Economie et Politique - Revue marxiste d'économie

Frédéric Boccara

Université Paris 13, Sorbonne Paris Cité, CEPN (CNRS, UMR 7234)

Economie et Politique Journal

Euro-progressive economists network (EuroPen) and “Economistes Atterrés”, France

France

1. The Financial crisis

The financial crisis is linked to a deep over-accumulation of material and financial capital.

Since the beginning of the 1970's and the surge of the systemic crisis, with difficulties of the overall profit rate, we have witnessed a surge of a new over-accumulation, at the turning point of the Kondratiev long wave opened after world war 2 (P. Boccara, 2012).

Facing that over-accumulation, there has been efforts to raise the profit rate, especially by dominant capital. Three means have been used : (i) investment in new technologies, for extra profit and for economies on the capital value (ii) action for diminishing the share of wages in the value added, (iii) efforts by dominant capitals to develop withdrawals and transfers in their favor.

But the results have been contradictory. In particular, the unemployment has remained high, and high difficulties on the demand regularly come back.

But, indeed, since the early beginning of the 1980's, there seems to have some increase in the efficiency of machines and equipments. And, in the same time, the overall efficiency of capital (as a monetary value) experimented difficulties. As an indicator of that, we can see the output/capital ratio calculated on (1) machines (2) on the whole fixed material capital, on the case of France and USA (graphs 1 and 2). The indicators show an increase for machines efficiency, but not a so clear trend for the overall capital efficiency: the huge increase in the total capital-advances in values seems to pull downward the real technological underlying efficiency. It can also be interpreted in terms of organic composition increasing.

(Graph 1)

Output / Capital

USA

source: BEA – National accounts

(Graph 2)

 

Source: Insee – National accounts

 

During the 1990 and the 2000 years, the acceleration of debt and of labor productivity have worked increasingly together against the real potential of growth and employment in developed capitalist countries, along a chaotic path of crisis (with especially two main in capitalist developed countries¹: recession in 1990-1993, and the krach of the so-called new economy in 2000-2001, see xxDimicoli) with an overall lower growth rate on the period (especially for Europe) and a high unemployment rate.

It leads then to the big and quasi-world financial and global crisis.

We can see it for France on those two graphs.

(Graph 3)

France

Source: Insee, Banque de France

 

Graph 3: We see the tremendous increase of the debt of firms (measured by total internal indebtedness) compared to the relatively little increase of the GDP, which measures the total value added produced.

We would like to stress that an increase of debts is not necessary a problem in itself... if there is enough growth in counterpart. Enough growth, it means enough demand, and on the supply-side, a production efficiency produced. Otherwise, capita accumulation (in the form of debt titles, or of equipment, or etc.) without enough demand, at least on a middle term, means over-accumulation.

Indeed, in developed countries, (1) demand was highly attacked by the capital offensive against wages, which plays against demand, and (2) insufficient demand² was replaced by financialization, and in several developed capitalist countries, insufficient demand from households was supported by securitization of households debts (the sadly famous subprime system), which was a financial inflation driven by the growing exigencies of banks capital for profit and which masked, until the collapse, that there was insufficient underlying employment and insufficient wages.

It would be a completely different picture if it were credit to households anticipating future employment and wages, and if they really came. But it is the fundamental myopia of the system.

The attack against public spending played the same role against demand side, and also contributed to undermine the supply side efficiency.

(graph 4)

France

Source: Insee, Banque de France

On the graph 4, we can see how much the real potential of growth was attacked. I mean employment, which does not only play a role on the demand side by wages of workers, but also on the supply side, because people and employment are a high and a higher part of the real efficiency.

The surge of the financial crisis, and its lasting, is essentially due the basic rules of capitalism. Basic rules deeply implemented in powerful institutions, as banks and multinational enterprises, n the culture and in the system of powers. The basic rule is: "money must be used only to make money" and to make the most important quantity of money that is possible, whatever the consequences can be (i.e. in Marxist terms: money must be used as capital). Private property, for example, is mean to ensure it, but the essential rule is the profit rate seeking.

The monopoly appears now as a monopoly on the use of money. It has to be contested. And it is, in fact, in many capitalist countries, but without enough conscious of it.

2. The originality of the present capitalism and the novelty of the period

I would like to say some words on the originality of the present capitalism and on the novelty of the period.

Financial crisis is a component of a global genuine systemic crisis. This crisis calls for new answers, up to human challenges an up to the transformations experimented by capitalism, turned global and so financial.

After money, we shall insist on one very important aspect: technology.

There is a process of what we call, in France, the informational revolution.

We define it as the replacement of human's brain by informational machines for certain operations in material production and in services activities. So information tend to predominate progressively. Its logic is, in principles, highly different, and rather opposed, to the logic of the industrial revolution (industrial revolution was at the root of the capitalism).

Information revolution needs sharing and to promote human capabilities. But it is mainly used and orientated to serve the financial capital globalization and the development of MNEs. That brings to high contradictions³. Some words to

sketch the novelty of the informational revolution compared to the industrial one.

