The belief that the collapse of the USSR also means the collapse of marxism has set off a wave of neo-liberal euphoria. Nowadays all economic change is presented as a sign that the law of the market prevails over monopoly, whether in state or private form. This belief is now so widespread that there isn't a question answered without the magic word “liberalisation”. The level of unemployment is too high? Well, liberalisation of the labour market - or rather the abolition of any protection for the workers - will solve it. The budget deficit needs to be reduced? Privatise public services and put them onto the free market. This will increase efficiency and reduce costs. Three quarters of humanity is dying from hunger? Just ensure there is free movement for capital and everything will be resolved. As Pangloss (Voltaire's tutor for Candide) would have it, this is still the best of all possible worlds. Even though a crisis has broken out which in less than no time has sunk whole continents to their knees, we are told that it would be even worse if market forces were ignored. So far unfortunately, the proletariat, like Candide, has been predisposed to believe this. Others, who only yesterday numbered themselves amongst the parties and intellectuals who called themselves marxist, pretend to believe it.
In reality capitalism is the same as ever and is doing nothing other than reorganise itself in the interests of self-preservation along the lines dictated by the tendential fall in the average rate of profit. All the transformations in the mode of capitalism's existence are essentially the product of this law which Marx defined as “tendential” because it represents a practical working out “of the antagonistic influences which are conflicting with or neutralising the law in general” (1).
One of the effects of this law is that the mass of global profit tends to be reduced in relation to social capital. For this reason every capitalist who does not want to let go of his business seeks to increase both his quota of the total mass of profit produced and the rate of surplus value. In the latter case, besides furthering an increase in his own quota of profit, he also (albeit unwittingly), helps to increase the total mass of profit. Thus the individual capitalist receives his quota of the total profit whilst the increased rate of surplus value is reflected in the process of concentration of the means of production and the centralisation of capital. These, in turn, allow the employment of ever-larger amounts of capital. This is what has brought about the constant search for technological development of the productive process, the birth of large-scale industry and mass production.
Thanks to technological development and the consequent rise in labour productivity, the biggest capitals were able to sell their goods at prices higher than their real value, thus ensuring that a growing share of the total surplus value extorted fell to them.
This process fosters the constant change in the organic composition of capital, a change which can even become a factor operating against the tendential fall in the rate of profit, but which does not eliminate the contradictions that generate it. On the contrary, these are repeated on an ever-wider scale. Capitalism is a system of permanent contradictions. Its tendencies and counter-tendencies emerge as a contradictory movement which leads to the transformation of the mode of existence of the system itself. This is part of the very nature of capitalism. Thus a certain amount of additional capital is continually formed which does not produce an equivalent addition of supplementary profit but a relatively reduced amount. Colonialism, and eventually imperialism, are derived from the search for more substantial returns from the capitals concerned.
Without a doubt one of Lenin's greatest merits is to place the laws of concentration and centralisation and therefore, even if implicitly, the law of the tendential fall in the rate of profit, at the base of capitalism's passage from free competition to monopoly and likewise from colonialism to imperialism. He does so without arguing that the basic contradictions which propel the process are attenuated or directly overcome. Thus, while for Kautsky monopoly capital was supposed to lead to a sort of ultra-imperialism which, by superseding the anarchic relations of bourgeois production, would govern the economic world in a rational and harmonious fashion for the good of humanity; for Lenin imperialism - as the product of monopoly capitalism - would lead to the accentuation of the contradictions of the mode of production on a world scale. This would be accompanied by both economic and political violence on the part of the strongest capitals which were intent on securing their own position through the export of excess capital, or rather of finance capital which had become an increasing part of extra profit.
Typical of the old capitalism, when free competition held undivided sway, was the export of goods. Typical of the latest stage of capitalism, when monopolies rule, is the export of capital. (2) It is not our intention here to give a rehash of Lenin's theses on imperialism. Such a necessarily potted version would run the risk of giving a formal reading which could be supported by statistical data but which would lead to the erroneous conclusion that capitalism's imperialist phase has been superseded. We refer to the fact that in the course of the Eighties the United States - the world's major economic, financial and military power, became a net importer of capital.
