The current debt crisis

international | public consultation / irish social forum | opinion/analysis Sunday August 07, 2011 19:07 by Paddy Hackett rasherrs at eircom dot net

What is the solution?

Throwing more debt, in the short or long run, at the problem will not solve the problem. At most it merely alleviates or postpones the problem. This is precisely because the source of the problem does not lie within the process of circulation (i.e. money and credit spheres). It is contained within the production process­­­.

I published a piece on this site some time ago in which I argued that that the solution to the problem manifesting itself as a Euro zone crisis is in fact a crisis located within the capitalist process of production itself. Recent developments confirm the truth of this thesis. Despite the recent solution launched by the EU the problem continues to persist assuming different and even more acute and universal forms. This is because the EU solution is essentially confined to the process of circulation of capital. It is not a solution concerned with the production process. For over twenty years the ruling class has sought to overcome the problems of capitalism by influencing the circulation process: increasing debt through the expansion of the credit system. Even the potential threat of the working class is sorted out by throwing debt at the problem. This is why the welfare or nanny state is so large in Ireland and the radical Left so weak. The ruling class provides the working class particularly the less educated and cultured layers of it with goodies: such as welfare benefits in the form of income supplements, fuel subsidies, medical cards and unmarried mothers’ income. But the resources to pay for all of this have their source in borrowed money. It is for this and other reasons that the Irish working class is so passive and unquestioning.

The same applies to other aspects of capitalist life. Many capitalist companies continue to exist because they are supported by the state through various forms. Under a normal healthy capitalism, if I can use such language, these companies would not exist. Only the stronger capitalist companies would survive. Today there are lots of (bubble) companies existing because they are propped up by a mountain of debt. But the ruling class, by throwing credit at the problem, merely delays the day of reckoning. The day of reckoning has now come. The nature of the class struggle will probably take on a different form as will the working class itself. Hopefully it will lead to the realization of communism.

Much of the radical Left/Right falsely posit the source of the current capitalist contradictions as existing within the process of circulation of capital. This is why it persistently confines itself to solutions that are grounded in the process of circulation of capital. They focus on money, credit, spending, taxation and commodities. Each one of these forgoing forms is necessarily confined to the sphere of circulation. Consequently they cannot provide the key to the solution of the Euro crisis let alone the current world capitalist crises. Much of the radical Left/Right are acting like King Canute. The crisis of capitalism is the crisis of the radical Left. It is also a crisis of consciousness, organisation and leadership within the (if today I can suggest the existence of such a phenomenon) working class movement.The Euro currency crisis, today, has found its extreme expression, economically and politically, in Ireland and Greece spreading into Spain and Italy. The Greek social system is enormously indebted to such a degree, that it cannot sell government bonds to acquire credit with which to meet the cost of running the state. Consequently the Greek ruling class is being forced to seek loans from the EU under extremely strict conditions that will, in the short term at least, further hinder growth. These austere conditions involve enormous privatisation of state companies and large cut-backs in state spending. Much of this austerity package will entail job losses, diminished incomes and reduced welfare benefits. Even this forthcoming Euro loan will not go near getting Greece out of its financial and economic problems. At most it may merely temporarily alleviate the financial problem. This punctuated policy amounts to death by a thousand cuts.Some  commentators mistakenly argue, Constantin Gurdgiev and Brian Lucey, that the better approach is a comprehensive deal now that sorts out Greece's problems once and for all. This, they claim, must involve  debt forgiveness and presumably economic restructuring. They argue that a piecemeal approach can only but prolong the crisis leading in the future to an even more devastating situation. This, they claim, can only intensify the problem thereby rendering the collapse of the Euro more likely. This event will have widespread ramifications.

The EU tops, and their subalterns, argue that their punctuated policy is the best policy in the circumstances. By staging financial help to Greece accompanied by the imposition of belt tightening it appears that the EU hopes to protect the Euro. The overall fear among the European bourgeoisie is the collapse of the Euro and its ensuing impactNeither policy can solve the crisis. The Euro crisis is the result of a much deeper dynamic.The problem has its source in the failure of capitalism to produce sufficient absolute surplus value to compensate for the falling general rate of profit --the regulator of the capitalist economic system. Resisting this ongoing falling volume of surplus value will not be sorted out by throwing more debt (paper) at the problem. At most this just postpones the crisis leading consequently to an even more devastating crash.The solution has to be the production of more surplus value. This economic problem is lodged within the production process --not in the circulation process. This means that transformation must take place within the process of production. Consequently this leaves only two options open.The capitalist solution: A massive development and investment of technology on an unprecedented scale leading to an enormous increase in the rate of surplus value and thereby a corresponding enormous increase in the volume of total surplus value produced.The communist solution: A revolutionary transformation of the production process involving the abolition of capital and thereby the valorization process. Under these latter conditions the production process will exist to serve popular needs.Throwing more debt, in the short or long run, at the problem will not solve the problem. At most it merely alleviates or postpones the problem. This is precisely because the source of the problem does not lie within the process of circulation (i.e. money and credit spheres). It is contained within the production process­­­.

In short all rhetoric by elements within the Left (SWM, SP, WP etc) calling for more spending is merely a call for more debt to be thrown at the problem which, in a sense, is ironically  the very source of the problem. It is precisely just what right wing commentators such as David McWilliams, Constantin Gurdgiev and Brian Lucey are clamouring for too.