By Tao Wenzhong

Just as the Financial Crisis broke out, many people began to give their respect to Das Kapital again.

As revealed by Karl Marx, capital’s pursuit of profits and extraction of value from labour compose the essential features of the capitalist society, and result in the proletariat revolution against the capitalist class. That’s the future of the capitalist, or Marx’s trap.

 By Tao Wenzhong

Just as the Financial Crisis broke out, many people began to give their respect to Das Kapital again.

As revealed by Karl Marx, capital’s pursuit of profits and extraction of value from labour compose the essential features of the capitalist society, and result in the proletariat revolution against the capitalist class. That’s the future of the capitalist, or Marx’s trap. In the late 19th century, Fabianism, represented by Sidney and Beatrice Webb, and other social reform thoughts advocated establishment of legal status for labour organizations, the collective bargaining system, employee participation systems, and some other industrial democratic measures, appearing just as the world savior to resolve antagonistic relations between labour and capital. Since that time, perhaps fearing proletariat revolutions, many European countries experimented with the collective bargaining system. Yet the US continued to operate by the laissez-faire doctrine which went on to spawn the global economic crisis triggered by the Wall Street stock market crash in 1929.

During the Great Depression, one of the main solutions for the economic crisis and labour disputes was to promote collective bargaining legislation. Following the Norris-Laguardia Act of 1932, and the National Industry Recovery Act in 1933, the United States (US) enacted the National Labour Relations Act in 1935, and administrative agencies were established to protect the labour rights of association and correct unfair labour practices. From then on, the collective bargaining system formed one of the bases of the social and economic machinery to keep labour relations running stably for more than 70 years. In Europe, the Swedish Social Democratic Labour Party (SAP) promoted the Saltsjobaden Agreement in 1938, which represents a milestone and served as a model to cooperate, with mutual respect, to arrive at peaceful solutions based on compromise and a sense of responsibility for developments in the labour market. Once Leon Blum return to power as the prime minister in 1936, the French Popular Front government led parliament to pass the Bill of Collective Contracts and to fend off fascism successfully.

Source: www.marxists.org

Historically, as a labour and management interests-sharing mechanism, the collective bargaining system was able to play a positive role in overcoming the abuse of the market economic system, promoting the smooth operation of the economic and social systems. The social function of the collective bargaining system is far more than merely to improve the employee’s wages and other fringe welfare benefits. The most important things are that the labour union, as a pressure group, is able to promote industrial democracy at the workplace, diminish unfair management actions, balance wage levels inside and outside of unionized plants, establish complaint and appeal mechanisms for employees, restrain the super-exploitation of the employee by the employer, improve the social distribution structures, diffuse social classes conflicts, and build up social cooperation. So, the trade union and collective bargaining system undoubtedly worked as the basic social vehicle to balance economic efficiency and social justice. It is no exaggeration to say, it is the social reform function that the collective bargaining system brought that has fended off the capitalist system falling into the trap which Karl Marx defined.

However, just as Marx foresaw, the collective bargaining system has run into some difficulties in capitalist societies, which it cannot overcome itself, as workers in the global labour market were and are limited by being in different sovereign nations, while capital is much less so; so the collective bargaining system based on countries, businesses, and industrial are limited and easily defeated. The National Industrial Recovery Act under the Roosevelt New Deal legislation was ruled unconstitutional by the court. The National Labour Relations Act was also accused of harming the country’s investment attractiveness. As the labour movements developed rapidly after World War II, the main market-based industrialized countries began to restrict trade union movements in different respects. The NLRA was modified in 1947 and 1959 in the US, imposing greater restrictions on the labour unions. The real damage to the collective labour relations system was the wave of deregulation that began with the oil crisis in 1970s. In recent years, the shrinking percentage of employees represented by unions in the US has continued to decline to eight percent in the private sector, and has reduced the impact and influence of the American labour relations system, as well as in other industrial countries. To some extent, the non-union strategy which substitutes human resource management for the collective bargaining system seems to have become a trend. Meanwhile, informal employment—including part-time work, temporary work, and dispatched work, and some other non-formal or atypical employment—the basic characteristic of which is that the workers cannot get effective protection by the labour law, has been viewed as the flexibility of the post-industrial society development rapidly.

But short of the collective labour relations system, the contradictions inherent in the capitalist social structure have gradually accumulated. The compensation gap between the employers and employees and in different industries, swelled from several times to several hundred times. The employment and living standards of the low-end workers in the labour markets survive at a fixed low level, while their purchasing power has been severely restricted.

