Abstract
The ultimate cause of crises in capitalism is lack of profitability. The Keynesian and Austerians (the supporters of austerity measures), deny this. So their solutions to crises do not work. Keynesian state-induced stimulus programs (redistributive, monetary, and fiscal) cannot overcome the underlying tendency for profitability to fall. The same holds for the policies of “austerity,” which are designed to reduce debt and raise profitability. These conclusions are particularly relevant for the weaker Eurozone economies in the midst of the euro crisis. In a case study of Argentina, we argue that it was not competitive devaluation that restored growth after the 2001 crisis, but default on state debt caused by the previous destruction of productive capital.
Highlights
Capitalism does not develop in a straight line upwards
Capitalists try to avoid the crisis in various ways: by trying to exploit workers more; by looking for yet more efficient technologies; and by speculating in unproductive areas of the economy, e.g. the stock market and banking and finance, where they gamble for gain
The world rate of profit has been static or slightly falling and has not returned to its peak of the 1990s (Figure 4). This suggests that the boom of the late 1990s and early 2000s was not based on rising profitability in the major economies, but more on a credit bubble and the growth of fictitious capital
Summary
Capitalism does not develop in a straight line upwards. Its movement is subject to recurrent cycles of “booms and slumps” that destroy and waste much of the value previously created. Between 1982 and 1997, the rate of profit rose 19 percent, as the rate of surplus value rose nearly 24 percent and the organic composition of capital rose just 6 percent.5 This “neo-liberal period” had less severe slumps, economic growth was still slower than in the Golden Age, because profitability was still below the period of the Golden Age, in the productive sectors of the US economy.. The world rate of profit has been static or slightly falling and has not returned to its peak of the 1990s (Figure 4) This suggests that the boom of the late 1990s and early 2000s was not based on rising profitability in the major economies, but more on a credit bubble and the growth of fictitious capital.
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