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Does the economic impact of the Corona virus show the illogic of capitalism?

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explainthingstome's picture
explainthingstome
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Jun 20 2020 18:50
Does the economic impact of the Corona virus show the illogic of capitalism?

1) Economic "good times" under capitalism are a result of people buying stuff.

2) In order to prevent the virus from spreading, there has been lockdowns and people have been going out less.

3) Due to decreased demand, companies either go bankrupt or fire a bunch of employees.

4) Either way, employees become unemployed and get no wages which leads to less consumption.

5) Saving people from dying from Corona therefore hurts a lot of workers under capitalism.

Sidenote: unemployment is stupid because the only reasons they're not doing any work are that 1) it's not "profitable" to employ them and 2) their basic needs aren't being fulfilled since under capitalism your have to work in order to then get the resources you want.

Under anarchism, profit doesn't exist and production won't automatically stop just because there's less consumption, not to mention that people will receive resources without having to work.

Are my views flawed? I'm asking because, based on a few searches on the web, I haven't seen leftwingers make the point that I've made here. If the point is valid, isn't it a pretty good argument in favour of societies where there's production for use and not for profit?

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darren p's picture
darren p
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Jun 21 2020 14:21

I don’t think what you’ve written is totally wrong but the first points can read as a bit underconsumptionist. Let me know if you’d like me to expand.

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zugzwang
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Jun 21 2020 14:37

There've been quite a few articles looking at food waste/destruction because of decreased demand from restaurants, schools and other buyers. The need for food definitely does exist, but there are different costs involved in getting the un-saleable food to people (among other obstacles), and capitalist production is not for need and businesses are not charities. In the US the USDA is spending billions to absorb un-saleable food products and distribute them to foodbanks and other charitable groups. (Wasting and intentionally destroying products is nothing new to capitalism either, along with other irrationalities like $300 shoes that cost a fraction of that to produce but can be sold at that price because of brand prestige etc.)

There's also the cases of producers and retailers price-gouging, and people buying up a store's inventory of certain products to sell them more dearly, which is another indictment of capitalism that people are more concerned with fattening their own pockets amid a pandemic than with others having things they potentially need.

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cactus9
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Jun 21 2020 23:38

The thing I find interesting is that, if money wasn't an issue, society functions fine with only essential work. In fact, better in some ways.

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explainthingstome's picture
explainthingstome
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Jun 22 2020 16:59
darren p wrote:
I don’t think what you’ve written is totally wrong but the first points can read as a bit underconsumptionist. Let me know if you’d like me to expand.

I have somewhat of a clue of what underconsumptionism is, but is the term really applicable to my reasoning here?

I am not arguing that the cause for the economic crisis we have now is the result of workers not being able to buy back the full value of their labour.

Rather, I'm saying that saving people from dying of corona means that there's less consumption, which leads to lay-offs and hurts workers, and that this shows how unreasonable capitalism is.

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Khawaga's picture
Khawaga
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Jun 22 2020 18:41

It is capitalism that has an imperative to produce, and it is capitalism that forces the things to be produced to go to the market to be exchanged for money, a mediation that is frankly unnecessary. If things are not sold, it is not an issue of underconsumption, but rather of an overproduction of things that cannot be matched with money.

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explainthingstome's picture
explainthingstome
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Jun 23 2020 18:42
Khawaga wrote:
If things are not sold, it is not an issue of underconsumption, but rather of an overproduction of things that cannot be matched with money.

But in this current situation with Corona and all, wasn't the issue that people weren't buying things as a result of restrictions and not a result of people not being financially able to buy stuff that they would buy otherwise?

I get that other crises, such as the great depression in the 1930's, might have had other causes than underconsumption. But why can't our current crisis be a result of restrictions on consumers freedom of movement?

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Khawaga's picture
Khawaga
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Jun 23 2020 18:56
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But in this current situation with Corona and all, wasn't the issue that people weren't buying things as a result of restrictions and not a result of people not being financially able to buy stuff that they would buy otherwise?

The current situation doesn't really change capital's imperative to grow by having exploited workers produce stuff to sell so that the whole process can start over again. But again, what you're referring to is really not an issue of underconsumption, but rather a lack of "equivalents", people would consume if they could, it's just that capital is the reason they are not. This can only be seen as "underconsumption" because it is only capital that requires things of social need to be bought and sold. In short, the root cause is not the lockdown at all, it is capitalism itself, i.e. the social relations of capital, corona only reveals this problem.

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zugzwang
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Jun 23 2020 21:26
Quote:
Rather, I'm saying that saving people from dying of corona means that there's less consumption, which leads to lay-offs and hurts workers, and that this shows how unreasonable capitalism is.

