GUEST BLOG: Comrade Dave Brownz – The Fudget fiddles while Capitalism burns


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The NACTS budget is really a fudget for trying to hide the growing weakness of NZ’s neo-colonial economy behind a veil of spin. The Key regime hopes to promote business confidence in a climate of falling profits by ‘tax cuts’ made possible by cuts to public spending on the ‘social wage’ and by ‘dividends’ created by privatising state assets and plundering public resources such as water and fisheries.

The NACTS cannot even pretend that NZ’s GDP growth is based on a return to profits in the private sector when the basis for growth is $30 billion in handouts to rebuild Christchurch and billions more to farmers to intensify dairying. Moreover the coming crash of the world economy must bring about a massive destruction of value in fixed assets and commodities as well as workers living standards before profits can recover

So the coming crash has nothing to do with ‘wrong’ policies that have shifted wealth from production of value to unproductive consumption (wrongly labelled ‘financialisation’ today) for the benefit of the ‘banksters’ and rentiers. These are the necessary effects of a deeper underlying cause of crisis which has to do with the failure of capitalist production to produce sufficient profits to justify investment in new production. The failure of profits drives money away from productive investment to speculation in already existing assets – land, gold, or any bet on financial ‘derivatives’ which looks like holding their ‘value’.

Do not mistake the current panicked rush to buy company ‘bonds’ that earn more than negative interest rates or betting on commodity ‘futures’ as the causes of the current economic stagnation. These are mere symptoms of hot money speculating on the latest bubble. While neoclassical economists including Keynesians share the assumption that the market can return to equilibrium (i.e. stability) Marxists see all these signs as a vindication of Marx’s theory of crisis which predicts growing chaos and disequilibrium until the capitalist system breaks down and is replaced by a socialist system.

Marx on Classical Political Economy

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Marx developed his theory of crisis out of a critique of classical political economy of Smith and Ricardo. Capitalist growth resulted from the three ‘factors’ of the economy, land, labour and capital, each earning a ‘reward’ (rent, wages, profits) for its economic contribution. Each was seen as productive, because while labour was productive of value, both land and capital was necessary for its production.

Crises which interrupted the ‘equilibrium’ of these three ‘factors’ combining to ensure ‘fair shares’ resulted from ‘interference’ of one or more at the expense of the other(s). Since classical economics reflected the interests of capital, it was land and labour demanding excessive ‘shares’ that put pressure on the share of capital causing falling profits. Therefore, the classical explanation that crises of falling profits could be overcome by cutting the share of land (rent) and labour (wages) was no self-righting market solution, but actually a class struggle between the three classes over the share of value produced by wage labour.

Marx critiqued this theory as bourgeois ideology masking the actual social relations that determined the shares of these “revenue classes” based on the exploitation of wage labour. Wage labour could only be exploited because it was dispossessed of the ownership of land and capital allowing capitalists to treat labour-power as a commodity. The wage was the exchange value of the labour time necessary for labour-power to reproduce itself. But its use-value to the capitalist was that without land and capital, labour could be forced to work longer hours than necessary to create surplus-value out of which rent and profits could be expropriated. As proof he gave the example of Mr Peel who migrated to the Swan River (Western Australia) with money, machines and men. The men ‘shot through’ to the bush to carve out their own land as ‘independent’ owner-occupiers working for themselves, leaving him with two factors, land and capital, but not the vital one – labour-power. The result: Mr Peel could not become a capitalist and instead became a land agent and property speculator.

Marx continually warned that if the working class failed to break with bourgeois ideology it would continue to wage it’s “revenue class war” for ‘fair shares’ rather than overthrowing the ‘wage-system’ itself and with it the inherent inequality of capitalist production relations. (See Critique of the Gotha Program) But revolutionary consciousness did not fall from the sky. The rise of trades unions put limits on profits so that capitalists could not force up the rate of exploitation to overcome the TRPF caused by a relative rise in investment in machines that did not produce value. As a result surplus capital that could not be invested in production was exported from the imperialist countries to the colonial world to find cheap raw materials and labour as ‘counter-tendencies’ (CTs) to the TRPR.

