Contents "The internationalist proletarian" n.16
RELATIVE OVERPRODUCTION: FLAMMABLE MATERIAL FOR THE TRADE WAR
Questions of method
We take this occasion to remember what the method of the school of intransigent Marxism has been, which we follow in our publications and in particular in this article and those that follow:
“To enable the reader to obtain the most well-grounded idea of imperialism, I deliberately tried to quote as extensively as possible bourgeois economists who have to admit the particularly incontrovertible facts concerning the latest stage of capitalist economy. With the same object in view, I have quoted detailed statistics which enable one to see to what degree bank capital, etc., has grown, in what precisely the transformation of quantity into quality, of developed capitalism into imperialism, was expressed.” (Lenin, Imperialism: The Highest Stage of Capitalism, 1916).
Illustrating the development of capitalism in this way, it is especially important to understand that the statements of representatives of the bourgeoisie or other classes that are mentioned must never be taken as the driving force of events. They are a reflection of the relations of production, a reflection often hallucinated in the sense that the aims they think they are pursuing do not necessarily coincide with the real aims towards which their actions tend, even if we can also deterministically explain why they think they are pursuing these aims:
“Our critique is equivalent to a complete and definitive depreciation, not so much of the action of each of the individuals, presented even as protagonists of the historical events, but rather of the intentions and perspectives with which they believed they were able to coordinate this action.” (Lyon Thesis, 1926).
Causes and effects
As earlier with the confinements and then with the war in Ukraine, now the erratic tariff policy of the new US governing faction becomes in many media the sufficient explanation and supposed cause of all phenomena.
We Marxists know that accidentality appears at the intersection of necessary processes, and it is on the basis of these big processes that we make the study of the course of capitalism, without prejudice to examining also with dialectical materialist method the concrete series of events through which necessity imposes itself.
Capitalism tends towards OVERPRODUCTION, DEFLATION and a FALL IN THE RATE OF PROFIT. The very development of this ineluctable process detonates and will detonate a series of counter-processes that tend to slow down, postpone or even momentarily reverse the main process. The more capitalism sinks in its overproduction, the more forcefully will be detonated these kinds of counter-processes, which tend to destroy or paralyze part of the productive capacity and merchandise already created.
These counter-processes are carried out, desired and theorized by those who delude themselves that they are free of material determinations and, on the contrary, their actions, desires and theories are completely dominated by material circumstances that normally cause their actions not to produce the desired result, but the result imposed by necessity.
Interest rates evolution
As we have seen in previous issues of the review, after the electroshock of the paralysis and epileptic resumption of capitalist production and circulation, the premises of the previous situation are once again manifesting themselves. We can see them in the fall in interest rates which - at different paces - is taking hold in the Western capitalist economies.
The central banks of other Western capitalisms such as Switzerland or the United Kingdom follow – with greater anticipation or delay – the rate curve in the EU and the US. Regarding the latter two countries (Japan and China), we will make the following point. In the case of Japan, the fact is that it has not managed to take off beyond 0.5% and has lagged behind the rest. As for China, the downward trend is obvious, although it has not reached 0, like the rest. In addition, it can be observed that since China is the epicenter of the production volcano, the spasm that manifested in the periphery did not occur, as it did not manage to emerge from the deflation imposed by the productive overcapacity and the relative overproduction of goods and capital.
What is the importance for Marxists of this tendency of the rate of interest to fall and to be placed even in negative ranges? The answer is now to be found in Part 5 of Volume III of Capital, Chapter XXII:
“All other conditions taken as equal, i.e., assuming the proportion between interest and total profit to be more or less constant, the functioning capitalist is able and willing to pay a higher or lower interest directly proportional to the level of the rate of profit. Since we have seen that the rate of profit is inversely proportional to the development of capitalist production, it follows that the higher or lower rate of interest in a country is in the same inverse proportion to the degree of industrial development (…) In this sense it may be said that interest is regulated through profit, or, more precisely, the general rate of profit. And this mode of regulating interest applies even to its average.
In any event the average rate of profit is to be regarded as the ultimate determinant of the maximum limit of interest.” (Capital, Volume III, Part 5, Chapter XXII, K. Marx).