In the face of serious social imbalance in distribution and the plight of survival of low-end workers, the only thing the capitalist government wants to do is further accelerate the collapse of the traditional system of collective labour relations. In the process, social security privatization, labour market segmentation, and deregulation of the labour law system develop as the labour policy reform tendencies in the developed countries.

Globalization has helped and covered up this trend. Based on the industrial division of globalization, as the developing countries bear the main responsibility for the manufacturing sector, the developed countries have entered the age of the knowledge-based economy, the headquarters economy, the virtual economy. As for those low-income citizens, their problems will be easy to resolve by using market-based instruments, and then, by distributing the risks to investors by derivative financial instruments.

The international trade structure under the globalization has been highly colonized.

Where do the high-margin products in the financial markets come from—do they come from the high price in the security markets, in the capital markets? Karl Marx told us: NO. The high profits in the financial markets are based on, and only come from, redistributing the profits of real economics. Within the international industrial value chain, intellectual property rights, including the technology, management, brands, sales network, and so many factors which were established from colonial times and fixed in the last century, occupied almost all the profits. The labour, resources, and environment, which will be exhausted in the competitive developing countries, may be given a share of one or two percent profit from the capital, just as a pair of Nike shoes priced $100 can leave the manufacturer only $1 in profits, or even nothing. Faced with manufacturing costs increasing rapidly with the higher prices of raw materials and local currencies, buyers will not give up one cent. Faced with attempts to improve the work conditions of the bottom tier of labour with the nightmare of incessant mining accidents, injuries, child labour, wages in arrears, open resistance and threats of relocation to countries with cheaper labour came from international capital at once, although the trade unions from developed countries are still moaning somewhere. Even the words of the newly implemented labour law are only a pile of empty shells, as the arrogance of international capital with its profit-driven nature shift without hesitation to choose lower labour costs.

The collective labour relations system, which had been the essential element to protect the workers’ rights of association established in the last economic crisis, worked as the social balance machinery to ensure the global economy would develop stably for a long period. But now the system is sick, the labour movement traditionally confined to one country’s domestic arena has gotten into trouble in these days of globalization. Capital on a global scale can find the lowest labour costs, and force the developing countries affiliated to the capital, as well as be the suppresser of workers’ rights. The world has seen the decline of organization rates and the weakening of the collective bargaining. When Roger Toussaint, the president of the New York Transport Workers Union, was thrown into prison for organizing an unwelcome strike with the slogan of ’no contract, no work’, did anybody give him sympathy? Many people just believe that all those old measures are of no use in today’s post-industrial society. The social administrative structures established during the last economic crisis period have experienced a profound transformation.

The seriously weakened collective labour relations system could do little to globalization. As other alternative mechanisms for the social management, the CSR and NGO still work outside of the labour relations system. The Corporate Social Responsibility movement, to some extent, could only work based on the self-consciousness of the entrepreneurs who can afford the social responsibility costs, for the sake of preserving their market share and brand value.

To the non-governmental organizations, their pressure will not be able to play a role at the legal level. So, the global relations system has become seriously imbalanced with the weakening of the traditional trade union system, although that is just the one in which the capitalists have the choice of choosing labour relations strategy. Now, the global capitals can do anything they want to do. The nature of capital, which Karl Marx has ever cursed, is now such that it can behave wantonly in the world without any limitation. Financial capital may optimistically believe, with the excessive profits brought by globalization, that inadequate consumer power could be expanded by innovative financial tools, just as someone has said that the Chinese people save, and the American people consume, or that the more China produced, the more Americans became wealthy. But the question is, whether the low-income residents could maintain their houses by a financial bubble all the time. As it turns out, they could not. The Virtual Economy’s being lovable must be based on the Real Economy’s being livable. The high prices of the financial assets could blur the credit risk, but a lowered price may fracture the credit chain. When it turns out that the mechanism for balancing social relationships has failed, it means bad news for society.

Karl Marx told us that the blindness and endless pursuit of profits inevitably brought about overproduction, and on the other hand, the rapacious nature of capital inevitably also brought the impoverishment of the proletariat. These two factors worked together, and the cyclical economic crisis was inevitable. The global industrial division system could give financial capital the chance to enjoy the excessive profits based on the population profits in the developing countries, and to expand their consumption based on the excess profits by a variety of innovative financial tools. Overconsumption led to overproduction, the excessive production then lead the serious imbalance in industrial structure, but this time, the imbalance is in the pattern of globalization. During the past few years, the price of petroleum, iron, steel, and other material commodities have soared amazingly, and the manufacturing costs increased rapidly. But the owners of capital are not willing to transfer any share, they can turn their production orders to lower cost areas; that’s the benefit of globalization—benefits from the labour cost, environment and other natural resources race to the bottom worldwide. That’s the right of capital. But the transfer of international capital, the transition of the manufacturing sector in developing countries, is not an overnight process. To form an industrial cluster and logistics support systems needs a sufficient period of time. When the prices of materials have increased madly, when the capital profits have achieved incredible heights, unexpected crisis comes to us. As the huge profits collapsed and disappeared, the bubble in the fictitious economy burst, the market was fully shown to be in a miserable situation with a variety of non-performing assets. The market had entered into a mandatory self-adjustment process.

