The IMF in its latest prognosis praises what it sees as a stable growth of the world economy. Yes, there are some risks the IMF says, not least the political ones. But the crisis has been overcome, and a new and rosy period lies ahead. However, if you only look at the surface, that picture might seem true. In June, Fed-Chief Janet Yellen said in London that there will be no new financial crisis in “our lifetime”. She is 71 years old, so there is a chance she might be correct.
But the prognosis of the Pacific Investment Management Company (Pimco) seems to be more realistic. It judges the likelihood of a recession within the next five years to be around 70%. Not only is the recent recovery based upon a piling up of new debts and we also see new bubbles inflating. These bubbles can – and will – burst and can then trigger a new downturn in the volatile economic situation.
No new revolution
New technology, robotics, automation, Industry 4.0, the Internet of things, computing, and other terms are used to describe what is said to be a new industrial revolution. After the steam engine, Fordism, and computers, we are now said to live in the 4th industrial revolution. And this, so the propagandists of capitalism want us to believe, will lead us all into a new era where humankind will live peacefully and liberated from most of hard, dirty, and tiring work.
It is true that smartphones, computers, and even robots are everywhere and increasingly influence our lives. In 2010, one million robots were used worldwide. By 2019, prognoses expect that this number will have nearly tripled. By 2020 nearly 21 billion devices are expected to be linked to the Internet. But under the framework of capitalism this development is not only limited, but it is even lifting contradictions to a new level. While investment in production is less profitable given the situation that capitalism is in, they invest their over-accumulated capital in other areas where they hope for higher profits. But because of the chaos of the market this is not done by some, but by many and this is creating a new bubble.
The profitability of capital is shrinking, as Marxists analyse that the rate of profit has the tendency to fall. One way to overcome this is to increase the exploitation of labour. The German trade unionist Welf Schröter calls the term “Industry 4.0” that was created by the German government “simply a propaganda term.” Humans are put in competition with robots and pressured to work more cheaply. The vision of robots taking power is far from real, but spyware and robotic combat systems show how dangerous the development ist and companies that implant chips under the skin of their employees shows what it’s all about: to subordinate people under the rhythm of machines. But this is done in the interest and under the rule of very human beings, of the small but wealthy elite, the ruling class.
The other side is a very real race for supply in a limited market. The US and European capitalists are frightened to lose more ground, especially to China. This still booming economy is no longer just copying the technology and brands of the West, but is inventing and even taking a lead in some sectors. In the field of renewable energy, China has become world leader and other areas can follow. So there is the strategy in the West to use more modern technology to produce more cheaply, and so stay in the market. SAP Manager Luka Mucic announced that companies in the US, Europe and Asia are “gearing up.” It is an economic war, which can be followed by military confrontations, possibly in the form of proxy wars.
While a lean state is propagated in fields that are important for ordinary working class people - like healthcare and education, in the field of new technology the capitalists demand help and finances from the state. To support its domestic capital, governments shift state money from the social sector to investments in new technology. The propaganda of “rags to riches” has a new chapter, claiming that you only need a computer, access to the internet and a clever idea to become rich. This is used to put more pressure on the unemployed, claiming that it is their own fault if they don’t use the opportunities. A myriad of new small companies are formed, living from self-exploitation. The few ones that are successful are often bought up by big companies. They save a lot of money as they don’t need to put resources into research, but can cheaply buy the successful results of state funded and self-exploitive start-ups.
The worldwide trend of mergers and takeovers is pushed by what is happening in the field of new technologies. Mergers are close to a long-term high, reaching a volume of US$2.476 trillion – and technology deals count for around 30% of these transactions, as a study by the Boston Consulting Group (BCG) shows. Many of those buying up technology companies are banks, which increases the close ties between the financial sector and the “real” economy – a link that is a guarantee, that a collapse in one sphere will not be limited, but will affect the other. In modern capitalism there is no such thing as a pure “financial crisis”; it always has serious effects on the whole economy.
A new bubble
30 years ago, on October 19th 1987, the Dow Jones lost 22.6% within one day. The stock markets “corrected” overvalued rates and the small investors, including working class people who had hoped for a piece of the cake, paid for it. Today there are debates about a new possible crash.
Experts point especially to the “Big 5” (Apple, Amazon, Facebook, Alphabet/Google, and Microsoft) or FANG & Friends (Facebook, Amazon, Netflix, Alphabet/Google, Apple, eBay, Microsoft, Priceline, Salesforce...) as being overvalued. They speak of an “irrational euphoria” (David Einhorn from Greenlight Capital) and draw parallels to the earlier bubble in 2000.
An indication for the increasingly speculative character is the development of cryptocurrencies like Bitcoin. The “currency” was artificially created ten years ago and is not only a profitable way to whitewash money, but a market for quick profits as well. An increasing number of hedge funds are investing in this game as well and with entering the futures-betting market the whole thing gets even more speculative. Bitcoins rush from one record price to the next. When it was created, 10,000 Bitcoins were worth the price of two pizzas. By December 2017 one Bitcoin was traded for up to US$20,000 at some stage. It is like all pyramid schemes: if you were there from the beginning and jump ship in time, you can make a fortune. This is a principle that many want to profit from: today more than 900 virtual currencies exist. At the beginning of 2017 they were valued at US$17.5 billion – by September it reached US$100 billion. This is what a bubble looks like.
On June 9th 2017 the markets were shaken after the Tories’ bad performance in the British election by a downturn in technology assets, where over US$100 million were written off the books within only a few hours. In November the stock markets where shaken another time. The markets recovered quickly, but the foundations of the world economy remain far from solid. The current upswing is financed by state money and growing debts. New technology does not solve the capitalist contradictions, but only pushes them to a higher level. In their rush to win the race of competition, companies invest in new technologies to reduce production costs. By doing this, they reduce the only factor in the process of production that not only reproduces its own value, but is able to produce more value: human labour. Japan used to be the role model for an economy basing itself on new technologies in the 1980s. Everything that was modern was “Made in Japan”. But this could not prevent the Japanese economy from falling into a deep slump from which it has not recovered for 25 years. Beside all propaganda about a new boom, the foundations of the world economy are resting on chicken legs. The question is not if, but rather when the next slump will happen.
Socialism is workers’ democracy plus robotics
In 1920 Lenin declared that “Communism is the Soviet government plus the electrification of the whole country.” This is just one of many examples how socialists and communists want to use all technical possibilities for the benefit of mankind.
Under capitalism, research is only paid for in fields that are profitable, and new technologies are only invested in if they promise revenue. The paradox is that under capitalism, technologies that can be used to reduce human labour and liberate us from dirty, dangerous, and unpleasant work are used against the working class. Workers are sent to the dole, instead of the working hours being reduced while still receiving full pay. If the economy is run under the democratic control and management of working class people, then new technologies could be used for the benefit of all. Cleaning robots could be a fixed part of all homes and reduce housework to a minimum, which would add significantly to the liberation of women.
There is nothing “revolutionary” about the various forms of new technologies that ad the end of the day still rest on the old mode of production that needs human labour to generate profit. Robots do not change the exploitation of humans by other humans and cannot solve the contradictions of capitalism. Therefore they offer no way to overcome the crises that are typical and unavoidable in capitalism. But new technologies can be used to revolutionise our lives, if they are used in a society where the chaos and horrors of capitalism have been replaced by a democratically run socialist economy.