Chapter 7 The Economics of Disaster Capitalism

System Crash: An Activist Guide to the Coming Democratic Revolution.

The only questions concerned the trigger and the timing. Neoliberalism is the most dysfunctional and parasitic form of capitalism in the history of the system. It is characterised by economic stagnation, financial speculation, grotesque and growing inequality, trillions of dollars of waste expenditure, and a repeating cycle of boom, bubble, and bust. Striding the world in pursuit of corporate profit, it leaves in its wake social, ecological, and military devastation.

It was only a matter of how and when. The trigger turned out to be Covid-19, a lethal virus spawned in the ecological mayhem and social squalor on global agribusiness’s wild frontier. Thanks to the negligence and cover-ups of the world’s rulers, by the time it was called out, in March 2020, it already had a grip. Because of that, the world went into lockdown and was tipped into an economic depression.

Forty million out of work in the United States. Unemployment in Britain set to triple by the end of 2020. A record 30% out of work in South Africa. Hundreds of millions of low-paid workers in the Global South facing a gut-wrenching choice between catching the disease in a crowded sweatshop or street-market and watching their children starve.

The pandemic is still with us. There is, at the time of writing, no clear end in sight. Waves of redundancies and wage cuts are choking demand, driving fresh waves of collapse. Businesses and consumers, facing an uncertain future, are reluctant or unable to spend. A negative ‘multiplier effect’ is pulling everything down. Some economists are saying the world will take a decade to recover.

A rational world would have organised things differently. We would have shut down the corporate farm complexes, cleared and rebuilt the slums, and made health provision a priority. And now, even in the face of the pandemic, if ordinary people were in control, we would guarantee everyone a job, an income, a home, and basic goods and services.

But we do not live in a rational world: we live in a world of corporate power and competitive capital accumulation powered by the pursuit of profit. It is this dynamic that explains the present crisis of neoliberalism.

The system is afflicted with chronic deflation, a persistent and debilitating lack of demand. This has been exacerbated by neoliberal restructuring of the workforce and work processes, by deregulation and privatisation, by the breaking of union power, which have enabled employers to raise profits and reduce wages. This means ‘over-accumulation’ of capital and ‘under-consumption’ by the working class; an economy with productive capacity far in excess of purchasing power; a system overloaded with surplus capital.

Underpinning the crisis are two massive shifts in global capital accumulation. First, during the neoliberal era, the size of the international working class has roughly trebled from 1.2 billion to 3.5 billion, and there has been a seismic shift of world production from the relatively high-wage Global North to relatively low-wage Global South.

In the sweatshops and factory complexes of slum mega-cities across Asia, Africa, and South America, hundreds of millions of new proletarians experience super-exploitation at the hands of local sub-contractors working for giant transnational corporations; and it is the latter, in control of finance, technology, supply-chains, digitalised information, and markets that cream off the resulting super-profits.

Second, especially but not exclusively in the Global North, there has been a relative shift in the focus of exploitation from the workplace (‘the point of production’) to the individual household (‘the point of consumption and social reproduction’). The spending power of working-class families is hoovered up by mortgages, rents, taxes, utility bills, transport costs, supermarket prices, and, not least, interest on consumer debt.

Debt. That is a matter of special import. We now live in a ‘permanent debt economy’, where demand is sustained by government, corporate, and consumer debt, and where debt becomes a tradable commodity in its own right, with vast edifices of financial speculation, of casino banking and electronic mega-fortunes, built out of debt-based financial assets.

That is why the system keeps crashing, most spectacularly in 2008, when it was discovered that millions of ‘sub-prime mortgages’ had been sold to poor people who could not afford to repay them at the height of the speculative boom. That bad debt had been ‘diced and spliced’ with sound debt and sold on in the form of complex ‘financial derivatives’, so that the entire world banking system was infected. The only thing that prevented a complete meltdown was a series of gargantuan state bailouts to prop up bankrupt private banks.

The state bailouts rebooted the electronic casino. With the real economy in freefall, with incomes shrinking and demand collapsing across the world, we hover on the brink of another financial catastrophe.

