Socialist approaches to the recession

Infrastructure is crumbling all over the country, states are slashing education budgets, public workers are being scapegoated, forced into accepting pay cuts, or being laid off. Working people, all across the board, are being forced to shoulder the consequences of a crisis that they had no hand in creating. Unemployment is very high across the board and show no signs of improving in the immediate future.

Yet, in the midst of the worst crisis since the Great Depression, ours is still an extremely rich society. Our society has the surplus capital and resources necessary to wipe out all of the unmet human needs, gaping holes in municipal and state budgets, etc. Yet the economy is discussed as if it were bad weather, that is, something we could not actively change or alter, which we can merely plan to shield ourselves from (if we're lucky enough to have shelter) when the time comes. Yet the economy is nothing other than a massive accumulation of human actions over time, in the form of coordinated actions, institutions, laws, etc. But how can something created by human beings be so completely out of our control? What's to explain the irrational warpath of capitalist recessions and crises?

Within a Marxist framework, the root problem here is this: capitalism is inherently crisis prone, and during periods of recession massive gluts of capital are hoarded by capitalists since there are no profitable places to invest it. Marxists call this the problem of over-production or over-accumulation.

Why are there so few profitable places to invest in recessions? Part of it has to do with long term problems of capitalism, which we can set to one side here. But at least one reason why profitable investments are not forthcoming now is that effective demand is lacking. In short: because so many people are being laid off, evicted, foreclosed upon, forced to accept furloughs and pay cuts, a large percentage of the population is not in a position to consume in such a way that the commodities capitalist firms sell can be purchased. Most people are short on cash to spend right now, and are cutting back on their level of consumption accordingly. Think of the massive glut of houses and condominiums on the market right now with no potential buyer in sight.

Worse still, if the set of profitable investments is drying up because effective demand is shrinking, many capitalist firms are likely to downsize and operate well below capacity, which, in turn, leads to a further erosion of effective demand. It's not difficult to see that these are mutually reinforcing problems.

It is a peculiar thing about capitalism that it makes it appear rational for individual capitalists to fire workers right now. From their own narrow short-term perspective, it is indeed rational for capitalists to slash the rolls, and cut wages and jobs, although it is completely irrational for all capitalists to do this at a system-wide level all at once. That is, the cumulative result of their individually "rational" decisions to cut jobs cause society's unemployment level to rise considerably, and, hence, effective demand is further eviscerated. And, as we've seen above, further eviscerating working people's living standards means further reinforcing this whole sorry state of affairs in which capitalists find it "rational" to layoff more workers. So, even from their own narrow, exploitative perspective, what's going on right now is eroding the conditions for capitalists to be in a position to reap profits in the future.

If this irrationality isn't a reason to reject capitalism, I don't know what is. Why is it that the functioning of our entire economy is conditional upon a small class of investors making handsome profits for themselves? Why are all of us (and all of our jobs, social institutions, etc.) held hostage by this small class?

Take a step back and think about the big picture here. We have massive amounts of capital on the one hand, and massive amounts of willing human labor on the other. What good reason could be given to keep them separated apart from one another amidst a world of human need? And who is keeping them separated?

The answer to that last question is easy: capitalists. In a capitalist economy, capitalists determine where and whether to invest capital, and whether to employ labor.

So why aren't capitalists employing labor and investing capital in order to meet the massive amount of unmet human needs created by this crisis? Their answer to this question is also easily deduced: capitalists won't combine their capital with labor unless it means they can earn a rate of profit cushy enough to meet their requirements. We forget at our own peril that there is only one thing that motivates capitalists to invest: profit.

For these rational misers, the extent of social misery, poverty, want, suffering, etc. visited upon large swaths of the population just doesn't matter, unless, that is, it negatively impacts their profit rates. If using our society's productive capacity to end misery and suffering is not profitable for the small class of people who own and control our economy, it simply doesn't get done. If changing the conditions people in impoverished ghettos isn't a profitable activity, it doesn't happen. If medically insuring chronically ill people isn't profitable, which it isn't, capitalists won't insure it.

If you find this repulsive, you're not alone. The socialist intuition here is that this system represents an irrational, unjust and therefore indefensible state of affairs.

Everyone, even sober apologists for capitalism, will agree that poverty, vast inequality and want are not objectively necessary in a society as technologically advanced and productive as ours (though suffering, poverty, and vast inequality may have been objectively unavoidable in, say, the Bronze Age). The socialist thought is that if vast inequality and social misery aren't objectively necessary, why are they still a central feature of contemporary societies?

Contra defenders of capitalism, socialists think that the productive forces of society should be made to work for goals worthier than profits for the few. The socialist claim is that our society's technological and productive capacity should be mobilized to meet human needs and to cultivate the conditions in which people can live free and flourishing lives.

What this makes clear is that the problem of capitalism, among other things, is a problem of profoundly misplaced priorities. Rather than subordinating all human beings to the demands of profit, as is the case in capitalist societies, socialists think that economic institutions should be subordinated to human beings. Is it really a radical idea to think that the basic function of social institution should be to maximize human freedom and well-being, rather than enriching a small few at the expense of the many? If everyone were in a position to freely choose either option, I find it difficult to believe that the majority would opt for a society in which they were exploited by a small gilded elite.