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From the Crisis of Surplus Value to the Crisis of the Euro
Abstract
The financial crisis that erupted in 2007 and the subsequent crisis of the euro have received enormous attention both in the media and in specialized journals. One of the features of the recent literature is that the relation between Marx's law of the tendential fall in the rate of profit and the earthquake that has stricken the euro zone has been, with a few exceptions, overlooked. The basic reason for this failure is that it has become almost a matter of common sense to regard Marx's law as internally inconsistent and empirically disproved. What follows submits empirical material supporting the validity of the law. It then proceeds to sketch the basic lines of Marx's analysis of crises. Finally, it relates this analysis to the present financial turmoil and to the euro crisis.
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This first section returns to and expands some of the themes in G. Carchedi (2011b) where an extended bibliography is available. The figures in Carchedi (2011b) are nominal while in the present article they are deflated. But the conclusions in both articles are similar. For statistical sources, see the Appendix. More empirical data can be found in G. Carchedi (unpublished paper). Here, the focus will be (1) on the US economy because it is by far the most important worldwide and (2) on the sectors producing material goods, a proxy for the productive sectors, because only these sectors produce value and surplus value, the vital lymph of capitalism. But the same trend is discernible if the world rate of profit is computed. See Michael Roberts (unpublished paper).
In conventional economics, efficiency is the ratio of output to inputs. Here it is the rate of labor to assets.
This is all we need to know to reject the Okishio theorem (Okishio 1961). Okishio purportedly demonstrates that, if innovative capitals adopt new techniques they raise their rate of profit. If subsequently other capitalists too adopt those technologies, the ARP rises. Okishio's flaw is that it substitutes Marx's notion of labor as value creating activity with the individual capitalists' notion of labor as a cost, the point of view of capital. (See Carchedi 2011a, chapter 2.) Some authors (Shaikh 1999) argue that the innovative capital can undersell the competitors, at least initially. When the competitors innovate as well, they reduce their price and the generalized price fall reduces the ARP. But if a capital reduces its output's price, its loss is the buyer's gain. Price competition (redistribution) does not explain falling average profitability. The ARP falls because the innovators sell their higher output at the same price as that of the lower output of the backward capitals while at the same time causing the average profitability to fall due to the expulsion of labor.
Michel Husson (2010) is just one out of a legion.
I have avoided the term long waves because I am not submitting a theory of long waves but only empirical evidence limited to the post-WWII period.
What follows is a short summary of Carchedi (2011b: 147–150).
The Marshal Plan was relatively unimportant for the US economy (but not for the European countries).
Moreover, if profits in the financial and speculative sphere were productive of surplus value, their multiplication could not bring about crises.
For example, a bank issuing credit to a firm charges an interest. This profit (interest) is fictitious. It becomes realized when the firm uses money to pay that interest to the bank.
It could be held that if debts and credits are netted out, the net debt is much smaller. This is true but irrelevant. For example, Bank B is A's creditor but C's debtor. From an accounting perspective, debt and credit cancel out. However, bank A's bankruptcy can cause the bankruptcy of bank B and C.
But Fitch is controlled by the French Fimalac (Financière Marc de Lacharrière). The opinion that the rating agencies play right into the dollar's hands has been strengthened after Standard & Poor's downgraded nine euro-zone countries, including France, on January 13, 2012. Given that these countries are guarantors of the EFSF, this fund has been downgraded too from AAA to AA+. The assumption is that the European Stability Mechanism that will replace the EFSF in 2012 will be less liable to be downgraded because differently from the EFSF it will have its own capital. On February 14, 2012, Moody's too has downgraded a number of nations, including Italy, Spain and Portugal. And on July 26, Germany and The Netherlands have received a negative outlook by Moody's.
According to the dominant interpretation of article 50 of the Lisbon Treaty, a nation that would leave the euro would have to leave the EU. But nothing prevents a country to leave the EU and retain unilaterally the euro.
On August 1, 2011, Standard & Poor's cut the rating of US debt from AAA to AA+ for the first time since the United States was granted an AAA rating in 1971. From October 2010 to February 2012 Russia has halved its US debt and China is selling too, even if it has still $1 trillion of US debt.
This might be the reason why the size of derivatives has grown by more than one trillion dollars in six months. See Table 2 above.
Towards the end of July, 2012, the ECB announced that it would purchase as much sovereign debt of countries at risk as needed.
However, only $200 billion is new credit. The rest is short-term credit that has been turned into three-year credit.
Germany's share is 27 percent.
The decision of the ECB in June and July 2012 to refuse to accept Greek sovereign debt as a collateral in exchange for ECB funds contradicts the ECB's stated aim to salvage the euro at all costs. If meant to put extra pressure on Greece to further proceed in its program of social butchery, it might very well backfire.
Even the most radical and well meaning proposals or political programs (e.g. Syriza in Greece) based on pro-labor redistribution and/or investment policies are objectively damaging for labor if formulated as anti-crisis measures. See Carchedi (forthcoming).
The option of exiting the euro zone while retaining unilaterally the euro passes unnoticed possibly because the euro is (wrongly) considered as the cause of the financial crisis.
According to official German statistics, unemployment has fallen from 5.3 million in 2005 to 2.9 million in 2008 and 3.4 million in 2010. But these figures are cooked. In 2005, the Schröeder government introduced a reform of the labor market. Before the reform, the unemployed received unemployment benefits equal to two-thirds of the last salary for up to three years. After the reform, the length of the unemployment benefit equal to two thirds of the last salary has fallen to one year, after which time the benefit falls to half of the last salary and becomes conditional upon the capacity to work of the unemployed, defined as the capacity to work for three hours a day. In this way, the unemployed have been pushed onto the labor market at hunger wages and about 2.9 million long-term unemployed have disappeared from the official statistics. See Brigitte Lestrade, “Les réformes sociales Hartz IV à l'heure de la rigueur en Allemagne,” Ifri, 2010, at http://www.france-allemagne.fr/IMG/pdf/IFRI_ndc75lestrade.pdf. According to another report, in 2008, 6.55 million employees worked for a wage below the low wage threshold, an increase of 2.3 million since 1998. Thorsten Kalina und Claudia Weinkopf, “Niedriglohnbeschäftigung 2008,” Universität Duisburg Essen, 2010, at http://www.iaq.uni-due.de/iaq-report/2010/report2010–06.pdf. According to other figures, the workers holding mini-jobs increased by 47 percent between 1999 and 2009 and temporary workers increased by 131.4 percent. See http://cdn1.myeurop.info/sites/default/files/media/images/Capture_4.PNG. High productivity and high rates of exploitation: the ideal recipe for capital.
The data above concern the economy as a whole. However, the notion of productivity is really meaningful if it is referred to the productive sectors. Unfortunately, data for only these sectors are lacking.
Domingo Cavallo, “Looking at Greece in the Argentinean Mirror,” 15 July 2011, http://voxeu.org/index.php?q=node/6758
See Carchedi (unpublished paper), where the Marxist multiplier is applied to the analysis of Keynesian policies.
Quoted by Kristen Allen in “Uncomfortable and Bitter Truth for German Economy,” Spiegel OnLine International , July 30, 2012, at http://www.spiegel.de/international/business/german-companies-disappoint-with-quarterly-earnings-reports-a-846751.html