By the early 20th century the failure of the market to prevent crises and restore equilibrium saw capitalism enter its full-on imperialist stage where capitalism relied increasingly on state backed global monopolies fusing productive and banking capital as ‘finance’ capital. This led to the rise of Labour and Social Democratic parties advocating that workers as the majority take control of the state to regulate the market and ensure ‘equal shares’ without the need to overthrow capitalism. It was no accident that these reformist parties emerging in the imperialist countries where a layer of privileged workers could benefit from the super-exploitation of colonial empires as reformist governments legislated for ‘fair shares’ in the colonial plunder. Lenin called these parties “social imperialist” because they paid for their ‘socialism’ a home by supporting imperialist super-exploitation abroad.

Enter Keynes

While accepting that capitalist social relations were here to stay, Keynes and his followers adapted neo-liberal economics to take advantage of the monopoly capitalist state. Keynes was responding to the capitalist transition from ‘competitive’ to ‘monopoly state’ capitalism. Far from interfering with market equilibrium and causing crises, capitalist states were now necessary to overcome crises. The market no longer determined prices based on market competition (or class struggle at the level of ‘revenue classes’) but monopolies based on giant global cartels backed by powerful imperialist states. By over-riding the market the state could theoretically prevent future crises and even turn war spending into public works!

Lenin as the leading Marxist of the day extrapolated Marx’s theory of crisis to explain that imperialism was necessary to overcome the limits of the national economy in countering the TRPF. The export of capital enabled firms to locate new sources of cheap resources and cheap labour to process them. As a result new sources of value from the colonies acted to counter the TRPF and postponing the demise of the capitalist system.

However imperialism could not overcome the inherent limits to capitalist growth. The ‘underdevelopment’ of the forces of production in the colonial and semi-colonial world based on the extraction of ‘absolute’ surplus value from cheap labour-power could not stop the decline in capitalism’s growth potential and re-emergence of the TRPF that would manifest itself in an increasingly destructive struggle between the imperialist powers to plunder the earth’s diminishing resources.

The destructive decline of global capitalism into world war and depression posed the need for socialist revolution for Lenin and Co. But Keynes and the social democrats (Fabians, Labourites and Stalinist economists like W.B. Sutch in NZ) regarded Bolshevism was a greater evil than unregulated capitalism. They proposed that the state reform the market by intervening to prevent crises and thus restore ‘fair shares’ along with capitalist stability.

Yet the recent history of the global economy since the Great Depression of the 1930s proves that it is not Keynesian policies of state intervention that overcame crisis but depression and world war. This is why Marxists refer to the ‘welfare’ state as the ‘warfare’ state. The post war boom was made possible by the massive destruction of old technology and workers living standards allowing the introduction of new technology increasing labour productivity (rate of exploitation) and restoring the conditions for profitable production, albeit temporarily. Thus the post-war boom was no more than a relatively brief period of real GDP growth before it once again faced the TRPF. By the late 1960s the boom gave way to stagflation as price inflation and wage inflation undermined real profits. Once more boosting consumption failed to restore investment in unprofitable production.

The proof that Keynesianism failed was recognised by the collapse of social democracy into neo-liberal economics marked by the destruction and restructuring of capital as the state attempted to restore the conditions for profitable production. In Aotearoa this was the basis of the “Rogernomic” counter-revolution by supply side monetarists who took over the Labour Party. In the US and Britain it was a similar counter-revolution the drove social democracy to the right opening the road to Reaganomics and Thatcherism then echoed by the Clinton and Blairite “third way” camp.

Vindicating Marx

The recent history of capitalism has proven that Marx was right. The capitalist state cannot stop crises because it cannot control investment. The state is not class neutral sitting above the class struggle but the instrument of capitalist class rule. The flaw in Keynes is that no matter how much money the state prints, it will not be invested in production unless the rate of profit is restored. But the capitalist class will not forego its control over capital and the working class will not to accept a massive attack on wages, conditions and rights.

The end of the post-war boom and onset of neo-liberal counter-revolution proved that only depression and war works to restore capitalist production. The neo-liberal counter-revolution did activate CTs to the TRPF. Massive accumulated social wealth in state assets were devalued and privatised. Unions were smashed and wages and conditions driven down. The privatisation of state assets and cuts in social spending reduced taxation on profits. The restoration of capitalism in Russia and China returned these former bureaucratic workers states to the world economy and created new sources of surplus-value that allowed the rest of the world to survive the 2008 crisis.

But none of these CTs was sufficient to overcome the general law of the imperialist epoch – that capitalism can no longer develop the forces of production in general and must become increasingly destructive to survive. The crisis of overproduction of capital due to the TRPF that began in the 1980s has yet to be resolved. The excess capital that could not be profitably reinvested despite the various CTs mentioned, were diverted into financial speculation in existing assets. The Asian Crisis of ’98, the Dotcom crisis of 2000 and the GFC of 2008 all demonstrate that once created commodities that are bought and sold may increase many times in price but never in value. Money invested in speculation on existing values does not produce value or profits only asset bubbles. To restore profits all these bubbles must be burst.

