I. The Historic Crisis of Capitalism

 

 

Note of the Editorial Board: The following Chapter contains several figures. For technical reasons these can only be viewed in the pdf version of the book which can be downloaded here.

 

 

 

 

As we state in our “Theses on Revolutionary Defeatism in Imperialist States”, the global acceleration of the contradictions between states and classes can only be understood when put into a broader historical context – the decay of the capitalist system which is dominating the world. Such decline forces the ruling class of all capitalist countries to accelerate the attacks against the working class and the oppressed people as well as against each other. Hence we see in such a period of historic crisis of capitalism that the ruling classes of all imperialist states strive for:

 

i) Intensification of the exploitation of the working class;

 

ii) Intensification of the oppression and super-exploitation of the migrants in these countries;

 

iii) Intensification of the oppression and super-exploitation of the semi-colonial countries;

 

iv) Intensification of their military interventions and wars of aggression in the semi-colonial world under the hypocritical phrase of “War on Terror” (in particular in the Middle East and in Africa);

 

v) Increasing use of sanctions and trade wars against rivals;

 

vi) Acceleration of armament and militarist propaganda against rivals (US and Japan vs. China, US and EU vs. Russia, etc.).

 

In the following chapters we will illustrate this analysis with a number of facts and figures. Let us start with a brief overview of the background for the recent acceleration of the rivalry between the Great Powers. The world situation is characterized by a profound acceleration of the contradictions between productive forces and the capitalist relations of production. As a result we have experienced a tendency towards stagnation since the 1970s – a tendency which turned into outright decay since the beginning of the new historic period in 2008.

 

Such decay of capitalism is reflected in the dramatic climate crisis and the resulting environmental catastrophes, the increasing poverty as well as the decline of the growth rates of world output. As we have dealt with this in detail somewhere else we limit ourselves to present a few figures and tables from official bourgeois institutions. [1]

 

Figure 1 demonstrates the long-term decline of world output per capita. Table 1 and 2 as well as Figure 2, which we have taken from United Nations sources, demonstrate the same. The annual world output growth rates declined consecutively from +5.84% (1960–70), +4.09% (1970–80), +3.46% (1980–1990, +3.04% (1990–2000) to +2.66% (2000–10). Table 2 shows also that growth rates since 2007 are clearly below the figures before in nearly all world regions. Likewise, Table 3 demonstrates that growth of world output between 2008 and 2017 was substantially lower in every year (except one) than the average growth in the cycle before.

 

 

 

Figure 1. Growth Rate of Real Per Capita Gross Global Product, 1961-2015 [2]

 

 

 

Table 1. The development of global Gross Domestic Product, 1960–2010 (in absolute numbers as well as average annual growth) ^[3]

 

Global GDP                                            Average annual                                                  Average annual

 

in absolute numbers                          growth rate (5 years)                                        growth rate (10 years)

 

 

 

1960: 7279                          

 

1965: 9420                                           1960–1965: +5.88%

 

1970: 12153                                         1965–1970: +5.80%                                           1960–1970: +5.84%

 

1975: 14598                                         1970–1975: +4.02%

 

1980: 17652                                         1975–1980: +4.18%                                           1970–1980: +4.09%

 

1985: 20275                                         1980–1985: +2.97%

 

1990: 24284                                         1985–1990: +3.95%                                           1980–1990: +3.46%

 

1995: 27247                                         1990–1995: +2.44%

 

2000: 32213                                         1995–2000: +3.64%                                           1990–2000: +3.04%

 

2005: 36926                                         2000–2005: +2.93%

 

2010: 41365                                         2005–2010: +2.40%                                           2000–2010: +2.66%

 

 

 

Legend: GDP figures are in billions of constant 2000 US dollars. The growth figures are the respective averages of the five ten years cycle (our calculations).

