imc indymedia

Los Angeles Indymedia : Activist News

white themeblack themered themetheme help
About Us Contact Us Calendar Publish RSS
Features
latest news
best of news
syndication
commentary


KILLRADIO

VozMob

ABCF LA

A-Infos Radio

Indymedia On Air

Dope-X-Resistance-LA List

LAAMN List




IMC Network:

Original Cities

www.indymedia.org africa: ambazonia canarias estrecho / madiaq kenya nigeria south africa canada: hamilton london, ontario maritimes montreal ontario ottawa quebec thunder bay vancouver victoria windsor winnipeg east asia: burma jakarta japan korea manila qc europe: abruzzo alacant andorra antwerpen armenia athens austria barcelona belarus belgium belgrade bristol brussels bulgaria calabria croatia cyprus emilia-romagna estrecho / madiaq euskal herria galiza germany grenoble hungary ireland istanbul italy la plana liege liguria lille linksunten lombardia london madrid malta marseille nantes napoli netherlands nice northern england norway oost-vlaanderen paris/Île-de-france patras piemonte poland portugal roma romania russia saint-petersburg scotland sverige switzerland thessaloniki torun toscana toulouse ukraine united kingdom valencia latin america: argentina bolivia chiapas chile chile sur cmi brasil colombia ecuador mexico peru puerto rico qollasuyu rosario santiago tijuana uruguay valparaiso venezuela venezuela oceania: adelaide aotearoa brisbane burma darwin jakarta manila melbourne perth qc sydney south asia: india mumbai united states: arizona arkansas asheville atlanta austin baltimore big muddy binghamton boston buffalo charlottesville chicago cleveland colorado columbus dc hawaii houston hudson mohawk kansas city la madison maine miami michigan milwaukee minneapolis/st. paul new hampshire new jersey new mexico new orleans north carolina north texas nyc oklahoma philadelphia pittsburgh portland richmond rochester rogue valley saint louis san diego san francisco san francisco bay area santa barbara santa cruz, ca sarasota seattle tampa bay tennessee urbana-champaign vermont western mass worcester west asia: armenia beirut israel palestine process: fbi/legal updates mailing lists process & imc docs tech volunteer projects: print radio satellite tv video regions: oceania united states topics: biotech

Surviving Cities

www.indymedia.org africa: canada: quebec east asia: japan europe: athens barcelona belgium bristol brussels cyprus germany grenoble ireland istanbul lille linksunten nantes netherlands norway portugal united kingdom latin america: argentina cmi brasil rosario oceania: aotearoa united states: austin big muddy binghamton boston chicago columbus la michigan nyc portland rochester saint louis san diego san francisco bay area santa cruz, ca tennessee urbana-champaign worcester west asia: palestine process: fbi/legal updates process & imc docs projects: radio satellite tv
printable version - js reader version - view hidden posts - tags and related articles

The Error is in the System

by Volkhard Mosler Tuesday, Feb. 21, 2012 at 5:04 AM
mbatko1@hotmail.com

The financial crisis mutated into a global economic crisis and a state debt crisis. The financial crisis was not a "bump in the road" or an industrial accident but a systemic and structural crisis that caused trillion of wealth to vanish while millions lost their jobs. homes and pension

THE ERROR IS IN THE SYSTEM

By Volkhard Mosler

[The financial sector is denounced as “speculators,” “crisis profiteers” and “parasites.” In his eleven theses on the crisis, Volkhard Mosler explains the new power of financial capital and why the distinction between “evil banks” and the “good real economy” is not helpful. His article published in January 2012 is translated from the German on the Internet, http://marx21.de/content/view/1609/32.]



1. Among critics of capitalism, it seems almost undisputed that the prese3nt crisis results from financial capital separating itself from the real economy. Therefore it can be overcome by a reconnection of the financial sector to the real economy. However I represent the standpoint that financial capital and industrial capital cannot be separated. The independence of financial capital was only a result of an earlier over-accumulation and realization-bottleneck of capitalism.

2. The financial sector grew as never before up to the 2008/2009 economic crisis. In 2004 all the shares of the financial sector amounted to 29 percent of the stocks of the real economy, four times as much as 1979. In 2005 the financial assets worldwide amounted to 316 percent of the (annual) world social product. In 1980 they were only 109 percent. In other words, the financial sector grew three to four times as fast as the real economy since the beginning of the 1980s.



