Open letter, closed mind - a response to Business Day's Tim Cohen
On Monday Business Day contributing editor Tim Cohen published an open letter to the SACP addressed to our general secretary, cde Blade Nzimande ("Time for Communist Party to make a contribution", BD, 16 July). In his letter Cohen regurgitates a formerly fashionable trend amongst anti-communist, ex-left-wingers back in the 1960s.
He begins with a "confession" - as a student in the early 1970s at the University of Natal he was enamored with Marxism, but "over the years", he tells us, "I gradually lost my faith". I can only assume that for Cohen Marxism wasn't a dynamic theoretical and programmatic body of thought, but some kind of naïve idolatory, or teenage crush.
Retired history professor Jeff Guy has already responded admirably in a brief article buried in the back pages of Wednesday's Business Day ("Trabant versus Mercedes, Cohen versus Marx", BD, 18 July). I imagine Professor Guy was embarrassed that one of his former students should display such a crude understanding of Marxism, and such a cynically smug version of the world as it is now. According to Cohen the world we are living in is "a fabulous, inventive, creative, rich, fun place [with] all the freedom...[the SACP] promises but never delivers."
Professor Guy in his response highlights several indicators of grinding global poverty, underlining just why it is stupendously crass on the part of Cohen to imagine that global capitalism has somehow lifted the whole of humanity into the happy hereafter.
It is perhaps no surprise that at the very moment in which the bankruptcy of the standard capitalist neo-classical economic theory is so glaringly obvious, Cohen should choose to embark on a diversionary attack on Marxist theories. Cohen, who has replaced his teenage left-leaning idolatory for a middle-age crush on neo-liberalism, wants us not to notice how mainstream neo-liberal economic theory dismally failed to anticipate the current global economic crisis, and how it remains nonplused by its continuation.
Even the chairperson of the US Federal Reserve, Ben Bernanke, recently conceded to a Princeton university audience that the standard macro-economic models had failed to predict the crisis because they "were designed for non-crisis periods"! As one critic remarked, that's as useful as having a weather bureau whose meteorological models assume that every day will be sunny. The neo-liberal economic models espoused by Cohen and his clique turn out to be apologies for a system, not an analysis.
But let's turn to Cohen's diversionary critique of Marxism. "Marxist theory...is not only wrong but diametrically wrong... it's the precise opposite of truth", he tells us. "Take, for example, the tendency for the rate of profit to fall...Turns out globally speaking rates of profit have been generally increasing ever since Marx predicted they would start to fall. Capitalism began producing wealth at a rate faster than any social system previously known."
In the first place, Cohen makes the elementary mistake of conflating "wealth creation" with the "rate of profit". Yes, indeed, capitalism as a mode of production has dramatically dwarfed all previous modes in its immense capacity for "wealth creation". Between 1900 and 2005, driven largely by capitalist expansion, world economic output increased an incredible 24 times. That's impressive...until we stop to consider a few things.
First, this growth has been grossly mal-distributed. Notwithstanding this stupendous growth, more than 1 billion people still live on less than $1 a day, 2,7billion on less than $2 a day. Moreover, capitalist growth is not necessarily a tide that lifts all boats (even if very unequally). For much of the world's population - forced off family peasant farms and into urban slums - the quality of life relative to their grandparents has actually deteriorated.
Then there is the small matter of the environment - the 24-fold economic growth since 1900 is increasingly undermining the environmental conditions for the sustainability of human civilization itself. We are hitting (and probably have passed some) of the carrying capacity limits of our planet. Any economy is a sub-set of the environment. All inputs into the economy come from the environment, and all the wastes emitted from the economy go back into the environment. We have a finite planet, while voracious capitalism requires constant, unrelenting growth that is using up natural resources quicker than they can be replaced.
