Download The Case of Greece (1960-1989), by E. Ioakimoglou and

Review of Radical Political Economics
Vol. 25(2)81-107(1993)
Capital Accumulation and Over-Accumulation
Crisis: The Case of Greece (1960-1989)
Elias loakimoglou
John Milios
ABSTRACT: In this paper, the concept of capital over-accumulation, formulated by Marx in
Volume 3 of Capital, is discussed and adopted as the theoretical framework for the study of
capital accumulation and economic crisis in Greece in the period 1960-89. The empirical part
of the analysis is based on the investigation of a series of indices which reveal the historical
trend of the social and economic relations determining capital accumulation. It is thus shown
that the main factor determining the economic crisis of Greek capitalism since the late seventies
is the decreasing ability of the capitalist class to economize on constant capital, which is the
outcome of the social relation of forces established in the class-struggle.
INTRODUCTION
Greek capitalism developed with very high growth rates in the post-war
period until the end of the seventies. Among the OECD countries, the
economic performance of Greece in the period 1962-79 compares only with
that of Spain and Japan. However, the high growth rates of Greek capitalism
came to an end in 1980, and have remained low ever since.
The country's per capita Gross Domestic Product (GDP) increased at
constant market prices at an annual rate of 5.8% in the period 1951-60,
7.6% in the period 1961-70,5.6% in the period 1971-75,4.1% in the period
1976-80 and 1.6% in the period 1981-90.
In the 1980s, the rapid decline of the country's GDP growth rates, along
with the deterioration of nearly all other economic indices such as the rate
of investment, the inflation index and employment, made it apparent that
Greek capitalism had entered a period of economic crisis. The discussion
concerning the character and causes of this crisis has not abated.
Conservative economists, as well as officials of the present conservative
government, argue the crisis is a result of the "socialist experiments" of the
previous socialist government, PASOK, (1981-88). They claim that wage
increases and the power gained by trade unions under PASOK rule
undermined the competitiveness of the Greek economy and discouraged
Greek entrepreneurs from investing in their firms. According to the
conservatives, the only way out of the crisis is to liberalize the Greek
economy.
Athens, Greece.
® 1993 Union for Radical Political Economics.
Published by Blackwell Publishers, 238 Main St., Cambridge, MA 02142, USA, and
108 Cowley Rd., Oxford, OX4 1JF, UK.
The majority of progressive or leftist economists, as well a« socialist
politicians, share the opinion that the crisis is a result of the structural
problems of international and Greek capitalism since the late 1970s. They
claim that the harsh, restrictive austerity policy practiced by the present
government merely aggravates the economic problems, reducing demand (the
consumption ability of the working classes) and destroying social consensus.
In our opinion, the economic crisis of Greek capitalism can be adequately
interpreted only from the point of view of Marxist theory, which allows the
consideration of the immanent mechanisms of capital valorization and
accumulation. Without such an approximation to the development of the
(Greek) capitalist economy, any general statement about "structural problems
of capitalism" becomes meaningless. We believe that the Marxian concept
of over-accumulation of capital, developed mainly in Volume 3 of Capital,
enlightens the immanent relations determining the statistically attested
stagnation of the Greek capitalist economy in the 1980s.
In this paper, we begin by presenting and discussing of the Marxian theory
of over-accumulation of capital, which we propose as the interpreting scheme
of the capitalist economic crisis (Section I). We then elaborate the empirical
picture of capital accumulation in Greece during the period 1960-89, using
a series of suitable statistical indices, the development of which also indicates
the developmental trend of the economic relations Marx postulated (Section
II). In this section we also formulate some theoretical conclusions with
regard to the character of both the economic crisis and the economic policy
adopted by the ruling political powers in Greece. These conclusions are
obtained by analyzing the statistical data in relation to the theoretical
premises presented in Section I and can be considered as a verification of
these premises. The statistical data presented in Section II are then used for
a concise periodization of the development of Greek capitalism since 1960,
by briefly referring to the social background (social relation of forces) during
each distinct period of economic performance (Section III).
I. THE CONCEPT OF OVER-ACCUMULATION
CRISIS FROM CAPITAL BY KARL MARX
Karl Marx presents one of his most famous discoveries, the law of the
tendential fall of the profit rate, in Part 3, Volume 3 of Capital. One of the
chapters found in this part refers to the development of the law's internal
contradictions, and includes a section which is entitled "Surplus Capital
Alongside Surplus Population" (Section 3, Chapter 15). In this section Marx
defines an over-accumulation crisis. On comprehending the Marxian
definition of capital over-accumulation, one is forced in one way or another,
to confront the logic of Capital; that is, the internal coherence and the
organization rules of the Marxian logical constructions.
83
It was Gerard Dumenil (1978) who showed that the capital is logically
based upon the distinction between internal and external determinations. One
understands internal determinations as the necessary relations in a given type
of society, which remain unchanged and are constantly present, regardless
of all the changes in historical development. These relations are present even
though they remain hidden beneath the surface of everyday events and the
changes of economic, political or ideological conjuncture. Internal
determinations constitute what Marx defined as the (capitalist) mode of
production. On the contrary, the external determinations constitute the
variety of relations and events which do not originate from the unchanged
structural characteristics of the given type of society (mode of production),
but from the changing mutual strengths in the class struggle of the
antagonistic classes, within one and the same type of class power. For
example, capitalist exploitation and surplus-value extraction are internal
determinations of every capitalist society. The fact that we are dealing with
a capitalist society, though, does not indicate that the working day will be
12, 10 or 7 hours, that the welfare services will be more or less extended,
or that the workers' trade unions will be strong or weak, etc. These last
relations belong to the variety of external determinations (external to the
structural relations that constitute the capitalist mode of production), which
can take on many different forms in different countries, or in the different
historical phases of a capitalist society.
The most valuable element in DumemTs analysis is his study of the way
these two forms of social relations interact with each other. Dumenil showed
that the external determinations do not constitute any violation of the
economic laws arising from the internal determinations, nor are they acting
restrictively or in contradiction to these laws. On the contrary, the external
determinations act only through the necessary internal relations. Their action
therefore, is mediated by the economic laws. The formation of the value of
the labor force, for instance, is not the outcome of two independent factors
acting separately from one another - namely the socially necessary labor time
for the production of the workers' means of subsistence on the one hand, and
the political or trade union strength of the working class on the other. These
two factors do not produce any separate results which can then be added or
mutually revoked. The relations external to the law (the results of the class
struggle) act through the necessary internal relations. The strengthening of
the working class causes an increase in the socially necessary labor time and
therefore an increase in the value of the labor-force.
