Socialist Party of America | Workers of the World Unite

The Question is Not - "When Will Capitalism Die?"
but "When Did it Die, and What Should Our Reaction Be?"
by Bertell Ollman

(Talk at The International Symposium on Socialism in the 21st Century in Wuhan, China - Oct., l999)

To begin, I would like to tell you a little story that brings out very nicely what will be the main theme of my talk. On a plane crossing the Pacific Ocean, the pilot informs his passengers that he has two announcements. "One is good news", he says, "and the other is bad news. The good news is that we are traveling at 700 miles an hour and all the plane's instruments are working perfectly. The bad news is that we are lost". Some have suggested that this is an excellent metaphor for capitalism, which works well but also doesn't know where it's going. In my opinion, however, only the latter piece of news is correct: capitalism is lost. But I don't agree that it is working well. On the contrary, right now it is working so badly that if it were really an airplane we would all recognize that it has gone into a tailspin and is on the verge of crashing into the ocean. Keep this little story and particularly my interpretation of it in mind, and you shouldn't have any difficulty in following me in what follows.

Are we socialists asking the right question about capitalism? Most theories can be seen as answers to particular questions, just as most of our political activities follow from the theories that we use. Thus, questions lead to theories, which lead to action. So it is absolutely essential in dealing with capitalism that we begin with the right question.

Marxists, who view capitalism as a historically specific social formation with a beginning and an ending, have traditionally asked one or another version of the question, "When will capitalism die?". This has had a profound effect on all our political strategy and practice. But what if capitalism is already dead? Then, the appropriate question is - "When did it die, and what should our reaction be?"

No, I am not jesting, nor is this just a polemical point. When exactly something dies is not easy to determine. As regards the individual, is it when everything in the body stops working? Or is it when the heart stops? Or when one goes into an irreversible coma? Or contracts a terminal disease? There is obviously a process here, and one could make a case for focusing on any of these moments as the moment of death. The same is true of a social system, such as capitalism. Because it appears to be alive and even strong, many are likely to be shocked by my assertion that capitalism is already dead. I would only ask you to recall, however, what Marx taught us about the deceptive nature of appearances.

Have you ever seen a chicken with its head cut off, how it runs wildly about, sometimes for several seconds, before it collapses and dies? If you are small and unlucky enough to be in its way, you can get badly hurt by these final gyrations. Capitalism is a lot like this chicken. It has died, but doesn't know it, and is flailing away in its death throes, causing terrible harm to everyone within striking distance.

Capitalism died the moment the conditions necessary for accumulating capital on the scale required by the enormous amount of wealth available for investment could no longer be assured. It died when the related conditions that are indispensable for selling all of the rapidly growing amount of finished goods likewise evolved out of reach. Today, there are simply not enough profitable investments in the production and distribution of goods, given the gigantic sums seeking such investments; nor are there enough people with the purchasing power to buy the mountain of goods that have already been produced.

These problems, of course, have always existed as part of capitalism - Marx presents them as internal and necessary contradictions of the capitalist system. But only recently have these problems become terminal. Earlier, major wars and a Cold War came to the rescue of the system by destroying and wasting enough wealth to create new opportunities for profitable investment. Thankfully, in the age of nuclear power, a major war is unthinkable (and if it occurs, there will be no one around to reap the benefits), and minor wars, as in the Gulf and Yugoslavia, do not destroy enough to play the same economic role in capitalism that was played by World Wars I and II. The alternatives that have arisen - like investment in the former "socialist" lands, the expansion of credit, space exploration, etc. - are simply too little to take up the slack.

As for being able to sell the growing amount of goods that are produced, here too capitalism seems to have come to the end of its tether. At the very time that developments in technology have led to an enormous increase in the amount of goods available for sale, the spread of capitalist production into many poor countries has given rise to a global working class whose low earnings permit them to buy an ever-diminishing proportion of what they make. The result is that capitalism is being suffocated with goods it can't sell. In the past, depressions - like major wars - provided a solution of sorts for this problem by destroying and wasting the goods that could not be sold as well as the factories that made them, so that capital could begin all over. Essential to the success of this formula was the link between increased investment and a rise in employment. Now, however, with the advances in automation, computerization, and robotization, new production does not necessarily mean more jobs. And without more jobs, the working class will not be able to consume more and help trigger the heightened investment that brought capitalism out of previous slumps. My point in all this is that while capitalism is not at its beginning and not at its end, it is definitely at the beginning of its end.

The problems of capitalism do not stop at the borders of China, but can be found in China itself as a result of the economic reforms of the last two decades that have made China - for all its pretensions to socialism - an integral part of the capitalist world system, albeit one with certain socialist features. Hence, capitalism's problems have become its problems. In the sphere of accumulation, for example, the growing failure to find sufficiently profitable investments can be seen in the drastic fall-off in foreign investments in l999 (down l4.6% in the first quarter and projected by at least one Chinese Government official to fall by over 50% for the year). A study of seventy foreign enterprises chosen at random in early l999 showed that only 40% were making any profit; most of the rest were thinking of leaving China. And in real estate, which has absorbed about half of all foreign investment since l992, the situation is disastrous. In Shanghai, for example, 70% of new buildings constructed in l997 have failed to find buyers, and rents in office buildings have dropped by over 50% and are still falling. There is no reason to expect that these figures will improve. In light of this, China's vaunted building boom - the sight of which impresses visitors to China more than any other - has less to do with the Government's housing policy than with its employment policy. That is, it has less to do with providing needed homes and offices, since they are not needed or if needed (as in the case of homes) mostly unaffordable, and more to do with providing low paying jobs to people who would otherwise swell the rapidly growing ranks of unemployed.

