DANIEL ALBARRACÍN ECOSOCIALIST SCHOOL 24th November IIRE 2018 AMSTERDAM, IIRE

1. 1. The Marxist theory on crisis: The profit rate2. The Theory on long waves of accumulation.3.  The neoliberal reaction after the crisis of 80’s. DANIEL ALBARRACÍN ECOSOCIALIST SCHOOL 24th November IIRE 2018 AMSTERDAM, IIRE

2. I) Introduction to the marxist theory on crisis:the profit rate

3. OBJECTIVE AND SUBJECTIVE FACTORS FOR THE SOCIAL CHANGE THE SOCIAL DETERMINATION BY THE OBJECTIVE FACTORS... • The material capacity of the existing production forces determines the possibility of development of a civilization. We are free though we do not choose the circumstances of our freedom… The production forces character has been set in an historical formation after the declining of the old society and how the new emerging classes respond establishing new rules for the production of the new society. AND THE CAPACITY OF THE SOCIOPOLITIC FACTORS (RELATIONS OF PRODUCTION) IN ORDER TO INFLUENCING THE SOCIOECONOMIC MODEL… • The result of the social strain, which basis are established by the concrete sociohistorical formation, pushes for the way of life of the different social classes and the distribution of social production. • When the socioeconomic contradictions explode, due to the limits of the production model, the production relations, ruled by the classes struggle and the socio-productive character , are in conditions of changing the model of society production and its corresponding socioeconomic rules. Thus, in this periods of conflict, the political struggle and its definition, in these case, has the capacity of changing the production model of the society.

4. Capitalist Accumulation dynamic • The capitalist class accumulates financial capital (Money, M) that invests in productive material (labor force (LF) and fixed and circulating capital –constant capital, Cc-) that is applied in the production process (P) of Commodities (C) to obtain a further money than the original investment (F + M ') through the sale. That is, its production is not oriented to satisfy needs, but to get profits (M’) for capitalists. CAPITAL CYCLE: Money->Labour Force, Constant Capital->Production->Commodities>Money+Profit M -> LF, Cc -> P -> C -> M+M’ LONG TERM TRENDS ANALYZED BY MARX • There is a concentration and centralization of capital that lead to an oligopolization of companies and an internationalization of capital. • The dynamics of accumulation are subject to a law in the long term. According to this, the profit rate tends, in a non-automatic way, to decrease in historical long waves, which leads to an oscillating and contradictory accumulation. • Economic crisis • Social crisis • Political crisis

5. The society and nature integrated into the capital cycle and valorization chain integrated Biosphere, ecosystems and nature Destruction, wastes Productive Capital (Cc) Extraction, Processing, transportation Production Commodities Money’ (Profitability) Money (financial capital) Means of Production Workforce employeed(Cv) Population Employable workforce Population available for working Reproductive work Population->Workforce->Effective work

6. The profit rate • The rate of profit relates the rate of surplus value to the organic composition of capital (+1). • It is a key reference for capitalists to determine which investments are going to undertake.

8. The surplus rate (numerator) The surplus value rate depends on straight the social forces correlation between social clases. • pv’= surplus value rate or exploitation rate • Pv= surplus work • V= workforce value or work needed

9. Organic composition of capital (denominator) (OCC) production means quantity x means of production price c’= -------------------------------------------------------------------------------------------- salaried workers number x avarage wage per worker Do not mistake OCC with technical composition of capital (TCC) TCC= Means of production quantity/Workers quantity According to Governeur, J. (2001: 93) OCC does not reflect completely the technical change. It depends on: • Mechanization degree, it tends to grow. • Evolution of unitary values (Means of production value/Means of consumption value) depends on the productivity evolution. • Real wage depends on the forces relations, and, in our view, also the costs of workforce reproduction.