Our presentation of the capital over-accumulation concept shall therefore
be based on the distinction between internal determinations on the one hand
(which are related to the economic laws), and external determinations on the
other.
The starting point of Marx's analysis is the definition of the absolute
over-accumulation. It can be regarded as a kind of preliminary definition
84
Elias Ioakimoglou and John Milios
which then leads to the definition of the relative over~accuniulttinm. The
absolute over-accumulation refers to a boundary situation, which allows
Marx to formulate a clear and comprehensible definition. (At this point,
Marx adopts a methodology which is common in the natural sciences).
We now follow Marx's definition:
There would be an absolute over-production of capital as soon as no
further additional capital could be employed for the purpose of
capitalist production. But the purpose of capitalist production is the
valorization of capital, i.e. appropriation of surplus labor, production of
surplus-value, of profit. Thus as soon as the capital has grown in such
proportion to the working population that neither the absolute labortime that this working population supplies nor its relative surplus laborvalue can be extended ...; where, therefore, the expanded capital
produces only the same mass of surplus-value as before, there will be an
absolute over-production of capital; i.e. the expanded C+AC will not
produce any more profit, or will even produce less profit, than the
capital C did before its increase by AC. In both cases there would even be
a sharper and more sudden fall in the general rate of profit, but this time
on account of a change in the composition of capital which would not be
due to a development in productivity, but rather to a rise in the money
value of the variable capital on account of higher wages and to a
corresponding decline in the proportion of surp lus labor to necessary
labor. (Marx 1981: 360).
First, a clarification must be made in the above definition. In the case
of capital over-accumulation, the fall in the profit rate is not the result of
a development in the labor-force's productive capacity ( with a
subsequent increase in the organic composition of capital). This
argument is related to the fact that in chapters 13,14 and 15 of the third
volume of Capital, which precede the definition of over-accumulation,
Marx had already formulated and analyzed the law of the tendential fall in
the rate of profit as an outcome connected with the development of the
productive capacity of the labor force. In the definition of absolute over accumulation Marx makes it clear, therefore, that he refers to a fall in
the profit rate determined by factors other than in the case of the law of
the tendential fall. In the case of absolute over-accumulation, it is not the
increase in the labor productivity and the subsequent increase, at an even
higher rate, in the organic c omposition of capital. It is the decline in the
proportion of surplus labor to necessary labor (Marx 1981: 360). In other
words, the determining factor in the fall of the profit rate is now the
decrease in the surplus-value rate. For reasons arising from the history
of the labor and communist movement, this Marxian argument has not
been seriously considered by Marxists, who tend to admonish that every
fall in the profit rate is a result of an increase in the organic composition
of capital.
85
Nevertheless, it is apparent that the profit rate depends on two "variables": the
surplus-value rate on the one hand, and the organic composition of capital
on the other. One should note at this point, that Marx's definition quoted
above seems to take into consideration only the surplus-value rate, that is,
the relation between surplus labor and necessary labor. However, this "onesided" analysis is not due to an omission or a theoretical mistake. It is
connected with the application of an analytical method widely used in the
natural sciences and well-known to Marx. This method is the study of the
change of a specific quantity under the influence of the change of another
quantity, taking into account that all other factors remain constant. The
definition of capital over-accumulation focuses on the influence of changes
in the surplus-value rate (i.e., the rate of exploitation of labor by capital) on
the profit rate, while all other factors, including the organic composition of
capital, are regarded as constant. That is why Marx claims that overaccumulation of capital occurs when:
the capital is unable to exploit labor at the level of exploitation that is
required by the "healthy" and "normal" development of the capitalist
production process (Marx 1981: 364).
The question that now arises is in what way does Marx study the
combined effect of organic composition and surplus-value rate on the profit
rate? Considering the profit rate to be the dependent variable (R), then the
exploitation rate (S/V) and the organic composition of capital (C/V) will be
the independent variables, according to the following relation:
(1
)
where S stands for surplus-value, V for the variable part of capital (value of
labor-force), and C for constant capital (value of the means of production).
As mentioned, Marx studies the influence of S/V on R by considering C/V
as a constant quantity in Section 3, Chapter 15, where he defines overaccumulation. On the contrary, when he elaborates the "nature of the law"
of the tendential fall in the profit rate in Chapter 13, he considers S/V as a
constant quantity. Therefore, he successively studies the influence of the
independent variables on the dependent one, in an effort to cover all possible
cases and factors that determine the change of the dependent variable.
The first assumption is that the organic composition of capital remains
unchanged. This leads Marx to the definition of capital overaccumulation.
His argument with regard to changes in the surplus-value rate is that an
increasing labor demand due to the capital accumulation ("as soon as capital
has grown in such proportion to the working population that..." (op. cit.))
will lead to a falling rate of surplus-value. This is due to the lack of
additional workers (very low unemployment rate) and the subsequent
86
increases of real wages. However, the surplus-value rate depends aim) on
other factors, which Marx does not seem to feel obliged to explain. The
absolute labor time, on the one hand, does not depend exclusively on the
number of workers, but also on the length of the working day. On the other
hand, the relative labor time (i.e., the rate of exploitation) does not only
depend on the wages, but also on the increase in labor productivity. These
"omissions" by Karl Marx concerning the definition of capital overaccumulation can be explained as follows:
* The length of the working day is purely an external relation with regard
to the examined economic law, as we have explained above.
* The labor productivity is regarded as an unchangeable factor, exactly like
the organic composition of capital, the increase of which is "just another
expression for the progressive development of the social productivity of
labor" (Marx 1981:318).
Therefore we are not dealing with omissions in Marx's analysis, but with his
scientific method of abstraction. The economic law does not refer to the
concrete capitalist relations in a given society. It refers to their "kernel," or
inherent elements of their specific structure, having excluded:
a) all the multiple external determinations, which occur in one form or
another, and depending on the changing economic, social and
political conjuncture in a given society, may not even exist.
b) all determinations which are considered temporarily constant, so that
the effects of each "independent variable" on the "dependent
variable" become separately apparent.