Here it is noteworthy to point out that even the most recent changes in the system of world economy can be entirely reduced to the ambit of capital's concentration-centralisation process. Whilst a new phase in capital's history is undoubtedly underway this doesn't mean that the inherent contradictions of the capital accumulation process have been superseded.
== The Restructuring of the Seventies
The crisis of the falling rate of profit which became apparent in the Seventies represented the watershed between the upward and downward phases in the accumulation cycle that had begun at the end of the 2nd World War. When Nixon, then President of the United States, took the historic decision to denounce the Bretton Woods Agreement and declared the dollar's inconvertibility he had not the remotest idea that this was making way for one of the most gigantic transformations in the history of the capitalist mode of production. He thought he could solve the crisis facing US capitalism by utilising its supreme position in the world to draw a significant portion of global profits to the US economy. Once the crisis period was over the assumption was that everything would turn back as, or better than before. Instead, there followed a period of extreme disturbance which in less than twenty years would change the shape of the world and push the relations of imperialist domination to their maximum limits.
Initially the United States' accelerating steps towards capitalism's global dynamic were taken principally with regard to European countries and Japan. Via the increase in the price of oil and raw materials in general - all provoked and desired by the USA - Europe and Japan in effect had to pay a kickback to Big Brother. This was justified politically as the cost of providing protection from possible future attacks by the Russian bear. In order to regain their competitiveness and keep up profit margins the Japanese and Europeans focused completely on raising labour productivity and opened up a mighty process of restructuring their productive apparatus.
In this first phase, which lasted until the beginning of the Eighties, there were apparently no significant modifications to inter-imperialist relations or to the movement of capital on the international market. One study on the relationship between growth of GDP and direct investment abroad in the OECD countries demonstrated a substantial continuity which lasted up until the end of 1977. Even the relationship between GDP growth and total international exchange, including both imports and exports, did not show any particular dicontinuity. (3)
This was simply a re-working of the model of development adopted by monopoly capital in its period of expansion. In terms of international relations it was a repetition of the existing scheme of things: between the USA and Europe, between the USA and Japan, between the industrialised countries as a whole and the oil-exporting and raw material producing countries, and in general with the so-called developing countries. What tends to be forgotten, however, is that this model could only come into operation at the cost of two world wars and that it required the birth of new sectors of production with a higher level of variable capital, such as the car industry and its suppliers; electronics, electromechanics and electrochemicals, as well as the continuous impoverishment of a growing area of the planet. Moreover the following facts are completely ignored:
1. restructuring increased the growth of constant capital in relation to variable in the industrialised countries so that there were already signs that the fall in the rate of profit was reaching absolute limits and resulting in a drop in actual profits;
2. automation of the productive process by means of microeletronics was completely different from previous mechanisation and electromechanical automation in that it was not accompanied by the birth of new sectors of production or the creation of new jobs but only sytematically destroyed old jobs.
At the beginning of the Eighties there were already signs that things would never be the same again. By 1982 the United States was in the middle of a new and deep recession. This, despite the fact that the US had derived enormous advantage from the increase in oil and raw material prices and that it had been able to shift the greater part of the mass of petrodollars - above all from the bourgeoisie of the Middle East - towards financing its own economy. At the same time the whole of the “developing world”, including the primary goods and oil producing countries, were overwhelmed by a tremendous debt crisis which would never be overcome.
Thus there opened a new phase in the management of the crisis which was increasingly obviously part of the accumulation cycle. As such it was destined to seriously disturb the capitalist world order.
== Industrial globalisation
Unlike the powerful economic growth of monopoly capitalism's first period, restructuring did not lead as expected to a “virtuous circle” of new productive activity which would compensate for the manpower replaced by new technology. For the first time addtional investments were leading, not to an expanded productive base and an overall growth in the productive labour force, but to their relative and absolute diminution.
As it became increasingly difficult to increase the mass of surplus value and of total profit by widening the productive base, so began the frantic attempts to reduce the value of labour power by spectacular increases in productivity and cuts in real wages. Thanks to developments in microelectronics, both in the sphere of telecommunications and in relation to the actual organisation of the productive cycle, the planet really has been unified. Together de-skilling and the possibility of communicating in real time with every corner of the earth, offer capital the possibility of transferring entire spheres of production anywhere it likes.
