Chesnais: Excess Capital, Waste and Crash

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Thu Oct 1 13:06:20 PDT 1998

Hi Charles,

For many pundits--including George Gilder whom I talked to once at a high tech trade show--the explosive growth of the NICs held the promise of vitalizing capitalism as a whole. For a decade or so we were subjected to techno orientalist fantasies about the upcoming Pacific Century.

But this was hardly a new argument: at the turn of the century Tugan Baranowsky had already claimed that newly industrializing colonies would open up great possibilities for the system as a whole (for example by allowing the imperialist countries to escape any limitations of consumption demand at home by the export of capital, esp. means of production which were growing as a percentage of total production) and Louis Boudin had already subjected the argument to critique, though underlining that indeed the system could thrive on waste for some time. Boudin of course was vindicated by the course of events which Professor Tugan unfortunately did not live long enough to witness.

At any rate, these debates were forgotten as pundits and analysts--from the right and the left, from high tech ideologues to Marxists--became convinced that capitalism had entered an explosive growth period, though the centers of accumulation had shifted to the so called Asian NICs, the living pracititioners of Listian industrial neo mercantalism. A fellow named Fallows rose to national prominence, heralding the new economic model of the 21st century.

It should have been obvious however that since the NICs were being papered with cash which could find no outlet within the basically stagnant imperialist countries, the massive built up capacity would be wasted, though creating the only strong source of world wide effective demand in the building up period. Alas, there was to be no buoyant, fast growing imperialist markets and no rising incomes with which to absorb the goods. From relieving excess capacity during the wasteful short term build up, the miracle economies have now gone to becoming the major source of excess capacity, destructive competition, credit contraction and breakdown.

As an indication of stagnant the US has been even in the course of a so called business cycle upswing: only after the US stock market quadrupled--itself of course the other side of excess capital without productive outlet-- was there finally even a blip on the screen of net investment (and mostly increases in low order highly transient information technology at that), and that seems to have been reversed *already* with the recent plunge in capital spending. Lower interest rates or not, the US simply is not growing fast enough to ward off breakdown.

Brad and friends praised the ability of free moving capital to accelerate the industrialization of the world, though it should have been obvious that the system was thriving on waste, as Boudin meant it, which would soon plunge first the NICs and then the whole world into catastrophe as the rupture in the credit system ripples out.

The system has revealed that it has always moved in one direction--towards its ultimate breakdown. It is now only a question of whether humanity will accelerate that tendency and turn it into an opportunity to create a classless society. The alternative to that is as it always has been--barbarism.

best, rakesh

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