It’s well-known that the bourgeois economic science denies the objective laws of economic development discovered by K. Marx. Its representatives – various experts, economists and political scientists – have spent an incredible amount of energy proving that there are no objective laws of social development, that there are no laws at all that are independent from someone’s will and that are governing the development of the mode of production (in this case, capitalist production); everything that is happening in the society, according to their opinion, including in the economic area, is exclusively the result of people’s will and personal desires, and not just any people, but the special kind of people – only those who are in power and of a high social standing. The rest – the working population, the masses – are not taken into account by the bourgeois political economy. From the point of view of the pocket scientists of the bourgeoisie, those are only a blurred background to the “powers that be” – governors, politicians, businessmen, etc. – and their games.
The class nature of such views on social life in general and economic science in particular is obvious. As for the truth, bourgeois scientists don’t really need it. Even though life itself over and over again proves the falsehood of their idealistic position and the accuracy of the Marxist economic science.
The best example here is the economic crises that ruin thousands of small and large business owners and cause untold suffering to millions of ordinary people, whose lives during crises become simply unbearable. These crises (that in fact paralyze the entire economic life of the society) shake the capitalist world regularly – on average once every 5 to 7 years. With each time they become stronger and stronger and have a clear tendency to happen more and more often – not in 5 but in 4 years, then in 3 years, etc. It’s becoming more and more difficult or almost impossible for capitalist economies to get out of such a paralyzed state. For example, the economy of Japan, once the leading country of the capitalist world, has been in deep crisis for over two decades! Although bourgeois economists occasionally claim that they have finally found a recipe to avoid crises, in reality capitalism is not able to get rid of crises by any means.
Marxism has explained why it is so and why there can be no other way and never will be. As long as capitalism exists. The great scientist Karl Marx, who studied capitalist society for over 40 years, discovered the laws by which it develops and functions. Marx revealed the essence of economic crises, showed their true causes and strictly scientifically proved that capitalism cannot exist without crises and that crises, i.e. the paralysis of the entire economy, are an integral part of capitalism, a natural result of the capitalist mode of production.
The point is that the basis of capitalism is private ownership of the means of production. The direct consequence of this is the anarchy (disorganization) of production. Every private citizen (capitalist) is their own master; they produce as many products as they want, hoping to make a profit, having no idea whether anybody needs these products or not, and whether people will be able to buy them (meaning predominantly the working masses, which make up the vast majority of any society). The working masses are the main and only source of profit for any capitalist. Robbing them as “effectively” as possible is the only task to which all “entrepreneurial” activities of any private owner or manager are devoted.
At this rate, it is inevitable that sooner or later a situation will arise when there will be too many goods produced – more than workers can buy. Perhaps they wouldn’t mind buying them, but they do not have the money for it – the money is constantly being extracted from the working people by capitalists in various ways. Then comes the same paralysis of the capitalist economy, which is called the “economic crisis,” when it makes no sense to produce anything anymore – nobody buys anything. In other words, the essence of the economic crisis is the crisis of overproduction.
What do capitalists do in this case? They stop producing their goods – they shut down plants and factories, stop producing raw materials for industry, stop cargo transportation and, of course, get rid of the labor force that has become unnecessary for them – they throw the workers out into the street, depriving them of the opportunity to receive their wages. The number of unemployed grows dramatically, which means that the economic crisis is further deepening, as the number of potential buyers who could buy goods produced in excess is decreasing even more. Something that bourgeois economists call “market contraction” or “drop in demand” happens (meaning, of course, the solvent demand).
So basically, capitalists, because they are private owners of the means of production, in pursuit of profit, create problems for themselves with their very own actions – they drive themselves and the whole society into the economic crisis. But, unfortunately, other people have to pay for it – hired employees, production workers, laborers in general.
How do capitalists get out of this state, how do they overcome the paralysis of their economy? Previously, when there were no capitalist monopolies, capitalists would sharply reduce the price of their stale goods in case of overproduction crises. This widened the circle of potential buyers of these goods (i.e., the “domestic market was growing”) – they could be bought by workers who previously could not afford them. Now, in the era of imperialism and the rule of monopolies, during an economic crisis, capitalist monopolists do not want to reduce prices for their goods – they do not want to lose their planned profits, well aware that no one but them will offer these goods to the market (since they are monopolists!). As a result of this policy, crises become deeper and acute, the period of depression stretches much longer and there is no new economic recovery, instead of rise there is stagnation, a frozen state without any development, no movement forward, as they say – “the patient is neither alive nor dead”.
It is clear that there is no way out of this situation – there is simply no way out within the capitalist mode of production, as it is based on private ownership of the means of production. Whatever capitalists and their governments do will only delay the final collapse of the capitalist mode of production.