Let us now drill down deeper into the inner workings of the system. Neoliberalism’s ‘economics of the madhouse’ threaten the wellbeing of the great majority of humanity and of the ecosystems on which we all depend. To save ourselves and our planet, we have to understand the system, so that we can organise ourselves to overthrow it and replace it with an economy based on democracy, planning, sustainability, and human need.

A history of crisis

Crisis is a normal part of the way capitalism works. But sometimes a crisis is so serious it tips the system into long-term depression, tears society apart, and triggers fascism, war, and sometimes genocide.

There are three kinds of crisis under capitalism – cyclical, structural, and systemic. Cyclical crises typically occur every ten years or so. They happen because capitalism is a system of blind, anarchic, unplanned growth. Every boom ends in a bust.

But the bust, by driving many firms out of business, prepares the ground for a new boom. The effect of the bust is to choke back supply and clear clogged-up markets. The firms that survive can then start a new round of expansion.

Cyclical crises have been compared to the ‘breathing’ of the system – a recurring pattern of expansion and contraction by which capitalism, in its anarchic way, periodically rebalances supply and demand by bankrupting a swathe of existing capital.

A structural crisis is much more serious and intractable. It is a sustained period of sub-optimal growth when surplus capital builds up inside the system because there are insufficient outlets for profitable investment. The result is protracted stagnation, mass unemployment or underemployment, and austerity cuts.

There have been three or four earlier periods of structural crisis in the history of the system. Some economic historians see the entire period from 1815 to 1848 – when, of course, industrial capitalism was in its infancy – as a sustained period of structural crisis. This was followed by a long boom from 1848 to 1873.

Then the world economy collapsed into what was, unquestionably, a long structural crisis from 1873 to 1896. It was triggered by a financial crash, but what followed was more than two decades when growth rates were barely half what they had been in the preceding period.

This structural crisis – the Long Depression – led to major changes in the way capitalism operated. Smaller firms went to the wall. Big firms became dominant and formed cartels or trusts to fix prices and protect markets. Banks, heavy industry, and the state formed a tight economic alliance, with major firms buoyed up by bank loans and state contracts.

Because home markets were depressed, the imperial powers used their military might to build overseas empires and provide the big firms with new outlets for capital investment.

Because this process was competitive, international tensions rose, an arms race kicked off, and the world finally exploded into war in 1914.

So the structural crisis which began in the 1870s led to a remodelling of capitalism, aggressive imperialism, and, eventually, the industrialised carnage of the First World War, in which 15 million died. That war can be seen as a direct consequence of capitalism’s inherent tendency towards over-accumulation because it was this that drove imperialism and the global struggle for raw materials and markets.

The second great structural crisis was triggered by the Wall Street Crash of 1929. This plunged the world into the Great Depression, with unemployment close to one in three in both Germany and the United States in the early 1930s.

This story is familiar. The Great Depression polarised politics, but fascism triumphed across much of the world and eventually plunged humanity into the Second World War, when 60 million died, the majority of them civilians killed in the genocides implemented by the German Nazis (in Eastern Europe) and the Japanese Militarists (in China). Again, an economic crisis of over-accumulation became a military crisis of imperialist war. A stagnant system led to the horrors of Stalingrad, Auschwitz, and Hiroshima.

And again, capitalism was restructured by crisis. A new form of state capitalism emerged. In its most extreme form – Stalinist Russia – the entire national economy was controlled by a party/state bureaucracy. Elsewhere, state infrastructure and arms expenditure meant lucrative contracts for private corporations and provided a basis for economic recovery.

State capitalism underpinned the war economies of 1939-45, and then, after the war, the state-capitalist model became the basis of reconstruction, a new boom, the building of welfare states, and the advent of a ‘consumer society’.

The post-war boom – ‘the Great Boom’ – saw the world capitalist economy grow at a faster rate than at any time in its history. The boom was sustained by US financial power (the dollar became the world’s reserve currency), high levels of arms expenditure (during the Cold War), high levels of state expenditure (on infrastructure, housing, schools, hospitals, welfare, etc), and by proactive state intervention to regulate capital and manage demand (‘Keynesianism’).