1. Information is sharable nearly without any cost. For example: a chemical formula to make a tire or to make a medicine, or a software to command machines, can be used simultaneously in France, in Brazil, in China and in Tunisia. On the contrary, a machine-tool can only be at one place. And we need nearly a double cost to duplicate it n two places for two plants.

2. Information needs the development of human capabilities to be efficiently used and developed. It is opposed to the principles of capitalism that gives priority to the development of the material means of production.

Yet, MNEs share information on a higher level than only national enterprises, even public owned ones. It is one of the main reason why they supplanted and overcame national public owned enterprises, for examples in telecom industry. But it brings to contradictions, essentially because they impose financial capital criteria against people and nature development, and because of their limited sharing of informational results (as technology). Instead of "traditional" nationalization, we would need a kind of "multi"-nationalization on a public basis to fully benefit from the potential of efficiency of the informational revolution. One can also imagine genuine international cooperation and sharing between different public enterprises, not capital costly, instead of financial participations and takeovers to build such co-operations and limited sharings that are capital costly, as MNEs do.

A very new aspect of the economic situation, compared for example with the 1930s, is that investment in new technologies is not sufficient to absorb the surplus of new profit liberated by productivity growth. So, with such liquidities, we observe an exceptional financialization. It is at the basis of specific vicious circles and of the lasting of the long wave (more than the classical Kondratiev cycle depressive phase).

Hence, in 2011, after the deep years of the crisis for quantitative growth, FDI begun again to increase in the world, at a pace of 11%, especially towards developing countries, even if it has decreased towards the less advanced economies.

After the informational revolution, we have to mention that there is also a genuine monetary revolution. It frees monetary creation from gold. But we, nevertheless need a relation to reality. The limit must not be the savings, as conservatives think in a Malthusian view. But the "limit" may now turn progressively to be the needs for social expansion in the world and the capacity to realize it.

Third, there is the ecological revolution, bringing threatens, but also opening new frontiers. It reinforces the imperious necessity for changing the production mode concretely, and of radically contesting the fundamental rules of profitability. Because profit means accumulation of material capital against nature and man.

Fourth, we have a series of demographic revolution, calling particularly for an expansion of persons public services or for a new kind of independence of women.

Those are objectively genuine revolutions. And they are facing the conservation of the basic rules of the system: capital power and its monopolization of the use of money for its logic and objectives. It means for profit and accumulations, the other twofold face of profit rate.

However, in face of the crisis, these revolutions are objectively a call for the radical transformation of the system.

In particular, the rise of new technologies and of emerging countries develop potential of a new world. If we clarify the sense of what is happening. So we see our responsibilities as progressives forces, as organizations, and as politically involved intellectuals.

3. Political potentials and the stakes

Limiting the capitalist logic of profitability is an answer (from Chamberlin, J. Robinson until Stiglitz) now to be overcame. Because it will not really answer to the situation.

It is the same about the necessity of a State intervention: it can nowadays consolidate the capitalist logic.

What is at stakes is to begin going towards an alternative logic, by overcoming in practice the 4 markets of the global financial capitalism.

3.1. The labor market

We plead in France for a radical "securization of employment and training", to insure for each person employment or a paid training with a coming back to employment. The principle of unemployment would be eradicated gradually⁴. Social security is a part of that overcoming. Making progressively labor force turning non tradable on the market.

3.2. The production market or the market of products (and firms)

Beyond public ownership, it concerns the need of new social efficiency criteria for the production, as opposed to profitability criteria, and as an alternative to them. Especially: economizing capital and developing valued added available for human beings in the place of profit. That means to implement ratios like VA/K (value added / capital) and the quantity of available value added (AVA) for a given population of for a given territory. It means also promoting cooperation and to favor spending in training and research. That would necessitate a new king of social appropriation of enterprises and firms with new social rights for all different workers to intervene in the management of firms themselves. Especially by developing representative institutions inside firms and with a new role and new powers for them.

It opens to an ecological and cultural reshaping of productions and to an indicative planning.

3.3. The monetary and financial market

It is the question of the mastering of bank credit and of the monetary creation by Central banks. Instead of being oriented towards profit and even speculation, we need another kind of selectivity. Credit would be less costly for investment developing employment (in quantity and quality) and value added, more costly for those diminishing employment and/or value added, and at quasi prohibiting rates for speculation. It could be done by a lowering of banks interest rates and it needs new social institutions.

The lowering of interest rates (i) would be done directly by public owned banks, (ii) could be subsidized by specific funds (included the receipts of a so-called Tobin tax), (iii) would be practices by the refinancing policy of central bank (the central bank should propose lower refinancing rates for enterprise paper given by the banks as collateral, according to the employment contents of the investment corresponding to the paper and to the respect of social and ecological development criteria). The more the firm develop employment, value added and respect social end ecological criteria, the more the interest would be lowered until zero, even more (with subsides).

New social institutions should fellow the use of the credits. They should be opened to representatives of inhabitants and of workers, and they should be in correspondence with representative institutions inside the firms themselves.