But let's return more specifically to the subject of the tendency for the rate of profit to fall. Marx borrowed this concept from the classical liberal economists of the 19th century, Adam Smith and Ricardo. They were indeed concerned at this tendency, based they believed on the increasing use of machinery with fewer workers. Marx agreed that there was a tendency for the rate of profit to fall, but he was more interested in why it had turned out to be so slow - and he analysed a number of countervailing factors which we won't dwell on here. Over the past century there has been a debate WITHIN Marxism about the centrality or otherwise of this concept for Marx, and either way about how useful it is any case in order to understand the systemic fault-lines within global capitalism.
However, the falling rate of profit is a long-range tendency within capitalism. Across the few centuries of capitalism's history, driven by increasing capital-intensity, there has indeed been a tendency for the rate of profit to fall across the system. It is this tendency, amongst other factors, that has driven smaller firms out of business and for a massive process of monopolization to occur - first at the national scale from the late 19th century, and in recent decades on a global scale.
The much-trumpeted "globalization" of recent times has essentially been a rapid process of global monopolization dominated by the financial sector. The total revenue of the five hundred largest corporations in the world (the so-called Global 500) is now around an incredible 40% of all world income! So much for the so-called "free market".
The global monopoly power of these massive corporations that control much of the world's production (including in countries like China) along with their strangle-hold over the global supply chain has been used to resist the underlying trend of a falling rate of profit through several strategies. Among these strategies is monopoly pricing and ever-increasing globalization - the conquest of low-cost labour markets (China, India, etc.). But these strategies to resist the gravitational pull of the tendency for a falling rate of profit have created their own systemic log-jam - a crisis of over-accumulation.
The global monopolies have cornered vast amounts of surplus which can no longer be invested (profitably) in production, and so we have seen the third and increasingly dominant feature of contemporary capitalism - financialisation, the increasing shift of surplus capital out of productive investment and into a speculative casino economy.
Over-accumulation in a capitalist system is the systemic crisis of producing (or having the capacity to produce) - not more than is needed by humanity - but more than can be PROFITABLY SOLD. And it is this inherent tendency to capitalist over-accumulation (rather than a falling rate of profit as such) that lies at the heart of capitalism's bouts of crisis, including the current global crisis. In our current global conjuncture the over-accumulation crisis has been hugely compounded by global financialisation.
In the US, for instance, the finance, insurance and real estate sector nearly doubled its share of the economy relative to the productive sector between the early 1980s and the present. The increasing domination of finance global monopolies then perpetuates in a vicious feedback loop all of the underlying structural strains within the capitalist system.
To put it simply, banks create money out of thin air because they are able to issue loans far in excess of their deposits. Because more money must be paid back to the banks than was loaned in the first place, more money must be created if loan defaults are to be avoided. This additional money basically comes from one source - more bank loans, more money out of thin air.
It is this debt-based monetary system that is now driving the insatiable appetite of capitalism for relentless compound "growth" way beyond what is environmentally sustainable. And it is the same attempt at gravity-defying expansion of finance monopoly capital and the speculative basis on which it rests that has led to the current financial sector implosion spreading from sub-prime loans in the US, to banking and sovereign debt crises in Europe.
The SACP emerged last Sunday from its largest and one of its most unified congresses ever. Important resolutions and an updated Party programme, "The Road to South African Socialism" were discussed and approved. We are convinced that the policy work (and organizational unity) of our Congress will play a very positive role in taking forward policy and organization within our broader alliance, government, and our country. In a country suffering from the persisting legacy of a neo-colonial capitalist growth path and in a world immersed in a multi-dimensional capitalist crisis, these SACP contributions, rooted in a living Marxism, are more important than ever.
Notwithstanding its hypocritical title ("Time for Communist Party to make a contribution"), Tim Cohen's open letter had no intention whatsoever of engaging seriously if critically with our Party's actual ongoing contribution.
Indeed, the South African commercial media with few exceptions simply didn't know what to make of our Congress. Diversionary reports that had nothing to do with the Congress at all were the order of the day. Cohen's closed-mind open letter turns out to be just another variant of the same thing.
Jeremy Cronin is 1st Deputy General Secretary of the SACP. This article first appeared in the Party's online journal Umsebenzi Online.
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