This phase in the development of world capitalism came to an end in the early 1970s. Growth rates slowed in the mid to late 60s, and the system then tipped into full-blown crisis in 1973. Two interlocking factors were of decisive significance: the rise of the multinationals; and the squeeze on profits.

As the world economy grew, global markets were increasingly dominated by a relatively small number of corporate giants in each sector. This new stage in what Marx called ‘the centralisation and concentration of capital’ we discuss in more detail below. What matters here is that nation-state economic management was increasingly incompatible with the power and interests of giant corporations with global reach. Increasingly, state power was trumped by corporate power, with capital able to demand deregulation, lower taxes, subsidies, and incentives, etc, in return for investment.

The squeeze on profits was another consequence of the boom. Full employment meant tight labour markets, strong unions, and enhanced bargaining power for organised workers. Higher wages and rising living standards, combined with the increased ‘social wage’ represented by state spending on housing, education, health, and welfare, meant that the overall distribution of wealth become somewhat more equal: working people got a larger share at the expense of corporate profits and the incomes of the rich and the middle class.

To restore the rate of profit, ruling classes across the world launched a counter-offensive to roll back the popular gains of the post-war period. Social-democratic ‘welfare states’ in the Global North and ‘national-developmental’ programmes in the Global South – both involving state intervention, the provision of basic services, and a degree of income redistribution – were dismantled. This is the essential meaning of neoliberalism: it is a ‘counter-revolution’ by corporate capital at the expense of the working class and the oppressed on a world scale. Let us now explore this in more detail.

The neoliberal counter-revolution

William I Robinson argues that the neoliberal era (from 1975 onwards) has seen a sharp acceleration in the internationalisation of capital and a qualitative shift from merely ‘international capital’ to ‘transnational capital’. The distinction he makes is between ‘international’ firms that retain a primary national base but move capital and commodities on a global scale, and ‘transnational’ firms that relocate production itself, with plants in numerous countries, linked together in a web of supply-chains, so that the entire process of capital accumulation becomes fully globalised.

His perspective – developed in a series of seminal books over two decades – offers a holistic view of the world system today. The key observations can be summarised as follows:

  • The world capitalist system is afflicted with an intractable crisis of over-accumulation, chronic tendencies to stagnation, and increasingly pathological ways of unloading surplus capital.
  • A transnational capitalist class, with associated transnational state apparatuses, has now become the hegemonic fraction of capital on a global scale, dominant over regional, national, and local fractions.
  • A globalised process of ‘primitive accumulation’ has reached its culmination, with virtually the whole of humanity displaced from control over its own means of production and subsumed within global circuits of capital accumulation.
  • Capital has now colonised the planet as a whole, is pushing beyond the limits of sustainability, and thus threatens humanity with ecological breakdown and an existential crisis.
  • The global working class – now the overwhelming majority of humanity – is divided into a core group in relatively secure jobs, a precarious group in marginal employment, and a surplus group that is effectively excluded, with the former shrinking and the latter two growing rapidly, especially in the context of ‘digitalisation’ and the ‘Fourth Industrial Revolution’.
  • Because the global squeeze on working-class incomes means that the working class cannot consume its own product (‘under-consumption’), surplus capital (‘over-accumulation’) is offloaded in increasingly parasitic ways – through financial speculation, debt-driven consumption, pillaging of state assets (privatisation), and ‘militarised accumulation’.

Let us consider these forms of accumulation and the way they interlock in more detail. A growing proportion of the wealth of the rich is used to fund financial speculation. In this form of accumulation, nothing is produced, and no socially-useful service provided. Instead, the rich trade financial assets of one sort or another – bonds, shares, mortgages, currencies, etc. These are essentially claims on future value in monetary form. What the rich are actually trading is debt.

