Capitalist crisis deepens …
Anarchy rules!
Anyone wanting evidence of the irrationality of capitalism as an economic system will have found plenty of material over the last month. Two examples are the contrasting developments in Britain and Japan, reports ANDY KILMISTER.
Japan is currently in its most serious recession since the mid 1970s. Output fell by 5.3 per cent in the year up to the first quarter of 1998. The government budget deficit is estimated at about 7 per cent of GDP. The USA government has organised a major operation to support the value of the yen.
Meanwhile in Britain manufacturing output continues to slide. Despite this the Bank of England put up interest rates again last month and another rise is forecast by many. Profit growth is falling away, and the financial balance of UK companies is at its weakest position since 1992.
The striking thing is that orthodox commentators give exactly opposite reasons for these two sets of problems. The Japanese crisis is attributed to too little spending by consumers and too much saving. In Britain it is the inflationary effects of high consumer spending that are blamed for interest rate rises; while the government and employers claim that high wages are feeding into inflation and affecting profits.
In each case commentators claim that a bit more precision in government policy, adjusting expenditure or taxes, would have removed the problems.
But the Japanese government seems unable to push spending up however much taxes are cut, and in Britain rate rises have slowed down investment while consumption continues to grow.
Marxist approaches provide a way of understanding this paradoxical situation. The problems of Britain and Japan are not accidental results of policy errors. They spring from the nature of the system. As Marx showed, capitalist societies are continually perched between two possible causes for crisis.
On the one hand there are the problems of realising profits. The forces which give rise to profit, keeping wages low while increasing productivity, create a constant problem in selling the output which is produced.
On the other hand there is the problem of generating profits. If demand is increased in order to ensure output is sold then wages and raw material prices tend to rise and eat into profit levels. Japan currently faces the first problem, Britain the second.
In the past Japanese and British capitalists have overcome these problems in particular ways. Japan has relied on heavy investment spending and exports. But exports are now limited by the crisis elsewhere in Asia. It has been estimated that this will knock 2 per cent off Japanese GDP this year alone.
In addition the USA is increasingly resistant to the growing Japanese trade surplus. This is the reason behind American attempts to keep the value of the yen high and discourage a flood of cheap Japanese imports; just as Clinton has desperately attempted to stop any Chinese devaluation.
Investment spending in Japan has been hit both by the financial crisis and also by a general crisis of confidence. Capitalists are unwilling to invest to produce more consumer goods if there is no prospect of sales in the immediate future.
In Britain the traditional response of employers to the problems of rising wages and input prices is to raise their own prices. But this has become a more problematic option. The independent Bank of England is likely to respond to any such development by slowing the economy even further.
Increased international competition has also made it difficult to resort to this approach.
Britain too faces the prospect of cheap imports from Asia and falling demand there; while inflation rates are lower in other European countries as well.
Stagnation
So the unplanned nature of capitalism means that the system in Japan demands more spending and in Britain it demands less. But there is no way of transferring the spending in Britain across the globe and the result is increasing stagnation in both countries.
This process is made worse by the increasing integration of each country in the global market. But current developments are likely to increase that integration even further.
One of the main recent developments in Japan has been the movement of US companies into the troubled Japanese financial sector.
The Travelers Group paid $1.6 billionn for a 25 per cent stake in the Nikko securities company, while Merrill Lynch bought up 30 branches, including staff, from the bankrupt Yamaichi brokers.
At the same time Japanese companies are taking advantage of the crisis elsewhere by buying up South Korean firms on the cheap.
In this way the effect of economic crisis is to increase the interconnected nature of the market while making it ever more unplanned and anarchic.