Home > General Comment, political-economy, shorter work time > Driving a nail through the heart of the State: Unemployment and Debt

Driving a nail through the heart of the State: Unemployment and Debt

(Shown in the above chart is the historical correlation between the change in debt and the rate of unemployment. Courtesy of economist Steve Keen and chrismartenson.com)

Libertarians, anarchists and communists who sincerely favor a stateless society must realize that the present crisis is not merely, nor even primarily, an economic crisis — it is a crisis of the State itself. There is no exit for the State from this crisis, and it must result in the collapse of the State.

How we approach this crisis can spell the difference between a long drawn out process of collapse, or a much shorter one.

The two great issues facing Washington in this crisis are the rising public debt and the rising population of persons who cannot find work. Since World War II, Washington has been able to enjoy a trade off between these two symptoms of capitalist breakdown by encouraging the accumulation of private and public debt to offset the tendency toward a fall in productive employment of labor power.

The growth in public and private debt has allowed Washington to perform its essential role in a period of capitalist relative breakdown: to maintain generally stable conditions for the purchase and sale of labor power. This role corresponds to the needs of both the working and capitalist classes insofar as we only consider them as poles within capitalist relations of production.

In the face of falling demand for the productive employment of labor power, Washington has encouraged and facilitated the expansion of unproductive employment based on various forms of consumer debt in particular — mortgage, credit cards, auto loans, etc. — but also public debt, including ever increasing levels of federal debt. This debt, since it can never be repaid and sits on the books of financial institutions as fictitious assets, must be succeeded by increasing levels of new debt. It is a classic Ponzi scheme that had to unravel eventually and finally did in the Great Financial Crisis of 2008.

Since 2008, Washington has attempted to stabilize the economy by accumulating massive amounts of debt in its own right, hoping for its stimulative interventions in the economy to trigger a new round of debt accumulation by consumers. Consumers, who have been hit hard by the loss of millions of jobs in 2008 and 2009 have not responded to Washington’s stimulative interventions, and appear to be having an increasingly hard time even servicing existing debt.

The central problem facing Washington is that massive amounts of new debt must be created each year to absorb those who lost their jobs in 2008-2009. Moreover, this new debt must be sufficient not only to absorb those who lost their jobs, but also more than a million new workers who enter the labor force each year looking for work, and those who continue to be displaced from productive employment because of improving productivity. If consumers (who are, overwhelmingly, those workers who still are employed) are not able to carry a sufficient new debt burden to absorb this huge mass of new and existing unemployed, plus offset the falling demand for employment of labor power resulting from improvements in productivity, Washington will face an ever increasing mass of unemployed persons who are living on the edge of starvation.

At the same time, since Washington has been trying to compensate for inadequate consumer debt accumulation by running massive deficits in 2009, 2010, and 2011, a broad section of the population has been growing uneasy with the seemingly endless river of red ink in the federal budget. It doesn’t take a degree in economics to figure out that the massive accumulation of new federal debt must in time be offset by equally massive increases in the tax burden on the population and severe austerity of the type already evident in many European countries.

The result must be the steady conversion of public taxes into debt service to line the pockets of the big holders of federal debt, even as Washington tries to maintain its completely superfluous expenditures on military adventures, while the social safety net is ruthlessly eviscerated; leaving large segments of the population to starve. In its extremity, the fascist State consists solely of an ever increasing mass of new debt undertaken to maintain itself as an aggressive military machine.

Washington is thus trapped in an intractable crisis of rising public debt coupled with rising unemployment and an increasingly naked militaristic posture, even as it fails to address its most basic function: maximizing the purchase and sale of labor power. To an extent not seen in the post-World War II period, we are seeing the formation of permanent unemployable mass on the scale previously experienced only during the Great Depression. Despite two massive stimulus injections of nearly $1 trillion each, unprecedented zero interest rates for more than two years, and Federal Reserve money printing on a scale never seen before in history, unemployment has not fallen to anything approaching pre-crisis levels.

Washington is vulnerable to attack by those who favor a stateless society on both fronts. I would suggest libertarians, anarchists and communists pursue these points of agitation in their work:

  1. Debt and deficit spending: Oppose any attempt by Congress to increase the debt ceiling. It is clear that the Obama administration is working with both the GOP controlled House and the Democratic controlled Senate to slip through another increase in the debt ceiling this Spring. Libertarians, anarchists and communists should not stand aloof from this fight. They must combine efforts to ensure a NO vote on raising the debt ceiling, and to identify those Republican and Democratic Party representatives and senators who are conspiring with the Obama administration to saddle the nation with more debt.
  2. Unemployment and hours of labor: To the charge by apologists for Washington that deficit spending is necessary to combat rising unemployment, we should answer that it is not necessary. The unemployment crisis is solely the result of the refusal by Washington to reduce hours of labor. Those who stand for a stateless society should point out that increasing productivity of labor has made the reduction of hours of labor the pressing issue of our time. Any attempt to substitute State intervention in the economy for this reduction can only lead to further accumulation of debt without solving the problem of unemployment.

Washington is caught in a cul-de-sac from which there is no exit. Now is the time to strike a deathblow to it, and pave the way for a stateless society. If we fail to take advantage of this opportunity, we will have only ourselves to blame.

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  1. Threecrow
    February 9, 2011 at 5:00 pm

    This all sounds familiar. Is it Deja Vu or Jamais Vu?
    Oh yeah, I know what it is–its exactly what is happening in Egypt today.
    Egypt and the economic and political condition that brought the youth to the streets in protest and beyond protest to revolution is prolog to the inevitable endgame of this shell game we have been playing for the past forty years and about which the founder and editor of this site has been alerting us to for nearly the past decade.
    Peace, Charley

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