Home > economics, political-economy, shorter work time > Why didn’t capitalism collapse in 1929? (Final)

Why didn’t capitalism collapse in 1929? (Final)

September 27, 2009 Leave a comment Go to comments

Continued from here

If we try to reconstruct the underlying events leading to the Great depression according to Marx’s theory, we arrive at this narrative:

At the beginning of the Great Depression the owners of businesses would have been  experiencing some definite fall in the profitability of their operations. They would have then began implementing the previously mentioned four options to deal with it: (1) Slowing the rate of new investment in plants and machinery; (2) closing existing plants, etc.; (3) reducing wages of their work force; and (4) aggressively seeking new markets for their products.

To any mainstream economist looking into the events as they unfolded, it would not have looked much different from any previous economic downturn. There would have been no warnings signs of the impending catastrophe, no markers to indicate anything unusual, no sudden stillness as nature held its breath before a great quake.

All this, mind you, would have been occurring well before the Great Stock Market Crash of 1929 – in fact, the stock market bubble and eventual crash would itself have been the result of the sudden appearance of superfluous profits from industry which were now washing through the economy seeking any possible profitable outlet for reinvestment. Those superfluous profits would have resulted in a massive burst of speculation as investors, seeing productive investment outlets closing, turned to the financial markets and began engaging in rampant speculative pursuits.

Like rats trapped in a growing tsunami of unsold goods, each investor raced toward the highest point trying to escape the oncoming flood – pure financial speculation – until, at last, even the heights were breached on October 24, 1929 with the first of a series of stomach wrenching stock price drops.

The game was up, the party was over – an unimaginable amount of leveraged wealth evaporated in a matter of hours as capital announced in its own unmistakable fashion that it had outgrown the conditions of its own existence.

Victim of the U.S. bombing of Hiroshima

Victim of the U.S. bombing of Hiroshima

At that point – at that very moment – the fate of nearly 100 million human lives, and much of the productive machinery of the entire planet, rested on society’s willingness to recognize that capital had grown beyond the narrow bounds of nation states and must have new markets to expand itself.

This recognition should have been accompanied by the ghastly realization that several major nations had reached this same point together, and would, if not checked, be drawn into conflict with one another.

Bertrand Russell said exactly this. Speaking of superfluous profits, he states:

One of the commonest things to do with savings is to lend them to some Government. In view of the fact that the bulk of the public expenditure of most civilized Governments consists in payment for past wars or preparation for future wars, the man who lends his money to a Government is in the same position as the bad men in Shakespeare who hire murderers. The net result of the man’s economical habits is to increase the armed forces of the State to which he lends his savings. Obviously it would be better if he spent the money, even if he spent it in drink or gambling.

Absent a reduction in hours of work, Russell argued, this conflict could only be settled as its had been each time it was encountered in the past.

… a large proportion of the total produce goes to a small minority of the population, many of whom do no work at all. Owing to the absence of any central control over production, we produce hosts of things that are not wanted. We keep a large percentage of the working population idle, because we can dispense with their labor by making the others overwork. When all these methods prove inadequate, we have a war: we cause a number of people to manufacture high explosives, and a number of others to explode them, as if we were children who had just discovered fireworks. By a combination of all these devices we manage, though with difficulty, to keep alive the notion that a great deal of severe manual work must be the lot of the average man.

Thus, aggressive competition for those new markets, and the concentration, centralisation, and merger of capitals – which, in this instance, were the concentration, centralisation, and merger of entire national economies, and which, therefore, implied a global holocaust – to finish the evil work begun in the previous global catastrophe of the Great War.

What ends the Great Depression is the enormous loss of human lives and productive capacity triggered by the scramble for new territories, the result of which is the emergence of American capital as the last man standing in a game of global Russian Roulette.

Seen only from the theoretical side, and ignoring the staggering waste of human life and effort, the business interests located on Wall Street pulled off what probably remains today the biggest hostile takeover in human history.

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