3. The growing significance of the financial sector left behind traces in the world economy. Every upswing in the economic cycles of this time was accompanied by financial speculations. They were manifest in massive “exaggerations” (or “bubbles”) on the stock markets in the US and Great Britain (middle of the 1980s and middle of the 1990s), in an enormous rise of stock- and hou9sijng prices in Japan at the end of the eighties, in the boom of the “new technologies” (“dotcom”) at the end of the nineties and finally in the huge real estate- and housing boom in the US and large parts of Europe in the first seven years of the new century. The waves of takeovers and mergers of mammoth firms were another accompaniment financed by credits of financial management.

4. At the same time the general indebtedness of the governments, large parts of the real economy and consumers grew. The credit system grew many times compared to the real economy. The credit volume doubled in the US and tripled in Japan in the 1980s. The massive boom in the home sector in the middle of the first decade of the 21st century (2006/06) was “financed” in the US, Great Britain, Spain and Ireland by enormous indebtedness of the middle class and the working class. The Italian Marxist Riccardo Bellofiore correctly described this development “privatized Keynesianism.”



5. The growth of the financial sector never happened separated from the productive sector. In the long term, this growth was the product of the internationalization of capitalism on one side and a gradual slowing down of accumulation of capital on the other side. In the first decades after the Second World War, financial capital grew in unison with the real or productive economy. The new financial sector also operated in the less industrialized states. Since the late 1970s, the loans of the IMF and the banks created an endless chain of debts, interests, interest charges and “refinancing programs.” In 2003, the debt burden of the global South was .5 trillion.

6. The gradual and long-term slackening of accumulation is itself the result of the decline of profit-rates from the immediate postwar era to the end of the seventies. In 1973, the profit-rates worldwide fell to such a low level that a raw material crisis (the first oil crisis) caused by a war in the Middle East with higher oil prices caused by the first world recession since 1945. In 1950, the average profit-rate of all countries (gross profit in relation to applied capital) still amounted to 22 percent. That profit-rate gradually fell to a record low of only 3 percent in 1986, rose to 14 percent by 2006 and fell again to 5 percent by 2009.



7. The causes of the falling profit-rate can only be intimated here. Karl Marx explained this phenomenon with his “law of falling profit rates” (Das Kapital, 3rd volume). Since only living labor is a source of value, machines and investments in the course of their lifetime only transfer their value to products (“writing-off” or depreciation) and because technical progress tends to go along with replacing living by “dead” labor (machines). The “organic composition” of capital grows, that is the value relation of constant to variable capital (or “fixed costs” to labor costs). That profit-rates rose again since the middle of the 1980s is a consequence of higher exploitation rates (relation of paid to unpaid labor) through wage cuts, longer working hours and deregulation measures of entrepreneurs in the time of neoliberalism.

8. The relative increase of profit-rates in the 1980s and 1990s prompted a series of critical economists (Heiner Flassbeck, Michael Houston and Michael Schlecht) to argue that “excessively high” profits in relation to wages and mass consumption led to the crisis. According to this assumption termed the under-consumption thesis, the periods with a relatively high share of employees in the national income (wage share) must also be periods with high economic growth. Conversely, periods with low wage shares are also periods with low growth or crisis setbacks. But in reality it was the other way around. In the 1950s, the wage share of Germany was 59.4 percent and the annual growth of the gross domestic product (GDP) was 8 percent. In the 1970s, the wage share rose to an average 72.2 percent and the annual GDP growth in contrast fell to 3 percent. There was no decade after the Second World War when income distribution was unequal as in the 1950s and conversely GDP growth rates were higher. Conversely the 1970s on one side were marked by the highest real wage growth and on the other side by a return of economic crisis. Thus higher wage shares were connected with lower growth.



Marx’ thesis is that rising wages (in relation to business profits) are historically confirmed as “storm birds of crisis” or harbingers of crisis. High profit-rates drive the accumulation of capital; low profit rates paralyze that accumulation. The busine4ssman’s thesis was the inspiration for Schroeder’s Agenda 2010 that lower wages and piece-work costs are keys to overcoming crises. Conversely, Marx’ crisis theory starts from the assumption that fixed or capital costs are a long-term cause, not rising or falling wage costs. In the long-term, the increase of applied aggregate capital leads to falling profit rates and the systems’ proneness to crises.



