Richard Mellor
AFSCME Local 444 retired
Oakland CA
10-16-07


In 1848, Karl Marx wrote a short little pamphlet that presented a view of human history that shook the world. He included in his commentary some observations about the economic system in which he lived. He wrote of the revolutionary role the capitalist class was playing when compared to the feudal aristocracy, the rulers of an economic system that they overthrew by force.

He wrote of the incredible advancements and growth of the productive forces in the capitalist economy and the increased ability of society to exploit the natural world to its advantage: “what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?” he remarks. (1) What would he think today? The productive forces of his time are archaic and backward compared to the present period.

But he also observed that capitalism had problems of its own. That like all economic systems it has laws and its own internal contradictions. He foresaw the rise of the global economy and the obstacle that modern nation states, a creation of capitalism, would present to this process; that they would be in conflict with it. The development of modern nation states advanced the productive forces restrained by the compartmentalized feudal state and its predominantly self sustaining rural economy; they allowed capitalism to develop. But he pointed out that the productive forces would outgrow them, that no nation state, even one like the U.S. with a vast domestic market, would be able to absorb the products that were produced; the productive forces need a world market.

We have reached such a point that the productive forces have become so powerful, so productive that the global market place is not enough. Farmers are paid not to grow food and workplaces produce at less than capacity, as there is no “demand” for the products they produce. But money must be made, the economic system must operate, and the tendency is to produce more than can be bought, they saturate the market with a product, whether it is cars, housing, or money itself. When they do this, nasty things happen.

We have a crisis of considerable proportions today, a housing crisis that began in the U.S. and a credit crunch that stems from it. Too much money has been floating around at cheap prices and too many homes were bought and built with it. When the poor borrower became unable to pay the cost of this transaction to the moneylender, the ponzi scheme came to a halt and the owners of money are holding on to it more tightly and charging much more for its use. Many people have lost their shelter. In he U.S. home foreclosures have tripled. It is not that they have lost their homes; their homes are still there---vacant. You see, they never really owned them. They have been displaced, removed from their homes by the capitalist state.

Like any language, what a word means depends on who is using it. When the journals of capitalism refer to demand, working people should recognize that this does not mean there is not a need for something, something useful like food or housing or transportation. Millions of people are starving so there is obviously a demand for food. There is demand for medical care but people don’t get it. When the capitalist class talk of demand they mean the ability of workers to buy what they are selling, not the need for the object or necessity in question.

Marx noticed this little problem; that the capitalist economy produces more than can be bought, as workers are paid less value in wages than we produce in goods; hence, society ends up with too much stuff, recessions and slumps are the product of this inherent and insoluble contradiction of capitalism.

Marx wrote in that little pamphlet 150 years ago that:
“It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed.”

I am not an economist but I think he was describing a recession or slump, a product of what the big business press calls the “Business Cycle”.

Michael Mandel is a very sharp guy. He is the “Chief Economist” for Business Week, an important and respected journal of the capitalist class. Magazines like Business Week are the theoretical journals for the capitalist class. In the pages of these journals they discuss the system they rule and how to rule it, how to keep it stable and how to continue to increase their wealth. They talk to each other here, free from the eye of the worker, the source of their wealth.

Mandel, commenting on the present economic crisis one hundred and fifty years after Marx, proclaims proudly “periodic crises like the subprime may be necessary to keep global markets from melting down.” (2) But unlike Marx whose intention was to bring attention to and offer a solution for these crises and their devastating effects on society, Mandel is upbeat. “In fact these financial disruptions, rather than being signs of instability, may serve as critical safety valves for the global economy.” he writes.

The pages of the bourgeois press have been filled with such optimism of late. The reoccurring crisis that Marx wrote about 150 years ago is not a crises, it is part of a healthy organism and enables it to survive he tells the coupon clippers. As he writes, he becomes more confident, more convinced his argument will soothe the worried minds of those young speculators whose confidence in the free market might have been shaken by this financial storm. “If the global markets are functioning well, we should expect a financial crisis every few years..”, he warns his colleagues. He goes further and explains that to be healthier we need these crises more often. The difference between him and Marx at this point other than the not insignificant fact that Marx explains why they occur and how we can eliminate them, is that Mandel wants them more often and Marx explains that capitalism gives them to you whether you want them or not.

This theoretician of the capitalist class isn’t completely heartless. He doesn’t want to “minimize” the “real” damage that these crises inflict on people like losing one’s home for example, or for the slightly luckier victim, getting “stuck with staggering mortgage payments.” This “real” damage that has a devastating effect on people’s lives, material and personal, is an immediate result of the present crisis. But the global misery, homelessness and other socials disasters including predatory wars and the destruction of the earth’s environment are all products of the so-called free market system. How social production is organized is at the root of the problem.

Mandel recognizes this demon but he cannot look it in the face. He borrows from Marx without acknowledging it and keeps it hidden from the reader. He has to admit the problem but cannot take the cure. So Mandel calls on his colleagues to bolster his argument that the suffering is unavoidable in order to offer a band-aid for the cancer: “There is no guarantee that the next crisis won’t spread and turn in to the Big One”. he writes. Barry Eichengreen, a UC Berkeley economist agrees: “You don’t have a spare tire” So down this economic road they travel, a road they distinctly feel is littered with glass; and they have no spare.

Mandel’s colleague, former IMF economist Raghuram G Rajan says these economic crises “don’t create enough deterrence for imprudent behavior.” and calls for the government that the coupon clippers manage to regulate their own behavior. Mandel is a bit wary of this, after all, freedom is about the right to buy and sell. Freedom for the bourgeois is the freedom to own capital, to move it throughout the globe and with no restrictions. Freedom means the right of the owner of capital to seek unrestrained, the cheapest labor and the greatest return. Freedom means to hire and fire that labor at will with no interference form Unions or the state. Freedom means capital cannot be shackled.

Mandel is right, he knows in his gut that regulation has the potential to threaten the system itself, that there is a solution to the crises wreaked on society by the business cycle. The starving millions, in the former colonial world; the wars for markets, poor public education and health care in the mighty U.S.A, these tragedies are a necessary part of “…the self-equilibrating mechanism of the global economy.” of the market’s need to convert of every necessity and desire, indeed, every living thing, in to a commodity.

So he ends his commentary with a dire warning, “But to get rid of the financial crises completely would require far more regulation than is desirable or even possible.” He is right on both counts; it is not desirable and certainly not possible under capitalism. They will not orchestrate their own demise.

In response to the present crisis they will no doubt attempt to introduce some restraint, will try to curb some of the excesses that have infiltrated the financial markets. During a worse crisis, when the demise of the free market was knocking on the door, an astute and far-sighted bourgeois stepped to the plate to rescue capitalism with the feared, “socialistic” measures, regulation and government spending, Roosevelt’s regulation failed and some global destruction was in order. Mandel too may fear the “socialist” implications of regulation, as did the bourgeois economists of the great depression but as Broadus Mitchell pointed out in his work on the Great Depression:

“If those who had long made excuses for capitalist shortcomings were to be infected with collectivism, they preferred catching chicken pox from Keynes rather than the smallpox from Marx.” (3)

Things haven’t changed that much.

(1) The Communist Manifesto
(2) The Economy’s Safety Valve: Business Week, 10-22-07
(3) Broadus Mitchell: Depression decade

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