|One theory to explain the problem is that of underconsumption. The general tenor of this theory is that the goods being produced cannot be purchased by the mass of people, since these people do not have enough income to buy them. This is a problem of the demand-side. If there is a way to increase the money given to the mass of the people, then they can increase consumption and save capitalism from its crisis.
One approach toward this underconsumption problem is to increase the delivery of private credit to people who will then be urged – via advertisements – to live beyond their incomes. They will go into debt, but their consumption – it is hoped – will stimulate the economy out of a crisis. Eventually, these people will not be able to pay off their debts. Their debt will balloon and will create serious social problems. Governments will be forced to borrow to lift the burden off the backs of the banks – when the borrowers go bankrupt. The fact of this borrowing pushes the neoliberal governments to create further austerity programmes against social spending. The delivery of private credit to solve the problem of underconsumption typically ends up with social austerity.
A second approach toward this underconsumption problem is for the government to give an economic incentive to consumers through tax cuts or through a direct cash transfer scheme. Either way, the government turns over its money to the people and encourages them to buy goods and stimulate the economy. Once more, it is the government that goes into debt to solve capitalism. Once more, the debt will balloon, and the government will have to go into an austerity programme to appease the creditors and the IMF (when the IMF comes calling, little good results – as Celina della Croce, the Coordinator of Tricontinental: Institute for Social Research makes clear in this recent article). Once more social austerity will result, and it will once more dampen the buying power of the public.
The cycle will continue.
Either individuals and families or the state go into debt so as to increase aggregate consumption and save capitalism from itself. By this method, capital itself is not asked to sacrifice anything. It is allowed to pursue the strategy of profitability.
Capital seeks to increase its profitability by various means, such as:
- Substitute machines for people or make people more efficient. This allows firms to hire less people, to take advantage of automation and productivity gains and to leverage their effective competition to wipe out their competitors.
- Transfer factories to areas where wage rates are lower and where regulations of the workplace and of the environment are suppressed.
- Decrease the tax burden by going on a tax strike, transferring their money to tax havens.
- Move capital from productive activities into finance, trade and rent-seeking activities.
- Buy up public assets at low costs and monetarise them for profit.
These strategies allow capitalists to increase their wealth, but at the same time impoverish other people and society.
People are asked to be patriotic. Capital is only asked to be profitable.
For the Left, this situation poses serious challenges. The first set of challenges is to find a way to organise people who find their society shattered and their expectations confounded. The second set of challenges include how to find a policy exit from this system and its limitations.
What are the challenges before us to organise the people against the intractable system?