Marx was right

Apparently, things have gotten so bad economically that at least one mainstream analyst is willing to criticize capitalism. According to a recent article by Lee Sustar on SocialistWorker.org, “Economist Nouriel Roubini, whose predictions of the financial crash of 2008 earned him the nickname Dr. Doom, has referred his patients to a specialist in capitalist crisis: Dr. Karl Marx. In a recent interview with the Wall Street Journal, Roubini said, ‘Karl Marx had it right. At some point, capitalism can destroy itself. You can’t keep shifting income from labor to capital without having an excess capacity and a lack of aggregate demand.’ In his interview with the Journal, Roubini argued that the U.S. economy is flagging because business is hoarding cash – more than $2 trillion by one estimate – rather than investing it in factories, new equipment and hiring workers. As he put it, ‘If you’re not hiring workers, there’s not enough labor income, enough consumer confidence, enough consumption. In the last two or three years, we’ve had a massive redistribution of income from labor to capital, from wages to profits.'”

Sustar goes on to  say, “That shift has taken place not during the crisis, but during the recovery, as economist David Rosenberg pointed out earlier this year when he noted that the ‘labor share of national income has fallen to its lower level in modern history,’ 57.5% in the first quarter of 2011, compared to 59.8% when the recovery began. While that might seem like a small change, given the $14.66 trillion size of the U.S. economy, it’s huge.

‘The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses,’ Marx wrote in Capital, Volume 3. The unemployed want jobs, but during crises, capitalism can’t deliver, even when business has plenty of capital to invest. That’s because capitalists won’t put their money into building factories and offices and hiring workers – as Roubini pointed out – unless they have a reasonable chance of making a profit. Otherwise, they sit on their money. The result, Marx wrote, is both a ‘superabundance of productive capital’ and ‘paralyzed consumption’ – a fairly accurate description of recent trends in the U.S. economy. The root of these crises is in the unplanned and competitive nature of capitalist production. For the capitalist, what matters isn’t meeting social needs, but obtaining the maximum profit.

With mainstream economists fresh out of ideas about how to overcome the crisis, perhaps it shouldn’t be surprising that Marx made news even in Rupert Murdoch’s Wall Street Journal. But don’t hold your breath waiting for a follow-up Journal headline: ‘Capitalism Isn’t Working: Socialism is the Alternative.’ That part is up to us.”

Is socialism the answer? What does “socialism” mean? Those are some pretty big questions — to be tackled here soon.