What Do Marxists Mean by the Crisis of Capitalism?

Capitalism hasn’t always dominated the planet. It emerged from medieval society, and was born, as Marx explained, “dripping from head to foot, from every pore, with blood and dirt.”

Nevertheless, it played a historically progressive role for several centuries. Driven by the relentless pursuit of profits, it revolutionized the means of production, built massive cities and industries, and proletarianized the majority of humanity. This laid the material basis for a socialist world of superabundance and the transition to communism. But the system’s relatively progressive epoch ended long ago, and this has been especially acute over the last fifty years.

Since the early 1970s, as living standards have fallen, symptoms of barbarism have spiked, signaling a system locked into historic decline.

Capitalism can no longer develop the means of production in a way that benefits the majority. No longer do industrialists and bankers plunge the bulk of their capital back into the productive process, producing better goods for cheaper and pushing technology forward. Instead, these parasites splurge on luxuries, speculate in real estate, art, currencies, and stocks, hire armies of lawyers to sue their rivals, and park billions in offshore accounts.

The fundamental contradiction of the system is that the workers produce more value for the capitalists than they are back paid in wages. This surplus value is extracted through exploitation and is the source of the capitalists’ profits. But this disconnect between value created and wages received means that more goods enter the market than can be bought back by the working majority.

Eventually, the market becomes saturated and there are “too many” cars, houses, phones, and other goods. Not “too many” in the sense that people don’t need these things, but “too many” to sell at a profit. This leads to periodic crises of “overproduction.” The entire economy seizes up and millions are thrown out of their jobs and homes. This is an absurdity unique to the capitalist mode of production.

Greenville Public Works Recycling Coordinator audits a recycling collection on Monday, October 12, 2020. Original public domain image from Flickr
A rational society would match empty homes with the homeless and feed the hungry instead of hoarding millions of tons of food in warehouses. But capitalism isn’t rational. / Image: public domain

A rational society would use productive capacity to the fullest and find useful employment for everyone. Instead, capitalism shutters factories and overworks some workers while condemning others to the humiliation of unemployment. A rational society would match empty homes with the homeless and feed the hungry instead of hoarding millions of tons of food in warehouses. But capitalism isn’t rational.

Under capitalism, profit is king. The magnates of capital don’t produce for human need, but to maximize profits, and that’s what their shareholders demand. If they can make more by gambling on Wall Street than by investing productively, that’s what they’ll do. Intensified exploitation of the workers they do employ and reckless speculation is the name of the game.

These days, vast wealth generated by the workers goes mostly to a tiny minority at the top. Since the start of the pandemic in 2020, 63% of all new wealth was captured by the richest 1%, while 37% was shared out by the other eight billion people living on the planet.

While workers are forced to make hard choices due to rising prices, the billionaires have seen their wealth increase at three times the rate of inflation. If the world’s five richest men were to spend $1 million a day, it would take them 476 years to run out of cash.

CEO pay has risen by more than 1,200% since 1978, while workers’ wages have only gone up 15.3%. CEOs now make 344 times more than a typical worker, compared to 21 times in 1965, the height of the postwar boom.

US capacity utilization stands at just 78.25%, which means over a fifth of the country’s industrial infrastructure lies unused because it would be unprofitable. Why should the billionaires invest their idle trillions in new capacity if they can’t even use what they already have?

The stock market has reached unfathomable heights. But sooner or later, the bubble will burst, and the workers will be left holding the bag, while the capitalists plead poverty and beg for public handouts.

This is all a graphic illustration of the impasse of capitalism and its inability to take society forward. The system has thoroughly exhausted its potential and threatens to take us down with it. Capitalism’s “sell by date” is long past and it’s up to the new generation of the working class to put it out of its misery.


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