The above statements shall now be considered in relation to the concrete
analysis of the concrete reality, which is our final aim.
Obviously the assumption of a constant organic composition of capital shall
be abandoned. This means that when the decrease in the exploitation rate is
being compensated by an even higher decrease in the organic composition
of capital, the profit rate will rise instead of fall.
The following question shall be posed: Under what circumstances does a
decrease in the rate of exploitation, (as Marx described it in Section 3,
Chapter 15, Volume 3 of Capital) lead to a decrease in the profit rate and
to an economic crisis? The same question can also be regarded as part of a
significant problem which was studied by Marx himself: in what way is the
surplus-value rate (rate of exploitation) transformed into profit rate? Marx
deals with this problem in the first part of Volume 3 in Capital. Let us recall
its title: "The transformation of surplus-value into profit, and of the
surplus-value rate into rate of profit."
Let us follow, then, the methodology of Karl Marx. This time we will
consider the surplus-value rate as a constant quantity and deal with the
87
relation between the organic composition of capital and the profit rate. One
could argue that this problem is stated and solved by Marx principally in part
3, Volume 3, and more precisely in Chapter 13. Here he deals with the
famous law of the tendential fall in the profit rate, claiming that the increase
in the productive force of labor causes an increase in the organic composition
of capital and a subsequent decrease in the profit rate. However, the organic
composition of capital depends on a series of factors other than labor
productivity, which are considered here (Chapter 13) as constant quantities.
For this reason, our analysis shall focus its attention on part 1, Volume 3 of
Capital (Chapters 1-7). Let the following relation guide us:
which means that:
where Y is the net product, that is, the sum of surplus-value and value of
labor force (variable capital).
Equation (2) shows that the organic composition of capital C/V can be
analyzed by the rate of surplus value on the one hand, and the quantity C/Y,
on the other. This last quantity expresses the value of constant capital which
is necessary for the production of one unit of product. The increase or
decrease of this quantity illustrates, therefore, the ability of the capitalist
class to spare or economize on constant capital. Marx himself devoted the
whole of chapter 5 to this subject (economy in the use of constant capital).
In this chapter we find the enumeration of all factors related to the ability of
capitalists to economize on constant capital.
Once again, in Chapter 5 of Capital, Marx follows the abstraction method
we described above. He considers that the surplus-value rate is "given" (i.e.,
constant), "in order to avoid needless complications" (Marx 1981: 171). He
then describes the factors which ensure or restrict economy in the use of
constant capital. Let us attempt to summarize the main points of the Marxian
analysis:
a) Lengthening of the workday or work year.
The volume of fixed capital (factory buildings, machinery, etc.)
remains the same, whether work continues for 16 hours or for 12. The
extension of the working day requires no new expenditure on this, the
most expensive portion of the constant capital. (Marx 1981: 170).
b) Concentration of the means of production and employment of them "on
a massive scale" (Marx 1981: 175).
88
c) Socially combined labor (concentration and cooperation of workers,
social character of labor) (Marx 1981: 172).
d) Economy on the conditions of work at the expense of the workers
The contradictory and antithetical character of the capitalist mode of
production leads it to count the squandering of the life and health of
the worker, and the depression of his conditions of existence, as itself
an economy in the use of constant capital, and hence a means for
raising the rate of profit (Marx 1981: 179).
There are, of course, forms of economy in the use of constant capital
connected with an increase in labor productivity:
e) Re-cycling of waste products (Marx 1981: 173-74). Productivity increase
in sector I, (which produces means of production) (op. cit. p. 175).
f) Economy designated by the experience of the collective worker (Marx
1981: 198-199).
g) Economy as a result of the appropriate education of the collective worker
and his subordination to the factory despotism — that is the capitalist
relations of production which are, at the same time, the relations of
power:
The fanaticism that the capitalist shows for economizing on means of
production is now comprehensible. If nothing is to be lost or wasted,
if the means of production are to be used only in the manner required
by production itself, then this depends partly on the workers' training
and skill and partly on the discipline that the capitalist exerts over the
combined workers.... (Marx 1981: 176).
The analysis of Marx shows that the ability of the capitalist class to
economize on constant capital is not a "technical aspect" of the production
process, but an outcome of the social relation of forces, that is a result of
class struggle.
Increasing economy in the use of constant capital presupposes an
increasing power of the capitalist class over the production process itself. It
is often connected with a deterioration of the workers 9 economic and social
status, as Marx showed. On the other hand, economy in the use of constant
capital "concerns the worker as little as a horse is concerned with the
expense of its bit and bridle" (Marx 1981: 178).
The fall in the exploitation rate is transformed into a fall in the profit rate
only in the case where it is not compensated for by economies in the use of
constant capital. On the contrary, an increase in the factor illustrating the use
of constant capital (factor C/Y) over a certain period (i.e., a fall in the
"constant capital efficiency," Y/C) may lead to a fall in the profit rate and
an over-accumulation crisis, even in the instance of a constant or slightly
increasing exploitation rate. An increase in factor C/Y, that is, the declining
89
ability of the capitalist class to economize on constant capital, can again be
the result of either a decrease in (Y/N) or an increase in (C/N), since:
where N is the number of workers, (Y/N) is the "apparent labor
productivity/ assuming that the length of the work year is constant, and
(C/N) is the constant capital intensity.
It is worth mentioning at this point that since the end of the 1970s, the
process of restructuring a capitalist economy through the introduction of
micro-electronic applications in capitalist production (automation of
production), does not aim only to increase labor productivity and thereby the
rate of exploitation. It also aims to economize considerably on the use of
constant capital.
Let us now return to the theory of over-accumulation crisis. The crisis
itself unavoidably results in a fall or deceleration in demand and thereby
leads to an increase in the unemployed production capacity, that is, an
increase of the so-called capital intensity of the capitalist economy.
It is clear, though, that in our theoretical approach we do not consider
under-consumption as the cause of economic crisis but as one of its major
effects, which then produces its own effects in respect to the profit rate; that
is, it feeds back into the crisis. The whole process takes on the form of a
"positive feedback," or a "vicious cycle." In our opinion, this "inner and
necessary connection" between the elements of a capitalist economy in a
conjuncture of over-accumulation crisis is verified by the fact that in many
cases (e.g., Greece), consumption increases during the whole period that
precedes the outbreak of the crisis.
