Capitalism Isn't Working- SA workshop at Auckland Uni, Thurs March 26

Thursday, March 26, 2009
7:00pm - 9:30pm
Algie Lecture Theatre, University of Auckland Law School
Waterloo Quadrant
Auckland, New Zealand


Socialist Aotearoa gathers activists from the unions, movements and the anti capitalist left to discuss the twin evils of economic and climate crisis, and why we must move beyond capitalism as an outdated and failed economic system.

The workshop will be divided into a number of phases, discussing-
(a) marxist theory on the economic crisis
(b) strategies to build a combative anti capitalist movement
(c) what kind of socialist organisation, what kind of socialist society?

The University of Auckland Law School is one of the nine faculties that make up the University of Auckland. It forms part of the city campus but is separate from what is termed the "main campus" which spreads across four blocks, two on each side of Symonds Street. In contrast, the Law School sits between Waterloo Quadrant and Eden Crescent, in buildings formerly used by the High Court of New Zealand in Auckland. Prior to that, the land was used by an ice cream manufacturer, leading to its nickname "the ice cream factory".

The law school is accessible by a right of way down a small hill from Waterloo Quadrant. Originally, this was only a mud track nicknamed the Ho Chi Minh trail but this was paved when the Davis Law Library was completed and replaced Eden Crescent as the main entrance into the Law School grounds.


Can ‘new markets’ rescue the bosses?

by Ken Olende

As the recession deepens capitalists face a quandary – how are they going to make money?

Companies won’t invest unless they believe they’ll get a decent profit, no matter how much governments encourage banks to make funds available to them. But they are already finding that the goods they have manufactured can’t be sold at a profit.

In earlier crises, bosses have regained their ability to make profits by developing new markets, either by creating them in areas outside those already dominated by capitalism, or by redividing control of existing areas. Alternatively they can try to create new products or services within their existing economies.

For modern capitalists there is a problem with the first of these approaches. It worked for European economies during the first “Great Depression” of the 1870s and 1880s. This was when most of the planet was divided into empires and spheres of influence.

Even during the better known Great Depression in the 1930s, there were areas of the globe that could be brought into the system as new markets for manufactured products or as new sources of cheap raw materials.

But now capitalism covers every part of the world. And the imperial division of the world is not just a matter of Western powers dominating poorer countries. It is a process of competition between the most powerful countries that has often led to military conflict.

Both the First and Second World Wars were primarily about states fighting over markets and resources.


From a coldly capitalist point of view, the Second World War can be viewed as a success. Despite 50 million deaths, it ended the 1930s Depression and made the system profitable again.

But it is not easy to repeat such a feat. There is a danger that any conflict between major powers today would swiftly become so calamitous that the system could not recover.

Alternatively a cycle of smaller imperial war could continue without end, with the destruction and destabilisation of markets outweighing any gains it might make. A hint of this dynamic can already be seen in the “war on terror”.

The alternative for the bosses to imperial conquest or war is to search for new markets and develop new products within existing spheres of influence.

This is not a simply matter of some industries doing well while others stagnate – replacing jobs provided by the manufacturing of cars with jobs in burger bars will not end the recession.

But capitalists always hope that the development of new industries will restore profitability. This was what appeared to happen with the growth internet in the late 1990s. While there was a speculative bubble over this “new media” that soon burst, the hope has remained that new technology can be a genuinely new source of wealth.

Such hopes were rife during the 1930s Depression as one technical innovation after another emerged onto the new mass market – the radio, cinema, mass produced cars, fridges and telephones.

But these new products did not solve the economic crisis.

Capitalists worry more about how to increase their share of profits than about where value is generated.

This means they often fail to understand why innovation doesn’t create profitability in itself.

To explain that we have look at the Marxist analysis of where profit comes from in the first place.

It is the labour of workers that adds value in the production process. This value that people create by their work is greater than what they are paid in wages. The bosses’ profit comes out of the difference between the two sums.


But the pressure on bosses to compete means that they try to cut the amount that they invest in labour.

Instead they invest in new technologies that allow them to spend less on workers. They can produce the same, or more, with fewer workers thanks to new technology or machinery.

But since profits are ultimately generated by workers’ labour, reducing the proportion of that labour tends in the long run to reduce the rate of profit.

Individual firms might benefit in the short term from investing in new technology. But once their competitors catch up this advantage is lost – and the whole cycle must start again.

Furthermore, the first company to develop a new technique will often face research and development costs greater than those of later competitors.

There are various factors that counter this tendency. One is scientific innovation. Some new technologies will use less machinery and raw materials per worker than old technologies. Thus the proportion of labour in the production process is increased – and with it the rate of profit.

But such scientific innovations will always tend to be in the minority. The most reliable way to increase efficiency under constant competition is to invest in machinery.

In the end, on average, it will be the firm that invests the most that makes most profitable innovations, not the lucky ones that make a breakthrough that increases labour power.

So it turns out that each and every one of the capitalists’ solutions to the crisis is temporary and unreliable.

The world is already, in practical terms, entirely capitalist, so there is little room for expansion.

Imperial competition tends towards war and brings the threat of destroying the system rather than repairing it.

New products and production methods can restore profitability, but then the competitive logic of capitalism tends to wipe out the profits yet again.

Capitalism is a very flexible and tenacious system. But each way out of the crisis that it offers will only ultimately create more problems.

Also in the Capitalism isn't working series:
» Is this capitalism’s worst ever crisis?
» Can countries become bankrupt?
» What on earth is quantitative easing?


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