 

 

 

Table 2. Industrial Growth Rates, Selected Countries and Regions, 1870–2014 [4]

 

                                                                                (Percent)

 

Groups                                  1870-      1890-      1913-      1920-      1938-      1950-     1973-     1990-      2007

 

                                                1890       1913       1920       1938       1950       1973       1990       2007       2014

 

Germany,

 

United Kingdom

 

and United States             3.1          3.4          1.4          1.9          0.9          5.2          1.1          2.1          0.2

 

Germany,

 

Japan and

 

United States                     -               -               -               -               -               7.9          2.4          2.2          0.3

 

European periphery        4.7          5.0          -6.5         4.7          3.6          8.9          3.3          2.8          0.0

 

Asia                                       1.5          4.2          5.2          4.2          -1.7         8.5          5.8          4.2          4.1

 

Latin America and

 

the Caribbean                    6.4          4.4          3.4          2.8          5.3          5.7          2.7          2.2          1.0

 

Middle East and

 

North Africa                       1.7          1.7          -5.8         4.9          6.0          6.2          6.1          4.5          3.2

 

Sub-Saharan Africa         -               -               13.4        4.6          8.6          5.5          3.5          3.9          4.1

 

 

 

Table 3. World output growth: Annual percentage change 2001-2017 (Gross Domestic Product at constant 2005 dollars) [5]

 

2001-08                 2008       2009       2010       2011       2012       2013       2014       2015       2016       2017

 

3.2                          1.5          -2.1         4.1          2.8          2.2          2.3          2.6          2.6          2.2          2.6

 

 

 

Figure 2. Global Output and World Trade, selected country groups and periods, 1870-2016 [6]

 

 

 

 

 

Legend: The darker areas represent the contribution of developed countries to the corresponding world aggregates. Data represent real annual compound growth rates, computed using constant 1990 dollars between 1870 and 1973 and constant 2010 dollars between 1973 and 2016.

 

 

 

 

 

As we have demonstrated in our book “The Great Robbery of the South”, the heart of this decline has been the old imperialist states – the North America, Western Europe and Japan – resulting in a massive shift of capitalist value production to China and the semi-colonial world.

 

This shift is indicated by the dramatic changes in the world industrial production – the sector which creates most of the capitalist value. Historically, the old imperialist countries (usually called “developed countries” by bourgeois economists) have been the center of the capitalist value production. According to a study of the Soviet economist S.L. Wygodski, in 1938 the imperialist countries had a share of 91.7% in world manufacturing and the (semi-)colonial countries produced 8.3%. [7] By 1985, the so-called “developed countries” still accounted for 80.8% of world manufacturing. At that time the “developing countries”, on the other hand, were still the origin of 19.2% the world industrial product. By 2015, the “developed countries” accounted only for 56.3% anymore, while the share of the “developing countries” has increased to 43.7% (i.e. more than doubled). (See Table 4) We remark, as an aside, that the category “developing countries” confuses different types of states, i.e. the semi-colonial countries as well as China and the former USSR.

 

 

 

Table 4. Manufacturing Share by Region, 1985 and 2015 (in %) [8]

 

                                                                1985                       2015

 

World                                                    100%                     100%

 

Developed Countries                      80.8%                    56.3%

 

Developing Countries                    19.2%                    43.7%

 

 

 

However, as we have explained in the book mentioned above, these figures still massively underestimate the real shift which has taken place. In reality the real value creation in the South is much bigger than the official figures suggest and, conversely, the real value creation in the North is much smaller. (Basically, a substantial portion of the value created in the South appears in the official figures as created in the North.)

 

Another indicator for this dramatic shift of capitalist value production away from the old imperialist metropolises is the evolution of the total amount of labor employed across the economy as reflected in the total number of hours worked. As we can see in Figure 3, the total number of hours worked globally between 1993 and 2014 has increased by about 37%. The growth rate of total hours worked has been, however, much higher in so-called “low and lower-middle income“ countries (i.e. the poorer, semi-colonial countries). In these countries the number of hours worked increased by 65%. In contrast, total hours worked in the “high-income” countries (i.e. the Western imperialist countries) increased in the same period by only about 20%. In the “upper-middle income“ countries it increased by about 27%.