During the Eighties then, this was the basis for the opening of a second phase in the global restructuring process. It has involved an unprecedented acceleration in the movement of capital throughout the planet. Thus, if it is the case, as the economist Wilkins states, (5) that from 1914 to 1968 direct investment abroad by US multinationals has remained constant at around 7.3-7.5 per cent of GDP, since 1985 there has been a spectacular rise in such investments.
As can be seen from the graphs below, all of which relate to the foreign investments of the OECD countries, there is dramatic growth both in absolute terms and in the rate of expansion of GDP and the rate of exchange of goods and services. This is all the more exceptional when compared with immediately preceding years when growth was sluggish or nonexistent. The areas that best fit this description have specific state incentives to attract foreign capital: export guarantees, contributions to security funds, etc. Above all, however, areas like South Korea, Taiwan, Singapore and Hong Kong (the so-called Asian Tigers) are places where, .. the labour market is free in general, and in particular from strictures on sacking and redundancy payments which increase the cost of labour in the same way as minimum wage norms and social security schemes, which are also absent. (6)
South Korea, for example,
"holds first place in the world for number of hours worked per week (52 in general and more than 60 in the textile and wood sectors) and in lethal injuries at work (2236 people) in relation to the total workforce and where it was only in 1988 that a national pension system was introduced. (7)"
But just as in the Seventies, this new phase in the restructuring process has not reopened the “virtuous circle” for the world economy. Investments abroad have given way to various segments of production being transferred to one part or another of the planet, but not - as might be assumed by the overall widening of the productive base and the increased surplus value extorted worldwide - to the autonomous development of the countries of destination. Thus, if it is true that “in Singapore the state has stimulated an industrialisation process subordinated to foreign direct investment” it is also true that,
"... at the end of the Eighties foreign firms controlled 70 per cent of manufacturing production, one half of occupied manpower and 80 per cent of the country's exports.(8)"
What we are really talking about are those areas of production in the major industrialised countries which declined sharply over the period in question.
http://www.leftcom.org/files/1996-12-01-graph2.jpg
Traditionally important sectors for Italy, such as textiles, clothing, footwear and leather goods increased their share by three percentage points between 1969 and 1979 only to fall back to their initial level in 1989 (15%). The same sectors became almost insignificant in the other four countries (Germany, Great Britain, France and Japan).(9)
In other words, things Singapore produces today are now no longer made in Germany. But because one worker in Singapore does the work equivalent to two, if not three, workers of any major industrialised country the result is a tendency to lower the average wage on a global scale. In such a context it is increasingly difficult to find productive investment outlets with adequate returns for each additional unit of capital that comes into existence. Thus, capital either flies from production altogether or else seeks out a cheaper and cheaper labour force. In either case the contradictions are not only not superseded, but tend to be exaggerated. Accordingly, a growing quantity of capital has moved its operations from the predominantly industrialised countries to those which are less or more recently industrialised and with an abundant supply of very cheap labour power.
http://www.leftcom.org/files/1996-12-01-graph3.jpg
.
http://www.leftcom.org/files/1996-12-01-graph4.jpg
That same tendency for the average rate of profit to fall which Marx originally identified as giving rise to the development of foreign trade has ended up leading to a sort of globalisation of capitalist production based on the progressive impoverishment of the world proletariat and the most violent forms of exploitation which make the Fordist model of development from monopoly capital's previous era seem totally obsolete.
Thanks to the fall of the Berlin Wall and the collapse of the USSR, this phenomenon which was first limited to a few Asian and South American countries is now affecting the whole of Eastern Europe and Russia itself. In an inquiry it conducted on Germany Corriere della Sera of 25th May, 1995 informs us that in the eastern part of the country the average wage is 30 per cent lower than in the east;
"... Rhineland capital continues to overlook the ex-GDR in order to invest in the Czech Republic, Poland and Hungary, where the lowest of wages broadly compensate for the deficit in productivity."
