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John Passant

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August 2011



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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. (0)

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Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
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The downturn mark II?

Stock markets are both the casinos of capitalism and its canaries. At the moment the punters are keeping their hands in their pockets and the birds are gasping for clean air.

Across the world stock markets have begun falling and some economists are predicting this is just the beginning of a sustained decline.

The bourgeois euphoria over the US debt ceiling spending cuts settlement has given way to deep concerns about Italy’s solvency and the permanently stalled American economy.  

Stock market collapses are a symptom of something deeper. In the 1920s across much of Europe and in the US what Marx called the organic composition of capital had increased. The amount invested in capital grew at a rate greater than that invested in labour. Because labour is the source of value this means, all other things being equal, the rate of profit falls. 

That appears to have been the case in recent decades too. 

Drawing on the work of Fred Moseley, Thomas Michl, Anwar Shaikh and Ertugrul Ahmet Tonak, Gérard Duménil and Dominique Lévy, Ufuk Tutan and Al Campbell, Robert Brenner, Edwin N Wolff, and Piruz Alemi and Duncan K Foley, Chris Harman argues:

There is general agreement [among those writers – JP] that profit rates fell from the late 1960s until the early 1980s. There is also agreement that profit rates partially recovered after the early 1980s, but with interruptions at the end of the 1980s and the end of the 1990s. There is also an important area of agreement that the fall from the mid-1970s to the early 1980s was not a result of rising wages, since this was the period in which US real wages began a decline which was not partially reversed until the late 1990s. Michl, Moseley, Shaikh and Tonak, and Wolff all conclude that the rising ratio of capital to labour was an element in reducing profit rates… “Capital intensive” investments by capitalists aimed at raising their individual competitiveness and profitability have had the effect of causing profitability throughout the economy to fall. Marx’s basic theory is validated.  (Footnotes omitted).

There appears to be  pattern. Each crisis over the last few decades looks and is worse than the one before, and the recovery weaker. 

The state propping up capital that is too important to fail might have contributed to that. Of course letting them fail – the wet dream of the neoliberal right and the Schumpeterians- would have destroyed much of the economy in developed capitalist countries and wreaked havoc on the working class.

We can’t predict when the next crisis of profitability will erupt in its full fury. But the current circumstances are very dangerous for capitalism with the crisis circling Italy, the third largest European economy, and again revisiting Spain, its fourth largest economy, threatening to drag possibly France and Germany down with it and then the rest of Europe if not the globe.

Add to that a US economy with official unemployment at over 9 percent, weak retail spending and low growth, worsened by the proposed deep cuts, and a bonfire of value might be on the cards.

Certainly it would mean the weak economies of Europe will not be able to trade their way out of the mess on the back of strong US consumer demand for their devalued goods and services. The very idea of a strong US economy in the next few years seems a sick joke.

45.8 million Americans were receiving food stamps in May, yet the top one percent own over 40 percent of the country.

It is not just government debt that is an issue. One of the responses to the shift in wealth from labour to capital that has been a characteristic of the 3 decades of neoliberal rule in country after country has been an increase in private debt. In part workers have maintained living standards or slowed their decline by going into debt. The time to repay the bankcard bill may have arrived.

In Australia much of the private debt is owed not only on credit card debt but also on houses whose prices are well above historical norms.

Capital and its governments will respond to economic crisis by attacking workers’ living standards even more viciously. The global trends of the last few decades to transfer wealth from labour to capital will intensify if workers let them.

Whether the state will or can bail out major sections of capital that are threatened by the ongoing crisis (eg big banks) is another question.

Faced with a choice between restoring profit rates or the environment, the feeble attempts post GFC to address the environmental crisis of capitalism will be abandoned because they might impact slightly on the accumulation of capital process. 

Australia will not be immune from these possible developments. Our economy is deeply integrated into the world economy.

Some recent developments cast doubt on the strength of Australia’s economy. Annualised GDP fell 1.2 percent in the first quarter this year. Treasurer Wayne Swan blamed the Queensland floods. Inflation is on the rise. Treasurer Wayne Swan blamed bananas. Retail sales have collapsed.

Although we sell lots of minerals to China, we depend on investment from the US and Europe to satisfy much of our capital needs.

China cannot survive a long term and severe worldwide downturn given its integration into the global economy both in terms of goods produced for other countries and its loans to and investments in the US and Europe.

A system based on such unpredictability and misery is bankrupt.

There is hope. The austerity in Europe and the US has produced partial fight-backs which could explode into full blown rebellion. The Arab Spring has challenged dictatorships across the region in the fight for freedom and food.

Our task is to deepen and develop that resistance into a democratic and revolutionary reconstitution of society in which people and their needs, not profit, are the priority.



Comment from Ross
Time August 4, 2011 at 8:25 am

yes John it doesn’t look good.What we need to do is put pressure on our leaders to make the RBA the lender of first resort.The central banksters will soon have to increase rates since the inflation they have caused will depreciate their assets.we can’t have banksters losing wealth can we/

The trap has been set.The US Fed has created $trillions from nothing and loaned it out to institutions all around the planet.Our banks think they’ve made a killing borrowing for 1% and loaning out at 8%.Now the US Fed will spring their trap thus creating more austerity.

If the RBA is lender of first resort,it can create $86 billion pa debt free and loan it to our banks stopping them from calling in mortgages.Spain has a youth umemployment of 43% and 270+ houses per day being reposessed.

Comment from juanR
Time August 4, 2011 at 2:48 pm

Here… here Ross, I entirely agree with your comments.

Comment from Ross
Time August 4, 2011 at 8:05 pm

I’m amazed juanR how ignorant even educated people are of the machinations of the banking system.

When I learned 3 yrs ago that the banking system was allowed to create money from nothing and perpetrate debt from it,my BS detectors became alarmed.I thought banks only loaned out money that already existed.An intensive study on the internet soon educated me.

The difference between Aust and the USA is that our Govt still controls the RBA even with corporate trolls on it,while the US Federal Reserve is wholly privately owned with a few token Govt officials been told what the policy will be.

Make no mistake,the US Fed controls Congress because it creates all the money as debt for it to function.

If we the people become aware,then we can take control of the RBA and stop the austerity that is destroying Europe and the USA.

We can defeat this insanity if enough people become aware.This has to be a grass roots movement and it involves all sides of the political spectrum.While I don’t agree with everything that John espouses,we do have common basic philosphy of fairness, humane treatment of all races and true democracy.

Comment from juanR
Time August 5, 2011 at 11:42 am

Ross here is how some Spaniards are making their feelings about speculators and rating agencies known to the world. Hope you can download the video.

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