Stagflation is the necessary consequence of the failure of capitalism to invest in the production of value. This leaves surplus money capital in circulation which engages in speculation for existing assets driving up prices. But the bosses refuse to take the blame for inflation and blame rising wages. Marxism proves that chronic stagflation is a symptom of terminal capitalist decline. We argue here that the way to defeat stagflation is to socialise the means of production, distribution and exchange. Once we realise it is the failure of capitalism to extract value from workers and no fault of the workers, we can concentrate on what must be done to build a socialist society.
The political challenge to Reserve Bank Governor, Adrian Orr, for straying too far from orthodox monetary policy and printing too much free money at the Reserve Bank and causing stagflation, doesn’t blame property owners who were the beneficiaries of $1 Trillion of state handouts over the last 3 years.
However, this apparent hypocrisy is rooted in a deeper structural contradiction. That is the failure of capital to invest in production to supply enough to meet demand. In other words, the charge that too much money is chasing too few goods fails to mention that capitalists diverted their free money into speculation because production of goods and services was not profitable.
This is why bosses took their free money and ran to the bank or stock exchange, buying their own shares and even more property for ‘capital gain’ instead of investing it in production for profit. They had no confidence that they could extract surplus value in an over-regulated labour market.
So, the problem is not the amount of money in circulation stimulating too much demand which leads to wages pushing up prices. It is the decision not to invest money capital to produce a supply of goods and services to match the increased money supply, that pushes up prices.
The question that has to be asked is why capitalists could not make a profit by investing in production. The response of the employers is to blame rising wages, not falling supply, and to call for higher interest rates to slow the increase in the money supply, and at the same time flood the labour market with migrant workers to drive down wages.
Neo-libs, liberals and radicals
The neo-lib National Party response is to raise interest rates to wind back the money supply and dampen cost/price inflation. Opening the labour market to immigrant workers will drive down wage costs. Slashing spending on climate change targets and total state spending will allow tax cuts. Cost cutting will then stimulate investment in production and confidence in restoring the rate of profit.
The Liberal Labour/Green response tweeks a few policy settings to protect wages and to push for rising labour productivity to cut labour costs. It also adds some criteria to the Reserve Bank inflation targets such as ‘full employment’ and ‘wellbeing’. However, the Labour Party remains hostage to its neo-liberal past and will not tax the rich nor use the state to directly invest in delivering labour productivity, climate reform and social wellbeing.
The radical response is to go beyond the liberals to the logical extreme of Fabian state socialism. Martyn Bradbury and Mike Treen for example, on The Daily Blog, raise demands that include full employment, free housing, transport and education as well as a ‘green new deal’. To realise such a program, a Labour/Green/Māori party government would have to nationalise production, distribution and exchange, and pay for it by printing money backed by production of goods and services to meet a fleshed-out socialist wellbeing standard.
Covid lessons in dying capitalism
Let’s see why Covid shows us why all the above Lib/Lab/Rad bourgeois-type solutions are unable to deal with stagflation. Briefly they have no program to eliminate the Law of the Tendency of the Rate of Profit to Fall (TRPF), the fundamental contradiction of capital that dictates state economic policy.
During Covid, the government demonstrated that it is the ‘organising committee’ of the ruling class. It acted as guarantor of the system and put the capitalist class on corporate welfare. It replaced lost profits and wages to keep plant and machinery and the labour force in a state of readiness for the return to business-extracting surplus value for profit. The result, as we have seen, was a massive state transfer of value from worker to employers and landlords.
Second, it exposed the fact that, rather than investing these handouts in more advanced plant and machinery to increase labour productivity, they went into speculation in existing assets such as land and shares. Wage subsidies, when passed on, kept workers on basic rations, and when not passed on, made windfall profits. The lesson is that the neo-colonial state cannot direct the ruling class to use its corporate handouts to increase labour productivity, leaving NZ is stuck as a low wage, underclass-Pacific-reserve pool-of-labour-semi-colonial regime.
Third, capitalists using state handouts for speculative gains demonstrate that ‘financialization’ is not a mere deviation from productive investment that can be corrected by the right policy. Rather, it is the fusion of banking and industrial capital – the essence of 20th century capitalism – experiencing the breakdown of the productive system as stagflation. At the most basic level it shows that capitalism now faces the ultimate contradiction; it cannot produce profits to save itself without destroying itself.
The final lesson is, that capitalism failing to invest in labour productivity when provided with handouts, demonstrates that even with slave wages, pandemics interrupt labour flows and cannot cut production costs sufficiently to counter the LTRPF. At this point chronic stagflation becomes terminal as permanent recession and slump. The means of production and labour-power necessary for production face destruction as global warming leading to nature’s blowbacks which then destroy the conditions for future human survival.
