On the author and article
Prolekult publishes below a new article by Ted Reese, author of Socialism or Extinction: Climate, Automation and War in the Final Capitalist Breakdown. Here, Reese provides a concise breakdown of the scale of the economic crisis today in motion, arguing that it represents the final breakdown of the capitalist system - long predicted by Marx. We are in fundamental agreement with Reese's position upon this question and urge all of our supporters to read both this article and his book, both of which are invaluable resources. We urge all comrades to consider Reese's suggestions of policies to be adopted by communist parties as there is certainly a hugely fruitful and illustrative discussion to be had here.
The coronavirus outbreak has sparked the biggest economic crisis in capitalist history, with stock markets crashing quicker than at any point during the Great Depression, unemployment soaring around the globe in the hundreds of millions  , and oil prices falling below zero for the first time ever.
But far from causing the economic crisis – many countries in sub-Saharan Africa and Latin America were already in recession – the virus, whatever its origin, is merely a catalyst. As author of The Coming Bond Market Collapse Michael Pento has said: “The virus was a pin that pricked the stock and junk bond [debt] bubbles. We wouldn't have had stocks fall by 30% if we weren't in an epic bubble. Stock prices have been at a record high of 150% of GDP. They were extremely vulnerable to an external shock.”  And, he warns, “the real crash is coming”.
Pento’s book, published in 2013, predicted that the US is approaching “the end stage of the biggest asset bubble in history”, pointing to an “unprecedented triple bubble” in the property, stock and bond markets. He has compared the situation to “the end of the Roman Empire”, predicting that all fiat currencies will collapse against precious metals. Since publishing the book, he has said that the crisis is even worse than he thought at the time of writing:
“Not even I would ever have imagined that there could ever be negative yielding sovereign debt, much less to the tune of $10 trillion. That means that governments are borrowing money and paying you back no interest and less than your principal payment. That has never before happened in the history of the world. But it’s not just happening in the US. It’s a global bubble.” 
The quantity of negative-yielding debt – which barely existed before 2014 – hit $14 trillion in the first half of 2019, $15 trillion at the start of August 2020 and $16.7 trillion before the end of the month. In the middle two weeks of August the proliferation of negative-yielding bonds erupted – 30% of global, tradeable bonds were being sold at a guaranteed loss.
The recovery from the 2007-08 ‘Great Recession’ has been the weakest in the ‘post-war’ era. Whereas US GDP grew by 43% over the first 39 quarters of the 1991-2001 expansion, in the first 39 quarters of the last expansion, through to March 2019, it grew by only 22%. At that rate, the last expansion would have had to continue for another six years to equal the aggregate growth of 1991-2001, and nine more years to match the 54% recorded over the 1961-69 expansion .
Corporate profits peaked in 2015. US President Donald Trump’s record corporate tax cut in 2017 – from 35% to 21% – saw after-tax profit rates resume an upward turn, but the 3-6% GDP growth Trump promised did not materialise (averaging 2.4% between the end of 2017 and the end of 2019). Corporate tax receipts in 2019 were down by 23% compared to two years earlier.
In August 2019, the US yield curve inverted for the first time since 2007. A yield curve inversion means that the interest rate on 10-year government debt has fallen below the rate on the two-year equivalent. At the time, two-year Treasuries Bills (T-Bills) were trading at a yield (return) of 1.634%, while 10-year T-Bills only offered 1.628%. The longer-dated government debt should normally offer a better rate of return, as there is simply more time for something to go wrong before the money is due to be repaid. An inverted yield curve therefore implies that investors are more pessimistic about future growth prospects, and usually precede recessions. The news prompted investors to snap up long-term US government debt, sending the rate on 30-year T-Bills to record lows (putting prices at record highs).
August 2019 updates also revealed that Germany’s economy had contracted by 0.1% in the second quarter, while Britain’s shrank by 0.2%. Germany’s yield curve inversion was worse than in the US and Britain. Berlin responded by unveiling a plan to auction €2bn of new 30-year government bonds at a zero interest rate, meaning it would simply take money and promise to return it in 2049. Inflation could of course erode much of its value by then – making conditions very difficult for pension funds, insurance firms and fund managers whose job it is to grow their clients’ wealth.
Pento described the fact that the US yield curve inversion happened after a base interest rate cut, from 2.25% to 2% at the end of July, as “very remarkable”. But the remarkable keeps coming.
As John Smith, author of Imperialism in the Twenty-First Century, explains: “10-year US Treasury bonds are considered the safest of havens and the ultimate benchmark against which all other debt is priced. In times of great uncertainty, investors invariably stampede out of stock markets and into the safest bond markets, so as share prices fall, bond prices – otherwise known as ‘fixed income securities’ – rise. As they do, the fixed income they yield translates into a falling rate of interest. But not on 9 March , when, in the midst of plummeting stock markets, 10-year US Treasury bond interest rates spiked upwards. According to one bond trader, ‘statistically speaking, [this] should only happen every few millennia’. Even in the darkest moment of the global financial crisis, when (the 160-year-old mega merchant bank) Lehman Brothers went bankrupt in September 2008, this did not happen.” 