The scale of what has been called ‘the permanent debt economy’ is awesome. In late 2008, the ‘value’ of the world derivatives market was estimated at $791 trillion. This was eleven times the value of the entire world economy. Where the ratio of fictitious capital to real capital is 11:1, you have an unsustainable speculative bubble. Sooner or later, the bubble bursts. When it does, debts cannot be repaid and a tranche of mega-corporations go bankrupt.

Only what happened in 2008 was that the big corporations were bailed out by trillions of dollars of state money. One estimate of US government spending on bailouts between 2008 and 2012 put the total at $30 trillion.

So public money – taxpayer money – our money – was used to prop up private banks and stabilise the global financial system. This meant states becoming heavily indebted. They therefore imposed a decade of austerity that lowered wages, cut pensions and benefits, and eviscerated public services.

The rich, meantime, used the injections of public money to fund a new round of speculation. Total world debt was around $173 trillion (280% of global GDP) at the time of the 2008 crash. It is now around $250 trillion (320% of global GDP). So the world economy is hovering on the brink of another financial collapse.

Oxfam estimated that a few years after the financial crisis, in 2014, the richest 85 billionaires in the world had as much wealth as the poorest half of humanity. Five years after that, in 2019, they estimated that just 26 billionaires had this amount of wealth. The reason for this growing social inequality is simple: the permanent debt economy is a gigantic global mechanism for extracting wealth from working people and siphoning it to the top.

At the base of the great edifice of debt and capital accumulation are ordinary workers and consumers. When you boil it down, the rich accumulate wealth in two main ways.

First, workers are paid less than the value of the work they do, and exploitation at the point of production has increased massively in the neoliberal era. Four processes are at work: a) the breaking of the post-war ‘social-democratic consensus’ in the Global North so as to redistribute wealth from labour to capital; b) the smashing of national-development plans in the Global South through ‘structural adjustment programmes’ designed to open up economies to exploitation by transnational capital; c) the relocation of production to the low-wage mega-slums of the Global South; and d) using the ‘reserve army of labour’ created by a trebling in size of the international working class to undercut the pay, conditions, and bargaining power of workers everywhere.

The consequences are all around us. Even in the Global North, millions of workers are denied permanent, full-time jobs. Millions are on temporary contracts, ‘short-hours’ contracts, or ‘zero-hours’ contracts; millions are forced to work part-time or to moonlight; millions are low-paid, insecure, and end up in debt. Even those with decent jobs have faced falling or stagnant wages.

Low pay and high profit are two sides of one equation. The neoliberal counter-revolution of the last 40 years has engineered a huge shift of wealth from workers to bosses.

That is one kind of exploitation. There is another, of increasing importance: exploitation at the point of consumption and social reproduction. This takes three main forms.

The first is payment for the goods and services we need. This involves: the introduction of fees for things that used to be free (like higher education); increased charges for things that used to be subsidised (like transport); routine overpricing of consumer goods by big corporations (which collaborate to fix prices); and the extortionate rents charged by private landlords (in the absence of rent controls).

The second is interest on debt. Household debt has rocketed in the neoliberal era. Mortgage debt, student debt, credit-card debt, pay-day-loan debt, and more have become primary mechanisms by which the corporate rich accumulate wealth.

Debt has risen for three reasons: workers borrow money to compensate for falling wages; bankers encourage borrowing as a source of profit; the system as a whole needs debt to maintain demand in a time of austerity. The effect is to redistribute wealth from bottom to top.

The third mechanism is taxation. Taxes have been cut for the rich and the corporations in the neoliberal era; much of their wealth, in any case, is stashed in tax havens. Working people carry the main burden of state taxes. Some of this is used in socially beneficial ways, like funding education, health, welfare payments, and local services. But much is not.

Tax revenues are used to buy armaments, build detention-centres, fund prestige projects like HS2, and, of course, bail out bankrupt corporations. Even when used in socially beneficial ways, state facilities are privatised, or government contracts are outsourced, so that (our) taxes end up being recycled into (their) profits.

