Root of stock market crash: Crisis of overproduction

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SOCIALIST ACTION DECEMBER 1987 By W.I. MOHAREB Someone from outer space could easily come to the conclusion that the stock market is an animal with an independent life of its own. "The stock market jumped yesterday," The Wall Street Journal states. "The stock market roared yesterday."

But there's a reason why the bosses' press depicts the stock market that way (especially when prices are going up). They have a compelling interest in concealing the source of profit.

They would like you to think that "money begets money," that "capital is the source of profit." Karl Marx, however, methodically showed that the only source of the bosses' profit is the exploitation of human labor.

Stock markets have evolved into a basic instrument of the capitalist system. Capitalists need the ability to buy and sell, to trade their private property. The stock market is a way to effect such a trade.

Stock markets are like barometers of the capitalists' all-round evaluation of the future. The price of a share of stock reflects investors' expectation of future levels of profit.

Obviously, there is a subjective element here, and this permits the factor of speculation to enter. To give an example, the price of one company's stock might climb because it holds title to a marketable technological advance that will possibly bring in extra profits in coming years.

But the stock market as a whole can likewise rise or fall. To understand why, it is necessary to look at the broad underlying social conditions.

The market skyrockets In August 1982, the New York stock market began to rise. The Dow Jones Industrials Index jumped, in fits and starts, from a low of 770 to a high of 2720 five years later. The greater part of the rise took place in the past two years.

While no one development can be singled out for the entire climb, we can still point to definite contributing factors. By the summer of 1982, there were signs that the U.S. economy was about to climb out of a recession. Another factor was the beating down of wages of industrial workers here and in other countries.

Over 5 million industrial workers have been "displaced" in the United States since the start of this decade. In the steel industry alone, thousands of workers were laid off. Workers who had been earning from $10 to $20 an hour were replaced by unorganized workers earning $6 or less in the new minimills.

Other elements being equal, profits will rise when wages fall. For example, the combined profits of General Motors, Ford, and Chrysler amounted to some $6.3 billion in 1983, more than 13 times their profits the previous year. Profits went up again in 1984.

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Cortscher's speech histure LIBERATION MECIAL PRATURE THEOLOGY Ameria • SYRIA Another factor behind the stock market's rise in 1982 and again beginning in early 1985 was the defeat of the PATCO aircontrollers strike (1981-82) and the British miners' strike (1984-85).

With these strikes, the respective capitalist states took direct, unashamed intervention on the side of the employing class—acting to break the unions. Even more important, the leadership of the working class, both nationally and internationally, proved unable to effectively defend the workers' interests in these two watershed struggles.

There was no one-to-one relation between the stock market's rise and the outcome of such struggles. But the bosses took them into account in their overall investment decisions.

Business failures precede crash But the stock market crashed anyway.

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3435 Army #308, S.F. CA 941 For some time, capitalists have been aware that the economy is not doing as well as formerly. For most of the last year, for example, industrial production has declined in France, Western Germany, Japan, and Belgium.

In the United States, two years ago, nonbanking business failures stood at the highest levels since 1931. There is reason to believe they have gotten worse since. In the second quarter of 1987, U.S.corporate profits went down 21 percent-the biggest drop in four-and-a-half years.

Bank failures, a general indicator of economic health, have been rising without interruption in the U.S. in every year since 1981. In 1986, some 130 banks failed, a post-Depression high. Even more banks have failed this year.

Most economic "experts" are unable to explain what is going on. Let's see if Marxist theory can help us understand.

Budget cuts

(continued from page mies and take other measures-all inflationary—to absorb a larger proportion of the world's growing unsold surplus product. They hope in this way to at least postpone the outbreak of an uncontrollable crisis from which capitalism itself may not recover.

The fates of each capitalist economy are intertwined. If a major capitalist nation goes under in the current generalized world crisis, all could be dragged into a global depression. This drives them toward close collaboration in their mutual interests. But each capitalist class, primarily concerned with maintaining the stability of its own economy, resists such measures for fear of disrupting its domestic economic base.

The deficit-cutting, thus, is primarily a gesture of American capitalism's willingCapitalism's fundamental contradiction is that between the growth of the productive forces and the restrictive forms of capitalist property relations. That contradiction expresses itself in the economic sphere through what Marx called overproduction— more is produced than can be sold at a profit (but not more than is necessary to meet human needs).

Crises of overproduction

Marx wrote in the "Communist Manifesto" that one way the capitalist class "gets over" its crises of overproduction is by "the enforced destruction of a mass of productive forces." You need only think of recent pictures of steel mills in Pennsylvania coming under the wrecker's ball, auto plants being scrapped, and oil refineries being blown up to see how applicable those words are today.

The social expression of capitalist overproduction is unemployment. The fulltime equivalent of at least half-a-billion people are unemployed in the world today.