Between January and the end of April 2020, small businesses in the US collectively lost 50% of their revenue. Joblessness soared, with 30 million people seeking unemployment benefits after the federal government allowed employers to lay them off.
Having anticipated global GDP growth of 3.3% in 2020, the IMF said it would now shrink by 3%, the most in a century and much bigger than the 0.1% contraction in 2009. Bloomberg reported that the US would account for 31% of this, with US GDP expected to shrink by 40% in the second quarter compared to 2019. The Bank of England estimated that the first six months of 2020 would see Britain suffer a near 30% contraction – roughly matching the fall seen in household spending in March and April – the country’s worst recession since 1709. The ‘developing’ nations are expected to fare better than the ‘developed’ in relative terms. China’s growth rate is predicted to fall from 6.1% last year to 1.2% in 2020, with India on course to expand by 1.9%, down from 4.2%.
Adjusted to take account of population changes, the IMF’s forecasts were even gloomier. GDP per head is expected to fall globally by 4.2% in 2020, by 6.5% in the developed countries, and by 7% in the UK.
While the Bank of England claimed Britain would experience a ‘V-shaped’ recovery, the IMF conceded that its forecasts were highly uncertain, especially because lockdowns may be reinstated in the event of a second wave of infection.
There are more economic shocks to come regardless. That stock markets will fall further was demonstrated starkly at the start of May when Warren Buffett – the fourth wealthiest person in the world with a net worth of $89bn – sold his firm’s entire holdings in the four major US airlines.
Indeed, the US stock market during the Great Depression fell to its lowest point in 1932, a decline of nearly 89% compared to the high point in 1929. This time, it took only 22 trading days to fall 30% from its record high reached on 19 February, making it the fastest drop of this magnitude in history, according to Bank of America Securities. The second, third and fourth quickest 30% pullbacks all occurred during the Great Depression in 1934, 1931 and 1929, respectively.
The US central bank, the Federal Reserve, has taken the unprecedented action of buying up corporate bonds and exchange-traded funds (ETFs) in the primary market, having only ever done so in the secondary market. Now corporations can go to the Fed and sell them a bond that does not exist, directly. Small businesses can now go to the Fed and get money printed. This is happening because, as Smith says, “since 9 March, corporate interest rates have gone through the roof; in fact few corporations can borrow money at any price. Investors are refusing to lend to them. Corporations are now facing a credit crunch – in the midst of global negative interest rates!”
Pento argues that,
“The Fed and other central banks are in a desperate situation to reinflate asset prices... They are rapidly inflating the money supply in a desperate attempt to keep pension plans afloat in nominal terms, as they get eviscerated in inflation-adjusted terms.
”They're going to reinflate junk bond prices again. They'll exceed the 2% inflation target greatly. All bond yields will rise inexorably, prices will crash. And then the Fed will have nothing they can do. There will be no relief package coming from any government on the planet. No tax base can cope with that amount of debt. You cannot resolve an inflation crisis, you cannot placate a market that is rising, with cratering prices, by creating more inflation. Or by borrowing more funds into existence. You can’t do it. That's the real crash that’s coming.”
Pento was one of the few bourgeois pundits to predict the 2007-08 crash that began in the US sub-prime housing market. As was Jim Rickards, who has been warning for the past few years that “the next crash will be exponentially worse [than in 2007-08]” – even admitting that it would “discredit capitalism for good”. 
After governments responded, as in 2007-08, with unprecedented public bailout packages for private enterprise – nearly $3 trillion in the US alone – Smith grasped the stark reality of the situation:
“The immediate cause of this minor heart attack was the scale of asset-destruction in other share and bond markets, causing investors to scramble to turn their speculative investments into cash. To satisfy their demands, fund managers were obliged to sell their most easily-exchangeable assets, thereby negating their safe-haven status, and this jolted governments and central banks to take extreme action and fire their ‘big bazookas’, namely the multi-trillion dollar rescue packages – including a pledge to print money without limit to ensure the supply of cash to the markets. But this event also provided a premonition for what is down the road. In the end, dollar bills, like bond and share certificates, are just pieces of paper. As trillions more of them flood into the system, events in March 2020 bring closer the day when investors will lose faith in cash itself – and in the power of the economy and state standing behind it.
“[Social democrats such as Bernie Sanders and Jeremy Corbyn] see the decline of interest rates into negative territory not as a flashing red light showing the extremity of the crisis, ie not as the implosion phase of a supernova, but as a green light to borrow money to finance increased state investment, social spending, a Green New Deal, and even a bit more foreign aid. In fact, there is no magic money tree. Capitalism cannot escape from this crisis, no matter how many trillions of dollars governments borrow or central banks print.
