Home > Occupy the Marxist Academy, political-economy > Robert Kurz: The Road to Devaluation Shock and the Collapse of Capitalism (4)

Robert Kurz: The Road to Devaluation Shock and the Collapse of Capitalism (4)


4. The Necessary Parasitism of Fascist State

In a recent interview, Saint Paul Krugman gave us this gem of bourgeois economic theory:

SPIEGEL: More stimulus also means more debt. Many European nations, as well as the US, are already drowning in debt.

Krugman: I’m not saying that I don’t ever care about debt, but not now. If you slash spending, you just depress the economy further. And, given the low interest rates and what we now know about long-run effects of high unemployment, you almost certainly actually even make your fiscal position worse. Give me a strong-enough economic recovery that the Fed is starting to want to raise interest rates to head off inflation — then I become a deficit hawk.

Saint Paul tells us in a depression such as the one we are now experiencing it is impossible to pursue the sort of austerity currently being visited upon the EU without rushing headlong into calamity. Better, he says, we should expand the debt of the already bloated public sector still further and worry about the consequences later. It never occurred to the interviewer from Spiegel to ask Saint Paul why the growth of capitalist economies is now chained to the debt of the public sector.

Robert Kurz had a few ideas on that subject.

In the first three parts of his essay, Kurz showed how and why productive capital falls under the domination of interest yielding capital as a result of the ever increasing quantity of capital necessary to set a given amount of living labor into motion. This increasing reliance of productive capital on interest yielding capital is accompanied by ever increasing future claims to profits that, if these claims are to be realized, requires continuous expansion of the mode of production. On the other hand, satisfying the requirement for continuous expansion of the mode of production runs into the material barrier posed by the fact that this expanded economic activity is only productive if it results not simply in the production of values, but values that can themselves be consumed within the production process on a still expanded scale of capitalist reproduction.

As we saw in Part 3 of his essay, Kurz proposed that the emergence of the unproductive sector, which consist of the unproductive consumption of surplus value, has implications for productive capital. At a certain point in its development, Kurz argued, capitalism must begin to produce a sector of “third persons” whose labor is not productive, i.e. whose consumption is not replaced in the circulation of capital. The emergence of this sector embodies a growing mass of existing value that is being consumed outside the circulation of capital without being replaced by a mass of living labor that is capable of replacing the value of its own consumption, and producing, in addition, a mass of new surplus value. This capital is wasted, used up, consumed without being replaced by new value and the creation of new surplus value.

In Part 4, Kurz adds to the above that for interest yielding capital, the emergence of this unproductive sector embodies a mass of claims to future profits that cannot possibly be realized, because this unproductive sector, unlike productive capital, produces no surplus value, and does not even replace the value it consumes outside the circulation of capital as a whole. But, from the standpoint of productive capital, it only gets worse. Says Kurz, the reliance of productive capital on unproductive labor and the increasing reliance of the mode of production as a whole on interest yielding capital produces the perverse result that a portion of productive capital actually becomes structurally incapable of producing surplus value:

“To the same extent that the share of unproductive sectors as a part of reproduction as a whole increases, another growing portion of industrial production itself becomes structurally unproductive. This simple fact is the result—as we shall demonstrate—of an analysis in terms of the theory of circulation. The mass of unproductive workers—which is inexorably growing and which is paid only with credit money, always refreshed with new credit—must naturally eat, drink, and be housed, as well as drive cars, consume televisions, refrigerators, etc. Since this production, however, is not productive [in the capitalist sense] and therefore does not return to surplus value production, this only means that, indirectly, a growing portion of industrial production paradoxically depends upon unproductive sectors financed by credit.”

An ever growing portion of the surplus value produced by productive capitals is consumed in unproductive activity and replaced in the circulation of the total capital, not by living labor, but by fictitious claims to the future profits of the productive capital itself! Productive capitals, which in the first instance mortgage their future profits to interest yielding capital to finance ever growing capital requirements, now sells an increasing share of its commodities into a market financed entirely by fictional claims to its own future profits. Productive capital becomes only apparently the production of surplus value, since it increasingly comes to rely on profits it generates from sectors that themselves merely feed parasitically on the surplus value it alone produces.

In this colony of parasites that attach themselves to productive capital, and that grows out of productive capital’s own requirements, none can match the prodigious parasitism of the fascist state, which alone can meet productive capitals’ requirements for unproductive consumption, and which because of this facility, becomes the most important source of fictitious profits.

“If State consumption and State credit, crushed together as if by an avalanche, play a central role in this development, this is also due, of course, to the fact that the State (unlike a private entity which avails itself of credit) is considered to be a “secure debtor”: which means, however, that the State, in the event of a great monetary and credit crisis, will not declare bankruptcy, but will simply expropriate its citizen-creditors.”

