They're perplexed when the downturn is stronger than expected. They're perplexed when the downturn is longer than expected. They're perplexed when the recovery is "L shaped" instead of "V shaped;" or when it's "W shaped;" or when it's "U shaped." This leads anyone not schooled in the mystifying process of political economy to wonder "What exactly did they expect from a bunch of ignorant, prejudiced, biased, irrational, error-prone (regulators/deregulators, bankers/bureaucrats) acting ignorantly and irrationally?"
Most of them are perplexed. Most of the time. And those political economists that aren't confused? They're just not paying attention.
2. What the bourgeoisie's political economists lack, of course, is...well they lack many things. Here are a couple. They lack (1) a sense of their own role, their own function as shills for the huckster's pitch that capitalism, warts and all, is the best human beings can do. They lack (2) recognition that the forces intrinsic to capitalist accumulation impair and disrupt that accumulation; that accumulation becomes devaluation.
In truth, the political economists don't understand...markets. They cannot comprehend that in the billions of individual exchanges in the markets, the "trend," is established only because the commodities are not simply products, but also represent the conditions of capital.
While the processes of capitalism capitalism are always that of dynamic disequilibrium; are always erratic, uneven; the disequilibrium nevertheless expresses a secular, structural, historical development. That development is given its acute form in the cycles of capital. It is the convergence of the historical development with (and through) the cyclical movement, the aligning, the superimposition of the historical development upon the upon the capitalist cycle that brings us to the conjunction, which at one at the same time is and is more than the impairment of accumulation.
3. When our confused political economists ask why the current recovery is so weak, the question becomes a means for them to avoid the structural trend that is super-imposed upon, and concentrated in, the acute moment-- why has the rate of increase for the output of goods and service per capita during years 1987-2013 slowed to half the rate of that increase for the period 1961-1987?
In spite of all the technology thrown into the production process; despite all the deregulation; despite all the incense burned at the Fed-- output per capita has declined.
The rate of growth of output per capita declined over the long term for the reasons that the rate declines in the short-term cycle-- that is to say profitability and the need to offset declining profitability. Asset-liquidation, reduced industrial employment is essential to the expansion of technology. While the population continues to increase, the value-producing population decreases. The proportion of new value introduced into the economy just as, just so, and just because the new value is the living labor which now animates, mobilizes, carries the already, and continuing, accumulated capital which can add nothing new, and worse (for the bourgeoisie) can only give up its "sunk costs"-- its value-- over longer cycles of turnover.
4. Perplexed, the pundits, political economists, branch managers, security floggers search for a method of radical simplification for the task of understanding what they themselves mystify-- value-- in "markers" that act as index to the health of the capitalist economy. So there's copper, known to the traders as Dr. Copper. There are the order books for maritime shipping. There's oil, once upon a time known and no longer thought of as "black gold." There's gold itself, the "store" of value. There was/is/has been/will be cotton, coal, steel and of course automobiles-- especially automobiles.
The rise and fall of the prices of all these commodities are the measures by which the bourgeoisie make it perfectly clear to everyone but themselves that each commodity-- from container ships to powdered milk-- is a husk, a shell, a mule for the transit of the only measure that counts-- profitability.
5. We can "look" at any thing, or any measure we want. What we see however will always be a moment of capitalism. The accumulation of moments becomes the trend. The totality of the moments is the truth of capitalism, and that truth is overproduction. Overproduction is the overproduction of the means of production as capital, any portion of which capital can lay claim to a portion of the value in the markets only through the more intense exploitation of labor power...which is to say only through the general devaluation of all other capital.
We can look at steel. We will see overproduction. We see it in China's increased output and capacity. China now accounts for nearly half the global output of steel, utilizing only 2/3 of its production capacity.
We see that profits in China's steel sector have declined to historically low levels (although that's not really much of a history).
We see that half of China's steel mills operate at a loss.
We see at the same time that 2014 is the 6th consecutive year of declines in steel production in the European Union, with the decline in output between 2007 and 2013 measuring 21 percent.