It's true that the corona crisis has affected demand/consumption in some places (like restraunts and schools closing affecting demand of food products as mentioned), and I don't think anyone here would argue against the fact.

If people can't work because of lockdowns, then businesses suffer and workers don't have wages for necessities and rent (hence the rent strikes, "can't pay, won't pay" etc.). People who are allowed to work are forced to choose between being potentially infected (doing arguably non-essential work like working in restaurants or working in garment factories) or starving. So yes the corona crisis does expose the utter irrationality of production for profit and not need, where as mentioned food is first destroyed instead of given to people in need because need means little if money doesn't back it up, which is what demand is.

It's an issue however if you say that the current crisis is due solely to demand/consumption because wages are not high enough (or that if wages were high enough capitalism would be fine). Capitalists are forced through competition to increase their productivity (by adopting more dead labor or technology/machinery than living labor), which means more commodities are produced, but with less value distributed among every single one. Since living labor is the source of value, and it's being removed fom the production process (the labor time required for producing commodities also decreasing) the rate of profit, measured as surplus value over capital advanced, or s / (c + v), is also declining. The commodities, each with less value now, still have to be sold to realize their value in money form, which means finding new markets to absorb the greater output. There is the potential for overproduction in that regard, because more is being produced than there is demand for or that can be absorbed.

Fwiw Roberts (who's been posting about the corona crisis since February on his blog) and Carchedi have edited a book with a number of essays using actual data arguing in favor of Marx's TFRP (tendential fall in the rate of profit) theory as the major cause of most crises, and also against underconsumption theories. Passage from that that corresponds with what I said above:

Quote:
The ARP falls because of the specific nature of technological innovations under capitalism, which constitute the main cause of its dynamism. On the one hand, innovations replace laborers with means of production. New labor falls relative to assets. Given the rate of exploitation, profits per unit of capital invested fall, too, and with them falls the rate of profit. However, given that constant capital grows, total profits grow as well. The former grows more than the latter. In the 1948–2015 period, the former grows by 1,557 percent, while the latter grows by 445 percent. On the other hand, innovations increase labor’s productivity—that is, each laborer produces an ever-increasing quantity of output (use values) with the help of increasingly advanced means of production. The fundamental contradiction is an increasing mass of commodities (use values) containing a decreasing quantity of value. There is an inherent overproduction of use values, which is not the cause of crises but the consequence of the fall in the average rate of profit.

Marx quote in the same book on underconsumption or lack of wages as the source of crisis:

Quote:
"It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption. The capitalist system does not recognize any forms of consumer other than those who can pay, if we exclude the consumption of paupers and swindlers. The fact that commodities are unsaleable means no more than that no effective buyers have been found for them, i.e. no consumers (no matter whether the commodities are ultimately sold to meet the needs of productive or individual consumption). If the attempt is made to give this tautology the semblance of greater profundity, by the statement that the working class receives too small a portion of its own product, and that the evil would be remedied if it received a bigger share, i.e. if its wages rose, we need only note that crises are always prepared by a period in which wages generally rise, and the working class actually does receive a greater share in the part of the annual product destined for consumption. From the standpoint of these advocates of sound and “simple” (!) common sense, such periods should rather avert the crisis. It thus appears that capitalist production involves certain conditions independent of people’s good or bad intentions, which permit the relative prosperity of the working class only temporarily, and moreover always as a harbinger of crisis."

Is this passage an anomaly in Marx’s theory? For many Marxists who maintain underconsumptionist views, it would be, as a frequently cited passage of the third volume of Capital states that “[t]he ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit” (Marx 1981b, p. 615). This is in the manuscript that Engels edited as volume 3 of Capital. It had been written by Marx in the mid-1860s, that is, some twenty years before he wrote his mocking remarks on the idea that crises are caused by low wages. So he could have changed his views. Whatever the case, what is important is that the lack of consumption because of low wages is a very poor explanation of the economic slumps that we observe in reality

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zugzwang
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Jun 25 2020 19:30

I see Heinrich also notes (in his book intro to Capital) that the part of the product/commodity capital which represents wages and enables the capitalist to buy labor-power afresh (after the products are sold) will always be less than the full value of the product, so that there will never be enough demand from workers to buy the full product. Not sure if that's something Marx touched on himself in vol 2 with his "departments of production", but it sounds convincing I guess.

The comments on this thread (dealing with Reynolds book) on overproduction and profitability in agriculture, something Reynolds discusses in his book, are also interesting

https://libcom.org/forums/announcements/books-ben-reynolds-coming-revolu...