But a fast-rising proportion of this state expenditure is not socially beneficial at all. On the contrary: it is expenditure on what William I Robinson calls ‘militarised accumulation’ and a ‘Global Police State’. We have discussed aspects of this in earlier chapters. Here we focus on the economic aspect. This is how Robinson describes ‘militarised accumulation’ in his latest book The Global Police State (2020):

… the global economy is based more and more on the development and deployment of … systems of warfare, social control, and repression as a means of making profit and continuing to accumulate capital in the face of stagnation – what I term ‘militarised accumulation’, or ‘accumulation by repression’… the ruling groups have acquired a vested interest in war, conflict, and repression as a means of accumulation. As war and state-sponsored violence become increasingly privatised, the interests of a broad array of capitalist groups shift the political, social, and ideological climate towards generating and sustaining social conflict – such as in the Middle East – and in expanding systems of warfare, repression, surveillance, and social control. We are now living in a veritable war economy.

Neoliberalism is a highly parasitic form of capitalism. Much ‘economic’ activity today is not truly economic at all: nothing is made, nothing is done. Instead there is ‘financialised accumulation’ – a process whereby wealth is hoovered from consumers in the form of fees, prices, rents, debts, and taxes. Even in the real economy, there is vast expenditure on luxuries for the rich, on armaments and police repression, on advertising and marketing, and on other kinds of waste. And there are devastating consequences – the degradation of Nature, the creation of mega-slums, the spewing out of ‘surplus humanity’, the mind-crushing boredom of labour for capital, and so much more.

To understand why modern capitalism is so malignant, we must drill down even deeper, to understand the system’s long-term dynamics and trajectories.

The centralisation and concentration of capital

Capitalism is the most dynamic form of social organisation in human history. This is how Marx put it in The Communist Manifesto:

Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air …

He wrote this in the winter of 1847/8, when industrial capitalism was in its infancy. Who today can doubt its accuracy?

Take communications. In Marx’s day, even in the most developed parts of the world, news moved at the speed of the postal service. Then cables were laid and reports could be transmitted in minutes. But most people still had to wait for a printed newspaper to reach the streets before they caught up. By the time of the Second World War, however, many households had radios. Then, during the 1950s, the TV set became ubiquitous. The internet was invented as recently as 1989, and smartphones took off less than 20 years ago.

Capitalism is not only hard-wired for rapid change. The tempo of change continues to accelerate. This is because knowledge, skill, and productive power accumulate over time. So the world economy grows exponentially.

Global production increased more than 80 times between 1750 and 1980. Nowadays it tends to double every 25 years. (We leave aside, for the moment, the impact of Covid.) World coal production has risen from 15 million tons in 1800 to 8,000 million tons today. World oil production was 150 million barrels in 1900 but is now around 30 billion barrels a year.

Exponential economic growth has meant exponential growth in population and cities. The world was home to about 750 million people in 1750, but 1.25 billion in 1850, 2.5 billion in 1950, and 7.5 billion today. Only 2.5% of a much smaller global population lived in cities in 1800. Today the proportion is roughly half and rising.

The ancient Greek philosopher Heraclitus taught us that all things are in a state of flux and that change is the only constant. This is more apparent today than ever before. What makes capitalism more dynamic than all preceding social systems – what makes it a self-feeding process of exponential growth – is the process of competitive capital accumulation.

Unlike earlier forms of competition – like the political rivalry between tribal chieftains, ancient empires, and medieval kingdoms – capital accumulation involves economic competition between rival corporations. Capitalists are compelled to invest in new technologies to avoid being priced out of the market by more efficient competitors using labour-saving machinery. They are subject to the iron law of the market: the need to cut costs, increase output, and reduce prices to stay in business.

The measure of success is profit. The more successful capitalists capture a larger share of the market and make bigger profits. These profits then get reinvested in the business to enhance competitiveness further. The bigger the scale of operations, the more scope there is for investment and innovation. In the long run, this means the bigger firms win out. Small and medium firms with lower margins and less investment capital can often survive in a boom, but are more likely to go bust in a recession.