In 1994 Fiat Auto produced 2,200,000 vehicles with 123,000 employees. In 1989 it was producing 45,000 more vehicles with a workforce of 134,000. These totals are the product of an algebra sum since, thanks to the acquisition of new plants (in Brazil, Argentina, Poland and Turkey), the number of employees abroad has increased from 17,000 to 38,000.(10)
And continuing with the algebra sum, you find not only that in Fiat 11,000 jobs have been lost overall, but more significantly that the focus on relocating production to countries with the lowest priced manpower,
"has accorded a drastic lowering in the break even point. In other words, today it is enough for Fiat Auto to produce and sell 1,400,000 vehicles a year in comparison with before ... when it was necessary to sell 1,900,000. (11)"
The Fiat example sharply highlights the main features of this new phase of monopoly capital. Given the impossibility of increasing the rate of surplus value at home, production is relocated to areas where labour power costs less. Up to this point we are still within the frame of what can be defined as the classic scheme of things - except that, unlike in the past, the export of capital neither generates an increase in production nor a growth of the employed labour force, both of which are diminishing. In these circumstances counterbalancing the falling rate of profit almost exclusively takes the shape of increasing the level of exploitation. At home and abroad there is a tendency to reduce wages below their value, or more precisely - as Marx put it - “below the value of labour power”.(12)
Thus, with the globalisation of production a phase in the history of monopoly capitalism is closed. The period when the export of capital gave rise to extra-profits, allowing the maintenance of higher wages at home and accompanied by the development of a labour aristocracy which became the basis of monopoly planning, is over. Today whatever is produced in Milan can also be produced in Warsaw or Buenos Aires. Amongst other things, this means there is no longer any political reason for high wages which in any case are being undermined by international competition. The geographical expansion of new technology and the unification of the labour market at a planetary level depend almost exclusively on reducing the cost of labour.
== Financial Globalisation
The fact that the restructuring of the Seventies and Eighties has not produced a widening of the productive base, a necessary condition for a corresponding growth in the total mass of surplus value, has made it increasingly difficult for a growing mass of capital to be employed in the sphere of production at a satisfactory rate of profit. In graph number 4 the curve showing direct investment abroad has been broken down to distinguish between portfolio investments and those more accurately termed “direct”. According to the generally accepted definition of the World Bank, “portfolio investments” refers to those investments in foreign enterprises which do not exceed more than 10% of a total share package. Direct investments proper are those which exceed the 10% threshold and which are understood to be aiming at strongly influencing the overall direction of whichever enterprise is the object of the investment. As can be seen from the graph, the most significant curve is that for portfolio investments which shows the growing weight
"of financial activity, here of acquiring company shares (industrial, services, or in the banking and financial sectors) with the perspective of immediate profitability and where there is very great volatility.(13)"
In truth, the 1980's were years which saw an explosion in speculative capital. Even more than searching out particularly attractive labour markets, finance capital sought quick returns simply from speculation. This is fully in keeping with Lenin's analysis. In this sense the changes in the way banks dealt with credit to the developing countries, especially in the United States from the late Seventies, is revealing. Having succeeded in soaking up the petrodollars accumulated by the oil producing countries in the wake of the first oil shock, with the assertion that,
"the recycling of funds amongst the crude oil producers and the others could have been accomplished by the developed capitalist countries alone whilst this should not have been the function of the developing countries ... (14)"
the banks put themselves at the centre of a gigantic circulation of capital which allowed them to realise lavish profits without lifting a finger. Given the fact - as the once director of the Bank for International Settlements, Fritz Leutwiler, put it some time later - that,
"... the demand for credit in the industrial countries was not very vibrant [and in view of the thesis] that without an increase in aid the developing countries would not have benefitted from the global economic upturn, in that they would not have been capable either of rapidly changing the direction of their exports or of gaining broad access to the recycling of capital at market rates (15)"
there was a policy of intense increase in bank lending to the developing states. As a consequence of this policy, the overall debt of the developing countries at the end of 1982 was almost $749bn., “with a stunning increase of 475% compared to the end of 1973”. (16)
The lion's share of these loans were made by US commercial banks which were already accountable for 40% of the total banking finance of the developing countries.