There is no shortage of statistics to document the existence of overproduction. From 1974 to 1981, for example, an average of 30 percent of the entire practical industrial capacity of the United States was idle. From 1982 to 1985, the figure was 35 percent, according to the U.S. Department of Commerce.

"Too much" food and housing?

Although some 20 million people in the United States are suffering from hunger (according to a recent study), the problem for the capitalists is too much food!

The food-production monopolies have been operating at only 70 percent of practical capacity during the last four years. This year alone, the U.S. government is spending $25 billion to keep food off the market, in an effort to keep prices up.

The National Union of the Homeless estimates that some 3 million people will suffer from homelessness at some point this year. But as far as the sales and rental business is concerned, there are too many homes! Some 10.3 million houses or apartments in the United States are empty, awaiting the "right" rent or sales price.

The reason that so many "energy loans," "farm loans," and "real-estate loans" are not "performing" is that these industries are drowning in overproduction. Without sales, profits cannot be realized, and repayments of debts are endangered.

Brazil or Mexico cannot pay their debts because their industries cannot find markets for the goods they were lent money to produce. Overproduction makes payment of the $8-trillion capitalist debt virtually impossible.

The capitalists have a "solution" for their problems. They hope to make the workers and oppressed pay—to raise taxes and to cut down even more on education, healthcare, and social security. Their "solution" to overproduction is to dismantle the world's "excess" productive capacity while increasing war production.

ut working people can ofter our ow olution. Ultimately, we will replace thi irrational economic system. Capitalism will be superseded by a revolutionary new society oriented to peoples' needs instead of the profits of a few.

ness to take its share of the risks. At the same time the American rulers threaten to allow the dollar to fall even further. This causes American goods to be relatively cheaper, making inroads for their surplus product into world markets at the expense of U.S. capitalism's competitors.

But this policy can boomerang, as higher-valued foreign currencies permit an accelerated buy-out of basic U.S. economic institutions by European and Japanese capitalists.

This is a dangerous game, both for America's capitalists and their competitors. What the world's capitalists fear most is a breakdown of collaboration that occurs when one of the major imperialist powers loses control over its economy and acts in self-preservation without regard to its effect on their world system.

This is the other side of capitalism's present dilemma, which will prove in the end to be insoluble.

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Ryan campaign used mayoral election to reach thousands with socialist program.

The Joseph Ryan for Mayor campaign concluded successfully in San Francisco on Election Day, Nov. 3, 1987. The socialist campaign was considered a success because of the number of people it reached. But its actual vote total was small. Ryan received 359 votes.

While socialist candidate Ryan could "whip" all the Democratic Party candidates in any one-on-one debate, and always got a better response from audiences when allowed to speak, his campaign never expected to override illusions. Many people still erroneously believe in the ability of the Democratic Party to provide solutions to today's social problems.

All three of the socialist candidates for mayor of San Francisco-Melissa Ehman of the Peace and Freedom Party/Internationalist Workers Party; Peter Anestos of the Socialist Workers Party; and Joseph Ryan of Socialist Action-garnered a total vote slightly less than 1 percent of all votes cast. This amounted to approximately 1300 of the 190,000 total vote. Only 49 percent of eligible voters went to the polls.

Calif. State Assemblyman Art Agnos came within percentage points of accumulating the majority (50 percent plus 1) of the vote that was necessary to win the election outright. He will have to face Supervisor John Molinari, the runner-up, in a special run-off election on Dec. 8. Agnos's lead is so commanding, however, he is practically a shoo-in to win the runoff election.

"Lesser-evilism" prevails

The mayoral campaign took place in the context of increasing cutbacks in social services for working people in San Francisco. The issues of AIDS funding, housing, education and jobs, were uppermost in the minds of people. They got no MayMay Gong/Socialist Action Mav By CAROLE SELIGMAN SAN FRANCISCO-One hundred people gathered here on Nov. 21 at the Women's Building to hear firsthand testimony about why women must fight to protect the right to safe and legal abortion.

Billed as a "Speak-out in Defense of Women's Right to Choose," the meeting was initiated by the Coalition of Labor Union Women and organized under the auspices of the Northern California Pro-Choice Coalition, an umbrella organization made up of all the main pro-choice groups in the Northern California Bay Area. Ten women told their personal stories, and other testimony was read by the chairwomen.

Highlights of the meeting were the firstperson reports of several older women who had endured illegal abortions prior to the 1973 U.S. Supreme Court decision which ruled that anti-abortion laws are an invasion of privacy. These women spoke of abortions performed by non-medical profiteers in abandoned buildings and hotel rooms. They felt lucky to have survived.

The meeting was co-chaired by Nan Bostick of the Pro-Choice Coalition, Pat Norman, one of the main organizers of the recent March on Washington for Gay and Lesbian Rights, and April Grant of the National Organization for Women.

As a response to the new California law, which will require women under the age of

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