DM

This crisis is the logical outcome of the last one. But, at the same time, it will have a number of unique features. As I have argued elsewhere, capitalism undergoes regular crises because of its in-built tendency toward over-accumulation. In a nutshell, competition for markets and profits induces corporations to invest frenetically in order to get an edge on their rivals.

Each one attempts to purchase new machines and technologies, build new structures — from factories to shopping malls — and expand their operations, all with an eye on seizing market share. The end result of frenetic investment is that capitalists massively overshoot. They produce buildings and machines far in excess of what the actual level of profits can justify.

As profits per dollar of investment fall, a great contraction takes place. Factories close, workers are laid off, banks collapse. That was the scenario in the Great Depression of the 1930s, just as it was in the Great Recession of a decade ago. The latter, of course, was triggered by a meltdown in financial markets tied to real estate.

But triggers are not fundamental causes; they simply arrive at a tipping point. This time, the trigger appears to be Trump’s trade war with China. This will give this crisis distinct dynamics. Moreover, it may not be possible for governments to respond in the same way this time.

A decade ago, in 2009, the major capitalist states did something unprecedented: they injected tens of trillions of dollars into the world banking system in order to prevent a complete financial meltdown. As major banks began collapsing, they worried — rightly — that a global financial crash could imperil the capitalist system as a whole. Arguing that global banks were “too big to fail,” they demanded that public funds should be used to bail out private banks — as they were on an enormous scale. Next, they pushed interest rates (particularly the price at which commercial banks can borrow money from the central bank) to record lows. While this “quantitative easing” kept the banking system afloat, it had other effects.

One of these is that cheap money allowed loads of relatively unprofitable firms to stay alive. No need to declare bankruptcy after all, if you can stay in business by borrowing free money. Paradoxically, this blocked the kind of deep restructuring that capitalism needs to reenergize itself.

In a classic slump, the least efficient enterprises get wiped out, and this allows the more profitable to expand their share of sales and profits. In the recessions of the mid-1970s and early 1980s, for instance, scores of steel mills shut down across the United States, resulting in two-thirds of all steelworker jobs disappearing. But those companies that survived then had huge new market opportunities available. And it is this that induces the remaining firms to launch new waves of investment. From there, the cycle of boom and slump resumes.

But throughout the Great Recession, thanks to the free money policy that kept banks afloat, corporate bankruptcies were not widespread. “Zombie firms” lived on by borrowing. However, this meant that the most efficient companies did not perceive prospects for a new wave of growth and expansion. As a result, business investment has been anemic since 2009, and so has the overall economy. Rates of growth have been well below the norm for economic recoveries.

Profits recovered, of course, though much of this had to do with squeezing workers harder by holding down their wages and benefits and speeding up the pace of work. Alongside squeezing workers, the rich were able to parlay free money into financial investments, like stocks and bonds, that made them wealthier, thereby exacerbating social inequality. We should not forget that the twenty-six richest people on the planet now have as much wealth as the bottom half of humankind (3.8 billion people).

Yet while profits and incomes of the wealthy rebounded, living standards for working-class people did not. In fact, levels of impoverishment today are utterly shocking. Recent reports indicate that four out of every ten families in the United States struggle to meet the costs of food, housing, health care, and utilities every month.

In Britain, fully 4 million people are in “deep poverty,” and living standards have been declining for a longer period than ever before recorded. British life expectancy is falling, with the poor dying ten years earlier than the rich, and the number of children in poverty rising by 200,000 per year. In Argentina, 3 million more people have fallen into poverty in the last year.

It is rightly said that working-class people around the world — and workers of color in particular — have been living through a “lost decade” in terms of human well-being. While the top 1 percent in the United States has doubled its wealth since 2003, for instance, the bottom half of households are 32 percent poorer. If that is the situation during the recovery phase of the capitalist business cycle, one shudders about what is coming. As profits contract and the economy turns down, pressures on working-class people are going to get drastically worse — unless there is mass social resistance.