To this pressure on the state that increases with the increase in unproductive labor, in Part 5 of his essay Kurz examines the role the state plays in the competition between national capitals within the world market. Once again the State is called upon to intervene to protect its domestic industries from the encroachment of competition within the world market, both as a response to domestic economic interests, but also because these industries have critical significance for its own domestic, military and diplomatic power. To forestall the collapse of the cohesion of the national economy, which is the precondition of its own existence, Kurz argues,

Ultimately, the State must have recourse to subsidizing its industries, whether to preserve them in the domestic market, even in the case of a reduction in customs tariffs, or to make them artificially competitive in export markets (export subsidies).

With the cohesion of the national economy itself threatened by the development of the world market, the state, says Kurz,

State credit must therefore once again be expanded towards infinity, and State subsidies and expenditures together surpass all previously known records. For many countries, this factor already constitutes the most important part of all credit transactions. The alternative would be the complete collapse of these national economies; capitalist reproduction would then become extremely limited, restricted to a few “islands of productivity” for the world market, a market which, should such a state of affairs become generalized, would cease to exist.

The point Kurz makes here cannot be emphasized enough, since he is now pointing beyond money itself as the objective material expression of value producing labor to the nexus of money, as this objective material expression whose relation to value producing labor has now been stretched beyond its extreme limits, and the fascist state, which with its power to determine what serves as money within its territory, displaces this objective material expression of value producing labor with its own fictions.

Although this at first appears only within each country, at this point it has already become clear that money, having died on a “Cross of Gold”, is again resurrected in its divine incarnation as a value-less token that, having shed its earthly form as the mere earthly expression of value producing labor, is elevated by the church of Mammon as a deity that, in some sort of divine comic inversion, now appears to political-economy (and some imbeciles within the Marxist academy) as capable of producing socially necessary labor instead of being produced by it!

Thus we can read this fascinating piece of rubbish written in 2009 by the bourgeois economists Miguel Almunia, Agustín Bénétrix†, and Barry Eichengreen at the depths of the financial crisis:

Our results … suggest that fiscal policy made little difference during the 1930s because it was not deployed on the requisite scale, not because it was ineffective. They suggest a positive impact of government expenditure on GDP during the interwar period, with substantial fiscal multipliers: for example, the first set of VAR exercises suggested that these were 2.5 on impact and 1.2 after one year. Where significant fiscal stimulus was provided, output and employment responded accordingly. Individual country experience with large fiscal stimulus was rare in this period, but where it occurred the evidence points in the same direction. One of the biggest fiscal stimuli in this sample occurred in Mussolini’s Italy during 1936-7, as a result of the war in Ethiopia. Italy ran a deficit in excess of 10 per cent of GDP in 1936 and 1937. Italian GDP grew by 6.8 per cent in 1937, by a marginal amount in 1938, and by 7.3% in 1939. According to Toniolo (1976), the Italian economy moved to full employment during this period. In France, the budget deficit increased substantially beginning in 1935, and GDP grew by 5.8 per cent in 1936. The deficit exploded in 1939, during which year the economy grew by no less than 7.2 per cent. These examples remind us, of course, that the real Keynesian stimulus, when it came, would be associated with military expenditure during World War II, producing very rapid growth in countries like the United States. In our view, peacetime stimulus packages, which could have halted the rise in unemployment that ultimately led to the election of Adolf Hitler (according to King et al. 2008), would have been preferable to the stimulus of war.

We have also provided some evidence that monetary policy was effective in the 1930s. In the IV regressions without time dummies, in the panel regressions in Table 2, and in the VARs in differences, we found that central bank discount policy was effective in boosting GDP.61 These results are less robust than those for fiscal policy, but again we think that the implications are clear. To the extent that the world economy is again experiencing a significant demand shortfall and is at risk of deflation, both monetary and fiscal stimuli are appropriate. In current conditions there is good reason to expect them to be effective.

Note here, despite arguments to the contrary by those in the Marxist academy who reject the application of the term “fascist state” to Washington, the writers explicitly employ fascist Italy of the 1930s as a case study of modern economic management practiced in D.C. Unlike those who choose to define fascism or barbarism in purely political terms, no examination of the fascist state is complete without the critical function the state comes to play in managing the total social capital of a nation.

In the final section of this series, we will examine Kurz’s argument on the death and resurrection of money within the world market, the road to devaluation shock and the collapse of capitalism, and, finally, a few thoughts on Kurz’s legacy for communism.


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