From the article of 'Petrel'
No.653 / November 9, 1997
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Capitalism's Deep Contradictions Are Exposed
A Warning of What "Liberalism" Will Bring
The collapse in stock prices which began in Asia near the end of October spread at once throughout the world-making the bourgeoisie of the world shudder. For a moment, didn't the fear run through their minds that this was a reappearance of the nightmare of 1929? What meaning does the repeated fluctuation of stock prices have for world capitalism? Is this just a temporary heavy drop, or is this the beginning of a long, continuous depression? In other words, is this like the "Black Monday" of 1987 or the "Black Thursday" of 1929? Overall it is still not clear. However, no one can deny that, at the least, this revealed the deep, latent contradictions of capitalism. In the midst of the present easing of economic regulations and "liberalization", in other worlds the thorough permeation of liberalism, as well as "globalization", the global collapse of stock prices, which are called the barometer of the "health" of the capitalist economy, characteristically shows that the permeation of liberalism has at the same time magnified and deepened capitalist contradictions. This immediately revealed the bankruptcy and nonsense of the recent fantasy of the world's bourgeoisie that with the spread of liberalism everything will be alright.
The first question the collapse in stock prices raises is what relationship there is between the "real economy" and this collapse.
If a serious impact spreads from this to the "real economy" it will certainly not be a trivial or idle problem.
For this reason the Japanese bourgeoisie have an uneasy feeling. But, on the other hand, if the "real economy" of America is sound they can prosper on this base and there is no problem, and so even if stocks went down somewhat it would be nothing to worry about and Americans could steep themselves in extreme "optimism". The course of reality in the near future will probably reveal whether this will be the case.
When we speak here of the "real economy", of course we mean the fields dominated by industrial capital. That is, those spheres related to the root production of surplus value. They instinctively have the premonition that if this reaches the production of surplus value, a real crisis of capitalistic production will occur, and it wil not only be a collapse of stock prices. On the other hand, if the problem is limited to the stock market only, they can breath easily since the crisis will be overcome, returning to a course of accumulation once again.
In this regard the bourgeoisie in Japan and other countries cannot embrace "optimism" so easily since they have many problems close to home.
Already at the beginning of the Nineties, Japanese capitalism was languishing under a long recession. After the stock price index(Tokyo Stock Exchange) reached nearly the 40,000 Yen level in the mid-Eighties, there were repeated collapses and sluggish conditions, and now it has fallen to 20,000 Yen. In the midst of the current stock price trouble it has fallen once again, which reflects the fact that Japanese capitalism has been unable to shake off the long stagnation since the collapse of the "bubble economy".
But up to now Japanese capitalism has had the "good fortune" to unload its commodities in Asia, Central and South America, and the United States. Further, the contradictions of excess production have been eased by the export of capital focusing in Asia.
Therefore, if the economies of Asia and Central and South America are troubled, the Japanese Bourgeoisie's sense of crisis will immediately deepen.
Currently, China and America are the salvation for world capitalism. China with her enormous and youthful market would be sufficient to possibly salvage world capitalism. On the other hand, however, recent rapid economic growth has concentrated all the contradictions of world capitalism in China, making it possibly the weakest link.
America is now the last stronghold and as a last resort it is expected to pull the brake on the collapse in stock prices. The bourgeoisie throughout the world, especially in the United States, insist that no problems can be found in American capitalist production and that it is in "good condition" and "healthy".
However, is this really the case? Isn't American capitalism hanging on by just "a thin strand of hair"?
In two years and five months, the American stock price index suddenly jumped from $4,000 to $8,000. But to what extent does this sudden rise have a "substantial" or "real" base? The profits of capital didn't double, dividends didn't' increase suddenly, and interests rates didn't drop.
From this it is clear that the sudden rise in stock prices is due to speculation and it is inevitable that this speculative bubble will burst.
Speculation is inevitable for stock market investment. Even though the stock price index (Dow Jones Average) went from $4,000 to $8,000 no one is willing to say that $4,000 is normal and $8,000 is abnormal (or the reverse). Stock prices are made capitalizing dividends by interests rates, but there are founders profits, and "capital gains" which are come from rises of stock prices. If stock prices will be rising at any rate in the future, people can get big profits by selling them at the right times.
Stocks cannot be separated from speculation. If speculation is kept at bay, some means other than stocks such as bonds or savings will be used.
Essentially, if speculation that is cut off from the "real economy" expands suddenly it will inevitably collapse. If $8,000 is the bubble, this will inevitably burst.
