System Series Part Three - Crisis

In the first part of this series we talked about the origins of the current system. The fact that our lives are based on working for wages, the fact that we can only get stuff for money, the fact that companies exist for profit and the existence of powerful nation states - this is all fairly new. This whole system started to develop as a result of peasants' and poor peoples' struggles against the personal oppression and exploitation by land-owning lords.

In the second part we saw that the current system is still based on the exploitation of those who produce most of the stuff and do most of the care work on this planet. We keep this world alive, but we have little say in how we are doing this.

In this part we will discuss that a system based on exploitation is not only unfair, but is also very unstable, irrational and prone to crisis. In the past, crises often happened because of natural reasons (bad harvests etc.) that meant not enough was produced. Now, crisis mainly happens because too much is produced that cannot be sold or does not generate profits.

Situations of crisis increase the competition amongst nation states for markets and amongst workers who compete for jobs. In the 20th century this increase in competition due to crisis triggered two World Wars killing 120 million people. And since the 2008 crisis, we have seen an increase in national tension (Brexit and anti-immigrant views etc.) and trade wars (US/China trading tariffs etc.).

As workers who don’t want to compete or fight with other working class people we want to understand roughly how these situations of crisis happen.

*** The fundamental reasons for modern crisis

Situations of crisis in the current system happen regularly. In general, they are not the result of natural disasters or human error or accidents. Unlike in earlier systems they are also not just outcomes of war - ironically wars are often attempts to solve the crisis. The main reasons why modern crises happen is because of the divisions in this society. The system we now live in is built on these divisions. These are:

1. Stuff/Money

In this system production does not take place to produce something in particular, but to make money by selling the product. The thing or service produced is just the means to make money. To every thing or service there is a price attached that can go up and down. The important question is not if things or services are useful or needed, but if they can be sold at a profitable price.

2. Producers/Means of production and products

Why does money become all important and seem to ‘make the world go round?' This happens only in a situation where the majority of people have no option but to sell their time and energy for money (wages). Like any other commodity, our time and energy has a price tag attached to it. And like any other price, our wages go up and down. We need the wages in order to be able to buy the products that we (as a class of people) actually make. We ourselves are also not interested in what we produce, but how much we are paid in wages. Money symbolises that those who produce don’t own what they produce. So money in itself is not the problem, but the fact that we as producers have no say about how production is organised and what for.

3. Political power/masses of workers

The majority of people spend their lives working and are not able to decide how their jobs are organised. This also means that they have little to no say in how society is run in general. The state is a power separate from us and it also wants to keep things this way. To keep a potentially powerful mass of people separate from power needs divide and rule. Some people are given jobs to guard, control or administer things - which gives them a feeling of power. In the long run this means that the state bureaucracy grows and sucks up more and more of societies wealth and resources.

The division between things and their price, between producers and control of production, and between the masses of working people and the state all lead to different forms of crisis.

*** The most simple form of crisis: over-production

Companies invest in products or sectors where they expect high profits. Once production is running they churn out as many products as possible. This frequently results in over-production, which means that products cannot be sold and their prices can drop under a profitable level. This is why we see wheat being burnt or milk being chucked into the gutter to keep prices up - while hunger still affects millions of poor working class people across the globe.

*** The most blatant form of crisis: under-consumption

To increase profits (and to be able to compete on the market) companies have to increase productivity and lower wages. ‘Produce more with less workers’ means that people become unemployed and have little income to spend. The problem is that many products are consumed by working class people, who now cannot afford to buy things anymore. The system shoots itself in the foot. After the 2008 crisis we saw homelessness in Spain or the US increasing rapidly, while thousands of new apartments remain empty because of lack of buyers.

*** The most fundamental reason for crisis: falling profit rates

While the first two forms of crisis are more of a regular up and down of the system, the main problem in the long run is falling profit rates. In order to increase productivity (and keep workers under control) companies invest more and more of their money into machinery and technology. This cuts into their profits - which then forces them to churn out more with less people. If a company only makes 2 instead of 4 percent profits, they will try to double the mass of profits by expanding production. This results in the creation of huge companies, from General Motors to Amazon.

*** The falling profit rates lead to financial speculation

If profits are falling in production companies try to find other places where they can invest their money. From the 1980s onwards General Motors made more money from their banking branch than from manufacturing cars. They used the pension funds to create ‘financial assets’ to speculate on the stock-market. The big financial bubbles that emerged since then (dot.com bubble, housing mortgage bubble) are expressions of the fact that profits in production have dropped since the 1970s. These bubbles expand to huge dimensions and if they burst like in 1929 or 2008 they drag the whole economy down.

*** Role of the state: debts and bureaucracy

The state tries to counteract these ups and downs and instabilities of the markets and the falling rates of profit. The main way the state does this is by pumping money into the economy in the form of credit, hoping that profits will be better again in the future, so that the debt can be paid back. Consumer debt or state treasury bonds are supposed to oil the machine and keep it running. Since the 1970s state and general debts have been increasing rapidly. If all this fails the state tries to ‘run the economy’ itself, by taking over industries through nationalisation. This happened in the Soviet Union in the 1920s and in western economies in the 1950s. The Labour Party now are calling for the re-nationalisation of certain industries. Given the internal tendencies of state bureaucracy (expansion of the apparatus to keep workers under control, corruption etc.) this can only postpone the crisis.

*** Role of the state: war

If the nation states cannot create more profitable conditions generally, they try to save their economy at the expense of others. We see trade wars and protectionism as a consequence of the 1929 and 2008 crisis. In 1929 we also saw that states invest more and more money into the military, also to boost the local industries. Since then, three factors have pushed the system into global war: the competition between nation states; the attempt to present an external enemy to angry (unemployed) workers at home; and the tendency of the system to want to destroy the unprofitable masses of idle factories and unemployed people in order to ‘start fresh’.

*** Crisis: a threat to humans and the planet

If the billions of people who produce this world have no say in how production is organised and if the so called rulers are also not able to run their own system, we can see blatant conflicts:

• The tendency to increase production and churn out more and more product kills nature. Nature is plundered for cheap resources and polluted to the point of no return. Climate crisis is an expression of this and the fact that those ‘in power’ can do nothing about it.
• Technology that could make life easier for everyone is mainly used to get rid of people to save wages. This increases unemployment, which in turn lowers wages. There is more poverty, despite abundance and more productive machines. If the gap between rich and poor increases, more and more social product is invested to protect the rich.
• Excluded from control and political power, millions of people don’t care about ‘politics’. Elections and politicians are a joke. The problem is that no alternative seems to be in sight, which means that pessimism and depression are the most widespread illnesses amongst the working class. What is the sense of life in a world of shit jobs and competition? What is friendship without having time? Where is the possibility to live in free community with other people?

This system is out of control. We can’t let our lives be ruled by the ups and downs of markets and by a small ruling class that only pretends to be in control. With the global crisis deepening the only way they can pretend to be in control is through divide and rule and an increase of violence.

With modern means of communication we have the chance to decide together what we need and how we produce it. The current system excludes the knowledge and creativity of billions by trapping us in shit jobs - once we get rid of the current system of profits and crisis we can rebuild the world based on conscious decisions: what are our resources, what do we need to produce; what is the best way to do it, not just for us now, but also for nature and future generations etc.. We will have more time and joy of being and deciding together.

In the next part we will look at alternatives.