Capitalism in Crisis: Socialist Solutions Needed

by Elisabeth Wichser

This article was originally published in Socialism Today, the paper of the Independent Socialist Group. Subscribe to the paper to receive each issue in print and read the articles before they’re published online!

The signs of capitalist crisis are everywhere. Year two of the COVID-19 pandemic rages on. Your landlord wants to increase rent and you can’t afford a car. Since January 2021, average rent prices increased by 16.4% and new car prices shot up 12.1%. Inflation recently increased by 6.2% — the sharpest increase since 1990. Work is overwhelming because of chronic understaffing. Prices are rising sharply and working people haven’t really recovered from the Great Recession of 2007-09. 

Increasing inflation, a wave of evictions, and supply chain disruptions are just some of the symptoms of the growing economic crisis. Capitalism is unable to plan, adapt to events, or provide basic necessities. The result is hundreds of thousands of homeless people despite over 16 million empty houses, food shortages despite tons of wasted food, deaths from preventable diseases, and the destruction of the environment by climate change, severe weather, and natural disasters.

These crises are representative of the problems inherent in the capitalist system. Capitalism is based on instability, chaos, and exploitation. It inherently goes through cycles of boom and bust. Working people lose their savings, lose their homes, lose their jobs, or are driven further into debt. 17.8% of Americans owe medical debt and 45 million people collectively owe over $1.7 trillion in student loan debt. Meanwhile, the capitalist class continues to profit. During the pandemic alone, when millions of working people lost their incomes, American billionaires increased their wealth by over $2.1 trillion

Capitalism will always be in crisis because of its focus on short-term maximization of profits and constant expansion. And the crises of capitalism don’t just affect the economy; they also have social and political implications. In the eyes of more and more working people, the capitalist political system lacks legitimacy. This is seen in the low voter turnout and approval ratings of presidents and Congress. Capitalism relies on keeping the working class poor and politically powerless, dividing people by race, gender, or other identities. Divisions make workers’ lives more precarious and easier for capitalists to exploit (see our article “2022: Bring the Fight Against Oppression Back Into the Streets” in issue #1). 

It doesn’t have to be like this. A socialist economy would mean that working people could democratically plan what gets produced and how it is distributed. Everyone’s basic needs — food, housing, health care, education — would be fulfilled. The resources for such a world exist, but under capitalism, the means of production and the world’s wealth are controlled and hoarded by a handful of super-rich individuals. 

Cost of Living Soars 

With prices for food, energy, and other necessities increasing, many workers have to stretch already thin paychecks further. The price of gas increased 44% between January and November 2021. Heating your home has become increasingly difficult as energy costs have risen 28%. The average price of a house went up 18% between October 2020 and October 2021, the largest increase in 45 years. The price of meat, poultry, fish, and eggs increased 12.8%

Inflation is used as a weapon against the working class. Instead of being blamed on capitalism’s tendency for crisis, inflation is blamed on higher wages for the working class. This doesn’t make sense as wages largely have stayed the same, but also when inflation hits, workers’ wages are devalued and we have decreased purchasing power. Wages are always trailing prices. The “laws” of supply and demand are treated as untouchable forces like gravity when there is quite a lot capitalist governments can do to prevent or mitigate inflation. They could set price controls or control the supply of key goods, as they already do with goods that have artificially-inflated prices, like milk. 

Inflation is largely a consequence of capitalists and shareholders demanding constantly increasing profits. Companies don’t have to increase prices. They could simply decrease profit margins. For example, Proctor and Gamble (P&G), a huge conglomerate that owns most hygiene and cleaning brands, announced they would be increasing their prices on goods like diapers and paper towels because of rising costs for raw materials. Yet just last quarter they had an almost 30% profit margin. Instead of making working people spend more on necessities, they could simply decrease their profit margin. 

Capitalists know that booms and busts are built into the fabric of capitalism. So when the economy suddenly worsens, they make the working class pay the price in rising costs and decreasing wages. The COVID-19 crisis is a great example of this. Just like with the 2007-09 Great Recession and its aftermath, the capitalist class is weathering the storm just fine. 

The Great Resignation and “Labor Shortage”

If you’ve been to a store or restaurant recently, you’ve likely noticed “help wanted” signs. Capitalist economists complain about a “labor shortage” because people are quitting low-wage jobs with horrible working conditions and hours. Entire stores have temporarily closed because the employees resigned en masse. Workers refusing to work for such low pay has forced some companies to give meager wage increases (that don’t even come close to matching inflation), but many continue to pay minimum wage and complain about a shortage of workers. 

