The real causes of the global economic crisis: - What the "new competitors" and "blind nodes"

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National Academy of Science of Azerbaijan

The real causes of the global economic crisis: - What the "new competitors" and "blind nodes"

Annotation

capitalist market liberal economy

Analysis of the global economic crisis disturbing the international community in recent few years was given, the real and major causes of the crisis are highlighted in the article. The explanation of new scientific notions, such as syndromes of “new rivals” and “blind nodes” were given and the historical roots of these notions were investigated. In addition, basing on Marx's economic doctrine and the dialectical historical methodological principle stepping of the world to a new era of development and the explanation of the expected consequences of it in recent decades of years is included in the article.

Keywords: economy, crisis, market economy, alternative models, sovereignty.

Анотація

Проведено порівняльний аналіз за останній 30-річний період існування соціалістичних і капіталістичних моделей у світлі ринкової економіки і шляхом розроблених принципів виявлені наукові та практичні аргументи на користь подальшого розвитку цих моделей за результатами аналізу. Крім того, на основі аналізованих ризиків та альтернативних моделей наголошується, що економічна модель ліберальних ринкових відносин містить у собі характер державного суверенітету, національного добробуту і розвитку етатизму (державного соціалізму).

Ключові слова: економіка, криза, ринкова економіка, альтернативні моделі, суверенітет.

Аннотация

Проведен сравнительный анализ за последний 30-летний период существования социалистических и капиталистических моделей в свете рыночной экономики и путем разработанных принципов выявлены научные и практические аргументы в пользу дальнейшего развития этих моделей по результатам анализа. Кроме того, на основе анализируемых рисков и альтернативных моделей отмечается, что экономическая модель либеральных рыночных отношений содержит в себе характер государственного суверенитета, национального благосостояния и развития етатизма (государственного социализма).

Ключевые слова: экономика ,кризис, рыночная экономика, альтернативные модели, суверенитет.

In the way of its development humanity passes through a sharp turn that will lead to great changes. The footholds of the liberal corporate system that rejected taboos, 5 or 10 years ago considered unbreakable, invincible as well as inviolable, and even the term capitalism as a foreign body, now has begun to creak. History steps to a new stage. Those who until yesterday accepted the term communism as communist propaganda and erroneousness of Marxism, those who wrote works in volumes and denied the existence of Marx's capitalism in the world, now in Davos forum where the liberalism's brain storm was storming saying with the tongue of Svab “capitalism has become out-of-date, no longer do so, it needs to be renovated “caused feelings of mixed exclamation and question in everyone's mind - Does mankind return to Marx?!!” [13].

We pass through the turns, but through sharp turns where the historical processes are taking place very quickly. Crisis shakes the world economy, with all its severity, begins a new era of searches. Everyone turns from until yesterday's steadfast “market” dogma to totalitarian labeled “etatism” [4]. Humanity is changing direction and outlook, market fundamentalism and liberal dogmas are expelled from thoughts and life and announced heretic. Regimes try to veil the truth that the crisis of corporate capitalism in fact, is created from the essence of the system, the truth is hidden from the people. Liberals sentence the truth to death, saying “truth cannot be for everyone, everyone should have his (her) own truth”, the liberal preacher tries to make masses to fall asleep. But Hegel said, “death of all things is born in their wombs”, and men of wisdom (sages) said “death is born with the life itself”. What's the global corporate system's illness, is it infectious or lethal? How accurate the doctors made the diagnosis of the last desease of humanity? I watch the course of processes as an outside observer. Liberalism is hitting against before our eyes, “salvation” programs are issued one after the other, funds are established, hundreds of millions, no, billions is not enough, voices are rising from the other side “not sufficient!”. Hundreds of billions are needed. Those billions, hundreds of billions like the sack of sand cannot prevent from the stream. The crisis absorbs hundreds of billions, digest it, but the end of the problem is not seen. If nothing came out of it, then other ways are thought. I laugh with irony. “This will do no good either”. You flounder in vain, you swim against the flow of history. You will sustain a defeat, your failure is inevitable. Because history do not like and do not forgive those who swim against it. Which history? The supreme law. Liberals are laughing, The history cannot have a law, because we have finished this issue. Has Marxism not gone out of vogue?”. The liberals rejected the laws of development of history. But now this law sentences their system to death. We start our journey in the tunnel of time, we are returning to Marx, to the person who taught us to the doctrine of spiral development of the history. He taught us that the development of history is not straight; this development passes through bumpy, winding and tangled pathes, but in the end it moves forward. That is the goal of science, to perceive behind these winding, tangled pathes the general law of the development of history, to discover it. Therefore Marx considered the history science as the most exact one. Now history itself is mocking over those who saying “history is a tale” reduced the history science to the level of tales, mythology and stories.