But it is possible to live without crises – Marx has proved this theoretically, and the USSR – practically. However, this requires the destruction of the private ownership of the means of production. With the current machinery and technology (production forces), private property is like a stick in the wheel of social development.
Why? Because in order to live without crises, it is necessary to produce products (goods) not chaotically, but in an organized manner, in a planned manner. It is necessary to have a planned production, in which each enterprise knows exactly what to produce and how much, knows that people need what they produce and people can buy it. But planning on the scale of the entire society is impossible when the means of production have different owners, because it is impossible to dispose of other people’s property and make some plans about it – nobody will follow them. For planning on the scale of the whole society, all means of production have to have one single owner, and only the people, the society itself must be this single owner. In other words, we need public ownership of the means of production. And this means that in order to overcome economic crises and get rid of them forever, it is necessary to get rid of private ownership of the means of production – factories, enterprises, plants, etc.. All these means of production should become the property of all people, all citizens of the country, the whole society, i.e. public (people’s) property.
This conclusion flows logically from the economic theory of Marxism. It shows where, in which direction the economic development of the society is moving – towards communism, which must replace capitalism, and all the insoluble contradictions of capitalism will thus become solved.
But the defenders of capitalism – the capitalists and their servants – cannot agree with this conclusion, because then their privileged position in the society will end. They will have to become like everybody else and earn a living. And they do not want to make a living with their own labor, they want to continue to live at the expense of others, to parasitize and exploit someone else’s labor. That is why the bourgeois economists – the learned lackeys of capitalism – deny Marx and his truly scientific conclusions, they shout that Marxism is “outdated”, that there are no objective laws of social development and come up with one “theory” after another, pulling them out of thin air, each time promising that now they have an effective way to fight crises! And each time they and their “recipes” completely fail to save the capitalist economy from crises. Life itself, time after time, laughs at their miserable attempts to cope with what is the essence of the capitalist system, and what is nothing more than the creation of the capitalists themselves, the natural result of their unbridled pursuit of profit.
The economic crises still happen regularly, and in the past 20 years there have been several major economic crises: in 2008-2009 and in 2014-2016. And now we are on the verge of a new crisis and a huge one at that! Capitalism that never managed to get out of the previous crises is rapidly slipping into the pit of a new economic crisis, which promises to be unprecedented and escaping from which is highly unlikely.
We don’t exaggerate the danger of what is happening in any way. Probably, everyone has heard about the terrible crisis that broke the capitalist system in late 1920s – early 1930s – the “Great Depression”.
How did the “Great Depression”, the economic crisis of 1929-1932, the memories of which still make capitalists tremble, begin?
This crisis began with a collapse at the New York Stock Exchange in late October 1929. The day of October 24, 1929 was later called “Black Thursday” because the value of the shares of the largest American companies, previously considered to be unbreakable – U. S. Steel, Westinghouse, General Motors, Paramount, Fox, Warner Bros and others – went down sharply. In one day, 12.9 million shares were sold and the stock index fell by 11 percent. After a short-term price hike on October 25, the stock plummeted on Black Monday (October 28) and Black Tuesday (October 29). October 29, 1929, went down in history as the day of the Wall Street stock crash.
By 1933, almost half of American banks went bankrupt. Many banks, having lost all of their invested assets, had to pay debts to depositors and shareholders, and they had no money for it, because the panicked population was withdrawing money from the surviving banks .
Following the collapse of the financial sector, the crisis in production began. During the first years of the crisis, 50% of American firms and factories were closed. Millions of people across the country were left unemployed. By 1933, the unemployment rate in the USA reached 25%. In some states from 25 to 90% of all children were suffering from malnutrition.
The crisis of 1929-1933 had truly catastrophic consequences. According to various data, during the Great Depression in America, 7 to 12 million people died from hunger, cold and disease. Almost 3 million people were left homeless. The drastically reduced level of industrial production threw the country 30 years into the past, into the beginning of the 20th century. In the U.S., small and medium businesses have almost completely disappeared (small businesses have gone bankrupt). The domestic market was in decline. The U.S. GNP almost halved.
The situation was not better in other capitalist countries either.
“This crisis, which lasted more than four years and covered the entire capitalist world, all spheres of the economy, literally shook the whole system of capitalism to its core. The total volume of industrial production in the capitalist world decreased by 46%, steel production decreased by 62%, coal production decreased by 31%, shipbuilding production decreased by 83%, foreign trade turnover decreased by 67%, the number of unemployed reached 26 million people, or 1/4 of all employed in production, real income decreased by 58% on average. The cost of securities at stock exchanges decreased by 60-75%. The crisis was marked by a large number of bankruptcies. In the USA alone, 109,000 firms went bankrupt”.