“The neoliberals rejected [such] ‘magical thinking’, now they embrace it – this shows the extent of their panic, but it does not make magical thinking any less fantastical. The trillions they spent after 2007-08 bought another decade of zombie-like life for their vile system. This time they will be lucky to get 10 months, or even 10 weeks, before the explosion phase of the supernova begins. The coronavirus supernova makes socialist revolution – in imperialist countries and across the world – into a necessity.”
Smith has come to the same conclusion that I did during the course of writing my book, Socialism or Extinction: Climate, Automation and War in the Final Capitalist Breakdown, published in November 2019. The book argues that capitalism is facing a breakdown that, unlike all its previous crises, will prove to be insurmountable – that whatever counter-measures the capitalist class deploys to revive the system will prove to be futile.
Falling manufacturing costs, falling rates of profit
That capitalism is unsustainable has long been empirically observable. Most obviously, manufacturing costs and consumer commodity prices are trending towards zero. For example, whereas the world’s fastest supercomputer in 1975 was worth $5m ($32m in 2013’s money), the price of an iPhone 4 released in 2010 with the equivalent performance was $400. Aerospace companies producing propulsion systems in 2010 for $24m in 24 months are now 3-D printing their engines for $2,000 in two weeks. And rather than having globalised supply chains, such companies foresee the entire rocket being built in ‘at home’ . While ‘offshoring’ manufacturing jobs to the ‘low-income economies’ is said to save up to 65% on labour costs, replacing human workers with robots saves up to 90% . Unlike workers, robots do not need wages, breaks, sick days, holidays or pensions. And they work quicker in the first place, too.
While industrialisation, particularly in Asia, saw 83 ‘developing countries’ achieving growth rates by the early 2000s that were more than twice the rate of the ‘developed’ OECD members, the rest of the world has seen the same opportunity end ‘prematurely’. Latin America and Africa are already deindustrialising (shifting to services-based workforces) – from a much lower starting point than Asia . Whereas industrialisation peaked in western European countries at income levels of around $14,000, India and many sub-Saharan African countries appear to have reached their peak manufacturing employment at income levels of $700 (both at 1990 levels) .
Not only do robots and 3D-printing increasingly remove the incentive for capitalists based in the US and Europe to exploit workers overseas, the incentive to exploit transit workers – who add production time/value to the commodities they transport around the world – is also removed . The emergence of cellular agriculture (lab-grown food), with falling prices and rising quality estimated to see the beef industry go bust by 2035, is going to have the same effect .
For the past 145 years, the imperialist powers – the US, Britain, France, Germany and Japan – have been increasingly compelled to export capital (invest) overseas in order to expand and cheapen their exploitable labour bases, thereby sustaining their own economies by living off profits generated by commodity-producing workers in the ‘developing world’. Britain, for example, exported capital equal to 560% of its GDP in 2014 . Between 1980 and 2012 the net outflows of capital from ‘developing’ countries being funnelled into ‘developed’, ie imperialist nations, totalled $16.3 trillion . But the economic relation that underpins imperialism is now unravelling.
If prices are trending historically towards zero, so too must the ‘global’ aggregate rate of profit. According to Estaban Maito’s estimates, it fell in a secular trend from 43% in the 1870s to 17% in the 2000s, and is (as of 2014) on course to reach zero around 2054 .
Automation and absolute overaccumulation
But as the criminally under-appreciated Polish Marxist Henryk Grossman warned in 1929, capitalism is bound to collapse “much earlier than a zero rate of profit” , because capital, inherently, does not accumulate harmoniously – the process tends to break down.
Overaccumulated capital – surplus capital that has become unprofitable to reinvest – is inevitable. It causes every recession, a partial and temporary breakdown, and is at the same time an underproduction of surplus value; ie, too little profit has been generated to preserve and expand the value of total capital. (Surplus value, or surplus labour time, is the amount of value the capitalist appropriates from the worker, who, on average, keeps only what they need to subsist, their necessary labour time. Profit then is essentially unpaid labour, which tends to increase with innovation. Hence falling prices.) Debt therefore rises to ‘fill the gap’ caused by this underproduction, but can only cover the lag in profit for so long before recession becomes inevitable, since investors are bound to withdraw funds when growth becomes too stagnant, channelling this new surplus instead into tax havens, land and the competitive gambling of speculation that generates financial ‘bubbles’.
Each breakdown is overcome through the sufficient destruction, cheapening and centralisation of capital. But the resulting innovation means fewer workers tend to remain employed relative to total capital. Despite the increased rate of exploitation that temporarily lifts profit rates, the next overaccumulation tends to be greater than the one which preceded it. There is no such thing as ‘technological unemployment’ though – alongside surplus capital grows unexploitable surplus labour (unemployment).
Clearly, the closer we get to the completion of the historical trend towards fully-automated production, the closer capitalism gets to its final breakdown. Production is already highly automated. As James Manyika, McKinsey Global Institute director, said in June 2017: “Find a factory anywhere in the world built in the past five years – not many people work there.”
But the services jobs – relatively unproductive since they tend to handle near-finished commodities, if they handle commodities at all – that replaced manufacturing work are now becoming increasingly automated, too. In Britain, where services count for 80% of economic activity, the number of supermarket checkout assistants fell by 25.3% between 2011 and 2017.