So, the truth one: there are general laws of development of history and if these laws prior to two centuries allowed us to be aware in advance of the events that are happening today, then they are able to give us opportunity, as they did in the past, to glance from nowadays to the future and to guess though very weak, but seriously perceive of what was waiting for us in the future. But at first we return two centuries ago, to Marx. This will show us the real causes of the global economic crisis that we currently live in, which is lost in the “bundle of reasons” fabricated by itself. Even has lost its head. Sometimes they find Greece as a scapegoat, blame her, because when became a member of the European Union it had deceived with fictitious figures the international world. Greece finds Germany guilty. They say: “Because of Germany we are up to neck in debt. It has bankrupted us, and aims to buy our islands”. Others find Laws, the third in that the European Union does no reforms. The unemployed, wretched simple German in Germany who lives in miserable conditions being irritated clenches his fists, threatens Greece. On the other side the Greek taking the same fighting pose sees in the face of Merkel “the Third Reich”. In a word, a great variety of reasons for the global economic crisis are enumerated, that if all gathered together a mountain of paper and folders in the height of the headquarters of the European Union would be arise, but not a sand grain of importance in solving the problem. Why? Because this bundle of reasons mentioned as a reason is derivative, question of minor importance, second, third, or may be of the last importance, and are not able to affect the course of the global financial crisis. Therefore, the plan of measures of action aimed at the elimination of these reasons as if spend all of the finances in vain, and blow the fire. So, there are primary, first-grade, main reasons. The second truth arises from there: if we truly want to eliminate the main cause of the problem, we must certainly distinguish the main reason and significant, necessary, recurrent connections among the events.

Both truths cause and complete one another. Thus, the society events are not a collection of casual, chaotic, unpredicted, incoherent facts isolated from each other as liberals claim, on the contrary, it is the mechanism operating on the basis of the general laws of development. Coming out from this postulate Marx and Engels two centuries ago could very exactly predict the crisis and wave of discontent still ongoing in the west. Of course, the founders of scientific communism said these views under the circumstances of two centuries ago. It was the period when England fulfilled the function of the world's worshops and was the only largest monopolist in the world market. Therefore, Engels made all his analysis on the industry of England. Today the Western capital is in the same position. So, if to replace England with the West capital in Engels's ideas then we can see very clearly the causes of current global economic crisis. Engels wrote: “England's industrial monopoly is the keystone of the social system in this country. Even when this monopoly was in power, markets could not keep pace with rising productivity of the British industry; as a result, there was a crisis every ten years. Now, day by day new markets happen to be something unique... What if the world's supply most of the factories that all are still in the hands of the United Kingdom will reduce year by year? ... Capitalist production cannot stand dead in its tracks: either this production should be increased and extended, or should die. Only the limitation of England's a very large share for the supply of goods of the world market now means, on the one hand, stagnation and poverty, capital surplus, on the other hand, a surplus of unemployed workers. What will happen if every year there won't be any increase in production at all? The most vulnerable spot, the Achilles heel of capitalist production is namely here. Continuous expansion is a necessary condition for its existence, but the constant expansion now becomes impossible. From year to year even more dramatically such a problem stands before the UK: “either the country or capitalist production must be annihilated, which of them is doomed to die?” [3, p. 515-516].

Now, not only England but all the western countries, the western capital is in a hopeless condition in the face of this question, of this dilemma. What can be said if now to apply these words said for the 19th century England by Engels to the critical situation in Western countries? The fact is that, the western countries, called in some literatures as “gold billion”, so far had the monopolistic position in the world market. Thus, 5 states of the world had 75% of the industry in the world market [6]. Naturally, the hegemonic, without competitive advantagous position of these states in the world market gave opportunity to the people of these countries to have relatively high living standard compared to other countries. And this provided stable development and existence of social structures of these countries. Now the situation is changing, new players appear in the world market that will be competing with the western economy [14]. These countries taking advantage of cheap manpower begin gradually, but persistently to force out the western economic monopolism. According to the report of the World Bank in 2025 - more than half of the world market will pass under the control of such states as China, India, Brazil, Indonesia, South Korea [9]. In other words, the hegemony of the West will end in the world market. These countries will lose their spots in the world market gained for centuries, their shares will be reduced there. At the result, it will be accompanied with a sharp reduce in production and closure of factories and plants in western countries. As time goes on lasting development, economic growth cannot be done [7]. Take notice, according to statistics of the Italian National Economic and Labour Council, the country economy fell 20% in the last 10 years. This fall was faster than in other European countries. According to the reports of the newspaper “Handelsblatt”, Finance Minister of Greece Yannis Stornra at a conference on the economic situation said: “We have already witnessed the economic downturn going on in the country for more than 5 years. During this period, the country's economy fell 20%. Until 2014 year the country's economy is expected to fall 25%” [13].