If we look at China today we see a virtual laboratory test of Marx vs Keynes. China kept the world economy afloat since 2008 as the world’s most efficient producer of commodities. But it is now facing its own TRPF and rather than restructure or destroy non-performing firms and driving down wages and conditions, the state is using Keynesian spending to boost consumption. But all this has done is to create a debt mountain in China well in excess of the global subprime debt of 2008. The massive accumulated global debt of multi trillions has yet to be destroyed and continues to mount. That is why we are facing a cataclysmic terminal crisis that combines a new global depression with world war, exacerbated by climate catastrophe. Either capitalism must die, or we, as workers, and as humans, face extinction.

Never before has the need for the world’s workers to unite behind a program for socialist revolution been more urgent. Never before has the need to read and understand, and then act on Marx been so urgent. Never before has the need for a new world party of socialist revolution based on the method and program of the 1938 Transitional Program become so urgent. The cry of revolutionaries of “Socialism or death!” now becomes common sense.



Comrade Dave Brownz is TDBs Guest Marxist


  1. Thanks Dave,

    A great critique of this paper thin economic policy that Key/Joyce/English have composed using all our media sources to sell, us a dead rat once or a few times before such as when they tried as they presented the disaster known as TTPA now pronounced dead on arrival.

    So we consider this economic model will be dead before the end of this year also as the global economy heads for another deep recession/depression worse than the last 11yr one we had never even left!!!!

    • Cheap oil helped counter the return of the TRPF in the post war boom but not by itself. Today oil is very cheap yet trillions in excess capital has to be destroyed in a crash (as in the devaluation of the value of fracking assets) before cheap oil makes a return to profitable production possible. We have to turn a crash into a revolution to survive.

  2. Dave, the first paragraph I was with you all the way until the last line “Marxists see all these signs as a vindication of Marx’s theory of crisis which predicts growing chaos and disequilibrium until the capitalist system breaks down and is replaced by a socialist system.”.

    It was about there when you went into the classic Marxist interpretation of capitalism that it began to wander. If as Marx says there is a crisis of capitalism and from that arises a socialist state then why after 200 years of industrial capitalism with multiple crises has this not occurred in an industrialized society? Now don’t get me wrong, I am no particular fan of capitalism and Marxist analysis of the cause of crisis seems reasonably plausible given the evidence, however the predicted outcome never seems to arrive. The beast never quite dies, in fact it seems very good at doing a Lazarus.

    I see you got the sectarian dig in (Bill Sutch being a Stalinist…sort of dubious but never let a good dig go by…..), so what I am reading appears to me to be a theological argument that brooks no parallel theories nor empirically contrary evidence. I’m going to suggest to you that the beast will not be slain according to the theory, and that the beast is fantastic at healing self inflicted wounds. New methods of killing it are required, and Marx is not one of them if you go by the record to date.

    The Marxist revolution has no missed the bus. I do have faith that the current corporatist state capital nexus aka fascism that dominates the worlds economy today is not sustainable, but neither is a statist socialist model. For much the same reason. Marx, Hobbes, Smith, Keynes et al were observers of huge growth in industrialisation that worked upon the growth imperative. No growth and the industrial system cannot sustain debts or profits. This is entirely based upon resource availability and in particular energy comsumption. We are in a finite world, ergo growth must at some point end ergo the system will fail. Lovely as a socialist state would be to replace this it is not going to be an economy that produces growth. I have read enough Marx to know that the concept of permanently static and declining economies were ever considered.

    Might I suggest that your considerable knowledge of Marxist method might not be entirely wasted if you were to utilise it as a tool to bring forward new theories of post peak resource post industrial economics and society. These are going to be far more necessary, and few are working on it. On the plus side it is the one huge blind spot in the beasts armour.

    • Nick you missed climate catastrophe. That sets limits to future society way beyond resource depletion. If socialism has not yet succeeded then today it must succeed or we are all dead. Socialism is not a fixed model as in “the socialist state” held up as an impossible ideal/evil. It is about making human survival possible. Capitalism is in terminal crisis. We have to replace it to allocate scarce resources sustainably on the basis of a planned economy serving our basic needs. How that arises and what sorts of institutions are necessary to meet those objectives will be determined by the working majority, democratically, and collectively. In my book, that is socialism.