At the end of March, after most countries had entered lockdown, almost half of company bosses in 45 countries said they were speeding up plans to automate their businesses.  Innovation always takes place most rapidly during a recession, when prices are low. With lockdown turning the home into the place of work, Microsoft could boast of having discovered a fresh way of reducing labour costs and extending absolute labour time as it announced “two years’ worth of digital transformation in two months”.
As The Guardian reported at the end of April: “Bank branches were already closing in droves before the epidemic, but here is the perfect excuse to shut more. And that’s not all. The authors of an Oxford University study thought that by 2035 it would be possible to automate 86% of restaurant jobs, three-quarters of retail jobs, and 59% of recreation jobs. By unlucky coincidence, those are among the very industries hardest hit by an epidemic now demanding quantum leaps in efficiency if some companies are to avoid going under.” 
But automation is abolishing the source of profit, ie, commodity-producing human labour. To be more precise, automation is the final expression of capitalism’s self-abolishing tendency. As Marx wrote in 1858: “As soon as labour in the direct form has ceased to be the great wellspring of wealth, labour time ceases and must cease to be its measure... Capital thus works towards its own dissolution as the form dominating production.” 
But this dissolution does not happen in a seamless falling rate of profit towards zero, since – as explained, and as indicated by both zig-zagging profit rates and the recessions that tend to strike roughly every 10 years – capital does not accumulate harmoniously. As the Soviet Russian philosopher Genrikh Volkov wrote in 1967, increasing automation eventually leads to “the breakdown, instead of the consolidation, of the existing relations ... of the private ownership of the means of production…. Its consummation is incompatible with capitalism.” 
In Capital, Marx anticipates an eventual “absolute overaccumulation” of capital. “The limit of capitalist production is the excess time of the labourers,” says Marx.  But stretching the rate of exploitation of the working class to anywhere near 100% is obviously impossible – for starters, capital cannot even afford to exploit an ever-increasing part of it, a surplus population that grows alongside surplus capital, while workers in the growing services sector are also relatively unproductive. “As the capitalist mode of production develops, an ever larger quantity of capital is required to employ the same, let alone an increased, amount of labour-power.” But there are other limits too:
“As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working time supplied by this population, nor the relative surplus working time, could be expanded any further (this last would not be feasible at any rate in the case where the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore when the increased capital produced just as much, or even less, surplus value than it did before its increase, there would be absolute overproduction of capital.” 
From zero interest rates to worldwide hyperinflation
If the rate of profit is on course to hit zero around 2054, but the final breakdown is bound to happen much earlier than that, it at least becomes impossible to dismiss the theory that we are entering this uncharted territory right now. But empirically, there also seem to be several approaching economic limits or ‘tipping points’ which cannot be converging at the same time merely by coincidence.
For starters, average GDP growth rates in what the World Bank defines as ‘high income countries’ are already closing in on zero, having fallen every decade for the past half century: from 5.59% in the 1960s, to 4.15% in the 1970s, 2.93% in the 1980s, 2.35% in the 1990s, and 1.78% in the 2000s. The figure rose slightly to 1.97% in the years 2010-2017, but this minor reprieve has already proven to be unsustainable. GDP in the imperialist nations, though, is inflated by the profits leached from the rest of the world, since much of the profit from each commodity goes towards the GDP of the nation in which it is sold, rather than where it was made.  Productivity growth in the high income countries has itself, since 2011, spluttered below 1%.
Source: World Bank. Horizontal line shows decade average (simple mean).
Aggregate global debt (the total debt of governments, corporations and households), already mountainous before the Great Recession, has hit new heights, indicating record-high overaccumulation . According to the IMF, global debt fell by 1.5% of GDP in 2017 compared to a year earlier, but remained more than 11 percentage points of GDP above the previous high in 2009. In June 2019, the IMF said global debt stood officially at $184 trillion, 225% of global GDP. This averages out at $86,000 for every person in the world, 2.5 times average annual per capita income. But according to financial analyst Ron Surz, once ‘off-the-books’ net obligations such as social security and health care are taken into account, official figures are understated by a factor of 2.5, making actual global debt $460 trillion, 560% of GDP and $215,000 per person (as of July 2019) . He put the US figure not at the official 105%, but 390%. Even that is without taking into account the serious accounting problem in the US Department of Defense. In 2016, before Trump was elected, the department’s Inspector General said he could not properly track $6.5 trillion in defence spending. An academic study looking at the years 1998-2015 later put the figure at $21 trillion . The US defence budget has ballooned to $748bn as the long-time imperialist superpower scrambles to hold on to its dying empire.
Another financial analyst, Simon Thorpe, calculated in 2015 that global debt was 2.5 times higher than the global money supply (up from two times higher in 2013) . This is despite the fact that the US’s monetary base exploded from $842bn in August 2008 to $2.9 trillion in January 2013 and then $4 trillion in August 2014.