"... in relation to equity capital credits [i.e. to “developing” countries - ed] remained stationary up until 1979 but in the three subsequent years this relation jumped abruptly so that by the end of 1982 credits to the developing states were equal to 220 per cent of the equity capital of the nine largest US banks, compared with 166 per cent at the end of June, 1979; and for the following fifteen banks such loans comprised 150 per cent of capital compared to 108 three years previously. (17)"
However, what is more significant is the fact that the consequences of this policy were contrary to expectations. Rather than linking up to the international recovery and so contributing to the restoration of the so-called virtuous circle, the developing countries chased after the expansion of every macroeconomic variable and plunged headlong into catastrophic failure due to the incredible increase in the amount of their debt.
| - | 1980 | 1981 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | 1990 | 1991 | 1992
| Usa | 9,3 | 9,4 | 11,8 | 15,9 | 20,8 | 36,4 | 71,7 | 86,1 | 85,3 | 104,3 | 92,1 | 98,8 | 109,3
| Giappone | n.d. | n.d. | n.d. | n.d. | 25.0 | 62,8 | 163,7 | 147,3 | 128,5 | 156,7 | 120,7 | 92,9 | 72,2
| Germania | 7,5 | 7,8 | 12,5 | 16,0 | 20,7 | 33,9 | 45,6 | 55,2 | 60,7 | 67,3 | 61,1 | 59,2 | 90,8
| Francia | n.d. | n.d. | 8,4 | 13,8 | 14,0 | 21,4 | 28,0 | 37,3 | 34,6 | 51,6 | 53,6 | 78,9 | 122,2
| Italia | 1,1 | 1,4 | 1,0 | 1,4 | 1,9 | 4,0 | 6,9 | 8,1 | 10,3 | 17,6 | 26,6 | 60,4 | 118,4
| G.B. | n.d. | n.d. | n.d. | n.d. | n.d. | 366,1 | 648,9 | 830,1 | 642,6 | 766,6 | 689,0 | 1016 | n.d.
| Canada | 9,6 | 8,0 | 7,4 | 10,5 | 15,8 | 26,7 | 40,5 | 58,9 | 39,1 | 54,5 | 64,1 | 81,4 | 111,2
| Tab. 1 - Transnational share and bond operations as a % of gdp - (n.d.: unknown)
The generalised recession of the early Eighties and the connected fall in raw material prices would result in a strong contraction of revenues for the developing countries. At the same time, nominal and real interest rates went through the roof, putting so much pressure on the financial resources of the developing states that eventually they could not fulfil their financial obligations and thus provoking the international debt crisis of 1982. (18)
According to a piece of research by the World Bank, in 1974 the outgoings of the developing countries (repayments on capital account and interest payments) were respectively 8 and 4.2 billion dollars. This was against $25.1bn. coming in from loans. In 1982, against $119.3bn. coming in from loans, they were paying out $82.4bn. and $71.4bn. towards capital and interest repayments respectively, leaving them with a net negative balance of $34.5bn.
The noose was tightened so much round the necks of the developing countries that in fact they had become net exporters of capital. From a formal point of view these figures give the lie to Lenin's analysis which identifies imperialism with the export of financial capital. But this is only in a formal sense because in reality this “export” exists only in terms of accounting. In substance what is happening is that the income generated by the export of finance capital is being returned to the banks of the imperialist metropoles. This is none other than the essence of the coupon, the dividends by which the rentiers, so aptly described by Lenin, realise their profits without moving a finger. Lenin would probably never have imagined that the export of capital could lead to such large returns but after all this is only the confirmation of the validity of his analysis for today.
The debt crisis was eventually plugged. By means of the IMF the developing countries were able to renegotiate their contracts for servicing the debts which had become impossible to repay. However, the conditions imposed only increased the stranglehold, as can be judged by the relation of debts to exports which, according to the IMF itself, reached 121 per cent in general in 1982 and 270 per cent for Latin America. In other words, the capitalist periphery not only cannot create an aggregate demand capable of absorbing the goods and supplementary capital emanating from the metropoles (i.e. cannot contribute, as hoped, to the enlarging of the productive base and the growing mass of surplus value); but it has had to reduce its imports and use its exports exclusively to offset its foreign debt servicing. Thus the rate of increase in imports in the Eighties, by comparison with the Seventies, fell from 8 to 3 per cent.(19)
The bill for all this is being paid by the international proletariat, as a kind of new era characterised by the total dictatorship of the “financial markets” has opened up.