That is to say, the average rate of interest will always be lower than the general rate of profit, it is limited by the latter: no capitalist will borrow at a rate of interest higher than the rate of profit he expects to make on the investment of the borrowed capital. The tendency of the rate of profit to fall is expressed in the chronic collapse of interest rates and in the impossibility of the central banks to increase them in a lasting way (see ‘The Internationalist Proletarian No. 6, March 2021, p. 9 for a more extensive explanation of the tendency of the rate of profit to fall).
Maritime transport price developments
Despite the difference, which we already saw in ‘The Internationalist Proletarian’ No. 15 (January 2025, p. 8) as to the reasons and repercussions between the peak in 2022 and 2024, the price of transport is deflating again, approaching pre-2020 levels.
At the second peak, the Suez Canal used to carry 12% of the world's trade and was the fastest maritime connection between European and Chinese ports. But the major shipping lines redirected their freighters via the Cape of Good Hope, which has seen a 76% increase in traffic in the last year. This change of route means an extra 15 days of crossing and higher fuel costs, but it has been a boon for the shipping lines, which have seen it as a refuge from the collapse in transport prices.
The biggest immediate loser is Egypt, which is losing $800 million a month ($7 billion since the conflict began) due to the decrease in Canal earnings. The reduced transit situation is pushing Egypt to look for customers and investors willing to continue transiting the Suez Canal and to industrially develop the area: “Today less than half as many ships pass through this canal as before the war, mostly Chinese and Russian vessels, which have the safe-conduct of Iran and the Yemeni militia. (...) Just this week the Egyptian government signed a $1.65 billion deal with a Chinese company to develop several metal factories in the Suez Canal area, further consolidating China's already strong economic presence in the region.” (La Vanguardia, 30-03-2025).
In any case, in the medium to long term, shipping lines face a serious overcapacity problem. The expected combined effect of the China tariffs, the potential reopening of the Red Sea route and the increase in the world fleet is that capacity utilization “(…) - will come under severe downward pressure in 2025, with a potential declin 30% to 40% compared with 2024“ (Bloomberg, 02-03-2025).
Oil price evolution
As we saw in ‘The Internationalist Proletarian’ No.13 (March 2024, p. 31) the price of oil is more than 40% cheaper than a decade ago, at levels of the early 2000s, and even in nominal terms it is returning to pre-lockdown levels, and falling.
The cheapening of non-fuel energy sources (in addition to generating increasingly negative prices along with sudden energy surpluses and deficits) means that “oil's share of total world energy demand fell below 30% last year for the first time in history, 50 years after a peak of 46%, according to figures released yesterday by the International Energy Agency.” (Expansión, 25-03-2025).
And not only has oil's market share of total energy demand fallen, but the share of crude oil in the oil market has also fallen, which includes biofuels and Natural Gas Liquids (NGL)[1]: “Back in the late 1990s, crude accounted for almost 90% of the petroleum market, so it was a good proxy for overall supply and demand. (...) The share of crude in the total oil market has dropped to 74%. (...) . The most recent monthly data shows the US pumped 13.49 million barrels per day of crude in December; but it also produced 7.1 million barrels of NGLs, lifting total oil liquids to 20.6 million barrels — and there’s an additional 1.44 million barrels of biofuels.” (Bloomberg, 19-03-2025).
This leads to a clear overproduction of oil in general and of crude oil in particular, which is blocking attempts by the main OPEC+ countries to increase their production, as the drop in oil prices below $90 makes it very difficult for them to cover their States' costs.
“Global oil markets face a supply surplus of 450,000 barrels a day this year even if OPEC+ keeps output flat, as rival supplies — from the US, Brazil, Canada and Guyana — overwhelms growth in consumption.” (Bloomberg, 03-03-2025). “However, OPEC+ already this weekend stopped short of an attempt by eight countries to go further in reversing cuts (...) the OPEC+ Joint Monitoring Committee on Saturday rejected their plans, demanding compliance with agreed production quotas.” (Expansión, 08-04-2025).
“The oil cartel yesterday cut its demand forecasts for both this year and next, reducing global oil consumption by 150,000 barrels a day this year, to 105.2 million barrels a day for the year as a whole, and by 300,000 barrels a day next year, to 106.63 million barrels a day.” (Expansión, 15-04-2025).