The sheer amount of debt is unsustainable since the tax base needed to pay it is obviously shrinking in relative terms. Though it has been socialised, it is now simply too large to work off.
Something the capitalist state can do to ease the government’s ability to pay its debt is reduce interest rates, which also makes borrowing cheaper and stimulates lending, maintaining the circulation of money. But lifting the economy out of recession usually takes a 4-5% base interest rate cut. In the US and across Europe base rates are already at zero, having been cut by around only 2%. Central banks have said going negative would make the banks unviable.
Therefore, it is highly probable – lockdown or no lockdown – that capitalism, as Pento says, is soon going to spiral for the first time in its history into a crisis of worldwide hyperinflation, since rates will have to start going back up to re-incentivise bond holding and sustain the tax base. But debt-to-GDP – already at record highs and rising – will surge, and so the tax base will continue to shrink; bondholders will realise that what they are owed cannot be repaid and increasingly transfer their funds into hard assets, especially precious metals. The only way to avoid hyperinflation is for states to default on their debt through hyperdeflation – which the record bailouts imply they are understandably trying to avoid – but that would happen after hyperinflation anyway.
The US’s national annual deficit is now expected to soar from $984bn in 2019 to $3.8 trillion in 2020. The US has never meaningfully defaulted on its debt but, historically, countries that have failed to get their debt-to-GDP back below 90% have gone on to default, meaning they have had to go to the International Monetary Fund (IMF) for a bail out (usually in the form of high-interest loans and on the condition of privatising state assets). But given that the US dollar is the world’s reserve currency – all oil must be traded in US dollars, for example, making the solvency of all countries dependent on their ability to purchase US dollars – the IMF effectively is the US.
The US dollar has lost more than 96% of its value, its purchasing power, since 1913. The figure is more than 99.5% for British pound sterling, compared to 1694, the year it was founded . This is why negative rates would make the banks unviable – they would finish off the depreciation of fiat currency.
Many countries, including Russia and China, have started diversifying their foreign currency reserves in the past few years, meaning the main source of financing US debt is disappearing. Even the biggest US bank, JP Morgan, told its clients in August 2019 to sell the dollar. The world economy will likely soon be without a reserve currency.
While smaller economies have survived defaults through bailouts in the past, the US and western European countries are the richest and most developed in the world. They represent monopoly capitalism, or imperialism, the highest stage of capitalism. As mentioned, with their workforces now largely services-based, the imperialist nations have been largely living off of profit produced by the labour of commodity-producing workers in Africa, Asia and South America. If the imperialist economies collapse, it’s because the whole system has collapsed. Indeed, as of 7 March, investors had already pulled $83bn from developing markets, the largest capital outflow ever recorded, according to the Institute of International Finance.
If all these converging factors – near-zero prices, flat productivity growth, unsustainably high debt, zero interest rates, exhausted currencies – do not constitute a final breakdown of the system, then what will?
Can the IMF really bail out all the world’s central banks, or even just the Fed?  It seems unlikely, but even if it could, who would then bail out the IMF when the next, even greater breakdown strikes? If the state cannot save the banks, could the banks privately ‘bail in’ themselves by seizing the assets of their customers and charging user fees? This would surely provoke massive demand for the banks to be nationalised or require a total monopoly anyway. Will gold’s price stabilise, enabling it to become the global currency? Maybe for a while, but gold production too is being automated. Gold is the money-commodity, so if fiat currency collapses then surely so does the monetary status of gold.
China’s interest rate stood at 4.5% before the crash, so ‘the workshop of the world’ might have just enough room for manoeuvre for a few more years. After its economy contracted in the first quarter, by 6.8%, for the first time in decades, the base rate was cut to 2.5%. But to survive the coming global crash, China would surely require (having already become the biggest investor in Africa and South America) total world domination – a total monopoly, an impossibility under capitalism – and with its export-oriented economy dependent on demand from the rest of the world, it seems more likely that it will have to conclude its apparent ‘capitalist road to socialism’.
The rest of the world will surely have to follow. Indeed, for the first time, world socialism is now becoming an absolute economic necessity. And from fascism, to post-war Keynesian social democracy, to neoliberalism – all three became necessary in order to meet the demands of accumulation – economic necessity has usually prevailed. Privately-owned, anarchic, for-profit commodity-production must be replaced by socially-owned, planned, break-even utility-production. Indeed, Marx’s materialist conception of history makes this clear:
- Since the private sector is increasingly monopolised  and dependent on state subsidies (including tax cuts), trending towards 100% of income and therefore nationalisation, a ‘final merger’ is the historically logical next step in the development of the productive forces. Since a total monopoly is impossible under capitalism, this can only be done by taking all the means of production under public ownership; ie, a public monopoly.
- Since private corporations have become increasingly dependent on long-term central planning (budgets, forecasts, stock coding, etc), it is historically logical that the productive forces now require long-term central planning as a whole. The exponential developments in computing power, digital, data and stock coding now make planning much more viable than was possible at any time during the existence of the Soviet Union.