9. One consequence of falling profit raters was that corporations and enterprises saw no or trifling profit chances and therefore tended to invest less in the real economy. Instead they sought “other” forms of investment in the financial sector where higher profits beckon. The sociologist and money-theoretician Christoph Deutschmann writes: “Because the profitability of businesses stagnated, there was no growth of real investments that could exploit the growing financial assets and direct them back to the macro- economic cycle” (Kapitalistische Dynamik, Wiesbaden 2008, p.164). Since the 1980s, Volkswagen, General Motors, Siemens and many other world corporations invested an increasing part of their profits in the financial sector. The arising profits are only paper profits that do not correspond to any real assets. This first came to light when the financial- (for example derivatives), real estate- and other speculation bubbles (dotcom) burst. These bubbles originated in expectation of endless prices increases through the high demand for such “assets” and caused the destruction of such promises for higher future prices of the real economy.

10. Separating “good” and “bad” capital, the productive real economy and the unproductive financial sector, makes no sense when the growth of financial management is only the consequence of a crisis of the real economy. Conversely, the growth of the financial sector and the allied speculative demand for certain investment assets (gold, works of art, food, real estate or new technologies) helped delay the crisis of the real economy. The shares increase from time to time along with the risks and losses as with drug addicts. Correspondingly crises cannot be overcome with wage increases and increased mass consumption as desirable as these measures are. The battle for higher wages can be carried out from two opposite perspectives. From the under-consumption or Keynesian perspective, it is not only waged to raise salaries and improve the living standard of the working class. It also represents the way out of crisis by increasing mass purchasing power. However this perspective ultimately starts from a common interest of labor and capital. On the other hand, the Marxist perspective supports the struggle for higher wages amid an irreconcilable opposition between the two central classes. The battle for higher wages and social reforms weakens the capitalist class and strengthens the working class.

11. Capitalism is the increase of investments and consumption by means of profit on the market. This system has run into the ground. [Translators note: capitalism with its inbuilt insatiability pressure makes people anxious, not happy.] Refusal of investment faces deficiency, hunger and distress worldwide. Therefore production must be oriented in need instead of profit. A progressive millionaires’ tax (“tax on the rich”) and a democratic decision about financing state investments would be first steps in this direction.



RELATED LINKS:

“Final Report of the Inquiry Commission on the Financial Crisis,” February 24, 2011, 576 pages

www.gpo.gov/fdsys/pkg/GPO-FCIC/content-detail.html



Video: “Final Report of the Inquiry Commission on the Financial Crisis,” January 27, 2011, CSpan. 1 hr 10 min

www.c-spanvideo.org/program/297723-1



Video: John Kenneth Galbraith, 2008, 52 min

http://www.youtube.com/watch?v=jNgfIH5pyxg



Hild, Thorsten, "The Rule of Supply-Side Economists," January 2012

http://portland.indymedia.org/en/2012/02/413887.shtml



Konicz, Tomasz, "The Crisis Explained," December 2011

http://portland.indymedia.org/en/2012/01/413591.shtml



Lansley, Stewart, "Managed v. Market Capitalism," January 2012

http://www.eurozine.com/articles/2011-12-07-lansley-en.html



Mosler, Volkhart, "Capitalism Criticism 2.0," November 2008

http://portland.indymedia.org/en/2009/10/394496.shtml



Reuter, Norbert, "Stagnation as a Trend," 2009

http://nyc.indymedia.org/en/2011/09/116251.shtml



Schulze, Ingo, "Capitalism Doesn't Need Democracy," January 2012

http://portland.indymedia.org/en/2012/02/413795.shtml

Report this post as:

LATEST COMMENTS ABOUT THIS ARTICLE
Listed below are the 10 latest comments of 1 posted about this article.
These comments are anonymously submitted by the website visitors.
TITLE AUTHOR DATE
There is no error. The Global Satanic Cult of Death (CIA & Friends) is Evil by Design Global Satanic Cult of Death (CIA & Friends) Wednesday, Feb. 22, 2012 at 10:47 AM

