Deflation

Nicholas Siemensma nsiemensma at yahoo.com.au
Fri Jul 11 21:11:51 MDT 2003


Jurriaan Bendien wrote: 
 
> To increase the general price level, basically you
> need to find a way to
> raise the level of demand by consumers and
> producers, in a careful way, so
> that it does not get out of hand and implode again.

Deflation is not a realisation problem determined by
"underconsumption" or any other issue arising at the
level of circulation.  Rising inequality and trade
problems are symptoms not causes.  We don't need to
invoke Keynes: the problem is not lack of effective
demand but lack of surplus value (an issue arising, of
course, at the level of production).  The problem is
the underproduction of valorisable capital and the
overproduction of unprofitable capital.  Deflation
appears because (due to the low level of social
productivity) it is unprofitable to employ more
people, and hence less effective demand appears in the
market, while great pools of idle labour and moribund
capital exist everywhere.

This is an index of the hegemon's weakness, because
the US is incapable of sustained growth or of
capitalising the world economy.  This is important for
understanding relentless competition between rival
national bourgeoisies as forms of class struggle.  For
the past 30 years the US has managed to export its own
accumulation crisis, as Jim Farmelant mentioned, to
Japan, China and Germany.  Since the dollar was
delinked and competitively devalued by Nixon,
deflationary policies have been used by these national
capitals trying to outcompete US capitalism by raising
domestic productivity.  Behind these insidious
deflationary crises lies the search for competiveness
and higher rates of exploitation in the
labour-process.  This silent war between rival
imperial subsets is an outcome of class war at the
point of production and within the labour-process
above all: the winner is the capitalist power, the
grouping of regional and national capital, with the
highest rate of exploitation.  Of course China has the
advantage in policing its workers by direct political
means of internal repression rather than eg
unemployment.

These bouts of chaos, turbulence and deflationary
crisis arise in periods of interregnum and hegemonic
decline such as the Pax Britannica after 1873, in
which Britain became a coupon-clipping rentier
capitalism evoking the dollar seigniorage of today. 
In this period as with today, global deflation
coincided with hefty GNP per capita increases for
certain groups: the protectionist developmental states
such as Germany and the USA.  It also coincided with
the formation of imperial blocs and rivalries, and
eventual war and revolution.  

Such accumulation crises cannot be resolved and
profitability restored until the devaluation of
constant capital, the destruction of fixed capital, a
transformed resource base and the introduction of new
productive technologies allowing restructuration of
the labour-process and the composition of labour. 
These cheapen the cost of capital and allow
surplus-value to grow.  Until then, as Gary and others
have said, whatever stimuli and Keynesian policies are
implemented will only result in a brief acceleration
before the economy hits the stagflationary wall,
because this sort of arbitrary demand management does
not solve the underlying problem, and will only
produce inflation followed by recessionary crises.

Unfortunately no path-breaking series of innovations
has occurred which would allow the transformation of
the mode of production in order to allow for new
growth.  The form of imperial hegemony is the
political and social instantiation of the
accumulation-regime on a global level, so this is a
crisis of US imperialism.  The US guarantees the world
system of existing production relations, but cannot
renew the exhausted structures of production because
of an insufficient capital base and insufficient
energy resources.  Jurriaan's "Schumpeterian"
technological revolution may be impossible, and the
Bushies have considered this fact.  US strategy is to
seize control of West and Central Asia before
presumably confronting China, as it must, but this
doesn't solve the underlying problem and in fact only
politicises the crisis, allowing an opening for
radicalisation and revolution.

Nick

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