Boom and Bust (1947)

From the December 1947 issue of the Socialist Standard

The waste and destruction of the late total war has presented capitalism with a new burst of business, if only in replacing the bombed fixed capital and equipment made obsolete or worn out by six years of constant war production. With this leeway to make up, together with the general dearth of consumer goods, capital can look forward to a period of activity fulfilling the requirements of the “sellers’ market.” Only occasionally, amid the clamour of capitalists, “communists” and labour leaders, hounding on the workers to more production, is a voice heard warning that the sellers’ market will be of short duration. And what then? Will there be the usual slump?

The socialist answer is an affirmative, for whether production is carried on by private enterprise, or is planned through the medium of the state, the mechanism of capitalist production and distribution acts the same, no matter the ideology of those selected to control the pulling of its levers.

The memory of the world slump of the 1930’s is still green among the working-class, a slump which only ended with the preparation for World War 2; while significantly enough, a similar position existed before World War 1. In fact looking at the history of capitalism it will be seen to proceed with a movement of feverish activity followed by a crisis of stagnation. Why is this? What goes wrong with capitalism’s “works”?

At the risk of reiteration it must be repeated that the motive of capitalist production is a surplus of wealth which through the medium of money is distributed to the owners of both private and state capital; a surplus comprising the unpaid labour of the workers who having no stake in the “means of production” must perforce hire out their energies for a “cost of living” wage. The difference between this “cost” and the wealth turned out during the workers’ employment, figures in company shares, state bonds, etc. as rent, interest and profit. The “means of production” covers all those productive processes using plant, machinery, etc., with the factories which house it, as against the “means of consumption” consisting of food, clothing, luxuries, etc., consumed by the workers and capitalists, via wages on the one hand and “income” on the other.

If production and consumption are to balance it follows that the owners of the means of production should turn out no more equipment than that needed by the owners of the means of consumption. There should, for example, be the right total of ovens for bakeries or tractors for the land, while the amount of bread, etc., should not exceed the capacity of the consumers. But this presupposes a non expansive capitalism befitting its early days when domestic industry knew the limit of the local market and the means of production were puny and individually owned.

The development of the means of production ended this self-ownership and transferred the scene of production to the factories where men and women labour, not as owners but as wage-workers, and where handicraft is replaced by a division of labour suited to the pace and handling of power-driven machinery. A revolution from private production to social-production or commodity production by social effort.

Here lies capitalism’s dilemma. The productive capacity has long overflowed the local sphere and demands continuous and expanding markets, while competition for these markets creates an open race to minimise the amount of human labour in every commodity by automatic factory production and mechanical land cultivation. Capital, therefore, moves in the direction of spending more on labour-saving mechanisms than on workers’ labour-power, while the mechanism itself takes on the character of a Frankenstein which must be constantly fed with orders and “contracts.”

Take for instance a modern steel plant built to turn out girders, railway lines, etc., for the world market. From the iron to steel process, to the actual rolling, all its departments, must work at full capacity if the product, is to be economically produced, while this in turn requires the requisite amount of orders for rails, etc. To build a smaller works on the receipt of lesser orders requiring only half the capacity of the normal works would obviously he uneconomical. Repeat this example in other spheres of production and one sees the picture of capitalist production driven on to produce above the need of the market in the hope that stock will later be sold.

Eventually the ominous sign of glut appears in this drive for production and profits, by the banks shortening up on credit. “Cheap money” for borrowers comes to an end, and the stage where “stock is as good as money” changes to one where “money is the only real wealth.” To meet payments and obligations, every owner rushes to market with everything saleable for what it will fetch, for fear that market prices will reach a lower level. The crisis is on. The capitalist whales eat the capitalist small fry, now-gone bankrupt. Labour-power like every other commodity becomes a drag on the market where millions are idle because they have produced too much. In short, the forces of production are fettered and in conflict with the method of distribution.

All this may seem far away in these days of shortages, but heed the forecast of Sir Robert Johnson, chairman at the annual meeting of Cammell Lairds, shipbuilders. Criticised by a shareholder for the policy of consolidating reserves, he said : “We have to look after our money in shipbuilding because the slump comes as sure as night follows day. There are always seven years of plenty and seven years of famine in shipbuilding.” (Evening Standard, 4/4/47.)

Again, and this time from labour quarters: “America is heading for the biggest economic blizzard in history. There may be 20,000,000 unemployed and that blizzard will hit this country.” (Jake Woddis, Clerical and Administration Workers Union. News Review, 4/4/47.)

The “trade cycle” of slump and boom is inevitable for the reasons previously outlined and results from the wage system which denies the bulk ot the consumers the possibility of owning the total consumable wealth which they have produced. The capitalists stop production as soon as it ceases to be profitable and allow the piled up stock to rot or be destroyed. These they cannot give away to the needy even if they wished, for goods without price would mean the end of trade while furthermore a large part of the unsold stock is means of production, useless save as capital. Fared by such a problem periodically, national capitalism has struck out for the undeveloped areas of the world only to find that the export of means of production to these parts has resulted in their development as competitors.

There appears then only one desperate way out for world capitalism’s problem of overproduction, and that is to engulf the world in a periodic destructive war, arising from the national struggle for markets to absorb the surpluses thus giving capital elbow room, by furnishing the costly means of destruction followed by the breathing space given by the necessary reconstruction of the “peace.”

The only hope of ending this social madness and the drift to World War 3, is for the workers to advance beyond the support of capitalist planning controlled by “labour” or any other government, and to press forward to the goal of socialism where social production will be balanced by social ownership. With the means of life in their own hands they will cast off their servitude by ending the wage-system by which capital appropriates the fruits of their labour.

Frank Dawe