Marx observed all this when working on his masterwork Capital in the mid 19th century. He concluded that ‘centralisation and concentration of capital’ was an inevitable long-term process – centralisation of ownership, concentration of production.

It is more obvious now, as we look back. When Marx was writing Capital, a plethora of small and medium firms competed with each. Manchester, the first industrial city, was dominated by the textile industry. There were a hundred or so mills, most under separate owners, the largest employing 2,000 people, most a few hundred or so. By the time of the First World War, however, the largest workplaces were employing tens of thousands – 75,000 at London’s Woolwich Arsenal, 70,000 at Essen’s Krupp complex, 40,000 at Petrograd’s Putilov works.

This process – the rise of the giant corporation – has continued to the present. When Walmart, a few years back, was recorded as the world’s largest corporation, its annual revenues of half a trillion dollars made it bigger than Greece. In fact, had it been a country, Walmart would have ranked 25th largest in the world, ahead of 157 out of 195 of the countries in the world.

But wait. That was then (2017), and in the three years since no less than four companies have broken the trillion-dollar barrier – Apple, Amazon, Microsoft, and, most recently, Alphabet (Google’s parent company).

A similar picture holds for the world economy as a whole. Each major sector is dominated by a small group of transnational corporations. The biggest companies in finance, oil, motors, electronics, communications, pharmaceuticals, private health, armaments, security, and more turn out to be bigger than most countries. We now have a system where the global market in everything from supermarkets to social media is dominated by handfuls of giant conglomerates.

Watching this process of centralisation and concentration for a century, Marxists have adopted the term ‘monopoly-capitalism’. Add in recent globalisation and financialisation, and we have ‘global financialised monopoly-capitalism’ – a bit of a mouthful, but it sums up the key features of the system today in a single phrase.

When there were lots of small and medium firms operating – as in Marx’s day – the competition was pretty ruthless. Capitalists hate this: it means risk and the possibility of bankruptcy if you make the wrong call. They crave the certainties of managed markets with guaranteed sales and rising prices. So as soon as they are able, they form cartels or trusts, they create ‘oligopolies’ where a few firms dominate and manage the market.

Monopoly does not literally mean that one firm controls everything. Typically, each sector is dominated by half a dozen, maybe a dozen, top firms. But these are few enough, and powerful enough, to collaborate, either by formal agreement or tacit understanding, to avoid mutually destructive price competition. The monopolies become ‘price-makers’ instead of ‘price-takers’.

Rising prices are one side of it. Guaranteed sales are the other. The corporations do not just set the price. They also create the ‘want’. This becomes increasingly necessary with exponentially rising output of consumer goods. A growing proportion of the stuff churned out is not needed or even desired. So ‘demand’ has to be actively created through branding, packaging, advertising, redesigns, upgrades, and so on. Consumers are seduced and bamboozled into buying stuff they never knew existed, let alone wanted.

Intrinsic to this is monumental waste. Goods are designed to fall to bits so they have to be replaced. Commodities are denigrated as out-of-date and out-of-fashion within a year. Consumers are bombarded with messages about the need to buy the latest stuff if they want to be cool, sexy, classy, sophisticated.

Needs are not the same as wants. Needs are intrinsic to the human condition – food, clothes, shelter, education, health-care, and more. Wants can be conjured and manipulated by corporate capital to stoke up consumption. Every one of us is subjected to a daily barrage of corporate propaganda, especially nowadays online, with electronic surveillance and data-gathering used increasingly to target marketing at individual consumers through their social-media feeds.

The ideology of the system is ‘free market’ competition. In fact, markets have never been ‘free’ in the sense implied in economics textbooks, but they are less free today than ever before. The reality is monopoly-capitalism, managed markets, rip-off prices, artificial wants, and colossal waste.

We are told that consumer ‘choice’ shapes the market, that ‘supply and demand’ determine prices. The truth is that monopoly corporations create and control the market.