As we have constantly warned for years, Global capitalism is facing a crisis of long-term falling profits because of the terminal collapse of the conditions that allow it to make a profit. It is disrupted by worsening crises, pandemics, climate change and inter-imperialist wars over which capitalists have little control. In reality capitalism is failing as a system because it is destroying the material base in nature it needs for profitable growth.
End-Stage Capitalism: Solutions
Neoliberal solutions, fossil fuels and slave labour, are exhausted, bourgeois regimes become increasingly authoritarian and reactionary. Calling for political reforms do no more than keep alive illusions in bourgeois democracy when end-stage capitalism has to be ended and replaced by a workers’ government and workers’ state.
So when Mike Treen speaks of the breakdown of capitalism and yet calls for a Green New Deal, he is saying to workers that capitalism has not reached its end stage and can be reformed to stop climate collapse.
“A left-wing policy that protects working people is theoretically possible without unleashing inflation. But we need a different type of government that prioritises working people and the planet over private profit.”
Similarly, Michael Roberts still seems to think that capitalism plagued by stagflation can come back from yet another slump only three years since the last slump.
“That means the major economies could enter a period of stagflation, not seen since the late 1970s, where inflation rates stay high, but output stagnates. Indeed, it could be worse than that. The risk of an outright global slump is rising. If central banks continue to hike their policy rates, all that will do is increase of cost of borrowing for consumers and companies, driving weaker companies into bankruptcies and suppressing demand across the board. Sure, that may finally reduce inflation but only through a slump.”
We say that chronic stagflation is symptomatic of terminal crisis. Profits can be made only if certain conditions are met. These conditions cannot survive when capitalism is destroying its own conditions of existence, land, labour and capital. That is why the crisis of capital is terminal and we are living through end stage capitalism.
We need an international revolutionary workers’ party and a workers’ program that takes the necessary steps to take power and install a workers’ government. Such a government would socialise the means of production, distribution, communications and exchange, to plan the economy to produce for the need of the working majority, and to build the future commune where classes and the state would cease to exist.
Dave Brownz is TDBs Guest Marxist, because every left wing blog should have a guest Marxist.
You will not get a single main stream economist talking bout TRPF and how capitalism actually operates. Of course an international, and Aotearoa NZ socialist revolution is necessary and desirable in my view too. But it remains utopian, and mere projection, if current conditions are not taken into account.
What is the balance of class forces in NZ right now? That is what Treen and Bradbury address with their proposed reforms. Something that even non revolutionaries can grasp and campaign on in the here and now.
–The Wellington occupiers were a rabble politically really, with some very unsavoury backers. Unreliable and likely an anti working class section in some circumstances.
–NZCTU is class collaborationist, though there are some fighting unions and working class members out there and in action right now with strikes and pickets.
–There are hundreds of thousands of self employed, SMEs, and small business in this country. Exploited by the banks but aspirational capitalists nonetheless.
–There are thousands of unpaid workers in family businesses
–There is an army of reactionary boomers ready to back the cops and fight for their property values.
NZ is not ripe for revolution just yet…arm the workers now and they would likely be coming for us lefties, not Baldrick Luxon and the 1%ers. But something obviously has to be done, and it is fair enough to call for revolution as the earth turns to chaos with Climate Disaster
• Restore a fighting class left Central Labour Organisation
• Rebuild a marxist revolutionary section capable of leading struggle at street, suburb, town, and National level
(there are individual comrades who keep on trucking where ever they are in life)
• Build unity not division between Tauiwi and Māori
• Always oppose fascists and white supremacists
• Join or start a union if you are a paid worker
• Be politically active in the community rather than just arguing on line
There will come a day when ACT members and lumpen elements will go full Trump, Joe Carolan from UNITE got hit with a bottle at SkyCity after a recent picket had disbanded for the night, and some lumpen cowards moved in.
The counter to the nutters and right and fascists is renewed working class organisation.
Tiger…Mate..It’s over. The revolution is never going happen. The young people working in the low paid jobs have no idea what you are talking about. They are into TicTok, V and E energy drinks and Maccas…..They have been dumbed down by a clever process called the free market. The free market needs a huge amount of dumb people to survive.Preferably young and gullible and with backup from slave labour from overseas. The educated young who have apparently had their future taken away from them , will move on through life and leave the , stopping the coal train , protesting behind them and will move into the overhead class and buy entry level restored villa’s and when the bills come in with having kiddies they will understand the bottom line of a salary package. An electric car will be purchased and solar panels will be installed on the roof , to be green and can be on display for when friends come around for wine and cheese afternoons. The free market has won Tiger. Sadly your values are now consigned to the past as are my values of a New Zealand pre Douglas , Richardson. I’ve excepted what’s happened to New Zealand..I’m not happy with it , and I will tutt tutt like a green MP flying around the world for a carbon reduction meeting. The left has been replaced with genitalia fashion and overheads trying to out do each other with bizarre touchy-feely issues…of course it’s all financed by rate payers and taxpayers in the extorted manner they have become accustomed too…But Martyn and all you lefties on this site…keep up the good work but it’s every man and woman , and the folk who are not sure , for themselves now….Good luck with the revolution….