Of course, it's not yet clear whether this collapse in stock prices will be like the one in 1987 or the one in 1929.
In the case Black Monday (October 19, 1987), Japan and other countries were able to act as a "brake", and the stock market was able to rise once again. But already at the beginning of the 1990's, Japan's so-called "prosperity" was revealed to be a bubble. This time America is expected to carry out the same role Japan did in 1987.
On the other hand, the stock market crash of October 24, 1929 signaled the beginning of an enormous world crisis. Throughout the 1930's capitalism was unable to decisively break free from the depression despite the institution of militarism and fascism or the policy of popular fronts (this is the policy of democratic alliances!-the practice of democratic reforms!) and the New Deal. This was only overcome through the outbreak of World War Two and the appearance of "wartime business".
The 1929 stock market collapse (crash) was the signal or starting point of the world crisis. Production was halted, industries collapsed and number of unemployed throughout the world overflowed.
Because global overproduction has ripened and collapsed into an abyss, the stock prices, which have risen suddenly amidst keen speculation, have dropped-signaling a global crisis. This is contrary to the bourgeoisie's insistence that "a stock market collapse spreads a bad influence to the real economy". The bourgeoisie always mixes up the relationship of cause and effect.
Panic, a steep fall of the stock market, the collapse of confidence and the bursting of the bubble, are due to the fact that the global economy has already reached the limits of this contradiction. It isn't the opposite!
Throughout this long period of seven years, America has glorified the prosperous business condition. It is said that America, which is in the best economic condition, lacking even one problem, must now carry out the task of being a strong engine and play the role of the global economy's savior, tractor, or locomotive.
However, if America is unable to carry out this role, global capitalism will have to face a serious crisis. This would be like confessing to the current serious crisis.
It is a fantasy to think that the high price of the American dollar, bonds and stocks can continue eternally. Far from being eternal, they cannot even be secured for the near future.
What must be stressed further is that the so-called American prosperity is a skyscraper whose foundation lies on the victims throughout the world, that is, upon the global exploitation of the workers and petit bourgeoisie.
If the economic turbulence outside of the U.S. continues and the lack of confidence in Asia develops, global finance capital would increasingly be concentrated in the United States. But America will suck up all of the wealth investing this capital in the stocks around the world.
Under the dollar system, America is also able to plunder the whole world
through trade relations The dollars which America has scattered around the world, depreciated in a flash, and are also depreciating now. This is nothing other than the plundering of the world by scattering dollars.
In the midst of economic liberalization, the "gap between rich and poor" has grown wider as the drop in the average wages of the American working class and the worsening of working conditions has rapidly advanced (just look at the sudden increase in unstable part time employment). America's "prosperity" is made possible through the increasingly severe exploitation and suppression of the workers in the U.S. and throughout the world.
America is boasting of the strong dollar, but this is resulting in the rush of commodities throughout the world to America, and the U.S. trade deficit is beginning to rise suddenly again. Already "warnings" are being voiced by American car manufacturers because Japanese automobile imports are on the rise. Why is it that parasitic states, states that can buy without selling, are "healthy"?
Nevertheless, if a policy to weaken the dollar were adopted it would probably improve the trade balance somewhat, but it would halt the inflow of capital. Further, if interests rates raised in order to pull finance capital, the policy of keeping inflation low would become impossible, and this would speed the collapse of the bubble of inflated stock prices.
There is no basis for the American economy to be soaked in an easy going "optimism". Rather, the American economy as well as the Japanese economy, now still face difficulties that are not superficial and involve future contradictions.
If the world economy has been sustained through the strong dollar, its negation signals a new world economic crisis and is also probably the signal for reorganization.
Stock prices are "fictional capital" and even if they collapse, real capital will not been influenced fundamentally by them, nor will it reduce at all.
However, on the other hand, stock prices are a thermometer to measure the "healthiness" of capitalism and a symbol of economic prosperity (or sluggishness). The collapse in stock prices gives notice to, or suggests that it will be increasingly difficult for capital to increase profits, and that a capitalist crisis is approaching (or that it will explode).
Following the collapse of stock prices, the bourgeoisie fell into a panic and shrieked that tens or hundreds of billions of Yen worth of "wealth" had been lost. But the working class declare that this is not even "wealth" in the bourgeois sense, not real wealth but like foam.
The collapse in stock prices reveals that this society is full of contradictions, and rests on an extremely uncertain base, and that capitalism will inevitably fall apart and must be replaced by socialism.