 

 

 

Figure 3. Evolution of the total number of work hours (1993 to 2014) [9]

 

 

 

We note, as a side-mark, that several bourgeois think-tanks warn against the “decline of the West” and the unstoppable rise of the “emerging markets”. PricewaterhouseCoopers, for example, a leading Britain-based think tank, predict that by 2050 the ten most important economies are supposed to be, in the following order, China, United States, India, Indonesia, Japan, Brazil, Germany, Mexico, United Kingdom and Russia (GDP measured at market exchange rates) [10] While such prognoses have to be treated with caution, they reflect the decline of the old imperialist powers as well as a thorough crisis of self-confidence of the West. [11]

 

Another indication of the decay of capitalism, as we discussed in past works, is the stagnation of economic globalization and the rising tendency towards protectionism. This development does not come as a surprise to Marxists. We have predicted in the past the end of Globalization and the creation of regional blocs around individual Great Powers or Great Power alliances.

 

“In this book we have outlined the process of globalization and introduced the formula “Globalization = Internationalization + Monopolization”. We have explained that the massive amount of accumulated capital, the development of the productive forces etc. requires a world market. A retreat to relative isolation – as there was such a tendency amongst the US ruling class in the 1920s and 1930 – is impossible today.

 

However, we have also outlined that the same process of globalization which creates improved conditions for profits and extra-profits, also creates enormous contradictions and crisis at the same time. Furthermore, capitalism rests – and will rest as long as it exists – on national states. Without them the capitalist ruling classes can neither organise their domestic basis for exploitation nor posses a strong arm for support on the world market.

 

However, the increasing rivalry between the Great Powers is undermining this globalization. The monopolies need a market as big as possible. But at the same time they need absolute dominance, unrestricted access for themselves but maximum possible restriction for their competitors. As a result there will be a tendency towards forms of protectionism and regionalisation. Each Great Power will try to form a regional bloc around it and restrict access for the other Powers. By definition, this must result in numerous conflicts and eventual wars.” [12]

 

Such a tendency is not without historic parallels as we could observe in the historic period between the two World Wars 1914-1945. Now we see again the beginning of such a development. This is reflected in the stagnation of world trade in relation to production as well as in the stagnation of cross-border investment. (See Figure 4)

 

 

 

Figure 4. Changes in World Trade and Foreign Direct Investment, 1980-2015 [13]

 

 

 

 

 

 

 

Furthermore, there is also a fundamental tendency in Russia and China to increase payments in national currencies. Likewise, there is a substantial increase of gold production in these states. In fact, Russia has become the state with the worldwide fifth largest gold reserves, beating Stalin's historical record of 2.100 metric tons. The state-corporation Gazprom is now discussing a payment system which is related to gold equivalent. Today, the Russian Central Bank accounts for more than 17% of world's gold and foreign exchange reserves. [14] Such policies lead to less dependence on USA banking system.

 

Finally, we want to draw attention to the fundamental tendency which is the driving force behind the historic crisis of capitalism: the long-term decline of the profit rate. As widely known, Marx elaborated this fundamental law in Capital Vol. III. It basically means that, in the long run, the share of surplus value becomes smaller relative to all of the capital invested in production (in machinery, raw materials, etc., as well as wages paid to workers). Therefore, the surplus value which can potentially be used for the reproduction of capital on an extended level becomes less and less. This inevitably leads to disruptions and crises and a historic tendency of decline as it becomes less and less profitable for the capitalists to invest in the expansion of production. ^[15]

 

Naturally, over-accumulation of capital, over-production of commodities, and the tendency of the rate of profit to fall is not a linear process, but its tempo and dynamics are influenced by various counter-veiling tendencies – most importantly by the relation of forces between the classes, i.e., the political class struggle. ^[16] However, while such factors can for some time slow down or temporarily halt the fall of the rate of profit (as happened in the 1990s, for example, as a result of the coalescing neoliberal offensive, advance of imperialist globalization, and the collapse of the Stalinist workers’ states), they cannot stop – or even reverse – the decline for in the long run. (See Figure 5)

 

 

 

Figure 5. World Rate of Profit and Average Rate in Core and Peripheral Countries (1869-2010) ^[17]