Political struggle is non linear, but it never ceases in a class society. Sure, neo liberal hegemony has helped create dedicated consumers, expert gamers and go with the flow attitudes, but Uber is currently being challenged in Court by Etu & First Unions over the status of drivers, zero hours was won, pay equity for carers , and many more advances.
Defeatism is not an option for me-stick it to the “man”-till the people win.
Most people are selfish, it would not matter what you changed those that think they are more equal than others would find a way to rout the system to their benefit. Good luck with any attempt to change human nature although history would suggest it is not going to happen.
Not necessarily. More revenue doesn’t mean more liquidity. It just means more revenue. If expenses are growing more than revenue, particularly with high operating leverage/borrowing, then they will lose money, not make it.
companies steal huge profits
shareholders receive dividends
they invest further and do not spend
maybe their investments are used to fund the debt spiral
money is actually drained from the economy and never touches the sides
Money is actually the expression of wealth created by the physical and intellectual labour of workers utilising the world’s resources in producing stuff and services. The capitalist model allows private ownership, control, and then appropriation of the results. This is enforced by armed force, surveillance, and ideological dominance–the state superstructure.
Of course Finance Capital adds another level of craziness and exploitation with stocks, futures, banking and bit coin etc.–where wealth does not even pretend to have a real world value. The Aussie banks export billions per year from NZ mortgage holders and small business people.
Dave’s point is pretty obvious–do we just ignore this rotten system as the planet becomes a burnt out dust bowl or do we do something about it and send the 1%ers packing before it is too late?
Elon Musk and his mates are not into space travel for amusement–they want an escape option!
I really think the premise discussed about “late stage capitalism” are really just nonsense. Despite Marxists calling capitalism terminal it always revives. Why? Because it is not a system, a theoretical object. It is a reflection of human desire and ambition and other acquisitive traits. Kill off today’s version, there it will rise.
Maybe a more useful way to consider the current crisis is to regard it as a reflection of energy availability. It is in decline, which is fine until you consider that every transaction involves energy consumption and cost. Have a read of https://surplusenergyeconomics.wordpress.com/ for a primer.
nick, capitalism revives…through things like roosevelts new deal and the UK post ww2 reforms not any action by business or the invisible hand of the market (whatever the fuck that is supposed to mean) capitalism in crisis is always always always saved by intervention…
G, what you say may be institutionally true but its not what I’m referring to. Wipe out everything and humans will make, harvest, trade, improve, profit. The urge is innate, as is the urge to regulate, hence inevitable power structures.
nick, and that will support what level of population? how do you personally see ‘culling the herd’ and by what method to achive your bucolic sunny uplands…pray tell.
I agree the planet has far too many humans but how do you fix that?
Gagarin, turn the thinking around, Im not talking systems, economics, ideology here. Im saying that capitalism grows out of inherent human traits, as does socialism.
if there was a zombie apocalypse and five people survived on an island then Im sure those traits would emerge. “Late stage capitalism” would just be re-emergent capitalism. Ditto, somebody would come up with Marxist equivalents.
How many would that support? Never postulated anything here, but without fossil energy its back to horse and plough etc, work that out.
Think a compulsory course in fundamental economics is called for.
do enlighten us poor troglodytes bob the last..
Sorry gagarin but the troglodytes reference puts me off.
Cannot enlighten those who don’t have the capacity to be enlightened.
you mean you can’t..be honest with your own money bob.
I’ll give you a ‘starter for 10’ explain the benefits of ‘the kansas experiment’ to us poor unenlightened souls..
though how not to do things is a result of a kind, it was far from the one touted.
*
I answered earlier gagarin but like many of my posts they don’t make it.
To summarise;
I am not doing anything dishonest with my money.
The Kansas tax experiment was a disaster.
Unenlightened was on reflection probably a bit mean
yes kansas was a disaster bob the last, that’s why it’s a foundation plank of the nats current policy..glad you’ve been enlightened.
tax cuts –
shrink the job market
destroy services
and do not lead to productive investment
and finally trickle down has never worked anywhere at any time.
any pollie that states the contrary is a lying douche bag…and they do it in the full knowledge that what they say is a lie…solely based on ideology not the world as it is.