For central banks, I mention two other immediately possible actions, in link with the European crisis:

• To buy existing public debts in Europe, without anti-social and austerity conditions, by European central bank (ECB) and with giving back to States the interest charges that States would paid on the debt to ECB;

• To finance public services new spending, within existing European treaties (but against their logic), through a new Fund (a European Fund for Social and Ecological Development), at a very low interest rate, near to zero, the Fund itself being financed by the monetary creation of ECB, debt paper corresponding would not be tradable. Such a Fund would be a new social and democratic institution with parliament members and with trade-union representatives. It could be seized by people proposing their local or regional projects of pubic services development.

That means taking the Public services development and financing out of the hands of financial markets.

3.4. The International and World market

We needs institutions of mastering the international and world market and to promote cooperation. Not to insure the “freedom of the market” and the “throat cutting” competition. It concerns the promotion of cooperation rules, or for example international selective North/South financing at lower cost linked to trade, to help the production traded reaching better standards imposed in trade. In counterpart, this lowering of interest rate could be conditioned by outlets on the North side or by employment in both sides.

Public services are at the core of the mastering of the four markets.

With such a new economy, and beyond, with what we call a new “anthroponomy” — which denominates another conception of the non economic human social relations — we aim to construct a new civilization for all Humanity.

We could cross the West and the East contributions, in order to progress for each parts on its insufficiencies. Notably: liberties from Occident, but without selfishness and monopolies, and spirit and solidarity from Orient without hierarchical dominations.

4. Political potentials and the stakes

In Europe and in France, we formulate immediate proposals. They got simultaneously a radical and revolutionary perspective, opening to a transformation of the functioning of the system and of its logic.

Points of rapprochements between critical and heterodox streams of economists are developing. Especially between Marxists and Left Keynesian. The growing reject of austerity and also of “anti-social” conditionnalities imposed by ECB and the IMF to South Europe countries (Greece, Spain, Italy, Portugal) enlarge in Europe the circle of economists formulating alternative proposals. Beyond the limited position of an economist as Stiglitz, economic voices are growing for claiming other positive conditionnalities, reverse ones, in favor of public services and employment. Voices are growing for transforming ECB, the banks and, even, the world financial system.

There are also huge needs and incentives for alliances between peoples of all countries to unite against the US dollar domination, and the US imperialism. On the other hand, there a strong pressures from US government and from US multinational enterprises (MNEs) to make each government “collaborating” to their domination, especially pressure on intermediate capitalist countries in Europe or on Emerging countries. On the contrary, there is a growing need of unification against economic imperialism, even from within the system, by people and countries suffering from the finance capital domination leaded by US and by the US MNEs. This need is reinforced by the growing of a working class and of inequalities all around the world.

These movements are not without contradictions. But we need to clarify it and to put it in perspective. The development of original Marxist analysis, their diffusion and their mastering are decisive to clarify stakes as well as social and political struggles for a new democratization.

Conclusion

To conclude, some words on the world financial system and on common goods.

I have no time to enter in detail in MNEs specific stakes. Their are characterized by a combination between localized activities and globalization of resources — especially financial and informational resources — which leads to a dissociation in the costs, some being national costs and others being global costs — and they can transfer values (especially through transfer prices) and develop a certain kind of resources sharing inside their perimeter. The global costs include both capital and information costs, and are a basis, today, for resource and values transfers from countries. The question is to master those financial and informational transfers, it is the sharing of resources by other means and other rules than those of the financial capital and its markets. For example, the sharing of localized valued added on the global value added of a MNE should be the object of common international cooperative policies, through specific rules.

At the world level, we, French Marxists economists, formulated long years ago proposals for a deep reform of the IMF: its democratization (voting rights partly linked to the population weight, suppression of the USA veto right, etc.), its aim, and its tools. I want to insist here on the need for a new financing towards co-development of people.

For that, there is the necessity of another world common currency than the US dollar.

The governor of the Chinese central bank formulated recently on the international stage. He proposed to develop such a world common currency from the existing Special drawing rights (SDR). He was supported by Brazil and by Russia but USA rejected the proposals.

Paul Boccara already formulated in 1983 similar proposals, in the New-Delhi international conference⁵. I would like to specify it. First, SDR may be enlarged to other currencies and they could be related to some fundamental basic products. But, second, it is of very high importance to orientate those special drawing rights. They must stimulate public services expansion (including social protection) and another bank credit in favor of employment.

So (1) profoundly democratized IMF could refinance Central banks of countries in order to make them stimulate in their country a selective credit for efficient investment, developing employment and training. (2) On the other hand, the IMF should subscribe directly public debts, and hold it, in counterpart of supplementary creation of the new common currency, under the condition that the public spending corresponding develop public services, international cooperation, especially to develop global public goods of humanity.

Indeed it is the question of a huge expansion of public services for all countries, both for social demand and for efficiency, with a new kind of productivity. This expansion is essential to go towards the development of common goods of Humanity, as nature as well as technology, culture or health.

It would thereby challenge the world domination of MNEs, also helping and helped by cultural struggles and social seeking for a new civilization for all Humanity.