As a conclusion of the above theoretical analysis we can formulate the
following statement:
Over-accumulation crisis is determined by two factors, both being an
eventual outcome of class struggle: a decreasing exploitation rate of labor
and more decisively, a decreasing economy in the use of constant capital.
The investigation, therefore, of the empirically detectable characteristics
of economic crisis in Greece (i.e., the verification that the Greek economic
crisis has the character of an over-accumulation crisis) shall be based on the
combined application of two types of quantitative indices: (a) indices
approaching the rate of labor exploitation, (b) indices approaching factor
C/Y, and thereby the ability of the capitalist class to economize on constant
capital.
90
II. THE EMPIRICAL INVESTIGATION OF THE CRISIS.
INDICES OF CAPITAL ACCUMULATION IN
GREECE (1960-89)
The empirical investigation of capitalist accumulation from the Marxian point
of view is obliged to confront the fact that statistical data does not describe
(or correspond to) the Marxian value-categories, but illustrates some
"superficial phenomena11 of the economic processes. This fact gave rise to
a dispute among Marxian social scientists, as to whether, or to what extent,
empirical reality can be approached by means of a Marxian use or
interpretation of statistical data. In our opinion, the most interesting such
discussion, which is worth mentioning here, is one which took place in W.
Germany during the '70s (Altvater; Hoffmann; Schoeller; Semmler 1974-A
& 1974-B, Diefenbach, Groezinger, Ibsen, Wartenpfuhl, Wengenroth: 1976,
Altvater, Hoffmann, Semmler: 1976, Schoeller: 1976, Busch: 1978).
However, an analysis of this discussion is not required for the purpose of
this paper.
In our opinion, the fact that empirically detectable economic phenomena
are the forms under which the "hidden" structural characteristics of the
capitalist system (the economic laws discovered by Marx) make themselves
apparent (Erscheinungsformen: forms of appearance), allows the use of
carefully selected statistical indices under certain presuppositions. These
indices can be used only as indications with regard to the way economic laws
act in a concrete society and for a concrete historical period. They show the
trend in the development of the value relations.
The indices are then just historical proxies of value categories. As an
example, the real wage is not the value of the labor force. However, an
increase (or decrease) in the average real wages in a certain country over a
historical period indicates a respective increasing (or decreasing) trend in the
value of the labor force (in the given country and for the given historical
period). Our opinion is that Marx's whole analysis shows the conceptual
unity of value categories and their forms of appearance. Otherwise, one
would have to distinguish between the "history of structures" on the one
hand and the "history of events" on the other, as two processes independent
from one another. However, such an assumption contradicts the Marxian
theory.
The indices selected for the present investigation are the following:
* The annual Net Output (Y) at market prices (Net Value Added calculated
as the difference between Gross Value Added and the Consumption of
Fixed Capital). The historical change of this index illustrates the trend
of change of the sum variable capital + surplus value.
91
* The annual changes of the Net Value Added (ΔΥ), that is the additional
annual Net Output in comparison with the previous year, e.g., ΔΥ1988
= Y1988 —Y1987.
* The annual Net Fixed Capital Formation (I), which is the Gross Fixed
Capital Formation minus the Consumption of Fixed Capital.
* The so-called "Productivity of Capital" or "Capital Efficiency," that is
the Output/Capital Ratio (Y/K) (Net Product/Fixed Capital Stock). It
shows the net value produced by means of a unit of fixed capital. It also
represents the reverse relation of index (K/Y), the historical change of
which illustrates the ability of capitalists to economize on constant
capital. A decreasing "Capital Efficiency" (increasing index K/Y) means
decreasing economy in the use of constant capital.
* The so-called Marginal "Productivity of Capital," which is the Marginal
Output/Capital ratio (ΔΥ/Ι), that is, the increase of the Net Product per
unit of new Fixed Capital Investment. This index reveals the historical
trend of the ability of new investment to ensure economies in the use of
constant capital.
* The Investment Rate (I/Y).
* The Revenue of Labor or Labor Income (L) (wages and salaries plus
compensation for those who are self-employed and contributions for
social insurance paid by employers) and the average Revenue of Labor
(L/N), that is, the Revenue of Labor over employment.
* The share of Net Value Added going to labor (L/Y). The changes of
(L/Y) in real terms over a time period reveal the historical trend of the
rate of exploitation.
* The Rate of Profit or Rate of Return (R)
which is equivalent to
* The Marginal Rate of Profit (AR) on Fixed Capital
which is equivalent to
that is the change of Profit (ΔΥ-AL) per unit of new Fixed Capital
Investment (I), or the product of the Marginal Profit Quotient (1 ΔL/ΔΥ) and the Marginal Output/Capital ratio (ΔΥ/Ι). This index
illustrates the trend regarding the profitability of new investment.
92
* The Capital Intensity (K/N), which relates the total capital atock K with
the applied labor force N and represents, therefore, an index of the
technical composition of capital.
* The apparent productivity of labor (Y/N), that is, the Net Value Added
over the total employment.
The above indices were calculated both for the Greek economy as a whole,
and for the manufacturing sector. The data was provided by the National
Accounts of Greece. The calculation of the above indices is based on 1980
constant market prices, as well as current prices. The results of the
calculations are presented here for the Greek manufacturing sector in the
form of graphs, but they are also available in the form of tables on IBMcompatible computer diskettes (for Greek manufacturing as well as for the
total economy). 1 We continue by presenting only the graphs of the indices
calculated for the manufacturing sector, for two reasons:
a) The indices calculated for the total economy show exactly the same
trends as the manufacturing indices. Their presentation would not,
therefore, be of any benefit to the paper.
b) Data concerning the manufacturing sector is considered to be more
accurate than data referring to the total economy.
At this point we will comment on the empirical results presented in the
graphs, focusing our attention on the parameters of the economic crisis:
a) As Figure 2 shows, the rate of change of the apparent productivity of
labor (Y/N) lags behind: (i) the growth rate of capital intensity (K/N)
since 1979, and (ii) the rate of change of the average real wage (L/N)
during the period 1973-1985. As a consequence of these developments,
the Output/Capital Ratio (Y/K) in volume falls since 1979 (Figure 4),
while the Labor Share (L/Y) rises in the time period 1973-85 (Figure 3).