This brings us to the central contradiction of the economic system. If prices keep going up, the corporations are making profit twice over, once by exploiting their own workers, second time by overcharging consumers. This means ever more profit in the hands of the corporations. At the same time, however, workers/consumers are getting squeezed, reducing overall demand, making it harder to find a market for everything produced.

Consider Walmart again. It pays rock-bottom wages to its two million workers, but it needs high wages everywhere else so consumers can spend in its 12,000 stores. Every capitalist is in the same position. And the bigger the slice taken by profit, the lower the share of workers/consumers – and the wider the gap between what is produced and what can be sold.

This problem – low wages in the factory, high prices in the shops – is inherent in the capitalist system. It operates with an insoluble problem of ‘over-accumulation’ (of profit) and relative ‘under-consumption’ (by the working class). But this problem gets much worse under monopoly-capitalism because the corporations are raking in super-profits by managing the market.

That is one issue. Here is another. Reduced competition has not only enabled capitalists to accumulate super-profits; it has also undermined their incentive to invest in new production facilities. To build a factory with state-of-the-art robots to compete on a global scale is a massive, long-term, high-risk investment. What if, before the new production comes on-stream, a war, a pandemic, or an economic downturn shrinks the markets and leaves a glut of unsold goods?

Capitalists are risk-averse, especially the corporate bureaucracies that run today’s global giants; and the managed markets of monopoly-capitalism make it much easier to avoid risk. So corporations with a cash surplus are nowadays much more likely to invest in government bonds or company shares, buy up privatised state assets, put money into real estate, trade in debt, or speculate on rising asset values.

There has been a massive shift in the neoliberal era from relatively risky long-term productive investment into short-term financial speculation. That shift has been fast-geared by the exceptional mobility of money achieved by modern IT systems. Financialisation offers click-button fixes for capital in search of quick-and-easy profit.

In sum, the centralisation and concentration of capital means a system of monopoly-capitalism. This involves managed markets, super-profits, risk-avoidance, and financial speculation. Capitalism’s inherent tendency towards over-accumulation and under-consumption is thereby intensified. The ageing system is afflicted with chronic and endemic stagnation. It has become a zombie economy addicted to debt.

Digitalised dystopia

World capitalism is now set for a sharp intensification of the over-accumulation crisis rooted in the centralisation and concentration of capital. What some are calling a ‘Fourth Industrial Revolution’ has begun. Hundreds of millions of jobs are imperilled by digitalised automation. On the one hand, capital becomes concentrated and over-accumulated like never before; on the other, vast masses of workers are either displaced into low-paid precarious jobs or jettisoned entirely as ‘surplus humanity’, thereby, in economic terms, shrinking demand and deepening the crisis of under-consumption.

Consider some basic facts and figures. At peak employment in 1979, General Motors employed nearly 840,000 people and reported earnings of $11 billion. By contrast, in 2012, Google employed just 38,000 people and generated profits of $14 billion.

Nor is it simply a matter of tech companies being low-labour and high-profit. Their products are integral to all modern circuits of capital accumulation and are driving an economic transformation with massive social implications. ‘Digitialisation,’ argues William I Robinson,

… is leading to a new wave of technological development that has brought us to the verge of the ‘Fourth Industrial Revolution’, based on robotics, 3D printing, the Internet of Things, artificial intelligence (AI) and machine learning, bio- and nano-technology, quantum and cloud computing, news forms of energy storage, and autonomous vehicles. There is now a fusion of technologies across physical, digital, and biological worlds … While the tech sector that drives forward this new revolution constitutes only a small portion of the gross world product, digitalisation encompasses the entire global economy, from manufacturing and finance to services, and in both the formal and informal sectors. Corporations are now dependent on digital communications and data for all aspects of their business. ‘Tech firms,’ notes Foulis, ‘are becoming the conduit through which people interact with the world. The tech sector becomes a layer that sits across the entire economy.’

