological radicalness among
them.. But I think it is necessary to briefly say why I consider the term "eco-Marxism"
inappropriate for the contents of eco-socialism. The term "socialism"
is very much open and amenable to the revisions necessary today. In contrast,
"eco-Marxism" is, and logically has to be, connected with Marx's
thoughts as laid down in his texts written in the 19th century. That
can hinder our theoretical and practical work. Marx's works are, after all, no
holy scripture!
I am aware that prominent
Marxologists, e.g. John Bellamy Foster, have taken pains to prove that it is
"possible to interpret Marx in a
different way, one that conceived ecology as central to his thinking, …"
(Foster 2000: vi, emphasis added). After painstaking study, Foster even
"came to the conclusion that Marx's world-view was deeply, and indeed
systematically, ecological (in all positive senses in which that term is used
today), … " (ibid: viii).
Whereas it takes a lot of
painstaking study and interpreting to
come to the conclusions that Foster has come to, there are many clear words of Marx himself that show
that Marx's conception of emancipation of humanity was "Promethean"
or "productivist". For example, the following famous words:
" The development of the
productive forces of social labour is capital's historic mission and
justification. For that very reason, it unwittingly creates the material
conditions for a higher form of production." (Marx 1981: 368)
Obviously referring to such words of Marx, Ted Benton concludes that
Marx's vision of capitalism as "preparing the conditions for future human
emancipation" shares "the blindness to natural limits already present
in … the spontaneous ideology of 19th century industrialism"
(quoted in Burkett 1999: 148). He interprets Marx as follows:
"Modern industrial
production … is a precondition for the future communist society. The
'historical task' of capitalism is precisely to transcend the conditional and
limited character of earlier forms of interaction with nature. … Elsewhere
there is a recognition that some
element of 'struggle' with nature for the necessaries of life is inevitable,
the content of emancipation being given in the reduction to a minimum of the
time taken up in this struggle. Either way, the possibility of human
emancipation is premissed upon the potential for the transformative, productive
powers of associated human beings to transcend apparent natural limits, and to
widen the field of play for human intentionality." (quoted in: ibid.)
Burkett, who wants to defend Marx against such criticism, argues
"that Marx's belief in the historical progressivity of capitalism is not
based on an anthropocentric preference [of Marx] for material wealth over
nature" (ibid: 149).
Be that as it may, it is not
our duty to defend Marx, nor is it necessary to criticize him for not having
said things in the 19th century that it is our duty to say today. It
is our duty to make a convincing synthesis of socialism and the ecological insights
that science has achieved. And that is possible, as follows:
Under capitalism, but also
under the Soviet model of socialism, development of the productive forces has
gone so far that the latter have become destructive, for nature as well as for
humans. Therefore, generally speaking, not only must this development be stopped,
but also, again generally speaking, the world economy must be brought down to a level that is truly
ecologically, and in respect of resources, sustainable. In other words, world
economic production must contract. But such a contraction is not compatible
with capitalism with its growth compulsion. That is why it must be organized
through a planned economy with socialized means of production. Moreover, this
would definitely entail sacrifices in material standard of living. In any
society, it would be rejected by the majority of the people of the lower
strata, who constitute the majority of the population. In an egalitarian
society – that is the defining
characteristic of a socialist society – the necessary sacrifices would also be
distributed equally and would, hence, be more likely to be accepted by the
majority. That is why our vision should be eco-socialism, with or without Marx.
As stated above, we have seen that
in Greece and Spain the majority of the demonstrators against the recent
austerity measures of the government have realized that they must accept cuts
in their standard of living, but they are demanding that the necessary sacrifices
be distributed fairly, that also the rich must sacrifice part of their income
and profit and thus bear their share of the burden. The present world economic
crisis is thus preparing the ground for the vision of an eco-socialist society.
Our duty is to utilize this situation.
-------------OOO--------------
* After closing the text and
sending it off to the editor, I received the information (CNN, 28.08.2010) that
the US growth rate for the second quarter of 2010 has been revised down to only
1.6%. This naturally increases the fear of a second recession.
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Written in July–August 2010. Manuscript closed on 28.08.2010.