11. Tendencies and counter-tendencies Tendencies Counter-tendencies. • The OCC tends to rise, and it is compatible with a profit rate high enough, while the technology and raw materials allow increases productivity beyond the surplus rate. If not, the profit rate tends to decrease, minimishing the invesment decision making. • The surplus value rate can be eroded if the working clases conquest new labour, social or political rights, reducing the profit rate. • The privatisation process enlarges the market dimension and increase the business possibilities. • The market activity might be expanded if there are some territories (colonialism), social practices or older economic relations, outside of the market, from which new goods or services can be commercialised. • The OCC might decrease if: • There is a physical destruction of industries (war) • There is a destruction of fictitious capital. • Can be reduced in some territory through the capital relocation, if capitalists looks for a better environment for profits. It increases the OCC in the investment destination. • The surplus value rate might increase if the wages evolve below productivity, if the working conditions are more intense, the working time is longer, or the basic commodities become cheaper to keep or better the purchasing power. If it is not case, the profit rate falls. • The State can boost the economy and cushion the industrial cycle, when the market economy saturation is on the table. • The changes in geopolitics, the discovering of new raw materials, technology or energy sources can provide the conditions for new long waves of prosperity.

12. The capitalism character and goals, the contextual factors, and its limits. GOALS AND LIMITS • Capitalists invest in technical systems to foster the productivity levels. The productivity is the global framework which points out the distribution frontier (or appropriation limit). Even although it still is growing, its evolution is weaker than in the past. The Third Technological Revolution limited innovation capacity in this regard, the scarcity of key raw materials involved in the fossil energy industry, the bounds human conditions, and the global markets saturation and disputes, mark a clear limit. • All in all, the profit rate (E. Mandel) and the profit mass (A.Shaikh) are the reference for capitalists and pattern the volumen, rythm and sectorial distribution of new investment. THE POLITIC AND CONTEXTUAL FRAMEWORK: CLASSES STRUGGLE, COMPETITION AND GEOPOLITICS • Prevailing ideology (legitimation of general economic policy model). • The character of the hegemonic Superpower (France, United Kingdom, USA…). • The degree of technologic development. • World market structure, competition regime; • Monetary system; • Organization and consciousness of class conflict;.

13. Profit rate : A social battlefield. Organic composition of capital Surplus Rate • However, there are some “technical and natural factors” important to take into account. The state of the art of technology, and the abundance of raw materials and energy related to the dominant industriy, also determines the investment horizons. • Technology is not a neutral factor (the design of it and its goals respond to concrete interests and priorities). The property and control of raw material and energy is cause and consequence of territorial disputes. • At international level the uneven exchange and development among core countries and peripheral ones pushs for an inequal wage evolution. The capital relocates its investment to those countries with lower COC and higher profit rate. • The capital rotation (speed of capital cycles) tends to be faster in recent times (technology, financial facilities transport capacity and consumption society make it possible). • Capitalists just invest in production processes that increase added value, provided that the increase of global workforce costs are lower. Therefore, they just allow a moderate real wage increase, in direct or indirect terms (including taxation, public regulation, labour legislation, and social policy), the increase of working time, or work intensity and workload. These indicators determines the surplus rate. • If the classes struggle goes bad for working class, to avoid the application of capitalist interests, it might entail a rising of surplus rate (or exploitation rate). The labour reforms, social and labour rights, the working and employment conditions, production control, work organisation, and collective agreements express its consequences and distribution outcome, between profit mass and wage mass within the GDP. • This relation is set and expressed by the surplus value rate.

14. 2) The long waves of acumulation theory.

15. The long waves theory (E. Mandel): main ideas • Even although the accumulation is guided by the profit rate quite consistently, is not the single cause of its evolution. • This is not a a mechanic or an automatic law, despite there are some trends in the long term. The role of socio-politic and labour conflicts, the socio-technic organisation, the political economy, and the geopolitical strains (hegemonic powers, centre-periphery tensions, the belic conflicts, can be decisive. • There have been four long waves in the capitalist history so far. The three first ones have lasted around 50 years, but the length is not prefixed beforehand. • The business cycles, within each long wave, have been behaving with a last of 7-9 years. Recently this period speeded up, making the industrial cycle shorter. • However, every long period of prosperity, not longer of 25 years, have been succeeded of a new period of slowdown accumulation in a endogeneus way. • Passing from a depressive stage to a new expansive long wave is not automatic at all. It depends of sociopolitical factors –classes struggle- mainly, and economic conditions –new markets availability,…- and technical capacities –new products to trade, increasing productivity level,…-

16. Prosperity Depression Fundamental innovations 1793-1825 1825-1847 Manufacture 1847-1873 1873-1893 Steam machine 1894-1914 1914-1948 Oil Plastic 1955-1973 1973-… Microelectronics Atomic Energy Artificial synthetic fibers Technical change is effect, not cause of the accumulation stage, although it might prolong or intensify it. Long Waves of Accumulation • I Industrial Revolution • II Industrial Revolution • III Scientific-Technological Revolution Applied investment in industrial production Fundamental Research Industrial Innovation (inventions and patents)

