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The only thing we have to fear is capitalism itself

The dispute over the use of imported labour at a UK oil refinery looks like a minor side show compared to the global disquiet over a key part of Barack Obama’s economic package. The president’s throwback to 1930s Roosevelt-style government spending, and its inward-looking Buy American component, is causing concern amongst ailing corporations, as well as countries dependent on exports to the US.

In appealing to the millions of Americans who’d already lost their jobs as the credit-led boom ended, Obama’s presidential campaign touted economic nationalism, using slogans like “Buy American, Vote Obama”. He promised a requirement for the US government to buy American-built vehicles in a grim echo of Gordon Brown’s infamous “British Jobs for British Workers” remarks.

The protectionist provisions in Obama’s economic package bill now in Congress, including the use of domestic steel and manufacturing products in infrastructure projects funded by the stimulus package, have had to be watered down because the US is signed up to the World Trade Organisation’s agreement on international tendering for government procurements. Even so, among the countries which didn’t sign up are China, Brazil and India, so they can be excluded from tendering.

Opposition to Obama’s plans is mounting among capitalist rivals. Japan’s prime minister Taro Aso condemned the proposals in the Japanese Diet, the European Union has warned of trade litigation, and Australia’s government talks of trade war. Should the Buy American provisions survive, retaliation from countries throughout the world is sure to follow.

Even American firms are fearful about the consequences of the turn to economic nationalism. Thomas Donohue, president of the US Chamber of Commerce, said: “Such provisions would cost American jobs, trigger retaliation from our trading partners, slow economic recovery by delaying shovel-ready infrastructure and cede our leadership role as a long-standing proponent of free and fair trade and global engagement.”

The US Chamber has a better idea of what’s coming than the new president and his team. In a blog on its site it says:

Then there’s the lesson of history, which is that protectionism in the 1930s made the Great Depression worse. Here is the Encyclopaedia Britannica on the Smoot-Hawley Act of 1930, which raised import duties to protect American farmers and businesses: "Within two years, some two dozen countries adopted similar ‘beggar-thy-neighbour’ duties, making worse an already beleaguered world economy and reducing global trade. U.S. imports from and exports to Europe fell by some two-thirds between 1929 and 1932, while overall global trade declined by similar levels in the four years that the legislation was in effect.

Now that the debt-funded markets for their commodities have crashed, no national or even international “stimulus” programme can put them back on the path to growth. Obama’s own pledge to bring a “new politics” to Washington is already running into the sand. His bill is under fire in the US media for being the same old “pork barrel” politics. His call in the Washington Post for bipartisanship and an urgent response at a time when unless action is taken “our nation will sink deeper into a crisis that, at some point, we may not be able to reverse”, made no impression on Republicans in the Senate, who simply favour cutting taxes for the rich.

What history has shown, and Marx explained, is that before a new period of growth can begin, the surplus productive capacity accumulated during the boom years has to be destroyed. The shocking increase in unemployment that sets worker against worker is just the starting point of that process of destruction. The real enemy is capital itself, and the corporations and governments that do its bidding. They must be stopped. To paraphrase Roosevelt's famous remark on his inauguration in 1932, the only thing we have to fear is capitalism itself.

Gerry Gold
Economics editor
6 February 2009

Gerry says:

1 Yes indeed, workers are the producers of commodities, but they are owned by the employers, hence 'their commodities'.

2 Marx talks about the destructive consequences of crises for capital in, for example, Theories of Surplus Value Chapter 17 - and these paragraphs resonate loudly today.

When speaking of the destruction of capital through crises, one must distinguish between two factors.

In so far as the reproduction process is checked and the labour-process is restricted or in some instances is completely stopped, real capital is destroyed. Machinery which is not used is not capital. Labour which is not exploited is equivalent to lost production. Raw material which lies unused is no capital. Buildings (also newly built machinery) which are either unused or remain unfinished, commodities which rot in warehouses- all this is destruction of capital. All this means that the process of reproduction is checked and that the existing means of production are not really used as means of production, are not put into operation. Thus their use-value and their exchange-value go to the devil.

Secondly, however, the destruction of capital through crises means the depreciation of values which prevents them from later renewing their reproduction process as capital on the same scale. This is the ruinous effect of the fall in the prices of commodities. It does not cause the destruction of any use-values. What one loses, the other gains. Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt. If the value of the commodities from whose sale a capitalist reproduces his capital was equal to 12,000, of which say 2,000 were profit, and their price falls to 6,000, then the capitalist can neither meet his contracted obligations nor, even if he had none, could he, with the 6,000 restart his business on the former scale, for the commodity prices have risen once more to the level of their cost-prices. In this way, 6,000 has been destroyed, although the buyer of these commodities, because he has acquired them at half their cost-price, can go ahead very well once business livens up again, and may even have made a profit. A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction. This is also the period during which moneyed interest enriches itself at the cost of industrial interest. As regards the fall in the purely nominal capital, State bonds, shares etc.-in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalists who hold such securities-it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.

This might be a better place to read about the destruction of capital in the broader context of the tendency of the rate of profit to fall:

Capital Vol. III Part III The Law of the Tendency of the Rate of Profit to Fall
Chapter 15. Exposition of the Internal Contradictions of the Law

Bruce says:

War, Hu! What is it good for?... The contrdiction between Nation states and global capitalism is being played out befor our very eyes. How long will this last with profit and expansion indcline. Dose not coca-cola trade with both sides while ordinary people pick up the tab. Help, some questions about this blog "Now that the debt funded markets for their commodities have crashed, no national or even internationl "stimulus" programme can put them back on the path to growth." are we (the working class) not the producers of commodities by the use of our labour. + "What history has shown, and Marx explained, is that before a new period of growth can begin the surplus productive capacity accumulated during the boom years has to be destroyed." where did Marx explain this?

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