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Chapter 4 - The Uncontrolled Economic Cycle

Control of the machinery of wealth production for the purpose of creating surplus value is, therefore, the actuating motive of all capitalistic enterprise. It requires for its practice and perpetuation both a constant expansion and improvement of the machinery and modes of production. Among savage and primitive peoples the crude methods of production precluded the taking of surplus value. Life was largely a constant struggle with nature. With primitive methods of handicraft in a later period, the portion of the day's work devoted to producing the worker's living was necessarily longer than with the improved machines and largely automatic processes of today. As a consequence the relative portion of the day's work given to producing surplus value for the masters has advanced with the advance of the machine processes. The worker's portion of the day's produce being controlled at a level that barely sufficed to enable him to live and the lengthening of the working day being limited by human habit, endurance and a tendency to resist change in established habits by the workers themselves, the natural method of increasing the employer's share of the produce was to improve the efficiency of the machinery and thereby transfer as much as possible of the skill and strength of the worker to the machine by reducing them to simple mechanical processes. The worker ceased to be a skilled craftsman whose efficiency existed in his proficiency and mastery of a few simple tools. He increasingly became an unskilled laborer tending a machine which in turn became his master. He produced more and more commodities in a given time with each improvement in machinery and methods, but the increase belonged to his master as owner of the machines, while the worker's share declined in relative proportion. The surplus value produced for the capitalist thus increasingly exceeded the wages of the worker. It is by this process that there accumulates in the possession of the capitalist an excess that must be sold abroad, for the worker's purchasing power does not increase proportionately. The resulting competition between capitalists for markets for this excess of commodities, and the money and credit symbols into which the commodities are transformed in the market, stimulates the capitalist to cheapen production costs by utilizing every possible mechanical means to replace the worker with further mechanical improvements; for every increase in productivity of a given amount of labor power with lessened cost, enables the capitalist to undersell his competitor and capture the market. It also produces a constant increase in the amount of surplus value which cannot be used in the industry itself but must be invested profitably somewhere. This breeds international competition for markets and foreign fields of investment which results in wars. It produces another and more cumulative effect in that the constant seeking for a foreign field of investment for the accumulated surplus value converted into new capital, rapidly changes raw material producing regions that were once customers into industrially developed regions which become rivals for markets and rival producers of surplus value.

Thus the markets narrow relatively as industrial expansion proceeds with an increasing surfeit of unsalable commodities and capital that cannot find profitable investment. The struggle for survival between capitalists leads to a mad race for increased production at lower costs, over-development of plants and machinery, a rapid fall in prices in the competition for markets, ending in a final panic and wholesale shut-downs, bankruptcy and unemployment. These periods of crisis and panic followed by stagnation increase in frequency, scope and intensity as the area open for expansion is thus fully developed, and as machine production of commodities takes the place of raw material production in the newly developed regions. The agricultural nations that formerly exchanged raw material for manufactured goods rapidly become industrialized, producing their own manufactured goods and creating their own capital. The ever-narrowing field of exploitation and consequent increasing competition for the markets thus reach a final stage in which further expansion is impossible and the era of capitalism ends as it has ended in the years 1929-33 in an impasse, where it collapse in a final catastrophe of world-wide stagnation and revolution. That is the condition now presented. That is what has produced the world revolution now taking place, in which the old parliamentary systems, the old methods of uncontrolled competition and the old ways of doing things have disappeared forever from Russia, Germany, Italy, France and the United States, to give place to dictatorships, in which the state is used by the ruling class to stabilize and control production and markets in preservation or attempted preservation of an obsolete social and economic structure. The era of capitalism is passing into a transition stage, marked by collapse of credit and world-wide stagnation and unemployment. Markets and fields of exploitation have disappeared in proportion as production has increased internationally through advancing technology; and capitalism can, therefore, no longer expand. It is nearing an end, however slow may be the strangulation of its life breath—the production and expansion of surplus value. Previous crises and panics have passed through phases from depression to recovery by developing new fields of investment and new markets. That of 1837 ended in the Mexican War and the conquest of Texas and California. The impoverished victims of the aftermath of the panic of 1837 and the minor depression of 1848 poured into these newly opened territories and pioneered them for exploitation by adventurers and their kindred, the capitalists. The panic of 1857 was absorbed by the Civil War era of inflation and the homestead act provided an outlet for the jobless soldiers who were demobilized. An era of railroad building and speculation followed. The panic of 1873 ended in the development of the Northwest, the building of the Northern Pacific and a period of westward emigration. The panic of 1893 was followed by the Spanish-American War, the Klondike gold rush and the beginnings of American imperial expansion. The year 1913 saw another panic developing but the World War quickly developed the usual features of a war period—vast inflation of prices and the absorption of redundant man-power. The entire world went into an orgy of credit flotations. A crisis appeared in 1920 but it was deferred by tapping a new field of credit installment sales of autos, electric devices and every kind of gadget imaginable. The day of reckoning was delayed in an interregnum of the wildest speculation in history which came to the point of collapse in 1929. The panic was followed by the present depression—the most world-devastating and long-continued of the entire series of major panics. The whole world is bankrupt. There are no new worlds for the Alexander of surplus value to conquer—no new continents, no undeveloped markets. The world bandits of capitalism have ravaged the earth and are now wrangling over the spoils and consuming the spoils in the process of wrangling. The war that usually follows a world depression is already on the horizon in various directions and the ogre of capitalism is about to drown itself in its own blood.

Next page: Chapter 5 - The Part Played by Machine Development