Yet another great Depression

Occupy Wall Street : Perspectives
Dipanjan Rai Chaudhuri

Capitalism, after more than a quarter century of good winds, has definitely entered the doldrums since 2007. The subprime crisis of the USA led to a general crisis of credit, followed by disastrous reneging of sovereign debt in Europe which didn't leave American banks unscathed. Even a bystander like India has had to worry about balance of payments, as foreign portfolio investment is pulled out to stop cracks elsewhere. The announcement that history has ended with the crowning of a crisis-less capitalism has had to be postponed again and again like a bad soap on TV.

Let us try to probe the crisis from labour's point of view. If we draw graphs of labour productivity and real wages against time, in the USA, we see, from 1947-1971, the two increase at almost the same rate. But after this, real wages fall away from productivity.

Orley Ashenfelter of Princeton, in an amusingly simple yet clever calculation followed MacDonald employees in time and place and found the real wage rate (wages per hour divided by price of a well-chosen good) to decrease in the US by 7% between 2000 and 2007, and a further 9% between 2007 and 2011, although both the nominal wage rate and the price of the particular, popular good increased. Between 2000 and 2007, Canada showed the same trend, while Japan saw little difference in the real wage rate. Between 2007 and 2011, Canada, Japan, western Europe showed a decrease in the real wage rates like the US. Assuming the number of hours of work per day or week remained practically the same, the decrease indicated real wages were falling absolutely all through the crisis years 2007-2011, and falling with respect to productivity from long before the crisis. You don't have to be an economist to foretell the effect of such a decrease in real wage rates in a time of increasing productivity. : in the industrial countries supply of goods increased faster than the demand, the typical crisis of overproduction underlined by Marx. Now, to stimulate demand, credit is made too easy, and the subprime crisis starts.

Productivity must be increased by technical improvements, and by decreasing the worker strength. The last is an imperative because the wage bill has also to be reduced to limit market prices and ensure competitive power. The employment of casual and contract labourers also decreases the wage bill. Fall in the number of workers inflates the reserve army of the unemployed and half-employed and helps build pressure on permanent workers to obey the management, 'or else!'

What about rate of profit? In Sraffa-type two department models of the economy, an increase in the technical composition of capital leads to Okishio's theorem which guarantees a rising rate of profit in static equilibrium, which is supposed to put paid to Marx's law of the falling rate of profit, hence the neo-classical claim that Marx's critique of capitalism is wrong. However, Andrew Kliman and Alan Freeman and others have shown that if one tried to make the Sraffa-Okishio premises more realistic, for example, by heretically (but rationally) assuming that once the technical composition of capital has proved to be able to increase labour productivity and the rate of profit, each capitalist would continue to increase technical composition at a rate higher than the rate of increase of productivity. This will lead to a peaking of employment and, after this, will follow increasing unemployment which is equivalent to an overall falling rate of profit in terms of value.

One gets a picture of increasing technical innovation(indigenously generated or imported), increasing investment, increasing constant capital, decreasing employment, falling real wages, a scenario with which people are familiar in India and China (for some rough and ready empirical verification, see this author's books on Vranto Shilpayan. For a theoretical framework a must read is 'Development with Dignity' by Amit Bhaduri).

The Union and the states of India refuse to recognise that next to democracy, unemployment is the single major problem of the hard-working people of India, and this can't even be alleviated, leave alone solved by big investments by big capital. M Husson has argued that the inclusion of the profits of financial companies in the model, the internationalisation of capital, the effect of productivity in cheapening machines and other factors take away the guarantee of a falling rate, but leave a secular tendency of decline.
The debate continues. Let us have a quick look at the facts (acknowledgement: Michael Roberts).

If one looks at the USA, the economy was rescued from a sharp fall in the rate of profit in the Depression by war preparations and the rate rose from 14% in 1929 to 34% in 1944 when the war just started to peter out. There followed an almost 40 year period of falling rates with a short rise around 1965 (beginning of the proxy wars for Arab oil). The minimum was 19 % in 1983. It rose again as the oil wars against Iraq came into the picture and made-easy credit at home fuelled consumption-led growth, but started to fall again as the millennium passed to bring a second Great Depression, and the prediction is 18% in 2013. (We have quoted figures for current prices. If the figure is readeable, there will be seen a fainter upper curve with the same tendencies, calculated at the price at the time of buying.) There are a lot of cycles (people claim to have identified a 32-year cycle), but the message is clear. The capitalists try different stimulants like a world war, limited wars and easy credit spiralling into subprime lending. But every time the rate of profit crashes back to the slowly falling background rate. Well, it is difficult to walk out of the long shadow cast by the old man!