17. Some possible pending doubts of this approach • Perhaps, some kind of etnocentrism, due to the difficulties for having world statistics available. Michael Roberts has been contributing for a world profit rate indicator to solve this lack. https://thenextrecession.files.wordpress.com/2017/09/revisiting-a-world-rate-of-profit-june-2015.pdf • Is there just a single long wave along the world?. Are continental or regional markets behaving with synchronized rhythms, is there some kind of lag, or even they act independently?. • The 7 richest countries have had a better profit rate evolution than the global economy. China shows much better figures, although shares tendencies. • Are there some interlink between regionals and world market?. Do we find differences between developing countries and core countries?.

18. Fuente: Michael Roberts (2015)

19. 3) Neoliberal respond to the crisis 80’s onwards

20. The Neoliberal era • Political great transformations: • Austerity policies at international level. Wage adjustment, privatisations, setbacks in social and labour rights. • Fall of East Block of the real socialism • Emerging countries, semipheral countries gain space in the world market.. • Some supranational institutions come up. (G-20, IMF, World Bank, World Trade Organisation, EU, …). • Neoliberalism of State. Public Sectors intervene as an upside down Robin Hood. • Financialisation. Banking system privileges, and financial markets increase its weight in economic decision making. fictitious capital. • Decisive ascent of transnational corporations, generating a dualization in economies. On the one hand, one linked to local or national markets, and another transnationalized, that contribute to form a dual profit rate. • The cycle of capital rotation is different in each country. In general terms its duration is faster. In addition, the medium-term industrial cycle has a different duration depending on the country's international position.

21. Empirical and recent facts • The “Late capitalism” duration is longer than previous long waves. 70 years. • The profit rate, since 80’s, had a oscilant behavior, recovering and falling. Los lower financial costs have been allowing that the efective profit rate (EPR, A. Shaikh) sustained a sufficient level at least till 2008. The EPR is the profit rate after taxes deducting the real interest rate. • At world level, the accumulation rate have been slowdowning, but just a significant recession were seen in the period 1973-1979, 1992-1995, 2000-2001, and just was considered a Great Recession in 2008-2013. • The recent significat ascent of surplus or exploitation rate is not enough yet to make a new long wave of prosperity feasible. The conditions for that need or a higher increase of it, or a huge destruction of fictitious capital (financial capital). The capitalists make all the effort to impose the first scenario. • Financial factors and energy crisis might determine a permanent and irreversible shrinking economic trend. We are in front of the end of low real interest rates and the end of low, or steady raw material prices. In the context of a slight profit rate recovery with a high share of private debt, a long decadent period is pretty probable.

22. The financialized model of the Neoliberalism of State • The Neoliberalism opted for combating the overproduction crisis with a mix of old and new recipes. On one hand, through structural adjustment (privatisations, social and labour rights devaluation, worse social policies). On the other, through facilitating to indebt the economy, mostly the private sector with easy credit, and families with long term mortgages. • Expansive monetary policies have been applied. Although the financial sector and private economy were priviliged in this regard, in detrimental of public sector. • una fuerte desregulaA strong financial deregulation relaxed the soundness of banking system and financial markets, created hazard moral transferring economic risks towards public sector, small companies, and families. • In the EU, the economic architecture of the Eurozone has created a mechanism of crisis transference from the core countries to the peripheries, similat to that applied since a long time ago in the developing countries, but under the straightjacket of the single currency.

23. Questions for a debate(Please, elaborate your reply as more in depth as you are able) • In your view, following the approach of the long waves theory, which could be the causes of the prosperity period after the Second World War?. Identify some possible causes and try to make a reasoning of their influence. • In the case of your region, taking into account the workers movements organisations, collective agreemens and the labour regulation, could you summarise how they could be affecting to the profit rate and the investment trends. If you do not have any data, please, try to collect some experiences and organise your reasoning following (or disscussing) the explanations framework given in the seminary of today. • It is often mentioned that internet or the robotisation are major changes in the technology. From your point of view, to what extent they can provide the conditions for a new long wave. Try to see how they influence in the productivy and how raw materials abundance could imply a limitation. Please, consider to use the concepts handled under the long wave theory of Mandel.