euro crisis is more than a euro crisis

Even if there was no Euro, or even if there was the Euro and political union, there would still be a crisis. Why? Because the crisis is a crisis of value, says duvinrouge.

That’s not to understate the problem of trying to get economic convergence of divergent economies through monetary union. It cannot be done without a political union that is prepared to use regional policy and the consequent transfer of wealth from north to south. Even without the backdrop of world capitalist crisis the Euro‘s future would be in doubt. But it is the recurrent capitalist crises that bring such problems to a head. And still it is left to Marxists to explain why capitalism is crisis.

Say’s law (supply creates its own demand) does not hold because production is commodity production – things are produced to be exchanged for money, furthermore a monetary amount greater than the original outlay. This increase in value occurs in production – the amount paid to labour in wages is less than the value created by the labourer. But it’s not just about increasing value in production; there’s also the need for the effective demand – money – to be there.

Intutively, people can understand that printing money, when taken to a certain size, will debase a currency. But just what are the limits and just what is money? Supply and demand can explain movements around an equilibrium, but why is there a quantitative relationship between commodities? Why, for example, might a pair of shoes be valued 20 times more than a pair of socks? Of course, the thing that connects all commodities is labour time. Even the machines and raw materials (capital) require labour time initially. Money is that commodity, or represents that commodity, that is the universal equivalent. Historically this role has been played by gold. Gold takes a certain amount of labour time to produce. Producing more token money than gold will result is the price of gold in terms of the token money going up (gold doubling in price in recent times has largely coincided with QE). This is commodity price deflation in terms of gold – so in this sense we live in deflationary times.

The net result of allowing token money to exceed the labour value it is suppose to represent is aggregate prices exceed values. Reported profit rates are artifically inflated, but eventually the law of value asserts itself as the amount of token money does not truly reflect true values in terms of labour time (or in the case of debts, future labour time). This process has been going on since the late 1960′s. The collapse of the Soviet Bloc and the opening up of China did indeed greatly assist in the extraction of value in the production process, but not enough to compensate the excessive growth of token money.

We have reached debt-saturation; debts cannot be convincingly expanded and even at their current size will not be paid back. So without the ability to issue more credit (money) to inflate profit rates and the limits of the printing press, the adjustment (severe capital devaluation) can no longer be avoided.

Quantification is difficult, but just as in 2008 when governments were forced to take significant stakeholdings in some of the banks, it may well end up this time around with the financial sector being nationalised (or the bits that are left) – state capitalism. This will be done in the name of necessity – for our own collective good – but adds up to taxpayers stumping up for their own financial wealth (you lost £1k in the bank, so have to pay £1k in extra taxes). But as most taxpayers (my presumption) are overall in debt to the banks, it will be once again the majority bailing out the minority – the ultimate bank bailout.

Euro, or no euro, it’s just a colourful experiment that sits on top of the underlying capitalist crisis!