The 99% Occupy Wall Street
This is the background out of which erupted Occupy Wall Street. It started with few hundreds of young and very old men, mainly white and mainly middle class. There was a presence of vintage anarchists, but not a preponderance. The numbers swelled to thousands and the composition changed. A Fordham University study in mid-October(2011) at Zuccotti Park found 68% white and 27% black, latino or asian. 68% is more than the proportion of whites in New York, but close to the national proportion. A Baruch College study , in late October, found one-third of the occupiers were above 30, half were employed full-time, and one-third were unemployed. 70% called themselves Independents, 2.4% Republican and surprise! surprise 27.3% Democrat.

In fact, no surprise. Obama Democrats tried their best to dominate Occupy, as did others, exactly the reason why the occupiers refused to elect leaders or even representatives, making do with moderators and rotating spokesmen of different groups. The police wouldn't have allowed public address systems and, so, the occupiers set up human microphone relays so that all could participate in deliberations. The direct democracy practised was no anarchist fad, it sprang into existence due to the dire need to resist hijack by well-organised parties and prevent the rise of Caesars and Napoleons by training a multitude of effective foremen.

The spontaneous participation of workers and the tactics of the Democrat Party led to an endorsement of the Occupy movement by big unions like AFL-CIO and the Transport Workers' Union, after the October 5 arrest of 700 participants of an "illegal" procession down Brooklyn bridge.

In Oakland the repression was severe and the response proportionate. After spates of brutal assault by the police even on aged activists, a general strike was called on November 2. 20,000 people are reported to have come out on the streets. 2000 students joined striking workers. Banks and schools were shut and the port was inactive for a couple of hours. Rank and file workers of powerful central unions kept up wild cat strikes throughout the day in different parts of the port.

It is to be noted that each section of the workers was talking not about its own narrow demands but about demands like control over corporates and banks, employment-generating measures and measures to narrow the gap in income between the 1% and the 99%, rejection of 'austerity' measures, aimed at forcing the workers to pay for the crisis, which are demands affecting all workers and low-income people. Not only this. Participation in the Occupy movement exposed the workers to its political content centred around calls for abolition of capitalism.

The American workers are stirring. This is a very heartening development. Elsewhere, too, notably in Spain and Greece, the people have given notice that the burden of the crisis cannot be transferred to the shoulders of the workers, and rejected "austerity" proposals like cuts and moratoria in recruitment, wages, pensions, grants, subsidies and a stalling of government initiative and expenditure in public works and local self-government.

The French workers, heroes of many struggles, may be said to have initiated the current rumblings against shift of the burden of crisis to the workers. In 2010, there was a nation-wide fight, mainly of the working people against the Sarcozy government's proposal to raise the age of retirement from 60-62.

One must also remember the multitude of students who practically occupied central London for a day to protest against cuts in grants and scholarships (2010).

The Indian Scene
The workers of the world have started to resist the capitalists in their blatant attempts to transfer on to the broad shoulders of the workers the burden of the crisis of capitalism. The response of the working class of India is still disappointing. The organised sector is dominated by collaborationist central trade union organisations, while the unorganised sector, ruthlessly exploited, remains preoccupied with parity vis a vis full-time, permanent staff. The peasant origin of much of the class is still important, the permanent home is in the village and wages are posted back, often to buy land. The treacherous TU leaders, the management and the nexus between them are quite exposed. But the workers have not learnt to watch their leaders and rank and file initiative is rare. Class consciousness is not well-developed.

Recently the workers of the Maruti-Suzuki car factory at Manesar, Haryana, had a head-on collision with the management. An executive officer had insulted a worker, and the workers demanded amends. The management remained rigid and in the ensuing clashes several people were injured and the General Manager (HR) killed. The demonstrating workers numbered 500, and the management is inducting new workers in their place. Arrests and intimidation vitiate the atmosphere. 100 workers have already been arrested including union office bearers. It may be remembered that in 2011 there was first all -day and, then, a three-month-old strike on the issue of forming a new union with extra-mural affiliations. Later, it transpired that the leaders were stooges of the management, who left the factory after collecting hefty sums from the management. The management has yet to implement the agreement on the basis of which the strike was lifted. Instead, it called for "good conduct" undertakings to be signed before resuming work.

The Maruti-Suzuki factory is a good example of a militant workforce kept confused by leaders controlled by the management, and forced into personal attacks on representatives of capital instead of uniting themselves and others against capital and its political rule.
The backwardness and lack of political preparation of the Indian working class is preventing the development of an effective people's movement for democracy and self-government. The absence of the class in the leadership of the peasants' struggle in central and eastern India is felt acutely, as old mistakes like dependence on a line of individual killing of political opponents as spies, and new mistakes like militarism prevent the expansion and deepening of a political struggle built through heroic sacrifices of the people.

Nearer home little Occupy Kolkata was started by students. Individuals from the Left have come as visitors but the movement has stopped short of contacting workers or holding programmes in working class districts.

Bureau of Labour Statistics USA BLS
(On the ordinate, indices of productivity and real wages are measured on a log scale from 4.0 to 6.4.)

Frontier
Vol. 45, No. 14 - 17, Oct 14 - Nov 10 2012

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