Signs of growth in the 'advance economies
Internationa/ Viewpoint #266 May 1995
Introduced by Maxime Durand The bourgeoisie has had some sucesses recently — but not enough to assure a new period of60s-style expansion Stagnant salary growth seems inviersal. So does the falling share of salaries in national incom In the United States real salaries have been blocked since the early 70s, even though productivity began to increase again in the 80s. In France the current crisis dates from the austerity programme of the 1983 Communist-Socialist government. To understand why current growth is can't last, look at the behaviour of profits. The falling share of salaries in national income can be considered as an increase in the rate of exploitation —the share of progits in national income is rising. But they are still insufficient. Subject to the constant pressure of global competition, enterprises are pushed to introduce new methods of production and modify their products. Mechanisation is going strong. The composition of capital is increasing, overprodution is chronic, and new capacity is not being amortisized - if we calculate an underlying rate of profit on this basis, profits are simply too low to pull the capitalists out of the recession. Austerity in wages policy is good for the profitability of capital, but has the side-ettect of supressing the market demand. Growing public budget deficits are blocking the relaunch of the economy in many countries. By reducing the tax on capital in many different ways, neo-liberal regimes have cut off a source of revenue, without, in reality, being able to cut their expendture. Some radical economists see the problem as one of a powerful finance capital, which discourages capital accumilation, by constantly offering more lucrative home for funds. We disagree - the rate of profit in banking and productive sectors tends to equalise. Left economists should stop 16 imagining that there is an independent financial sector, where money is free to make money completely outside the productive cycle of capital. Governments have adopted restrictive policies to keep wage costs low, to maximise exports. The result is an even stronger recession. This is what we saw in the early 1990s. The rate of profit is an indicator of the double nature of capital — not just producing surplus value but realising it. The insufficient strengthening of protit rates (insufficient, at least, to teed a new period of growth) could be the result of a regressive contradiction -wage austerity and sharpening competition are reinforcing each other, inextricably mixing demand-side pressures and supply-side pressures. As Ernest Mandel argues, we must think of extended periods of growth or recession as long waves - not long cycles. There is no automatic process of transition from a long wave of recession to a long wave of growth. The conditions which affect this transition are, for the most part, not strictly economic. They certainly cannot be reduced to a simple re-establishment of profit rates. The economic universe is an environment in which capitalism struggles to manage and make compatible its various dynamics - which are, in their essence, incompatible. Each crisis is an open question - will they be able to put things back together? How! And at what price? The present situation shows the difficulties of the capitalist system quite clearly. We can say today that the current phenomenon of growth cannot become a stable, extended period. It will be weak, contradictory and uncertain. Such is the essence of the period we live in. The health of the capitalist system is improving, but that doesn't mean the system is any more capable of solving fundamental social problems like unemployment, and of meeting the needs of humanity. *
In 1994 the Western economies came out of the recession of the early 1990s. But the future is far from calm. On the one hand, the same fundamental problems plague the capitalist system - we are still not out of the 'long wave' of recession. On the other hand, the current upturn is still very weak - most of the elements which make up 'demand' are somehow hindered, and cannot yet become the motor of the economy which the capitalists hope for. by Jesus Albarracin
AFTER A CYCLICAL recession, you can expect a cyclical recovery. The industrialised economies started to grow again in 1994, but in a weaker, slower and more contradictory way than during their previous brief reprise in the 1980s. Productivity and capital accumulation have been increasing more slowly since the 1970s than in previous decades, despite the severe readjustment of the labour force, and the massive introduction of new technologies. This technology has made the capital accumulation and labour saving processes even more intense, which illustrates how hard it is to create the structural conditions for a new period of growth. The advanced capitalist economies seem cursed - they have massive unemployment, much worse working conditions than 20 years ago, they are replacing men and women by machines, and yet they can't increase productivity. The contradiction is quite simple. Capitalists are taking all these measures to increase productivity, to encourage growth. But it is clear that stable, constant growth would help increase productivity much more than all these limited 'starter' measures.
The exact strategy undertaken varies from one imperialist region to another. In the European Union, the obsessive search for competitiveness and relatively
INFLATIO
International Viewpoint #266 May 1995 razy system?
orthodox neo-liberal policies have provoked a virulent phenomenon — growth without job creation. EU capital is now stronger when it competes in international markets, but production in the EU is growing very slowly, and unemployment is higher than the other imperialist regions. In comparison, productivity is growing slightly faster in the export-oriented Japanese economy, alongside a modest but steady growth in production. As a result, some jobs are being created, and the country still has lower unemployment rates than the other blocs. Productivity in the United States is rising slowest of all, and U.S. companies face increasing competitive pressure from their EU and Japanese counterparts. Nowhere is productivity growing by more than 2% per year — a much lower rate than that achieved in the boom which followed the second world war.
STAG
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EPARGNE
Salaries
In an economic crisis, salaries have to be reduced so that profits can be Clockwise: Inflation, investment, consumption, savings, gold & stag-flation increased. It is no surprise that real salaries have risen more slowly since the early 1980s than productivity gains would have allowed. In recent years, wages even increased more slowly than the increase in production of goods and services. In the recession of the early 1990s, private consumption fell even further than during the 1981-82 recession. And the upturn in consumption over the last 18 months is much weaker than that experienced in the early 1980s. This weakening of the buying-power of the salaried classes represents a historical shift in the structure of "effective demand" -the total buying power in a capitalist economy. As a result, private consumption is no longer strong enough to pull the economy out of recession and act as the motor of growth.
This illustrates the fact that wages in capitalism have a contradictory role. If they go up too much, there will be less profit for the employer. And if they do not rise sufficiently, there will not be enough demand for the goods and services produced in the economy. Over the last decade, neo-liberal governments have persued supply-side policies helping the capitalists push down wages, so as to reduce the cost of goods and services on offer) to the point that they have neglected the role of salaries as part of the demand for these same products. This weakness of private consumption would not be so important if the other elements of effective demand - state spending, exports and investment - were growing fast enough to compensate. But they are not. Public spending
The rate of increase of state spending has been slower and slower throughout this last period of crisis. This was, after all, one of the main policies of every neoliberal administration. Paradoxically, the state debt of the advanced capitalist countries has increased considerably during the same period. Taking the OECD countries as a whole, gross state debt grew from 20% of Gross Domestic Product in 1990 to over 42% in 1994. We can
PLANTU identify the roots of this explosion in a range of changes in the process of production, and a series of state initiatives to reduce taxation of corporate profits and high personal salaries. All this is compounded by the generalised increase in interest rates.
Managing this debt has become one of the major problems of many capitalist states. So not only did they implement harsh fiscal policies during the recession of the early 1990, but they are determined to maintain these restrictions on credit and spending during the current upturn. Investment
During the 1980s capitalists worldwide faced not just declining rates of profit and growth, but a consistent long term increase in real interest rates. Interest rates have come down in the last few years, but in the European Union and the United States they are still around 4.5%, which is markedly higher than in the period of
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