It is worth noticing at this point, that an index such as (Y/K) or (R)
calculated in volume, illustrates the changes in the conditions of
accumulation in a better way than the same index calculated in value.
Calculations in value also take into consideration the changes of relative
prices (of consumption products and of capital goods as to the prices of
the net product) induced by market conditions and fluctuations.
It is clear, then, that the decline in the Profit Rate (R) of Greek
manufacturing since 1973 (Figures 6 & 7), can be attributed to the
combined effect of a squeeze on the share of output going to profits
([Y-L]/Y, or 1 - [L/Y]) and an increase in the Capital/Output Ratio
(K/Y). However, in the most recent period since 1985-86, there has been
a deterioration of real wages (Figures 2 & 3). The latter did not lead to
an increase in the Profit Rate (R) (Figures 6 & 7), because of the
continuing fall in the Output/Capital Ratio (Y/K).
93
Nevertheless, the de the net product (increasing profit share) in combination
with the lower decreasing rates of (Y/K) since 1984 resulted in a
stabilization of the Profit Rate calculated in volume, since the same year
(Figure 6). The same parameters significantly boosted the Marginal
Profit Rate (AR), that is the profitability of additional investment, since
1985 (Figure 8). b) The trend of the Rate of Accumulation (I/K), as well
as that of the Net Fixed Capital Formation (I) in Greek manufacturing has
clearly changed from down to up in 1986 (Figure 9). This reversal has
contributed to a stabilization or only a modest increase of the Marginal
Output/Capital Ratio (ΔY/I) (Figure 5).
It is evident from our calculations that the same factors affecting the
profitability in the Greek manufacturing sector also drive the Profit Rate (R)
of the whole Greek economy to low levels. All the phenomena discussed
above in relation to the manufacturing sector can be detected on the level of
the whole Greek economy as well.
These empirical results support the hypothesis of this paper, namely that
the present crisis of Greek capitalism has the character of a capital overaccumulation. To be specific, the rapid fall in the profit rate is mainly the
result of two parameters:
a) The fixed capital stock (K) is increasing in higher rates than the product
00 gained by means of this capital stock. This development has clearly
made itself apparent since 1979 (Figure 4), meaning that Greek
capitalists have failed to economize on constant capital since that time.
In the economical and political conjuncture of the late 1970s and '80s,
the decreasing "capital efficiency" (i.e., the increasing factor K/Y) seems
to constitute the permanent major factor which pushes the profit rate
downwards.
b) The share of wages in the national income cannot be suppressed below
a certain level. This means that the restrictive austerity government
policies face very strong opposition from the working class, which is
more or less succeeding in protecting its standard of living. Furthermore,
Greek workers managed to increase their wages in the seventies and
early eighties, pushing the wage ratio (L/Y) upwards.
As can be seen in Figures 2 & 3, the first phase of increase in real wages
and of the factor L/Y took place in the period 1974-78. This development
was connected with the overthrow of the military dictatorship (1967-74),
which had suppressed the labor movement and decreased the labor share
(L/Y). The restoration of parliamentary democracy is thus related to a
decrease in the exploitation rate of the labor force in Greece (i.e., an
increase in the labor share). This development coincided with stagnant
"capital efficiency" (Y/K), in the period 1974-79. During this period, Greek
capitalists did not succeed in economizing on constant capital any longer, as
94
can be concluded from Figures (4) and (6). The result wan a decreams in the
profit rate of Greek manufacturing (Figure 6).
The role of the banking system was also decisive during this time period.
Following the guidelines of the government's economic policy, it aided
Greek capitalism in facing only a mild crisis until 1979. During the late
1970s the Greek credit system functioned in a way which permitted the
continuation of production of non-profitable plants. This was done by
adopting an inflationary monetary policy. The section of means of production
that in a classic crisis would have to be destroyed continued to operate as
capital, using credit with negative real interest rates. This economic policy
also played an important role in the early 1980s, when the capital efficiency
Y/K of the economy started to fall, thus pushing the profit rate downwards
with higher rates (Figure 6).
The Greek working classes strongly opposed the restrictive austerity policy
adopted by the conservative government from 1979-80, as the crisis of the
economy was becoming apparent. In the 1981 general elections, the
overwhelming majority of the wage earning class voted for the Left (48 % for
the Socialist Party, PASOK, and 13% for the communists), which promised
to follow a policy of "re-distribution of wealth" to the benefit of the working
people. As can be concluded from Figure 3, the share of labor (L/Y) rises
again with high rates in the period 1981-85. The combination of a rapidly
increasing K/Y with the likewise increasing labor share (i.e., decreasing
profit share in the net product) results now in a rapidly decreasing profit rate
and an economic crisis that corresponds to the Marxian concept of capital
over-accumulation.
The duration and sharpening of the economic crisis led to a crisis in the
PASOK government's economic policy. A temporary aggravation of the
country's balance of payments in 1985 gave government officials reason to
accept that "healthy" conditions of capitalist production could be restored
only when new investment raised surplus-value with a higher rate than it
increased the capital stock. In order to obtain such a result, either the level
of exploitation (Y/L) or the efficiency of capital (Y/K) had to increase, or
both.
The capitalist way out of the crisis presupposes, therefore, a social and
economic restructuring of class power relations. To some extent, but not
exclusively, that depends on the ability of capital to reorganize the
production unit — the capitalist factory and enterprise. In other words, it
presupposes the devalorization of all inadequately valorized capital, and thus
tremendous economizing in the use of constant capital of the capitalist society
as a whole. This means a restructuring of the whole production system, so
that social-capital once more attains a high level of profitability. In any case,
and from the capitalist point of view, the obstructions in restructuring the
production process, and the decrease of real wages imposed on capital by the
strength of the working class, had to be removed.
95
On abandoning its left Keynesian policy, the socialist government
functioned UN tui "executive" of the laws of capital accumulation, taking the
lead in a new massive offensive of the bourgeoisie against the working class.
