Home > political-economy > Capital, the Negative Rate of Profit, and the Politics of Austerity

Capital, the Negative Rate of Profit, and the Politics of Austerity

If the State is now essential to realization of surplus labor, does politics tend to fluctuate around policies most conducive to this? And, if so, what would this look like? Since, we assume no one directly knows what is required for realization, what form does this take?

How would we know what policies are most conducive to the realization of surplus that has been extracted from the working class?

Since the extraction of surplus and realization are separated in both time and place, the possibility exists for the two to come into conflict. It is entirely possible for the conditions required for the extraction of surplus to be utterly at odds with those of its realization. This conflict, however, has to be resolved in a way that makes the normal operation of Capital possible. In this sense, the conditions required for extraction must negate those required for realization. And, the conditions under which this surplus is realized must entirely negate those required for its production.

In a closed system capitals have to be constantly producing surplus value; but, just as important, they must realize none of this surplus value. And, they must do this while, at the same time, they sell their goods at their production cost plus an average rate of profit. Finally, all of this must happen in a way that does not appear to violate common sense. For society as a whole it should appear entirely logical for the extracted surplus to be destroyed in its entirety — at a profit. Moreover, since profit is realized, Capital continues to accumulate, conserving both over-accumulation of capital and a surplus population.

The question then arises: if surplus is being entirely destroyed, what is the source of the profit realized by the capitalist?

Since the surplus has been destroyed, the profits must be fictitious. And. not merely fictitious, they have to devalue the existing capital. The secret to this entire process is Keynesian “ex nihilo pecuniam” — money created from nothing. This “money” fills the requirement of capital — the money laid out for production must be recovered plus an average rate of profit; and, it fills the requirement of realization that the surplus produced by the capital must be destroyed. i.e., consumed unproductively. The result is that the value of the sum of capital shrinks even as it grows in mass — i.e., the formation of a negative rate of profit.

(A negative rate of profit cannot be detected directly, since the entire point is to devalue capital even as it carries on normally. The entire point of debasing the dollar from gold was to accomplish what I just described — allow a negative rate of profit.)

Conclusion: The point around which politics revolves must be a negative rate of profit.

If I lost you somewhere along here: this negative rate of profit implies the constant expansion of the State. The State must constantly expand or the motive of Capital (profit) is extinguished, and production comes to an immediate halt. On the other hand, the expansion of the State is merely a measure of Capital’s actual self-abolition. Capital cannot go beyond itself, i.e., cannot go beyond its limited historical task. It does, however, abolish itself within these limits.

Both the struggle against austerity and the struggle against public debt must resolve into expansionary spending without deficits. What is now hidden — that Washington does not use your taxes to fund it expenditures, and that, therefore, there is no debt crisis — must become explicit. Washington will be forced to admit it creates money to fund it expenditures out of nothing. But, this admission can only be won by preventing DC from raising the debt ceiling. When this is done, it will be clear that there was nothing preventing Washington from ending unemployment immediately at any point. No reason to close schools, no reason to cut social security, no reason to avoid single payer health care, etc.; except to protect the profits of the banks and their monopoly on the creation of fictitious money.

That this outcome is even a remote probability is evidenced by PIMCO’s exit from US treasuries. The problem however, is that while Washington cannot pursue austerity, expansion of its spending will only accelerate devaluation of capital. The US will not only be unable to impose austerity domestically, it will have to create enough new money to saturate the world market. Washington must offset all the austerity of the states, plus all the reduction of all other countries in toto.

  1. Marty Gibeault
    March 16, 2011 at 11:26 am

    What will it look like?
    It will look like the plumbing work of The Three Stooges. Nuck, nuck, nuck. But there will be a sly and insincere quality to their work, and say what one will of the Stooges one could never accuse them of slyness or insincerity. And it will be painful. It will make the eye poking, hair pulling, head hammering of the Stooges seem like kisses from a broad.
    Oh, and one more thing: wait till they are forced to light the stove.

    Pubishable piece here Charley.

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