This is still the beginning of the end. All the western economy will have sharply been reduced over the next decades. So what will the result? As far back as two centuries ago, Engels wrote in the example of England: “as long as there was England's industrial monopoly, the English working class participated in the profit of this monopoly to some extent. These benefits were unequally divided between workers: the most part was taken by the privileged minority, however, sometimes wide masses also attained to something. That is, since ouenizm died there had not been socialism in Britain any more. The English working class will lose their privileged status with the fall of England's industrial monopoly, all the working class without exception of the privileged and minority leaders will be in the same level as the workers in other countries are. Therefore, socialism will again emerge in Britain” [3, p. 516].

Today we witness it in the case of the West. At present, almost in all the Western countries is going the process for reduce of social expenses, the cancel of privileges, the extension of the working day [8]. Workers lose all social rights and privileges gained at the expense of their centuries-struggle, their blood. As a result of system rivalry with the socialist countries, the western countries in order to isolate the working class from the communist movement had had to make concessions to various privileges, following the collapse of the Eastern Bloc all these privileges began to be canceled. If 15-20 years ago there was the flow of world's poorest countries to the west, today rather we witness the process of flow of the employees, particularly of the qualified personnel from the developed countries to other countries. The West which at one time used to gain benefits for themselves from world intellectuals at the expense of their work, at present, on the contrary, is exposed to brain drain, and loses its high scientific potential. Economic crisis caused the qualified personnel shortage in Italy. Such a statement was made by Andrea Rikardi, Italy's minister of economic cooperation and integration. According to Italy's news agency “Ansa”, the minister stated that during the economic crisis more than 1 million foreign workers have left the country's labor market. Foreigners that faced with the difficulty in finding a job and did not want to work in the low-wage areas go to other European countries, or are forced to return their homeland. According to the minister, at the time of the last census in the country it became clear that migrants leave the country in masses. Most of the migrants who have left the country are highly qualified personnel who the Italian economy needs for. And causing the qualified personnel shortage in the country, it can rise serious problems for the future development of the country - the minister noted [13].

The point is that the cost for an hour's labor in western countries is very high compared to other countries. For example, if in such European countries as Denmark, Germany, Italy the average statistic worker's an hour labor is 8-10 euros, while in China, Brazil, India and other countries this indicator is only 1-2 euros [5]. This gives opportunity to countries with cheap manpower to take use of this advantage and to seize the world market. The unwritten law of the capital is that it always flows to countries with cheap labor force. In this case, Westerners that cannot keep up with their new rivals have only 2 ways: first, to remove their enterprises tothe countries with cheap labor market or to stay in their own countries and regularly to reduce investments for manpower and social expenses [14]. Though these means are different, the result for western worker is the same in both cases, i.e. the masses will be reduced to unemployment and poverty. Now there is such a fashion in Europe, the capitalist blackmailing employees achieves them to work in the use of poor conditions [10]. Thus, the company announces that it will remove the manufacturing enterprise to countries with cheap manpower and for prevention of this, they are demanded to accept working conditions - workers work much but paid less than ever before. Workers who fear to lose their jobs, accepting all the demands of capitalist agree to work in the worst conditions. At the result, day by day, even more deteriorate working conditions. In general, this and the similar events are no exception any more in the west. It is common and are increasingly gets mass character. Currently normal working hours, concepts such as social insurance, as well as limits on the minimum wage are disappearing in the west [13]. One should not think that these cases are temporary and transitory. No, these events have a deeper reason, and this reason can be conditionally characterized as a “new rivals syndrome”. Moreover, another serious cause of the inevitable collapse of capitalism in the west is the syndrome of “blind nodes”. This case, including the change of the capital structure was worked out in details by Marx and is a very important, topical question for today; without it is impossible to understand the nature of the global recession.