Local News

GUIDE TO REBEL CITY LOS ANGELES AVAILABLE A12 5:39PM

lausd whistle blower A10 11:58PM

Website Upgrade A10 3:02AM

Help KCET and UCLA identify 60s-70s Chicano images A04 1:02PM

UCLA Luskin: Casting Youth Justice in a Different Light A02 11:58AM

Change Links April 2018 A01 11:27AM

Nuclear Shutdown News March 2018 M31 6:57PM

Join The Protest Rally in Glendale on April 10, 2018! M29 7:00PM

Join The Protest Rally in Glendale on April 10, 2018! M29 6:38PM

Spring 2018 National Immigrant Solidarity Network News Alert! M19 2:02PM

Anti-Eviction Mapping Project Shows Shocking Eviction Trends in L.A. M16 5:40PM

Steve Mnuchin video at UCLA released M15 12:34AM

Actress and Philanthropist Tanna Frederick Hosts Project Save Our Surf Beach Clean Ups M06 12:10PM

After Being Told He's 'Full of Sh*t' at School Event, Mnuchin Demands UCLA Suppress Video M02 11:44AM

Resolution of the Rent Strike in Boyle Heights M01 6:28PM

What Big Brother Knows About You and What You Can Do About It M01 3:30PM

Step Up As LAPD Chief Charlie Beck Steps Down F14 2:44PM

Our House Grief Support Center Hosts 9th Annual Run For Hope, April 29 F13 12:51PM

Don’t let this LA County Probation Department overhaul proposal sit on the shelf F13 11:04AM

Echo Park Residents Sue LA Over Controversial Development F12 8:51AM

Former Signal Hill police officer pleads guilty in road-rage incident in Irvine F09 10:25PM

Calif. Police Accused of 'Collusion' With Neo-Nazis After Release of Court Documents F09 7:14PM

Center for the Study of Political Graphics exhibit on Police Abuse posters F07 9:50AM

City Agrees to Settle Lawsuit Claiming Pasadena Police Officer Had His Sister Falsely Arre F04 3:17PM

Professor's Study Highlights Health Risks of Urban Oil Drilling F04 12:42PM

Claims paid involving Pasadena Police Department 2014 to present F04 10:52AM

Pasadenans - get your license plate reader records from police F03 11:11PM

LA Times Homicide Report F03 1:57PM

More Local News...

Other/Breaking News

What does the Quran Say About Islamic Dress?? A21 4:15PM

Biodiversité ou la nature privatisée A20 11:22AM

The Market is a Universal Totalitarian Religion A20 7:14AM

Book Available about Hispanics and US Civil War by National Park Service A19 5:52PM

The Shortwave Report 04/20/18 Listen Globally! A19 4:01PM

The Republican 'Prolife' Party Is the Party of War, Execution, and Bear Cub Murder A19 11:48AM

Neurogenèse involutive A18 9:21AM

Paraphysique de la dictature étatique A16 10:13AM

Book Review: "The New Bonapartists" A16 3:45AM

The West Must Take the First Steps to Russia A14 12:25PM

Théorie générale de la révolution ou hommage à feu Mikhaïl Bakounine A14 3:30AM

The Shortwave Report 04/13/18 Listen Globally! A12 3:50PM

“Lost in a Dream” Singing Competition Winner to Be Chosen on April 15 for ,000 Prize! A12 3:48PM

The World Dependent on Central Banks A12 4:43AM

Ohio Governor Race: Dennis Kucinich & Richard Cordray Run Against Mike DeWine A11 9:40PM

March 2018 Honduras Coup Again Update A10 10:52PM

Apologie du zadisme insurrectionnel A10 3:33PM

ICE contract with license plate reader company A10 1:14PM

Palimpseste sisyphéen A09 11:23PM

Black Portraiture(S) IV: The Color of Silence...Cuba No...Cambridge Yes A09 5:32AM

Prohibiting Micro-Second Betting on the Exchanges A09 4:18AM

Prosecutors treat Muslims harsher than non-Muslims for the same crimes A08 10:33PM

Amy Goodman interview on cell phone safety A08 10:29PM

Mesa, Arizona police officer kills unarmed white man A08 9:50PM

Israeli leaders should be prosecuted for war crimes A08 9:48PM

Paraphysique de l'autorité A08 12:11AM

Two Podcasts on fbi corruption A06 10:13PM

Fbi assassins assault & try to kill DAVID ATKINS A06 7:29PM

More Breaking News...
© 2000-2018 Los Angeles Independent Media Center. Unless otherwise stated by the author, all content is free for non-commercial reuse, reprint, and rebroadcast, on the net and elsewhere. Opinions are those of the contributors and are not necessarily endorsed by the Los Angeles Independent Media Center. Running sf-active v0.9.4 Disclaimer | Privacy