Capitalism failed to achieve its own programme

The current world economic crisis is admitted to be serious even by the International Monetary Fund. It could develop to become a general depression. Many are looking back at the great depression of 1929 in order to understand the unfolding events.

True, it is still only a problem in the finance sector, but the threat of collapse of the US financial system and with it an unprecedented financial crisis in the capitalist world is a frightful scenario for the ordinary masses because finance is at the helm of the modern capitalist system and neo-liberalism is really the ideology of the financial interests. The latter was able to replace the Keynesian state intervention policy with free market principles.

We are told that the lesser the intervention of the state the better it would be for economic growth. Furthermore, it is emphasised that with the new knowledge in micro economics, the market could be fair, free and progressive. Hence within an organised society the principle of survival of the fittest is not such a bad idea, as the weak and the disabled will be looked after anyway, by the state. But having preached all that, now, the same pundits of neo-liberalism beg us to believe that state intervention to rescue the sublime financial institutes is both necessary and ethical!

The immediate reason for this breakdown is the risk taken by speculators. As long as there is an assurance that the state will intervene to rescue, there is no real risk for speculation. So, it is not ‘short sighted speculation’ but unethical and callous activity of the financial players, that affected the situation so badly.

When the rate of profit goes down, it is not useful to invest in any productive sector, especially in sectors with the most modern technology. Speculation, credit frauds, stock swindles and even plain gambling, could be attractive, serious activities for someone who would borrow money.

Strangely enough all these were explained in Das Kapital by Karl Marx. He says,

“the credit system, which in its first stages furtively creeps in as the humble assistant of accumulation, drawing into the hands of the individual or associated capitalists, by invisible threads, the money resources which lie scattered, over the surface of the society, in larger or smaller amounts; but it soon becomes a new and terrible weapon in the battle of competition and is finally transformed into an enormous social mechanism for the centralisation of capitals.”

Now this concentration of capital and the increased production leads to a decline in the rate of profit, driving small borrowers in the direction of adventure.

Centralisation

Within a market economy even a partial solution can be achieved only, by taking drastic steps towards social and political centralisation, with consent and democracy in the world arena. The international financial system has virtually escaped all physical and political barriers. However labour and produce are restricted in many ways. National and political barriers prevent the flow of labour, according to its demand. The discussions by the World Trade Organisation are sill incomplete.

Thus the neo-liberals’ promise of globalisation with freedom for all aspects of human activity, remains an empty dream. Instead globalisation with Washington consensus, American hegemony and Pentagon military supremacy developed.

Capitalism has failed to achieve its own programme because its action is governed, not by the requirement of socially developed human beings, but by the realisation of maximum profit. Under pressure of the present crisis, will it take positive steps or will it allow a massive destruction of capital? On the other hand events may unfold towards the way out as predicted by Marx,

“The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralisation of the means of production and socialisation of labour, at last reach a point, where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property is nigh. The expropriators are expropriated.”