What is the change of the capital's technical structure? Marx emphasized that the capital consists of two major components: 1. Fixed capital (means of production, enterprises, buildings and so on); 2. Variable capital (expenses for labor force, wage funds, in short, the social expenses). According to Marx, if formerly the two constituent parts of the capital has the equal weight, gradually, with picking up speed of capital accumulation the general part of capital is mostly collected in the fixed capital and accordingly the weight of variable capital in the total capital is progressively reduced [1]. What does this mean? The essence of the problem is that formerly the capitalist widely used manual labour, at the result, productivity was little, but the manpower expense was very high. If the total mass of capital increased two times then the demand to manpower had to be increased two times or in order to increase the capital production two times needed to double manpower. But the gradual strengthening of rivalry forced capitalists to seek ways to reduce expenses. Because in the competitive struggle for markets won that rival whose manufactured products had costed cheap than the others'. As the expense of manpower had greater weight in the cost of the product, in order to reduce the prime cost and thus to take advantage over other competitors began to regular reduction of the variable part of the capital, i.e. of social expenses. As a result, with the deepening of competitive process, due to the apply of new technologies labor productivity was increased, and the demand of manual labor and the social expenses were reduced. Previously, the ratio of the variable capital to the fixed capital in the total structure of the capital was characterized by V> rate, gradually, this began to be reduced in %, 1/5, 1/6, 1/7, 1/8 etc. rates. And this process continuously goes on to this day. As a result, how rapidly was changing the capital, so rapidly the capital varing in its total balance, i.e. social expenses was reducing. In this case, the capital required to be increased 5-6, 7 times and even more, in order demand to manpower could increase at least 1 time. Western capitalism's monopolistic position in the world market allowed the total mass of capital to increase rapidly; it is the truth, that accordingly social expenses and the demand to manpower was reduced, but this decrease was progressive, i.e. though the variable capital in the structure of the separate capital was reduced, in total, the number of manpower increased. At present, in the background of the shaken hegemony, monopolistic position of the Western economy in the world market and the reduced Western capital lasting development is replaced by lasting decline. In such a situation, the reduction of both the variable capital and the social expenses are included not into the progressive but the regressive phase. As a result, the problem of “surplus in manpower”, unemployment and lack of social guarantee with each passing day is getting stronger... as time goes on, big changes take place in the capital structure. The part of all capital which consists of fixed capital - machinery, raw materials, and a variety of means of production gradually increases more than any other part of the capital, i.e.part of capital spent on wages or hire purchase...

If the earlier ratio of these two parts of capital was 1:1, with the further development of the industry, this rate becomes 5:1, etc. If 300 of the total capital equal to 600 is spent on tools, raw materials, etc. and 300 spent on wages, then in order to increase the demand for manpower from 300 to 600 people the total capital should be doubled. But if then 500 of the capital equal to 600 is spent on the machines, materials, etc. and only 100 is spent on wages, in order to increase the demand for manpower from 300 to 600 people this capital should be increased from 600 to 3600. Therefore, with the further development of the industry, the demand for labor do not keep up with capital accumulation. It is true that this demand increases, but compared with increase of all capital it increases in the constantly descending proportion.

“...As a result of the development of modern industry, the situation must be increasingly advantegous for capitalist, but in prejudice of workers and consequently, the general tendency of capitalist production is not to raise, but to lower the level of average wages, i.e. it reduces the labor cost to some extent to the minimum” [2, p. 79-80].

Now, the state of affairs is such that the great business do not create working places, and large masses of capital gathered in the form of “blind nodes” become obstacle for the general welfare of the society, gradually the capital begins to be existed for itself only. It means that, on the one hand, due to the syndrome of new rivals, the rapid economic increase, lasting growth becomes impossible, on the other hand, as a continuation of it creation of new working places, albeit for a slight increase in the labor demand mass of the capital is required many times much than every last year compared to the previous periods. Such a rapid growth of capital is impossible. Thus, the close circle of collapse is formed and capitalist social system begins gradually, but withot turn to be squeezed out and to strangle itself in the collapse created by it. In a word, while struggling desperately in order to get rid of, the capitalism is sinking even more and on the whole, its action has been directed on the contrary to its existence. If to say in figurative style, this reminds me a rope made into a sliding knot, while the living being is struggling in this rope to escape, the sliding knot is getting narrower and narrower, and is further choking. Now the hopeless situation of capitalism is exactly the same. “Rescue” programs are working to destroy capitalism.

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