Today, when we come to read Das Kapital again, how many people have thought about the question of how capitalism could jump over the trap which Karl Marx defined? Some people have the confidence that the laissez-faire philosophy was, is and will be the doctrine of market economy. Some people make sure that the trade union and the collective bargaining system only belong to industrialized societies. Now, the developed countries have been coming into the post-industrial era rapidly from the 1970s, the industrialized societies could leave the manufacturing to those developing countries such as China, India, Brazil, and even the Africa. Thus developed countries benefit enormously from the international trade structure, but at a weak point in the perfect chain, such as dramatic increase in oil prices which some companies cannot endure, the ‘perfect chain’ quickly breaks and waves of resulting damage quickly spread out.

The financial crisis has developed into an all-round economic crisis including the real economy, and the world economy has entered into a stage of adjustment, that is, what Marx called the depression phase of the economic crisis. More and more people will discover the intrinsic motivation of this economic crisis to be the unreasonable structure of the global economy. Being short of currency, nearly all the countries had to draw the government credit into the banks and enterprises to relieve the acute shortage of liquidity. But to judge the increase in supply or in the demand will be the dilemma. Due to its periodic and lagging nature, investment demand cannot be translated into consumer demand. For the manufacturing countries, the common problem will be the overcapacity, rather than lack or shortage of production. Some people may think that the credit crisis induced the financial crisis, and the financial crisis then induced the real economy crisis. But, to some extent, the fact is that the global industrial value chain imprisoned the real economy adjustment itself, and the high prices caused by the overconsumption eventually returned the real economy back to its corner. The diseased real economy unveiled the virtual economic which inflated excessively in real terms.

So, we can believe with good reason that this economy crisis is a reflection of the colonial trade structure inherent contradiction in the era of globalization. Compared to the Southeast Asian financial crisis that took place at the end of the century, despite the different trigger, the same foundation to the crisis is shown, in which the manufacturing industries lie at the low-end of value chain, maintaining their survival only by virtue of resources, environment and the cheapest labour, having no right to speak in the value distribution system, welcoming the exploitation, and bearing the consequences of any expansion of financial capital. The highly colonized global trade structure has seriously imbalanced labour relations system, exposed the fragility of the market economy to the world once again, and brought all the world into another depression.

At the moment to respond to the global economic crisis, it has gradually made people aware of and think carefully about the social governance structure adjustment in the era of globalization. During autumn 2008, both the conservative AFL-CIO, and the Change To Win which is seeking to change, gave their strong support as union federations to Barack Obama, a man who promised to have a labour law reform to promote organizing. In the face of the economic crisis of globalization, people should have higher expectations.

‘Demand guides the supply’ is the basic doctrine of the markets. The liquidity shortage of the banks and the large enterprises comes from the shortage of demand, including investment demand and consumption demand. The governments, from the US to the European Union, hurried to increase the state intervention, using national finances and credit to rescue the banks and large enterprises in crisis, and to expand the scale of construction. People repeat the measures again which Roosevelt had laughed at seventy years ago. To inject capital to the banks and the large enterprises, to some extent, will create more production capacity, and also more overproduction. The New Deal efforts in the Great Depression of the 1930s focused on promoting the social security system and collective bargaining system, aiming at giving people confidence. The first thing we need to do in these new depressing days, is to enhance the confidence of the consumer based on social security and social cooperation system.

We believe that the market mechanism always works, but not always well. When the market needs to adjust itself, the destruction to human beings is also huge and may lead to new social ideas or social movements. Capitalism has won uninterrupted growth for more than 70 years, by social rebuilding learned in the last crisis. Today, it has gotten sick again. And at this time, in the atmosphere of globalization, people have good reason to look forward to another Roosevelt, another Roosevelt’s New Deal. But this time, the social rebuilding will be thought of not only in a country’s domestic sphere, but as a global entity. A switch in time saves nine. The era of globalization put forward the urgent requirements to the labour movement to achieve solidarity on the basis of the global market economy. It is as Karl Marx told us 160 years ago: ‘An international society rebuilding is worthy to be expected in these globalization times.’