== New Products For a Growing Market
The policies of readjustment imposed upon the developing countries translated into sharp cuts in public spending and wages so that in effect,
"...the greater part of the debt burden fell on the wage earners of the debtor countries who had to content themselves with much lower real incomes. (20)"
In fact, there were wage cuts even for workers in the metropolitan countries since the state was obliged to intervene to bail out the banks and avoid a financial collapse and the cost of it all was clapped onto taxation in general.
Contrary to what might be expected, financial speculation and associated activities did not diminish after the 1982 debt crisis but rather grew sensationally. For ten years the financial markets underwent massive upheaval until eventually speculation had become the major reference point of the world economy.
Ever since the Mexican financial collapse of 1982 the commercial banks of the OECD, and in particular of the United States, have been afraid of getting tied up in a gigantic chain of bankruptcies and have suspended loans to the developing states. Thus these kind of outlets for excess capital have narrowed whilst the stagnation of the world economy does not encourage the deployment of capital to the productive sphere. Meanwhile, the public debt of the United States and the other advanced capitalist countries began to grow astronomically as the one sought to finance the restructuring of its military apparatus and the others tried to soften the disastrous effects of industrial restructuring. We are reminded, for example, that the US public debt leaped from $906 bn. in 1970 to $4061 bn. in 1992 and that between 1980-1990 the cost of servicing it increased by 7.4%.
The US, as a country with a low propensity to save and as the major recipient of international financial income, found it convenient to implement a high interest rate policy. This very quickly spread throughout the rest of the world and the issuing of government bonds became the source of a massive growth in capital. The high yields from state securities, plus liberalisation of the financial markets, principally in Great Britain and the US, drew all the other financial markets in their train and opened the process of “financialisation” of the world economy which so far has seen no respite. The market has been flooded with new financial products.
Credit guarantee notes (Note Issuance Facilities), Euro trade cards, medium-term Euro bills and other agreements not covered by the sale of monetary securities, these are the financial innovations which have become very prominent ... between 1983 and 1985 credit guarantee notes (NIF) assumed a growing weight of international loans and credits: in only two years NIF increased their share by 6 to 7 per cent. Subsequently NIF lost ground in favour of another financial innovation, the Euro trade card, which appeared on the market in 1985 and very soon became popular with the dealers. At that time these two financial innovations together accounted for more than 24 per cent of international loan and credit facilities. Two years later it was the turn of the medium-term Euro bill. Within four years this became the most important financial innovation of them all...
While traditional forms of bank credit diminished international security issuances grew. Between 1983 and 1991 their respective quotas changed “from 44 to 22 per cent ... and from 50 to 62 per cent.”(21)
The overall outcome is an unprecedented expansion of the share and bond market with a sharp rise in shares issued by foreign companies.
According to the Bank for International Settlements, by the end of 1992 the total sum of international credits (bank loans, international securities, etc.) had reached $4,940 bn. as against $1,230 at the end of 1982. It was only later that the stock markets joined this process but it has only taken a few years for the growth in shares issued by foreign companies to surpass that of resident companies. (22)
Again, it was during these years that financial instruments that would be more accurately termed “speculative” came to the fore: measures such as swaps over interest rates and values, futures and options. While the Bank of England - the only body which has tried to calculate - provides no figures for swaps but simply talks of a “considerable growth”, for futures and options there is data from the Bank of International Settlements. This informs us that between 1979 and 1989 the volume of deals increased from 10 to 230 million and from a negligible amount to 62 million a year respectively.
In contrast with previous financial products these new developments are partly the result of the desire to increase the security of other, high risk financial investments: the sort that can make a profit or a loss, not through the actual transfer of bonds or because of a change in their value, but by gambling on whether and how much interest rates are going to be lowered or raised, on the flow of public or private securities or exchange rates. In truth, this is not so new. These activities are none other than variations of old ways of so-called playing the market. What is significant, however, is the previously unthinkable dimension they have assumed. The fact is that the increasing difficulties of the accumulation process are forcing capital to look further afield for profits and run ever-greater risks. The productive sphere is being abandoned altogether as capital ventures into the stormy sea of financial speculation.
In the last analysis the host of financial innovations highlights not only the securitisation of financial markets, but a growing financialisation of the world economy