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By Alan Woods Thursday, 16 February 2006 (clip)Marx pointed out that the ideal of the bourgeois is always to make money from money, expressed in the formula: MM1. Whereas in the past the bourgeoisie developed the means of production and therefore played at least a relatively progressive role, this is no longer the case. Increasingly, the capitalists seek to make easy profits through speculative activity, dispensing altogether with the painful necessity of producing. With the exception of China, where there has been an enormous development of the productive forces, the capitalists have not been investing in production to the same extent as they did in the past. The figures for global Foreign Direct Investment (FDI) for the period 1999 to 2003 are as follows:
1999: 1.08 trillion dollars 2000: 1.38 trillion dollars 2001: 817 billon dollars 2002: 678.8 billon dollars 2003: 559.6 billon dollars.This shows that in 2001 there was an actual fall in FDI of 41%, in 2002 of 17% and in 2003 of about 17%. Furthermore, when we look at the figures for FDI into the United States we find that in 2003, there was a fall of 53% the biggest for 12 years. In Central and Eastern Europe there was a fall in FDI of 30%, in the EU of 20% and in Japan of 35%. (China is the exception, being the country with the biggest inflow of FDI). [Source: UNCTAD 2004 Report]. In its report for September 2005, the IMF warned that despite the strong increase in business profits, investment performance has been generally weak, and it called for a change of strategy: Until now world growth has been sustained by the increase in consumption, but it is now time to shift from growth based on consumption to growth based on investment.
In their search for easy profits, the capitalists have engaged in a new orgy of takeovers, which almost always end in factory closures, asset stripping and sackings. In the first few months of 2005 there was a 40% increase in takeovers, with a total value of 1,657 trillion dollars. The IMF tries to present this as economies of scale which permit a reduction of fixed costs. This is euphemistically known as creative destruction. In reality there is nothing creative about it. It amounts to a kind of modern Luddism, except that in the early years it was the workers who wrecked machines, whereas now it is the capitalists themselves.
A lot of the economic activity at the present time is not productive but speculative activity like the stock exchange boom, takeovers and the housing bubble. This does not benefit the economy and does not create an atom of new wealth. It acts as a monstrous bloodsucker, extracting the wealth created by the working class and siphoning it of into the pockets of the parasites. When the last speculative boom collapsed the bourgeois swore they would never repeat the experience. Like a drunk who has over-indulged at a party and wakes up with a bad hangover, they cried: Never again! I've learned my lesson! But subsequent events show they've learned nothing.
Of course, there is always a speculative element in every cycle. A speculative boom in real estate played a big role in the boom that preceded the 1929 crash. Before that there was the South Sea bubble in the 18th century and the Dutch tulips scandal in the 17th century. But this present bubble is the biggest speculative boom in history, bigger than 1929 and all the others. And the bourgeoisie will live to regret it. They are preparing a serious slump at a certain stage. The figures of the increase in house prices internationally in the period 1997-2005 in percentage terms are as follows:
South Africa: 244 Spain: 145 Britain: 154 Ireland: 192 Italy: 69 France: 57 Belgium: 71 USA: 73 Germany: - 0.2Although the growth of house prices in the USA has been slower than some other countries, it accounts for something like 80 percent of total US GDP over the last five years. To give an idea of the scale of the problem, the stock exchange bubble in the later 1920s, just before the crash of 1929 was the equivalent of 55 percent of total US GDP. In the last five years in the USA consumer spending and residential construction represented no less than 90 percent of total GDP growth. Over two fifths of all jobs in the private sector since 2001 have been related to housing. This situation is alarming the serious bourgeois economists.
The problem can be simply stated. In the last period there has been an enormous expansion of credit and debt. This is the basis of the consumption boom in the USA. A householder can owe more than what his property is worth. This is the way in which US capitalism has expanded the market far beyond its natural limits. But there is a small problem here: debts must be repaid, and house prices (and stock prices) can rise and fall, but debts are fixed. Sooner or later the gap will have to be filled. The present speculative orgy, like every other bubble in history, will inevitably end in a slump.
full: http://www.marxist.com/reawakening-world-working-class160206.htm
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