Working people have the power to increase our wages and benefits because without our labor, society stops running. Look at the number of workers involved in the creation and distribution of vaccines; without the scientists, lab workers, delivery drivers, pharmacy techs, and retail workers, the vaccine would not exist. Workers are essential to the running of society. Collectively taking away our labor is the most impactful thing workers can do to improve our conditions. The best way to achieve this is through militant, fighting unions

Imagine what we could win if the workplace actions we’ve heard about were coordinated on a mass scale by unions and union federations, with hundreds of thousands of workers going on strike. This is the type of battle we will have to conduct to win a living wage, for example. Such a struggle could be coordinated by unions and an independent workers’ party. 

Minimum- and low-wage jobs didn’t pay enough before the current economic slowdown, and they certainly don’t pay enough now. Despite what the corporate media says, there actually isn’t a labor shortage. 

In November 2021, the U.S. unemployment rate was 4.2%. This shows there are enough people to work; companies just don’t want to pay increased wages. They want people who can pass a background check, are available to work 24/7, and have higher education, experience, and transportation. For example, a Florida man applied to 60 low-wage jobs in September and only got 1 interview. Capitalism relies on the threat of unemployment to drive down wages. Under socialism, full employment could be easily achieved by increasing wages and decreasing hours, opening up more jobs, and improving life outside of work. 

“Supply chain disruptions”

Empty shelves and delayed shipping are being blamed on “supply chain disruptions,” yet these “disruptions” are a result of how capitalist production and distribution operate. Many items travel around the world before you purchase them. If you buy a shirt, for example, the cotton could have been grown in the U.S., shipped to Colombia for weaving, shipped to Indonesia for cutting and sewing, shipped to China for packaging, and then shipped back to the U.S. This is an example of a fairly simple supply chain under capitalism, where the driving force isn’t efficiency, but corporations finding the cheapest labor possible. 

Many of the problems with supply chains are a result of crumbling infrastructure and understaffing in the logistics industry. To cut costs, railroads and ports have laid-off workers and closed, causing bottlenecks in key areas. Logistics workers, particularly truck drivers, face chronic understaffing and incredibly difficult, sometimes dangerous working conditions. 92% of new truckers quit after one year due to lack of income, long hours, and being away from home. This is a prime example of how there isn’t a labor shortage, there’s a shortage of living wages and fair working conditions. 

Since capitalism’s birth, profit motive has forced it to expand to every corner of the globe, employing colonialism and imperialism to do so. The whole world experiences cyclical crises of unemployment, inflation, and shortages caused by capitalism. Capitalists try to pit working-class people in different countries against each other in a global “race to the bottom.” This is why the fight for socialism must be international. 

Socialist solutions

To function, capitalism must exploit people’s labor and the environment. The value that we produce for society is stolen by the capitalist class and we get a fraction of it back through paychecks. We spend those paychecks on rent, groceries, and medical bills. 

Socialism, on the other hand, puts people over profit by bringing democracy to all parts of society. An economy planned by working people wouldn’t be subject to the crises of capitalism. There would be fewer shortages because we would control the means of production (factories, machinery, land, raw materials, infrastructure, etc.) and could decide how much of a good or service should be produced to meet human needs. Supply chains would be more efficient through adequate staffing and proper planning and coordination throughout the logistics industry. We could end unemployment through jobs programs, free retraining, and working fewer hours for more pay. Social issues like racism, sexism, and homophobia could be systematically addressed in part by ending the system that benefits from and propagates them — capitalism. We would be able to ensure that social resources aren’t privately controlled and hoarded by an extremely small number of people. Instead, they would be distributed so that no one has to live in misery. Right now there is enough food, water, shelter, and natural resources to meet human need. It’s simply a question of distribution. 

A socialist world is possible and is necessary now more than ever as we hurtle toward a climate crisis that could permanently make the planet unlivable. We can’t rely on capitalist politicians — Republican or Democrat — to have our interests in mind. They serve the capitalist class by creating the best economic and political conditions for capitalism to maximize exploitation and expansion. Parties that occasionally repeat “progressive” demands will not act on them if they threaten capitalism. For example, many large cities in the U.S. are controlled by Democrats, yet have growing homelessness, and severe cuts to social and public services. Only by organizing workers can we force the capitalists and their politicians to implement things like a livable wage, union protections, and universal health care. 

We can’t just fight for what the capitalist class will allow within their system. While Scandinavian countries tend to have better social programs, this is only because of militant and organized working class struggles in the past. They are still capitalist countries and face problems like racism, xenophobia, sexism, and cycles of economic crisis, while their own capitalist classes work to reverse the gains of the workers’ movement. 

Fighting for a better, socialist world will take protesting, striking, occupying workplaces, and creating independent mass workers’ parties. Workers’ parties need to be organized by unions, socialists, working-class people and youth. A serious offensive against the capitalist system needs to include general strikes and nationalization of key industries, particularly energy production, agriculture and logistics. Ultimately, it will take a revolution of working people and youth fighting for socialism to truly rid the world of capitalism. If you are interested in joining the fight for socialism, join the Independent Socialist Group!