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By ELEUTÉRIO FS PRADO*

Why does the crisis of capitalism scare the left more than the right?

Many on the left are concerned: the specter of crisis and massive economic losses is once again looming over capitalist economies, especially in the West. But the capitalists, always in the center, on the right and even on the extreme right, are more or less calm. Why?

Michael Roberts recently wrote an article about the current financial crisis [https://aterraeredonda.com.br/crise-financeira/] in which he compares economic policy in the great crises of 1929 and 2008. it's always good to remember, she changed between one and the other from little water to a lot of wine... and of the best quality.

Faced with the disaster that was announced in 1928, the then US Secretary of the Treasury, Andrew Mellon, raised interest rates and cut liquidity, recommending that markets be allowed to adjust by themselves, because that is how it should be done. in a competitive market economy. Weak companies and incompetent management would thus be healthily eliminated by the natural selection that is implicit in capitalist competition.

Here is the “sage” advice he gave then-President Hoover: “The crisis process will “liquid off the labor, sell off the stocks, sell off the farmers, sell off the real estate . . . The high costs of living will fall and the high quality of life will come. People will work harder, live more moral lives. Values ​​will be adjusted and enterprising people will learn from less competent people”.

As is known, the purge of the system resulted in a depression that lasted a decade and was only really overcome through the Second World War, which began in 1939. After the end of the war, in 1945, the Western capitalist economy, which at that time was providing high rate of profit and a beautiful frontier of accumulation, entered a peak phase that was called the “golden age” of capitalism. The sequence graph tells this story succinctly.

In the stagflationary crisis of the 1970s, caused by a sharp drop in the rate of profit in combination with a labor policy that tolerated and even allowed union activism, Keynesian economic policies and social democratic social policies were abandoned.

In the 1980s, the so-called neoliberalism emerged, whose content consists of imposing the logic of competition on workers in general in a system dominated by large monopoly companies that operate worldwide. A wave of globalization thus led to a temporary recovery in the rate of profit, which lasted approximately until the end of the last century. From 1997 onwards, this rate began to fall and, thus, a new period began that Michael Robert well characterized as a long depression.

Neoliberal ideologues, since 1980, have used classical liberalism rhetoric to relieve the State of its commitments with society, that is, with workers and the poor in general – because, for them, as is known, society does not exist; there are only markets and families that are both supposedly seeking prosperity. But that hasn't been enough to lift the depressed rate of profit. Also with this objective in mind, neoliberalism boldly advocates policies for the privatization of public companies (and even certain common goods) and the deregulation of the financial system or its regulation by representatives of the financial system itself (independent central bank).

One of the striking characteristics of the entire neoliberal period consists of what is commonly called financialization – behold, under the magnetism of this term, a superficial perception of what is happening with capitalism has solidified.

In classical Marxism, financial exacerbation is associated with the three phases of the economic cycle: prosperity, crisis and recovery, but perhaps depression. At first, the profit rate seems promising and, thus, investments are accelerated, producing high economic growth. As this process is inherently disproportionate, it results in overaccumulation that can only be resolved through capital crisis and destruction.

In the second phase of the process, the present and future rate of profit falls, the possibilities for profitable investment are reduced, which leads capital to concentrate even more in the financial sphere. The crisis thus acts to purge surplus industrial and financial capital, which eventually allows the cycle to restart.

This is what leads certain Marxist authors to say that the so-called “financialization” does not mark a new era, much less a new capitalism, as it simply consists of capital's response to weak profitability. But what is also called “financial dominance” is decades old and cannot be explained only in this way. It ignores the long term.

Well, it is no longer true what Karl Marx said in his greatest work, that is, that capital creates barriers for itself, overcomes these barriers to create new and greater barriers. Behold, since the last two decades of the twentieth century, capital has no longer been able to overcome the obstacles that it has historically placed for itself.

There is a growing need for public goods that cannot be provided because it lowers the rate of profit. Production has become transnational, but there is no world state to create the external conditions of accumulation. Capitalist production uses and abuses human and non-human nature; now, ecological and humanitarian crises remain unresolved. Financial domination appears to be definitive and this implies that crises can no longer be resolved through the destruction of capital. As a result, secular stagnation paints the horizon of capitalism.

As Marx explained in The capital, if capitalism is based on private ownership of the means of production and investment capacity, there has always been a tendency to collectivize ownership of companies. And it happens now through the diffusion of equity capital and capital pooled in large investment funds. In this process, now well advanced, ownership of capital thus becomes increasingly socialized.

With the evolution of capitalism, private capital is transformed into social capital, that is, into “capital of directly associated individuals”. This is how, according to Marx, “the suppression of capital as private property takes place within the limits of the mode of production itself”. The management of companies changes. The command of the productive, administrative and commercial processes starts to be carried out by managers and the command of the destiny of the capital now becomes a privilege of the capitalists who own the money, that is, of the financial capitalists.

It is understandable, therefore, why there is a strong resistance to allowing the industrial and financial capital accumulated in the past to be devalued when crises occur. It is not just a question of the enormous extent and depth of the collapse that the crisis can produce. If the economic system is based mainly on individual private property, the losses will also always be individual; however, when this system starts to be based in an important way on social property, that is, on the association of monetary capitalists, the losses become collective, thus becoming politically incompatible with the survival of capitalism.

Financial dominance, as well as the climate crisis, contradictory globalization and state overload, etc. indicate that capitalism has entered its decline. Will humanity survive or will it die along with it? The answer to this question is to be found in political struggles, in the struggle between a new enlightenment and denialism, in the ability to confront those who benefit from a decadent capitalism.

This also explains why the specter of the crisis scares the left more than the right. The socialism of capital promotes a double regime of competition: the maximum possible lack of protection for workers linked, salaried or not, to the system and for small capital; minimum for big capital. National states protect capitalists in the outbreak of crises, but make life for workers in general increasingly difficult. For the moneymakers, shocks – as Naomi Klein has pointed out – are opportunities to further tighten the bottom and impose the competitive – and asocial – norms of neoliberalism.

* Eleutério FS Prado is a full and senior professor at the Department of Economics at USP. Author, among other books, of From the logic of the critique of political economy (anti-capital fights).


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