- Since the private sector is losing its ability to employ value-creating (commodity-producing) labour – it does so only if profitable – society, via an all-socialist state and state/socially-owned enterprise, must take over responsibility for employment, enabling (actual) full formal employment.
- Since the trend towards ‘globalisation’ has been interrupted by capitalism’s final breakdown, world socialism is required to make trade truly free, since no exchange of ownership takes place between social enterprises or nations in a socialist union.
- Since exchange-value is only created under capitalism through the production and sale of commodities, a workforce that is already largely services-based means exchange-value creation/economic growth can only be revived under an applicable model, whereby for-profit commodity-production is replaced by break-even utility-production.
- Since fiat currency is dying a natural death, with cash itself having already mostly disappeared, it must be replaced by a digital voucher system, with the ‘currency’ pegged to labour time worked (the true measure of value). For example, 6.5 hours of work earns you 6.5 labour credits. That is, workers receive all the value they create during the working day (minus deductions for social necessities, eg universal health care, etc) instead of having part (usually most) of it appropriated by capitalists. Units of labour time will be graded according to the type of work and productivity rates to incentivise work where it is needed. This system institutionalises equality of labour (the right to receive all the value you create; which includes access to the deductions that are now socially instead of privately owned), underpinning equal rights and limiting economic inequality, while consistently raising living standards for all. And since digital voucher credits will be non-transferable, cancelled like train tickets once ‘spent’, the centralisation of wealth into the hands of an aristocratic minority becomes impossible, while the economic imperatives and incentives behind most crime and corruption will also be seriously undermined. Labour vouchers will be used to draw down entitlements, ie, ‘purchase’ consumer goods that are priced according to the labour time it took to produce them, adjusted by a marketing algorithm according to supply and demand, in order to maintain stability (ie, to break-even).
- In the long run, free time will increasingly become the measure of social wealth, revitalising individual craftsmanship and experimentation. As full automation, 3D-printing, lab-grown food and hydroponics, etc, become increasingly diffuse and localised, and manufacturing costs fall to zero, socialism (the lower stage of communism) will bring about abundant material wealth for all, and class and the state will therefore become increasingly irrelevant. Both will therefore wither away, completing the road to (the higher stage of) communism. In this way, whereas capitalism has a long-term tendency to centralise, socialism has a long-term tendency to decentralise.
Appealing to the masses
However, the first task is to win over the masses – including the swathes of humanity now facing proletarianisation – by appealing to their immediate material needs. As part of an ‘abundance for all’ manifesto, we argue that communist parties should advocate the following initial policies:
- Full employment, including massive earn-as-you learn trainee schemes, especially where understaffing is chronic under capitalism, eg teaching, nursing, etc. (This should include migrants, who should be granted citizenship as quickly as possible, and released non-violent criminals.)
- A reduced working week and retirement age.
- A green industrial revolution that is actually green (ie hemp-based; enabled by the fact that, unlike capitalism, economic growth under socialism is not absolutely dependent on the labour-intensity of extraction) .
- Build highly accessible public transport in every region.
- A flat rate income tax (a percentage of value created, initially worked out by planners) to cover social necessities, such as universally available education, health, social and child care, free at the point of access. Indirect tax and interest should be abolished.
- The cancellation of all personal debt and mortgages (transforming privately-owned housing into personally-owned housing).
- Entitle all households, regardless of class, to retain or be given ownership of the property (ie the material of the building) they presently live in – and empty unowned properties to the homeless – with the land rented from the state, set as a low proportion of income and/or according to differential convenience or amenity of land.
- A nationwide programme of high-quality, spacious and carbon-negative house-building, using hempcrete and the latest 3D-printing technology in order to quickly solve the housing crisis.
- If enough land owners go bust before power is taken, as seems likely, all the land could be immediately nationalised and turned into state-run farms focused on a transition to hemp farming, hydroponics and permaculture, etc. If not, it is vital not to drive small farmers into a powerful counter-revolutionary alliance with large land owners; huge tax breaks for the former should be offset by a high land tax for the latter.
- Professional sports clubs to be owned and run by their (nation-based) fans.
- A democratically negotiated constitution – involving all the people and implemented with their consent – enshrining the rights to equality, free speech, housing, work, education, health, social and child care, in a people’s democratic socialist republic. Free access to digital and online technology should also be guaranteed to enable and assure the right to participate in polling and voting, so that every citizen gets a say on the issues that affect them.
Socialism or extinction?
For all the principles of the communist tradition, it is the incentives socialism promises that have won over the masses in the past. But the absolute apocalypse now promised by capitalism – given that depressions have always been followed by major wars – will surely have the same effect.
On top of the existential climate crisis, the accumulation crisis is driving nation-states into intensified competition over profit, trade, resources and assets, as seen by the rising trade wars and aggressive US posturing towards Iran, China, Russia and even Europe. In 2015-16 – before the Brexit referendum or the election of Trump – the G20 economies introduced a record number of trade-restrictive measures, at 21 per month .