      • I can appreciate that socialism may be a valid response but it will be very far from a Marxist planned economy. A more likely scenario is the long term sustainable economy that lasted up until the industrial era i.e one that ran within a solar energy budget with mainly local resources. Id contend that it is cheap concentrated energy that enables centralised planned economies. Without that energy relationship to production will still be a valid concept but may have more immediate and intimate inclusions. The historic dialectic will be shot.

        • Since the time of the Russian Revolution there has been a big debate about the potential of socialist planning vs the market. Today it is obvious that the market has failed because the allocation of resources by capital has led to the destruction of nature including the working class.

          Genuine socialism means taking advantage of the most advanced technology developed under capitalism to allow the use of energy from the sun to be harnessed to a production system which plans production to meet the needs of all. This can overcome scarcity and prevent the re-emergence of a new ruling class of winners take all.

          The caricature of Stalin’s centralised planning was opposed at time by Trotsky because it was dictated from above to allow the parasitic bureaucracy to live off the labour of workers. Bureaucratic planning failed because it was not run by workers democracy. It had nothing to do with socialism let alone communism.

          So in summary the socialist centralisation we need to survive today would be based not on centralised authority dictating the allocation of resources, but the coordination of democratic decisions taken locally, regionally and nationally, to allocate necessary labour to production on the basis of agreed priorities.

          • Sounds good Dave except it won’t happen for the same reason Stalin’s state planning failed. Even if localised it requires beaurocracy and coercion. It never ceases to amaze me that Trots dismiss Stalin as an apostate (he was a very committed Leninist Marxist intellectual: that’s what he wanted power for), and deny Trotsky’s role in creating and enforcing the Leninist state. At heart he was as cruelly calculating and responsible as Stalin for the resultant death tolls. More importantly both would have run a system based upon extreme coercion which is precisely why it failed and if implemented again would fail again.

            • Hey Dave, I am about to ban myself voluntarily because I find this site somewhat like the RWNJ sites, except its LWNJs. I appreciate that we do not agree but your willingness to engage is somewhat refreshing. If you ever want a really good argument about why you are right and Im wrong get my email address from the moderators.

  3. We could follow Trostsky in the fashion that Chavez did. THIS time it will work. We’ll need to stock up on body bags first though, Trotskys don’t really have a place for those who disagree.

    Seriously though, trotting out Trotsky from 1938 is the path to victory for the left? Couldn’t figure out how to get Trotter in that sentence.

    • “We could follow Trostsky in the fashion that Chavez did”

      Gawd, the old Charvez argument. Did Whaleoil teach you that one?
      Go look at the gini coefficient and look at Venezuela’s levels of inequality. They are more unequal than us. Charvez nationalised some oil and gave some money to the poor. If you think that was socialism, then you need to do some reading. Maybe it was the levels of equality that Bernie Sander’s is promoting, and therefore his definition of socialism. Or similar to a Nordic welfare state.

      What Charvez achieved in Venezuela is nothing close to what Marx proposed. Fox News is unreliable. Red-baiting capitalist utopians make me laugh. Thanks for the lolz. Try reading.

      • “Charvez”?

        You sure it’s me that needs to do the reading?

        So when socialists fail, it’s because they weren’t socialist enough?

        “Nationalised some oil”

        You really have no idea do you.

        • 10 points to you for spotting a typo, but a pity that’s half your argument.

          Chavismo was and is little different from what NZ, UK etc did after WWII. You call that socialism, most people who read call it social democracy.

          The oil prices fell. Same thing happened in the 80s and 90s under Venezuela’s market friendly leaders. The problem with Chavismo is it has been dependent on oil, just like Venezula was when they bowed down to the Washington consensus and rotted in poverty.

          “You really have no idea do you.”

          Please enlighten me then. Give me a book or a reading, or at least try to construct an argument. I dare you. Let me have some fun.

          Fox News inspired memes like “So when socialists fail, it’s because they weren’t socialist enough?” are boring. You can do better that parrot Bill O’Reilly. Or can’t you?

  4. These mini-crises like the one in 07/08 are a capitalist’s wet dream. I’ve got my fingers crossed for a massive depression, one that would make the Great Depression look like ‘economic headwinds’. When there’s a complete breakdown, then we can have some sort of revolution.

    Most people I know have nothing to lose, except perhaps our chains

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