WHAT do we mean when we talk of capitalism being in crisis, or the crisis of the US and British economies? Are the US and Britain in crisis at the moment? To answer these questions we need to distinguish three levels of crisis.
Fundamentally capitalism is Vulnembe ocean depends on the exploitation of labour as the source of profit. Ar capitalism develops, more and more capital takes the form of machinery, forcing profits However this long-term tendency can be offset by profits generated in foreign trade, inor technological improvements making machinery cheaper These strategies have their own problems though: for example forcing wages down can reduce sales and mean lower profits.
This is where the second level of crisis comes in. Slumps in production close the weakest firms and raise the rate of profit overall, laying the basis for future accumulation. In this way cyclical crises precede booms.
But as booms progress, wares and raw matchal costs rise, and if productivity does not rise fast enough to maintain profits, then slumps will recur.
Socialist JoD loses. Ine sharp end of the stump In the 19th century cycles happened fairly regularly, every decade or so. The greater complexity modern capitatist, paracurariy sne growthof imperialismandstate involvement in the has modified this pattern.
particular of circumstances • Us rexulaton of the world economy and working class defeats in the 1940s together with the arms spending of the 1950% and 1960m - led to a 25-year upswing from 1948 to 1973.
A balance was maintained between mass production of consumer goods and demand stemming from relatively high wages and employment levels. These factors were temporary, however, and after 1973 the un derlying cycle of crisis and recovery reasserted itself with slumps in 19/4/5 and 19/9/02 damental weakness of capitalism and to the penoar stumps wach ex ress this weakness and ay the basis for futur booms. But what is happening now! Flere we need te look at a third aspect of Different national economies respond to rosin ourses In particular the USA and continental Europe aversea sixmincanty in the 1980s. ( The share of the USA in world industrial production fell from 41.4 per cent in 1948 to 29.5 the main cason for this was the longterm slowdown in the US rate to 1973 was 25 per cent in Europe and 9.6 per But alter 19/3 the Us mam tained its share of production ana grew taster than i barope Government spending ticularly on defence, and mid ale-class consumphion fuelled by tax cuts, boosted demand weak. The price was a sharp in crease in the balance of pay nents deficit and governmen udget deficit. Income inc per cent or cave in 1930 to 39 per cent in 1989. The cor responding rise for houschold per cent and fore debt from 7 per cent to 24 per cent.
So we can speak of a third aspect of the crisis, the crisis of specific nationa! economy.
US crisis has been sharpened by the way the Class responded to the "In many ways britain has In many ways been similar, though government budget deficit has een less and unemployment "The UK company.
financial deficit reached record levels of four per cent of GDP in 1989 and five per cent in 1990. The governments of these countries face a dilemma.
Lack of home production and vulnerable to inflation and trade deficits even in very weak upturns. A or or spectave capt tal has been created.
But financial fragility means that any attempt to prevent this can easily turn into a major slump. so they oscillate be tween raining Interent rates to control inflation and lowering them WHen recession threatens to get too bad. ample of this. Fears of inflation in 1990 led to a restrictive to have a brief recession and resume growth in 1991. But this autumn the US economy stubbornly refuses to grow, Bush is ederal Reserve (US centra bank) to cut interest rates further and to renegotiate the Federal deficit reduction package agreed last year with Con. these difficulties. problem there remains the high unlevel compared with the US and Japan. Having she he used much higher as the with much productivity growth has thrown millions out of work.
Do individual responses of egions and states to crisis mear regional crises crisis of capitalism? eneral economists think so. to EClinks with castern Europe, pon, and la rese investment and Japanese in Asia and argue that these areas are increasingly inde pendent of one another and of the USA.
But this ignores the increas ing internationalisation of the world economy, particularly KrowiN of foreign invest ment since 1986.
Foreign firms have become foreign investment in the 1980s In 1989, for instance, 29 per cent for 48 per cent for Honda. The US recession is now affecting France, Italy and Japan.
Understanding the basic vulnerability of capitalism to crisis involves i understanding the way in which individual crises contradictions of the system. and lay the basis for renewed srowin. It aiso involves under standing the new contradictions soth in general and in specific national economies we can analyse those periods when the continuing instability of capitalism be comes apparent to all, and reates the basis for an alterna
quality increased and by 1985 from portent or nad