The effect on the structure of the global working class will be profound: a massive increase in the proportion of both precarious and surplus. Let us consider one example: the driverless car. Millions of people expelled from formal employment in recent years have found low-paid precarious work in the gig economy. Uber, for example, has three million drivers working for it worldwide on fake ‘self-employed’ contracts. In 2016, the company announced plans to replace a million drivers with autonomously driven vehicles. Walmart is the largest single employer in the world, with more than two million workers on its books. Most are low-paid precarious workers. But Walmart intends introducing robots to carry out inventory and janitorial work in its stores.

Even now, the International Labour Organisation (ILO) reports that 1.5 billion of the world’s 3.5 billion workers are in precarious employment. Many of these are recruited from the ranks of the world’s 230 million international migrants and 740 million internal migrants. But this immiseration of humanity is set to get much worse. Quite apart from the growing impacts of economic depression, social disruption, armed conflict, and climate change, there will be the impact of the Fourth Industrial Revolution. Robinson again: ‘As digitalisation now drives a new round of worldwide restructuring, it promises to extend precariatisation of workers who have employment and also to expand the ranks of surplus humanity excluded from the labour market.’

The Great Depression of the 2020s

Nothing substantive has changed since 2008. The banks are still run like casinos, and the debt mountain is now higher than ever. The neoliberal elite continues to siphon wealth to the top. The corporations continue to grow by driving down wages, privatising public services, devastating natural environments, and propelling us towards climate catastrophe. They are growing the precariat and spewing out the surplus. They are expropriating and despoiling Nature. They are investing in a new industrial revolution that will leave billions destitute.

All this, then coronavirus.

The great liberal economist John Maynard Keynes taught us that economics is not a science. What happens in the economy is the sum of millions of separate decisions, all based on incomplete knowledge and personal quirks, and no-one can second-guess the outcome with confidence.

But we can assume the following: mass redundancies and swingeing wage cuts; deep insecurity and a desire to save not spend; collapsing demand and confidence spreading across the economy; a self-feeding and self-fulfilling depression, as banks, businesses, and consumers assume the worst and rein back.

Far more likely than the ‘bounce-back’ predicted by some Tories is that we enter what Keynes called ‘a permanent underemployment equilibrium’ – a new Great Depression.

The bosses are anticipating this. They have already made it clear that millions are going to lose their jobs, and they have started imposing 15% wage cuts on those who remain and tearing up old contracts and agreed terms and conditions.

This is liable to be the beginning of a massive austerity programme, rolling out over years, to reduce costs and sustain profits – an austerity programme that will not only mean mass impoverishment, but will also be self-defeating, in that it will deepen the depression by driving down demand even further.

This new downturn in the world economy will deepen the system’s crisis of legitimacy. It will trigger desperation, anger, and resistance. The system will respond by ramping up police repression and peddling racism, nationalism, and militarism.

Neoliberal capitalism – a system of stagnation-slump, permanent debt, parasitic speculation, and grotesque and growing inequality – is the basis of the wealth and power of the international ruling class. They will defend it with utter ruthlessness. They will take us all into an abyss of barbarism if we let them. The rich and their system must be overthrown in the interests of humanity and the ecosystem.

Anti*Capitalist Resistance will soon be publishing this new book on the world crisis and the popular resistance in print format. Because of the urgency of the political situation, however, we will be publishing the book chapters as a series of long-read online articles over the next month or so. This is the seventh chapter.

Neil Faulkner is the author of Alienation, Spectacle, and Revolution: a critical Marxist essay (out now on Resistance Books). He is the joint author of Creeping Fascism: what it is and how to fight it and System Crash: an activist guide to making revolution. Neil sadly passed away in 2022.

Phil Hearse is a member of Anti*Capitalist Resistance and joint author of both Creeping Fascism and System Crash.

Rowan Fortune authored Writing Nowhere; edited the anthology of utopian short fiction Citizens of Nowhere; and contributed to the collaborative book System Crash. It writes on utopian imagination, revolutionary theory and trans* liberation.

Simon Hannah is a socialist, a union activist, and the author of A Party with Socialists in it: a history of the Labour Left, Can’t Pay, Won’t Pay: the fight to stop the poll tax, and System Crash: an activist guide to making revolution.

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