For the first time since the fail of the military dictatorship (1974), the
economic policies of all major Greek political parties have converged to a
commonly accepted political line and ideological language: "restructuring of
the production apparatus; development of the entrepreneurial sense of the
economy's social partners, improvement of the country's position in the
world market and benefit from the challenge of the European Single Market"
are some of the common "passwords" that unite all Greek political parties,
including the traditional communist Left.
In the 1986-91 period, and especially after the formation of a new
government of the Right in April 1990, the process of devalorization of
non-profitable capital developed faster than ever and was reinforced by the
devalorization of labor-force, resulting from the government's austere
economic policy. However, the crisis of the Greek economy has not been
overcome. As can be concluded from Figures 6 & 7, the profit rate remains
low as a result of the still decreasing "capital efficiency" (Y/K). The
decreasing labor share (which indicates an increasing rate of exploitation)
cannot restore the high levels of profitability on its own unless it is
"reinforced" by an "economy in the use of constant capital" (see also relation
(3) in Section 1 of this paper). Besides, the labor movement and
consequently the labor share itself cannot be suppressed as much as the
ruling class would like. Although the nominal wage increases during the year
of conservative government (April 1990- April 1991) were lower than the
average inflation rate of that period (decreasing wages in real terms), they
were significantly higher than the nominal wage increases initially "planned"
by the government's economic policy. It is also worth noticing in this
context, that the labor share in the net product (L/Y), decreased in the period
1985-87, only to increase again in the following period 1988-89 (Figure 3).
Closing our analysis of the factors which apparently determine the Greek
economic crisis, we can advance our main conclusion: the profit rate
decreased with high rates in the period 1980-85 under the combined
influences of a falling profit share ([1-L/Y]) and an increasing "capital/output
ratio" (K/Y). In the period 1985-89, the profit rate calculated in volume
remained stagnant at low levels, while the same index calculated in value
continued to decrease. In both cases this was due to the continuing decrease
in "capital efficiency" (Y/K), (i.e., the increasing "capital/output ratio"
K/Y). Therefore, the way out of the crisis seems to depend above all on a
restructuring of the production system which will push the value of (K/Y)
downwards, that is, it will significantly economize on constant capital.
However, Greek capitalism has not yet succeeded in this aim.
96
The result stated above definitively indicates that the crisis has the
character of capital over-accumulation, in the Marxian sense of the term, as
described in Section I of this paper.
III. THE HISTORICAL PHASES OF GREEK
CAPITALISM SINCE I960
After discussing the empirical evidence concerning the crisis of the Greek
economy since the end of the 1970s, we will now attempt to reconstruct the
parameters that influenced economic development in Greece during the whole
period studied, by means of the indices-method. We can distinguish four
periods of capital accumulation in Greece since 1960, defined by the turning
points in the evolution of both the main statistical indices studied and the
country's economic and political conjuncture:
1960-73: The Golden Era of Greek Capitalism.
By the early '60s Greek capitalism had entered a long phase of economic
boom and structural changes defined by the two turning points that we have
identified using the indices of capital accumulation: 1962 and 1973. During
this period, Greek manufacturing developed its ability to mass-produce
consumer products as well as means of production. This wide variety of
industries was essentially based on the home market. They expanded and
flourished, keeping pace with the development of a mass-consumption
economy on the one hand and the establishment and rise of a market of
means of production on the other.
Since the early 1950s, Greek capitalism had achieved a high level of
exploitation of the labor force by means of a combination of the most
"traditional" and "modern" production methods. To be more precise, the
production process was based on production of relative surplus-value, as well
as production of absolute surplus-value. According to our analysis, this was
the real "comparative advantage" of Greek capitalism with respect to other,
more developed capitalist countries. The development of relative
surplus-value production did not break up the traditional forms of
exploitation, at least until 1974, leaving enough space for the predomination
of the absolute surplus-value production, in some sectors.
As can be seen in Figures 3, 4, 6 & 7, the period 1960-73 is characterized
by the combination of an increasing "capital efficiency" (Y/K) and a
decreasing labor share (L/Y). The effect of these two parameters is an
increasing profit rate.
This development can be understood in relation to the status of the labor
market and the class struggle in post-war Greece. The civil war (1944 &
1946-49) resulted in the military and political defeat of the Left and the
formation of a quasi-totalitarian political regime of persecution and terror,
not only against Left activists, but also the labor movement. Trade unionism
..........................
97
waa typically “free”, but in reality it was suppressed with all means by the
state. A process of political democratization, connected with an impressive
political and trade unionist mobilization of the working people, was initiated
in the early 1960s. It was violently curtailed, though, by a military coup d'
etat in April 1967. The military dictatorship then devoted itself mainly to the
suppression of the Left and the labor movement.
1974-79: The First Period of the Crisis
The period 1974-1979 can be regarded as the preliminary phase of the crisis,
with high inflation rates, dramatically decreasing rates of investment (I,
Figure 9) and a rapid fall in the marginal profit rate AR (declining
profitability of new investment). However, one could argue that the dynamic
gained by Greek capitalism during its golden era, which started in the early
1960s, was conserved until the end of the 1970s. The economy maintained
sufficient strength, exports increased faster than ever and increasing real
wages boosted domestic demand. As already mentioned, the Output/Capital
Ratio (Y/K) in volume, was stabilized after a fall in 1974 related to the first
oil shock of the period, because of the high capacity utilization rate. This
development slowed down the decrease in the profit rate, mainly caused
during this period by the substantial increase of the labor share and the
squeeze on the profit share in the net product. Figure 11 presents private
consumption in constant prices, for the period of interest 1960-88. One
notices the increasing private consumption, along with the increasing labor
share in the net product, during this preliminary phase of the crisis.
What has happened since 1974 is that radical change in the political and
social relation of forces has benefitted the working class. This process
became known as a "modernizing" of Greek capitalism on the political, as
well as the economic level. The political organization of the working class,
the emergence of trade unionism and the social agitation of the period
1974-78, forced capitalism to accept several changes in favor of the working
class. This meant a "modernizing" of exploitation, or to be more precise, a
retreat from absolute surplus-value production methods. These changes
practically coincided with the two oil shocks of 1973 and 1979, which made
the developing crisis apparent. The international economic conjuncture and
the ascension, since the 1960s, of Greek capitalism in international markets
allowed the Greek bourgeoisie to cope with the new situation. The most
important outcome is Greece's joining the EEC in 1981.