We can look at iron ore. We see another moment of overproduction-- actually another moment in the overproduction of steel as prices for ore have declined some 50 percent off their peaks.
We will hear the market analysts moaning that although ore prices are near 5 year lows the major producers continue to ramp up production. Why? Because over the past five years the major producers-- Rio Tinto, BHP-Billiton, Vale-- have invested heavily in more efficient machinery and methods for the extraction of iron ore, so much so that they have reduced their costs of production to $30 per ton.
So the prices have fallen to $80 per ton? So what? There's still profit to be made by the majors through overproduction and driving the smaller producers out of the markets-- by devaluing capital.
We are seeing that overproduction rearranges profit even at the expense of profitability- at the expense of the rate of profit.
We are seeing that overproduction is the condition of capital where prices and values converge; where prices finally catch up, in their descent, to the reduced increments of value added in production.
We can look at the production of petroleum liquids and gas. We will see a tripling of output over last seven years in the United States. We see a production increase of such magnitude that US imports have declined by more than half. We see overproduction of such magnitude that it has offset, nullified, the "usual" "beneficial" impact armed conflict has on oil prices. Not even wars in the Mideast, proxy wars in the the Ukraine can get the price of oil back to $100 per barrel. We see overproduction of such magnitude that the "contango" is back in play-- where crude oil tankers are used to warehouse oil in hopes that future prices will rise.
We see all that while we hear the CEO of Chevron complain: "One hundred dollars a barrel is the new twenty dollars a barrel in our business."
We see, we hear, and we can read the oil companies' rate of return on capital employed: 2000-18%; 2005-19%; 2007-15%; 2009-9%; 2014-8%.
We can see the impact of US shale production in the deepwater rig utilization rate which declined from 100 percent to 65 percent in six years. Only yesterday seems so long ago.
We can look at world trade, where slowing growth is the twin, and the offspring, of overproduction.
6. We can see all of this. We can read Marx who, as noted in earlier posts, writes:
The violent destruction of capital not by relations external to it, but rather as a condition of its self-preservation, is the most striking form in which advice is given it to be gone….Since this decline of prof signifies the same as the decrease of immediate labour relative to the size of the objectified labour which it reproduces and newly posits, capital will attempt every means of checking the smallness of the relation of living labour to the size of the capital generally, hence also of the surplus value, if expressed as profit, relative to the presupposed capital by reducing the allotment made to necessary labour and by still more expanding the quantity of surplus labour with regard to the whole labour employedand maybe we realize or maybe we don't that this violent destruction is inherent to and resolves the issue of "underconsumption" and "effective demand." Maybe we recognize in that paragraph the answer to Marx's own musing about why, with the increase in social productivity, it is profitable to produce six knives for the same value contained in a single knife when there is no requirement for an individual or "individuals" to purchase six knives. Maybe we recognize that the producer of the six knives absorbs, garners the profit that the producer of one knife previously obtained, just as Rio Tinto obtains a profit from ramping up overproduction despite the decline in prices.
Maybe we recognize that this-- this producing 6 in the place of 1-- this overproduction is the way capital develops; that devaluation is inherent in capitalist reproduction.
Maybe we see, or we don't, that the upheavals triggered by overproduction/devaluation as confused as they may be in the Ukraine ("We want to live like Europeans." And now they have their IMF austerity program to prove it.); or Hong Kong; or Egypt; or Syria are in fact upheavals produced by the impairment in capitalist accumulation.
Maybe we see that the expressions, "slogans," these initial upheavals have adopted ("democracy," "freedom") are the initial opposition to the poverty that capital deploys as it reduces "the allotment made to necessary labour... by still more expanding the quantity of surplus labour with regard to the whole labour employed."
Maybe we see that these upheavals in and through their very confusion will recede, and be replaced by workers revolution against capital, against value production.
If we don't see that, all of that, then we're the ones not paying attention.
October 6 2014