The destruction of capital value and surplus labour brought about by two world wars and fascism – the First World War destroyed 35% of the world’s total wealth , and yet this wasn’t enough – saved capitalism in the 20th century, enabling a productivity mega-boom that took imperialism to yet new heights. But given the level of overaccumulation is now much higher, a world war now would have to be far more destructive. (Official US national debt when the Great Depression kicked off stood at 16% of GDP and rose to 44% when the depression ended with the conclusion of the Second World War. Before the Great Recession of 2007-08, US national debt stood at 65% and by 2013 had exploded to over 100% . Gross national debt and household debt have been at record highs at the same time for the first time ever.) A world war would almost certainly finish off the habitability of the planet, even if it did not somehow end in the nuclear annihilation of humanity.
Furthermore, the arms race sparked by a world war would only accelerate the development of automation and artificial intelligence (including the potentially existential threat of fully autonomous weapons), and with it capital’s final devaluation. Even a world war surely cannot save capitalism this time.
‘Socialism or barbarism’ is no longer sufficient as a rallying cry. Humanity now faces extinction on at least two fronts. Just as socialism is the only thing that can prevent extinction, extinction is ultimately the only thing that can prevent socialism.
So we must focus primarily on what unites us most, which is survival and economic need. We must appeal then to the widest possible strata of society, and – especially given our present lack of influence – we must do so in the most clear, reconcilable and persuasive way possible. A final breakdown could potentially bring the overwhelming mass of humanity behind the proletariat. A united front against extinction, fascism and world war is surely the tactic communist parties must now pursue on the road to securing socialism.
The world-historic task of the international communist movement has finally arrived. It is a monumental responsibility – billions of present and future lives are at stake, with hunger and ill-health already rising exponentially – but one we should be proud to bear as the potential founders of what Marx called “the beginning of human history”, whereby humanity is finally free from scarcity and the demands of capital accumulation. The difference between victory and defeat is now the difference between losing or winning everything – the difference between absolute calamity or, quite probably, the greatest story ever told.
Ted Reese is the author of Socialism or Extinction: Climate, Automation and War in the Final Capitalist Breakdown, available from Amazon and Kobo.
 The International Labour Organization said 1.6 billion workers in the informal (ie, unregulated) economy, nearly half of the world’s total workforce “stand in immediate danger of having their livelihoods destroyed… The first month of the crisis is estimated to have resulted in a drop of 60% in the income of informal workers globally. This translates into a drop of 81% in Africa and the Americas.”
 ‘Michael Pento – This is a Global Depression’, Youtube, 1 April.
 See ‘244: Michael Pento: The Coming Bond Market Collapse: How to Survive the Demise of the US Debt’, Cashflow Ninja, Youtube, 27 December 2017; and ‘The Coming Bond Market Collapse: Michael Pento, Pt-3’, The Lance Roberts Show, Youtube, 30 April 2019.
 Martin Hart-Landsberg, “Portrait of the 2009-2019 US expansion”, MRonline.org, 20 June 2019.
 Smith, “Why coronavirus could spark a capitalist supernova”, MR Online, 4 April 2020.
 ‘The Coming Big Freeze, Jim Rickards’, Youtube, 17 November 2017. Rickards estimates that if gold became the world currency standard, its price would rise by 700% to $10,000 per ounce, up from $1,400 per ounce as of August 2019 and $250 in the year 2000. Indeed, central banks have been preparing for the crisis. During the first quarter of 2019, they bought 145.5 metric tonnes of gold, compared to 86.7 metric tonnes in the first quarter of 2018, a 68% spike. The overall figure in 2018 was 651.5 metric tonnes, up by 74% from 2017 and the second highest yearly total on record, according to the World Gold Council. Rickards – like Pento, a right-wing ‘libertarian’ – believes value is created subjectively in people’s heads (“what they’re willing to pay”). He mocks Marx’s labour theory of value (despite acknowledging that GDP depends on the size and productivity of labour!) and for contending that gold has no intrinsic value. But he is wrong. Like any commodity, the average value of gold depends on how long it took human labour to produce it. Owning gold may save some people for a while, but by the time the economy bottoms out, it will be as worthless as fiat money.
 Bastani, Fully Automated Luxury Communism, Verso, 2019, p123.
 Quoted in TheGuardian.com, 5 November 2015.
 Andrew Norton, The Guardian.com, ‘Automation will end the dream of rapid economic growth for poorer countries’, 20 September 2016.
 ‘Premature deindustrialization in the developing world’, Dan Rodrik’s Weblog, 12 February 2015.
 Similarly, self-driving vehicles have also been developed much sooner than anyone predicted.
 George Monbiot, TheGuardian.com, ‘Lab-grown food will soon destroy farming – and save the planet’, 2 January 2020.
 TheEconomist.com, ‘Britain’s biggest export: wealth’, 8 January 2015.