1980-85: The Aggravation of the Crisis
As we mentioned in the previous section of the paper, the period 1980-85
was the phase of acute capitalist crisis per se. The worldwide recession
during the period 1980-82, which lead to shrinking external demand, caused
a slowing down of exports. The economy stagnated in spite of strong internal
demand since the latter, boosted by increasing real wages, contributed mostly
98
to price increases instead of investment. The unemployment rate increased by
more than 6% in the four-year period 1979-83 (Figure 1). Low capacity
utilization rates significantly contributed to decreasing Output/Capital Ratio
(Y/K) and to a fall in the Profit Rate. As can be concluded from Figure 10,
the Output/Capital Ratio, (i.e., Y/K), falls faster than ratio Y/K', where K'
is the "employed fixed capital stock," (i.e., the fixed capital stock K
multiplied by the rate of capacity utilization). The fall in ratio Y/K' means
that during the period examined, the idle productive capacity constituted one
factor determining the fall in ratio Y/K, but not the only factor.
The first election victory by PASOK in 1981 was followed by substantial
real wage increases, even by means of administrative resolutions — a
development of the welfare state (social security payments, pensions and
health expenditures, which had been introduced in Greece on a rather modest
scale until then). Significant changes in labor legislation also followed,
favoring the working class. By 1985, real wages in manufacturing were 70%
above those in 1974 and 15% above those in 1981. At the same time,
austerity triumphed in other European countries.
To compensate for these changes favoring the working class, the Socialist
Party tried to obtain a consensus on working practices, industrial discipline,
productivity increases and intensification of labor during that period. Social
change was presented as a way out of the crisis in the ideology of the
Socialist Party and of the Greek Left as a whole. In other words, a means
of accelerating "economic development." Put differently, the economic
policy for the years 1981-85 was an application of left-Keynesian economics:
demand boosted by real wage increases was supposed to become the
"locomotive" of the economy, reducing unemployment, stimulating
investment and productivity, and bringing "social peace" to the workplace.
Shutting down "non-economic" plants was postponed by means of credit and
state intervention; money supply was not tight and real interest rates were
negative.
The government was thus expecting the economy to respond to its high
public expenditure policy with faster growth and investment. More
specifically, Greek manufacturing was exposed more than ever to
international competition and faced both a dramatic rise in wages and the
development of the home market for consumer products. Yet it was
expected, by government officials, to respond by investing in new, more
efficient technology, keeping capacity utilization rates high, introducing new
organizational principles and working practices, thus boosting productivity.
By 1985 it became evident that this policy was not a success. Neither the
working class nor the bourgeoisie responded positively. The consensus was
not achieved and workers refused to adopt an "enterprise culture," meaning
the adoption of the very logic of capital valorization. The worker continued
to regard "the social character of his work, its combination with the work of
others for a common goal, as a power that is alien to him" (Marx 1981:
99
178), Employers, on the other hand, reduced net investment. During the period
1981-85 the economy stagnated, inflation was high and the profit rate continued
its fall as a result of the squeeze on the profit share on the one hand, and of the
falling "productivity of capital" (increasing Capital/Output Ratio) on the other.
What the Greek experience proves once more is that a government of the
Left is "condemned" to administer capitalist interests, and sooner or later to
confront the working class, since political and economic power remains in
the hands of capital. Moreover, in periods of economic crisis, the
bourgeoisie cannot "afford" any form of social-democratic economic policy,
and it makes use of all available means in order to overthrow it.
1986-91: Some Recovery of Profits
In October 1985, a few months after the second electoral victory of the
Socialist Party, when it was clear that the capitalist way-out of the crisis was
not provided by Keynesian economic policy, the socialist government finally
proclaimed a restrictive economic policy of austerity. The new economic and
political conjuncture gave rise to a massive workers' movement. This
resulted in the highest number of strikes and "lost working hours" (per year)
in Greece since the 1960s, in the subsequent period 1986-88. Massive
retirements from the Socialist Party of union officials and, members
deepened its rift with the workers' movement. The employers' organizations
acknowledged, for the first time since 1981, that the government's economic
policy was "realistic." By 1987, the Labor Share calculated in volume fell
back to the levels of 1979 (Figure 3).
The victory of the conservative party Nea Dimocratia in the 1990 general
elections gave a new force to the monetarist economic policy which Greek
governments followed during this last period. It not only restricted demand
by cutting up wages, public services and public investment, but it also
accelerated the shutting down of nonprofitable plants; the so-called
"enterprises facing problems." It became clear that the preferable capitalist
way of economizing on constant capital is recession, which allows the
collective capitalist to "get rid of" the economically "ineffective," who
burden the profit rate (the "ineffective" individual capitals and the
"ineffective" individuals being the aged, young, women, lower-unskilled
strata of the working class, etc.).
The new conjuncture since October 1985 has not lead to a way out of the
crisis, since it did not mark a reversal in the falling trend of "capital
efficiency" (Y/K). It marked a new phase of the crisis of Greek capitalism,
though, which is characterized by:
(i) The decrease of the Share of Labor (L/Y) in the Net Output, (ii) The
gradual modification of the relations of power in the factory in favor of
capital (stabilization of the labor discipline, acceleration of the
100
filial loakimoglnu
Mm Mill"-.
restructuring process of Greek industry — a process that pushes the
unemployment rate upwards etc.)*
(iii) The changes described above contributed to a significant increase in
the Marginal Rate of Profit (AR). The increase (since 1985, Figure 8)
of the Marginal Rate of Profit (AR) reflects a rise in the profitability
of new investment. Indeed, the Net Fixed Capital Formation (I) has
started to increase since 1986 (for the first time after 1979, Figure 9),
while the net imports of entrepreneurial capital in the Greek economy,
which were dramatically decreasing since 1980, attained an annual
increase rate of 30.2% in 1987, 52.3% in 1988, 6.7% in 1989 and
41 % in 1990, thus reaching the 1979 level in 1988 (calculated in U.S.
dollars and at constant 1980 prices).
(iv) The marginal output/capital ratio (AY/I) in Greek manufacturing has
shown a trend of stabilization since 1985, contrary to the
corresponding average output/capital ratio (Y/K) (see Figure 5). It is
clear then, that if the marginal ratio attains an increasing tendency for
some time and continues to attain higher values than Y/K, this may
result in an increasing trend also of the average output/capital ratio
(Y/K). This is, as argued above, the main factor affecting the profit
rate. However, this development has not yet been apparent.