As we have seen on previous occasions, this is not going to translate into a smoother migration, but just the opposite. We can see this in the case of coal, the price of which has followed the usual post-lockdown curve: “Investment in new production has dwindled in much of the world as shareholders and banks increasingly refuse to approve new spending on projects. Demand, however, continues to rise in India and China, outpacing breakneck rates of expansion in solar and wind, while even developed countries look to coal to help power the artificial intelligence boom.” (Bloomberg, 02-03-2025).
Overall debt
The forecast is that “global government borrowing will reach a record $12.3 trillion (’11.6 trillion) this year”. (Expansión, 05-03-2025).
And this debt has to be financed at prevailing interest rates which, although they have started to fall, are still comparatively high.
As a result, interest costs on public debt in the OECD countries have risen“in just three years from 2.4% of GDP in 2021 to 3.3% of GDP in 2024, higher even than during the debt crisis of 2010-2012” and that ”interest payments in developed countries have become the sixth largest item in national budgets (...), behind pensions, health, administration, education and economic affairs, and ahead of other items that are now becoming more important, such as defence, security or housing” (Expansión, 21-03-2025).
Industrial production evolution
In the case of European imperialism, the rebound effect of the epileptic resumption of production was short-lived and the rate of industrial production has been negative for a prolonged period ever since.
In the case of US imperialism, it can be seen that the rebound effect was a little longer, although with a downward trend that by 2023 had placed the industrial production index in the negative.
The third industrial production index to compare is the Chinese imperialist one. After the second fall in April 2022 due to the confinements in Shanghai, the industrial production index has remained positive, constituting the epicenter of the production volcano that floods the rest of the markets with goods.
Core inflation
As for core inflation in both the EU and the US, the curve has been falling once the impact of the stop and epileptic resumption of capitalist production and circulation has passed.
In the case of Chinese imperialism, since the production halt in 2020, underlying inflation has not taken off, remaining very low and even below zero.
Industrial prices
Even more significant is the development of producer prices. In the EU, after a prolonged fall, they have started to rebound slightly. In the US, the gradual but sustained upward trend has been interrupted.
And in China, they have been steadily falling over the last three years, a tangible manifestation of the domestic overproduction that is struggling to flood markets abroad.
Overproduction and the trade war
The overproduction of capital engenders tremendous competition between different capitals to offload onto their competitors the losses that capitalism as a whole will inevitably have to suffer.
“The rate of profit would not fall under the effect of competition due to over-production of capital. It would rather be the reverse; it would be the competitive struggle which would begin because the fallen rate of profit and over-production of capital originate from the same conditions.“ (Capital, Volume III, Part 3, Chapter XV, K. Marx).
“How much of it will be left unemployed is up to the struggle of the competition to decide. (…) The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, i.e., to what extent he must share in it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers” (Capital, Volume III, Part 3, Chapter XV, K. Marx).
It is in this context of relative overproduction of commodities and capital that the trade war has accelerated with the grandiloquent imposition of tariffs by the US on practically all the States of the world and its subsequent retreat, which we will analyze in the next article of this magazine. The following quote from Engels serves perfectly to summarize the current article and to introduce the next one:
“The daily growing speed with which production may be enlarged in all fields of large-scale industry today, is offset by the evergreater slowness with which the market for these increased products expands. What the former turns out in months, can scarcely be absorbed by the latter in years. Add to this the protective tariff policy, by which every industrial country shuts itself off from all others, particularly from England [ Today this role is played by China! ] and also artificially increases domestic production capacity. The results are a general chronic over-production, depressed prices, falling and even wholly disappearing profits; in short, the old boasted freedom of competition has reached the end of its tether and must itself announce its obvious, scandalous bankruptcy.” (Engels' remark in Book III of Capital, Ch. XXVII).
[1] Do not confuse Liquefied Natural Gas (LNG), which is mainly methane gas cooled to -160°C for storage and transport, with Natural Gas Liquids (NGL), which are hydrocarbons such as propane, butane, pentane, hexane and heptane that can be liquid at ambient temperature but at higher pressure.