The capitalist world could not get out of the “Great Depression” for almost 10 years, and in 1937 capitalist countries got into a new economic crisis and again on a global scale. The result of this truly great paralysis (a kind of self-eating) of the capitalist economy was World War II. The people of the world had to pay tens of millions of lives for the indomitable desire of imperialists to get rich at someone else’s expense.
Almost exactly the same picture can be observed today. The world stock markets have been feverish since the first days of 2020. At the end of February the fever increased – it became clear to many that this would not end well, and the powerful economic crisis, which had long been predicted even by bourgeois economists, was clearly not far off.
On Thursday, February 28, trading on the New York Stock Exchange ended with a collapse of stock: the S&P 500 fell 4.42%, the same amount was lost by the Dow Jones, which includes shares of three dozen of the largest U.S. companies. High-tech Nasdaq lost even more – 4.61%. London FTSE lost 3.5%, Japanese Nikkei lost more than 2%.
The same picture was observed in Russia: the index fell by 3.4% on the Moscow Exchange, and the RTS index – by 5.1%. The majority of shares of the largest Russian companies on the Moscow Stock Exchange lost about 10%.
“The rate of decline was unprecedented since the beginning of the Great Depression in 1928″.
At the world stock market, panic ensued. And it caused even further decline, on March 9, 2020, which is likely to go down in history under the name of another “Black Monday” (how many of them have been in the history of capitalism already?).
By the morning of March 9, the price of Brent oil had dropped to $34.8 per barrel, down 23%. The world had not seen this kind of oil price since 1991. By the way, $34.8 is lower than the cut-off price for the Russian budget ($40 per barrel), the minimum price of oil that was used in order to calculate the budget. This means that the Russian government will no longer “have” money for pensions, social benefits, financing of the social sphere, etc. The Russian government now has an excellent excuse to refuse to fulfill its social obligations.
Immediately Asian platforms began to fall as well: Japanese index Nikkei fell by 5%, Hong Kong Hang Seng – by 4.5%, German DAX lost 7.83%, and British FTSE – 8.4%.
After them, the U.S. indexes also flew down: S&P 500 – by 7%, and Dow Jones – by 7.3%. Their downfall was so fast that they even had to stop the trading.
The securities market reacted in a similar fashion – they also went down rapidly. The leaders of the fall were the shares of the world’s largest oil companies: Occidental Petroleum collapsed by 43%, ConocoPhillips – by 30%, Exxon Mobile dropped by 8.9%, Chevron – by 10.6%, Baker Hughes – by 15%.
The securities of the largest Russian companies collapsed. Gazprom shares fell by 24.82%, Rosneft – by 23.54%, Novatek – by 33.6%, Gazprom Neft – by 11.62%. Sberbank receipts fell in price by 27.38%, VTB – by 23.19%. Prices for receipts of Russian industrial companies dropped dramatically: NorNickel’s receipts lost 10.57%, NLMK’s receipts – 13.6%, Severstal – 18.9%, etc.
Following the drop in the price of oil, the dollar jumped up: the U.S. dollar exchange rate was RUB 74.5 against the ruble. (+8,6%).
On March 9 MICEX did not work and at the beginning of trading on March 10 the previous rate was set – 68,57 rubles for $1. In the morning of March 10, the Russian stock market opened with a sharp drop in quotations. By the end of the day on March 10, the MosEx index had fallen by 8.11%, the RTS index had closed in minus by 13.02%, the dollar rate was 72 rubles, the euro rate was 82 rubles.
The shares of the largest Russian companies collapsed. Tatneft lost 19.5%, LUKOIL lost 18.7%, Rosneft lost 16.9%, Gazprom Neft lost 13.6%, Surgutneftegaz lost 13.6%, Mechel lost 12% and Rossetey lost 11, 7%, RusHydro – 11.3%, FGC UES – 11.2%, Magnet – 10.5%, Inter RAO – 9.4%, Gazprom – 9.2%, VTB – 9.2%, AFK Sistema – 9%, Sberbank – 8.5%.
On March 10, the price of a barrel of Brent oil rose by 4.84% to $36 at world markets.
The index of 50 largest European companies Euro Stoxx 50 went down by 1.5%. Dow Jones rose by 0.4%, S&P 500 and Nasdaq Composite added 0.5% and 0.8%, respectively.
There is every reason to believe that this isn’t finished yet – the fall of the capitalist economy into the deepest crisis will continue, it’s only just begun.
Can we compare what is happening now to the Great Depression of 1929-1933?
Here is the opinion of Mikhail Aristakessyan, Head of Information and Analysis of World Markets Department at FINAM Group:
“Why do you think it’s impossible? Most likely, it will be much worse. When people talk about the Great Depression, for some reason they always mean the collapse of the U.S. stock market, although the main problem was the debt market, the default on sovereign bonds practically all over the world. And that was the main reason for such a large-scale and lasting crisis. It was a global crisis, not just an American one.