In sum, China - like Russia and the rest of the once "actually existing socialist" countries - have not proven to be the boon to capital accumulation that some thought they would be. China from here on in will get less and less foreign investment, with economic and social consequences that are perfectly foreseeable. Meanwhile, world capital's need for profitable investment will only intensify.

As for problems relating to the realization of value (or sale of the final product), here too China provides some striking examples. Overproduction has become very widespread in China - not overproduction of what people need, but of what they can buy, of what given their low earnings they can afford. The earning power of China's notoriously low paid workers (with relatively few workers making more than $60 a month) has kept consumption within China lagging far behind the rapidly expanding output of China's factories and workshops, and the growth of foreign markets, as impressive as that has been, has simply not been enough to take up the slack. The result is a major slowdown in sales all across the board. Sales in motorcycles, for example, a popular item among workers with minimal savings, fell 22.4% between January and September, l998. Overproduction has also brought a drop in retail prices (deflation) as stores compete to sell excess stocks. In the first five months of l999, retail prices for all consumer goods were 3.5% lower than in the same period in l998. And, finally, overproduction has led to a serious decline in capacity utilization in industry. Why bother to make what you can't sell? An industrial survey already in l995 found capacity utilization below 60% in the production of more than 900 different commodities. The situation today can only be worse.

This inability to sell what they make (and could make) is the MAIN reason that over half (some say as much as 70%) of China's state owned enterprises are losing money, and that more and more foreign capitalists are refusing to invest in China or, if already here, are beginning to pull out. What needs to be stressed is that the contradictions underlying these trends are intrinsic to capitalism, and, that for the reasons given, they can only intensify. In China, l998-l999 seems to be the years of the big turn-around when most of the important indicators that had earlier given the illusion of permanent economic development have turned into their opposite. Deprived of the conditions necessary for its continued existence - in investment as in selling the finished product - the capitalist system can only go down hill, with all its problems of unemployment, hyper-exploitation of workers still with jobs, overproduction of goods, unused industrial capacity, growing social and economic inequality, inattention to basic social needs, ecological degradation, the rise of money and of the people who have a lot of it to positions of major influence throughout society, increase in economic crimes of all sorts, exaggerated forms of individualism, selfishness and greed, and generalized corruption constantly worsening and becoming intractable. This is happening to capitalism all over the world, and, as we have seen, also in China in so far as it has introduced capitalist forms of production and exchange into its economy. Hence, too, my comparison of capitalism to a chicken that has already died but continues to flail about and cause injuries until, weakened beyond all recognition, it is finally put out of its misery.

But if capitalism is already dead, it doesn't follow that socialism is alive. In fact, the world is going through a post-capitalist transition that could lead to socialism, but it could also lead - as Marx feared - to barbarism, understood as a breakdown not only of the economy but of an entire civilization on the order of what is already unfolding in places like Rwanda, Albania, Chechnya, and Yugoslavia. What is absolutely impossible is the continuation of capitalist relations of production and exchange very far into the next century.

If capitalism is indeed dead, in the sense that I have declared it to be, then how should we socialists react? Or, as Lenin put it - What Is To Be Done? Here the Chinese people are very lucky to have had a great leader in the recent past to whom they can turn for help in answering this crucial question. I am referring, of course, to Deng Xiaoping. Didn't Deng say that we must seek truth from facts? In the present situation, this can only mean we should recognize that China's main problems today are not the same as the ones it had twenty-five years ago. Then, one could argue, the main problems were the lack of modern forces of production and generalized poverty. While these difficulties have not disappeared, China's biggest and most pressing problems today are overproduction, unemployment, unused industrial capacity, growing economic inequality, ecological degradation, corruption, greed, cynicism and other problems connected with the market economy. Deng, of course, is well known for his market reforms, but he is also famous as a pragmatist, which means doing whatever is necessary to solve the main problems of the day. But if the main problems of our time are so different from those of twenty-five years ago, the solutions Deng favored then could not possibly be the ones he would favor now. To believe otherwise, as so many of those who claim to be his followers apparently do, is to transform Deng's pragmatism of means into a dogmatism of ends, which is one of the very things that Deng fought so hard against.

What I am saying is that there are really two Deng Xiaopings: Deng the pragmatist and Deng the market reformer. Because the main problems China is suffering from today are so different from those of twenty-five years ago, Deng the pragmatist - if he were alive - would search out solutions very different from those he proposed at that time. And in my opinion, the pragmatic - as well as the principled - solution to the worst problems in China today lies in rejecting the experiment with the market economy and setting out firmly on the road to socialism. In brief, this means replacing anarchic production aimed at maximizing individual profit with socially planned production directed toward serving human needs. To those who believe that this was tried before and that it didn't work, I would only point out that despite the low level of economic development that existed at that time central planning was relatively successful in dealing with the very difficulties - unemployment, economic insecurity, inequality, corruption, crime, greed, etc. - that are now tearing China apart. Moreover, the economic development of the last twenty-five years together with the progress of computer technology should make planning production and distribution much more efficient than it was earlier, especially if a way can be found to increase the participation of the mass of people in the political process (making it easier for them to identify with the planners and the goals of the plan). That means, of course - introducing more political democracy.

And if China were to take this new socialist road, you shouldn't be surprised to find walking with you there - perhaps arm in arm with Deng himself - Mao Tse Tung. A good slogan for this new period might be - FORWARD TO SOCIALISM WITH DENG XIAOPING AND MAO TSE TUNG.

Positively last attempt to summarize the main point of this talk: There is an old Chinese proverb (Confucius?) that says - "Don't, don't, don't tie the tail of your dog to the back of the capitalist boat just as it is about to go over the waterfall".

l. All the statistics on the Chinese economy found in this talk come from The Rocky Road to the Market: Political Economy of Reform in Russia, China, and India by Prem Shankar Jha (forthcoming).