In the social and economic conjuncture determined by the above described
parameters, the Greek labor movement has become the major — if not the
only — force of opposition in the strategy of the leading capitalist forces and
the government's economic policy which arises from it. The political parties
of the Left can hardly follow the spontaneous initiatives of the working
people (strikes, demonstrations, but also alternative economic policy
propositions stated by trade-union leaders). On the one hand, the Socialist
Party (PASOK) gives some "rear-guard fights" by criticizing the "unsocial"
character of the government's monetarism. On the other hand, the
communist Left, having supported a "mandatory government" of the Right
in the Summer of 1989 {which was supposed to investigate the "economic
scandals" of the previous PASOK government and which practically opened
up the way for the electoral victory of the Right in April 1990), was split up
into two groups in 1991 and is rapidly loosing its political influence on the
working class, which benefits the Socialist Party.
A CONCLUDING REMARK
In our opinion, the Greek capitalism crisis has the character of capital overaccumulation. This hypothesis is supported by our theoretical
presentation of the Marxian capital over-accumulation concept as well as the
empirical analysis of the economic crisis in Greece. The two factors which
determine the character of capital over-accumulation are the decreasing
ability of the capitalist class to economize on constant capital and the
101
decreasing exploitation rate of the labor force from 1975 until 1985. The
second factor has been reversed since 1986 by means of a restrictive
economic policy. However, the increasing exploitation rate since then cannot
compensate for the effect of the decreasing economy in the use of constant
capital (regarding the profit rate) which is proved to constitute the main
parameter determining economic crisis. Furthermore, our analysis has shown
that this decreasing economy in constant capital usage is not the result of any
"technical inadequacies" of the "production system," as the bourgeoisie
economists claim. It is the outcome of the social relation of forces
established in the class-struggle.
NOTES
1. An analytical description of the indices used can also be found in: a) Schoeller Wolfgang,
Weltmarkt und Reproduktion des Kapitals, EVA, Frankfurt/M 1976, pp. 102-107. b) Busch Klaus,
Die Krise der Europaeischen Gemeinschaft, EVA, Frankfurt/M. 1978, pp. 87-214. c) Milios Jean,
Kapitalistische Entwicklung, Nationalstaat und Imperialismus. Der Fall Griechenland, Kritiki
Verlag, Athens 1988, pp. 221-243. d) Barou & Keizer Les grandes economies, Seuil, Paris 1984.
In our calculations of the Labor Share, only the primary distribution of the Value Added is taken into
consideration. The secondary distribution (through taxes, benefits from state education, health etc.)
does not reflect strictly accumulation conditions, but is highly affected by the general relations of
power at the state level, as well as by historical conditions and forms, inherent in each particular
social formation. In order to describe, therefore, the influence upon profitability of changes in the
production process, we preferred to use the profit rate corresponding to primary distribution (that is,
wages and salaries plus compensation of self-employed persons and social insurance paid by
employers).
REFERENCES
Altvater, E., J. Hoffmann, W. Schoeller and W. Semmler. 1974. Entwicklungsphasen und
-tendenzen des Kapitalismus in Westdeutschland. Part A in PROKLA No 13, Berlin, Part B
in PROKLA No 16, Berlin,
Altvater, E., J. Hoffmann and W. Semmler. 1976. Zum Problem der Profitratenberechnung.
in PROKLA No 24, Berlin.
Barou, Y. and B. Keizer. 1984. Les grandes economies. Seuil, Paris.
Billaudot, B. and A. Gauron. 1985. Croissance el crise. La Decouverte, Paris.
Busch, Kl. 1978. Die Krise der Europaeischen Gemeinschaft, EVA Frankfurt, M.
Diefenbach, Ch. G. Groezinger, D. Ibsen, F. Wartenpfuhl and U. Wengenroth. 1976. Wie
real ist die Realanalyse? in PROKLA No 24, Berlin.
Dumenil, Gerard. 1978. Le concept de loi economique dans le Capital, Maspero, Paris.
Epilogi (Monthly Economical Review in Greek language). The Greek Economy in Figures-1990.
1991. (Statistical guide in Greek and English), Electra Press, Athens,.
loakimoglou, E. 1989. Profitability Crisis in Greek Manufacturing, (in Greek). Proc. of the
Second Congress on Greek Industry, organized by the Technical Chamber of Greece, May.
loakimoglou, E. and J. Milios 1986. Crisis and Austerity, (in Greek), Review Thesis. No. 14,
January-March 1986, pp. 7-24, Athens.
loakimoglou, E. and J. Milios. 1988. Automation of Production and Labour Force
Reproduction. Proceedings of Samos Conference on Changing Labour Processes and New
Forms of Urbanization, Thessaloniki.
102
Loiseau, B., J. Mazier and MB Winter. 1977. Rentabilite du capital dans les economies
dominantes. Economic et statistiques No 86.
Marx, Karl. 1981. Capital, Volume 3, Penguin books in association with New Left Review,
London.
Milios, J. 1988. Kapitalistische Entwicklung, Nationalstaat und Imperialismus. Der Fall
Griechenland. Athens: Kritiki Verlag.
Milios, J. 1989. The Problem of Capitalist Development: Theoretical Considerations in View
of the Industrial Countries and the New Industrial Countries. In, Gottdiener, Komninos
(Editors): Capitalist Development and Crisis Theory. Accumulation, Regulation and Spatial
Restructuring, pp 154-173, London-New York: Macmillan Press.
Milios, J. and E. loakimoglou. 1990. Internationalization of Greek capitalism and the balance
of payments, (in Greek). Exandas, Athens.
Schoeller, W. 1976. Weltmarkt und Reproduktion des Kapitals, EVA, Frankfurt, M. p.
102-107.
APPENDIX
Capital
«nil Over-accumulation CrUi·: ...
103
104
Blto loakimoglou «n<i John Milioi
and Over accumulation Criiir. . . .
103
106
rim-, loakimoglnti »n<i i-.i... Milioi
( ,.,.,(,i A. . ..i....i.iii'-ii HIM! < » v « - i in i iniiiilaiM.il Criib: ,,.
107