 Figures from ‘Financial flows and tax havens: combining to limit the lives of billions of people’, Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics, December 2016. Quoted in Jason Hickel, “Aid in Reverse: how poor countries develop rich countries”, TheGuardian.com, 14 January 2017.
 Esteban Ezequiel Maito, The Historical Transience of Capital: The Downward Trend in The Rate of Profit Since XIX Century, Universidad de Buenos Aires, 2014. Maito’s work shows that Britain’s rate has long been the lowest in the world. This makes perfect sense given its position as the oldest capitalist power. Only in this context can the Brexit crisis be understood. Britain can no longer sustain itself as an independent imperialist power. Depending on where their investments primarily lie, Britain’s capitalist class is divided between those who wish the country to become a ‘junior partner’ to US or EU imperialism; while the nationalists who depend on the domestic market delude themselves that Britain can remain an independent power. Like the humiliated Mussolini, they imagine a country without a manufacturing base can rebuild their empire.
 Grossman, The Law of Accumulation and Breakdown of the Capitalist System, Pluto Press, London, 1992 (first published in 1929), p187.
 TheGuardian.com, ‘Bosses speed up automation as virus keeps workers home’, 30 April.
 Gaby Hinsliff, TheGuardian.com, ‘The next wave of coronavirus disruption? Automation’, 30 April 2020.
 Karl Marx, ‘The Fragment on Machines’, Grundrisse, 1858.
 Genrikh Volkov, Era of Man or Robot? The Sociological Problems of the Technical Revolution, 1967.
 Marx, Capital Vol 3, Penguin Classics, London, 1991, p373.
 Marx, op cit, p360.
 As described Smith’s ‘The GDP Illusion’ article for MR Online (1 July, 2012): a garment worker in Bangladesh is ‘paid’ €1 for making 18 t-shirts in a 10-hour shift. Each t-shirt is sold in Germany for €4.95 by the Swedish retailer Hennes & Mauritz (H&M); H&M pays the Bangladeshi manufacturing firm €1.35 for each T-shirt, 28% of the final sale price; H&M keeps 60 cents in profit per t-shirt; the German state captures 79 cents through VAT at 19%; the net profit goes towards Germany’s, not Bangladesh’s GDP.
 The growth of debt has been particularly pronounced in the countries of the ‘global south’. Total debt for the 30 largest of them reached $72.5 trillion in 2019 – a 168% rise over the past 10 years, according to Bank of International Settlements data. China accounts for $43 trillion of this, up from $10 trillion a decade ago.
 Ron Surz, “Per capita world debt has surged to over $200,000”, Nasdaq.com, 24 July 2019.
 ‘Has our government spent $21 trillion of our money without telling us?’, Forbes.com, 8 December 2017.
 ‘Global Debt is now 2.5 times the total Money Supply – the system is clearly unworkable’, simonthorpesideas.blogspot.com, 15 February 2015.
 ‘The Average Life Expectancy For A Fiat Currency Is 27 Years ... Every 30 To 40 Years The Reigning Monetary System Fails And Has To Be Retooled’, Washington’s Blog, 2 August 2011.
 Smith: “The left in the imperialist countries (or we could just say ‘imperialist left’, for short) has also ignored the fact that there is nothing in these emergency cash injections for the poor of the global South. If you are an ‘emerging market’, well, fuck off and join the queue for an IMF bail-out! As of March 24, 80 countries were standing in this queue, waiting for some of its $1tr lending capacity. $1 trillion sounds like a lot of money, and indeed it is, but, as Martin Wolf, chief economic correspondent for the Financial Times, points out (FT.com, ‘This pandemic is an ethical challenge’, 24 March),
“the aggregate external financing gaps of emerging and developing countries are likely to be far beyond the IMF’s lending capacity”. Furthermore, as Wolf suggests, the purpose of IMF loans is to help with “external financing gaps”–in other words, to bail out imperialist creditors, not the peoples of debtor nations; and they invariably come with harsh and humiliating conditions that add to the crushing burden already pressing down on the peoples of those countries. In this sense, they are just like the vast government bailouts of private capital in the rich countries–but without anything added on to finance welfare payments or partially replace wages. The aim of the latter is to purchase the docility of the working class in the imperialist nations, but they have no intention of doing this in Africa, Asia and Latin America.”
 In 1975, the biggest 100 public companies in the US took in about 49% of the earnings of all US public companies; in 2015 the figure had risen to 84%. ‘Investors bet giant companies will dominate after crisis’, nytimes.com, 28 April 2020.
 Hemp can be turned into almost anything, including batteries and supercapacitors that outperform lithium and graphene; biodegradable bioplastic that is stronger than steel yet lighter than carbon fibre; and carbon-negative hempcrete. Hemp rapidly draws down carbon dioxide and also heals even the most damaged soil. Hemp then is the key to stabilising the climate, reversing desertification, and further technological and industrial advancement.
 “WTO warns on rise of protectionist measures by G20 economies”, FT.com, 21 June.
 Grossman, op cit, p157.
 Pento, The Coming Bond Market Collapse, 2013, p24.