In fact, history is repeating itself. The situation in Europe is worse than in the USA.
Unfortunately, the ECB has almost exhausted its capabilities. Of course, it is possible to continue to buy back the government debt and keep the rates ultra low, but 10 years of this policy has not allowed the European economy to recover. It is again balancing on the verge of recession. You can also look at the Bank of Japan. It has been implementing similar measures for way longer, but the effect is the same. No significant positive result has been achieved”.
Well, what an honest admission! Despite all the efforts of high-profile Japanese economists, Japan, two decades ago the former ideal of capitalist economic development, never managed to climb out of the crisis. Marx, of course, is “wrong,” but for some reason, the bourgeois political economy, which is apparently “right”, is powerless in the struggle against the objective laws of capitalist production discovered by Marx.
Now the same fate awaits China, the former “locomotive” of the world economy. The decline of production in this country is happening at a gigantic pace. Once again, Marxism is “wrong” from the point of view of bourgeois economists, but it’s impossible to get away from the objective economic laws of capitalism, discovered by Marx.
Above we have explained the reason for what is happening, the cause of all capitalist economic crises. But bourgeois economists do not recognize it. Check out how they once again justify capitalism and their inability to cope with the problems caused by it:
“Markets are falling amid a growing epidemic caused by the COVID-19 virus and after the actual collapse of the OPEC+ oil restriction deal.
…According to Goldman Sachs analysts, this weekend a price war started between OPEC and Russia. “This may push oil quotations to $20 per barrel, especially as the economic downturn caused by the coronavirus outbreak slows down global demand,” Goldman Sachs said.
According to experts, the price war completely changes the outlook on the oil and gas markets, when producers with low production costs increase reserves from their reserve capacities to force producers with higher production costs to reduce production”.
“…panic sentiment at the beginning of the week was caused by two factors – the further spread of coronavirus and the collapse of the OPEC+ alliance, followed by statements by Saudi Arabia about its intention to increase production and provide discounts to consumers. Both circumstances have both a direct and indirect impact on the Russian economy. That is why the reaction of the domestic market to these events was so significant.
Low oil prices become the baseline scenario for 2020 in the absence of an OPEC+ deal. …At the same time, Russian oil companies do not look bad compared with other sectors of the global oil market, given the low total cost of production per barrel ($9.2-11.1 per barrel of oil equivalent) and the ability to “tighten belts” in difficult times (reducing capital expenditures, especially on geological exploration, as it was after 2014)…”.
That is, it is not capitalism or private ownership of the means of production that is to blame, let alone the capitalists who rob the working population in vain, bringing the people to such a degree of poverty when they are unable to buy the necessities. It is the coronavirus that is to blame! Without it, the capitalist economy would have prospered.
But then a simple question arises, two to be more precise:
- Previously, in the capitalist world, crises also occurred all the time, but there were no coronaviruses. So why did they happen then? Each time for different reasons, you say? But what kind of economy is it, for goodness sake, if it wobbles and falls after every small accident, after every “light breeze”?
- Who needs an economic system that is completely unable to protect people from such trifling matters as a virus which, according to medical doctors and the World Health Organization, is no more dangerous than the ordinary ODS?
That sort of economic system costs quite a pretty penny! It needs to be liquidated immediately and a new economic system has to be implemented – a socialist one, where there are no crises, no exploitation, no unemployment, and which does not shake with fear of viruses, but organizes all intellectual and productive forces of society to fight any threats to humanity – both natural and man-made.
But you have to admire the way Russian capitalists – oil and gas tycoons – intend to get out of the deep sh..t in which they were kindly pushed by their “respected business partners”. (In previous decades, the Russian state generously distributed huge preferences among those “partners” – of course, at the expense of the working people of Russia!). They explain their strategy openly, without any shame, saying that they “know how to “tighten belts” in difficult times!
But you are not going to tighten your belts, dear entrepreneurs! What you suggest is that the Russian people should tighten their belts, while they are already living on bread and water from your efforts. You intend to take away the last piece of bread from workers and employees, from pensioners and students of Russia, leaving them only water. And this way – at the expense of extreme poverty of millions of people in your own country – to save your precious profits.
Although, why are we even saying this? Whom are we trying to call to conscience? Capitalists don’t have any motherland or any countrymen; they babble on about motherland and patriotism only to fool the working masses.
One thing is clear – and capitalists, who are going through yet another crisis, say it openly – they intend to climb out of the void at our expense, dear hired workers. This means that a decisive attack on workers’ rights and incomes is not far off. Capitalists, together with the state faithfully serving them, will seek to take away every penny from us with every means available. Well, our mission is to not let them do that, to stand together as one, fiercely protecting our labor and human rights. And if they shall insist and use force – we shall respond accordingly. It is our duty not only before our families today, but also before the future generations.