Interesting essay by Sasha Lilley: “Apocalypse Now?” Lilley is convinced, “The left has a long history of catastrophism—expecting collapse to lead to social transformation.” She doesn’t approved of this alleged love affair on the Left with the apocalypse and so she wrote a book to express her disapproval.
I want to say one thing about Lilley’s basic dishonesty: while I was reading von Mises’ book Socialism yesterday, it was clear to my that that idiot began his critique by attempting to decontextualize Marx from capitalism by comparing Marx’s theory to biblical prophecies. This is not an unusual approach by the critics of Marx — Schumpeter did it as well. Marx is the prophet and his followers are religious zealots of the new Kingdom of God. Surprisingly, Lilley tries to pull the same stupid shit in her critique of the inevitable collapse of capitalism.
A new beginning emerging from a fiery end has been predicted countless times before. In 1844, the followers of American Baptist preacher William Miller sold their possessions in anticipation of the return of Christ. What did not, in fact, follow is known as The Great Disappointment. It is unlikely that the aftermath of the 2012 apocalypse will leave such a mark. Who remembers now the rapture predicted on May 21st of last year? Or the follow-up, “corrected” date of October 21st?
In a recent interview as well as in this essay, Lilley equates the inevitable demise of capitalism with “peak oil”, the Mayan calendar, religious inspired prophecies of the end of time, etc. She even tries to tie the inevitable demise of capitalism based on labor theory of value with the odious Malthus’ theory of overpopulation.
However, although she is very dishonest in her argument, she does raise several important questions. I think her complete dishonesty does not in any way detract from the question her essay, interview and book raises.
For one thing she notes catastrophes don’t turn out the way the Left usually imagines them. Lilley argues catastrophes tend to favor the Right more than the Left, so banking on them as a shortcut is at best questionable.
The idea of a cleansing catastrophe flows naturally from reactionary politics. The right thrives on fear. And it has a simple solution for the alarmist scenarios that it is constantly invoking: scapegoat the “enemy”—whether immigrants or other easily targeted populations—and demand authoritarian fixes. These do not work for the left (nor should they). Fear tilts right. Leftists enter into fear mongering at their peril.
I think Lilley is at least partially correct on this, but I think she emphasizes fear far too much. To see the logic of her underlying argument we need look no further than the Great Depression and World War II: The Left was really quite convinced that collapse was coming and it would lead to a proletarian revolution. Well, the collapse did come — but it brought Auschwitz in its wake, along with 80 million more dead in the world war that followed, plus the destruction of the productive capacity of Eurasia.
Not exactly how we all imagined the catastrophe would turn out, huh? But — and this is the fucking point — the catastrophe happened, just as labor theory of value predicted. And this part of the story never appears in Lilley’s argument for some reason. Lilley argues as though the “catastrophists” like Grossman spent their time reading Nostradamus, not Karl Marx when they made their predictions of a catastrophic breakdown of capitalism.
Moreover, the argument that catastrophes favor the Right looks pretty good until you realize the whole of human experience with economic catastrophes only dates to the 19th century. Even if the whole of the empirical evidence supported Lilley’s argument, that evidence is only a very thin slice of human history. Moreover, on the basis of the evidence we can only conclude people try to recreate their previous mode of existence and do so to whatever extent this is possible.
Since following any sort of crisis people set out first to restore their former conditions of existence, the Right, who promise this sort of thing, have an advantage. They pomise a return to some former state when everything was just peachy keen — like the fifties. You lose your job in the biggest crisis in decades, and Obama promises to give you another, while the Left promises to end wage slavery. But you only want a job. So fuck the Left and their silly promises.
I conclude from this that so long as Obama can keep promising jobs, the Left is not really going to get a hearing. So what? Did Lilley expect some other result?
As Lilley notes, the “stargate” did not open on the day of the predicted Mayan apocalypse, and nuclear power plants didn’t meltdown as a result of the Y2K bug — but the economic catastrophe, which many on the Left predicted, did happen. So are we just supposed to ignore the fact that, in fact, as Marx predicted, shit does happen in the capitalist mode of production?
For 40 years, the Austrians have been predicting the bond vigilantes are going to take Washington to task — it hasn’t happened and nothing indicates it is going to happen in the near future despite trillion dollar deficits. For 60 years, Keynesian economists have been predicting the problem of crisis has been solved by the fascist state — it hasn’t happened and this crisis saw Keynesian policies completely fail for the first time. By contrast Marx’s labor theory predicts crises of ever increasing intensity — and it has just kept happening as predicted for 150 years now.
So Ms. Lilley, I predict one day you and the “anti-catastrophist” (i.e., reformist) Left will just shut the fuck up and start listening. Unfortunately, that too will never happen.
I came across this interesting critique on Jacobinmag of Paul Mattick’s 2011 book, Business As Usual. Jason Schulman, the author of the essay is not at all willing to embrace Mattick’s anti-Keynesian argument, which Schulman explains this way:
“…with Keynesian measures already exhausted, capitalist governments are torn between fears of resistance to austerity measures as the crisis “plays out” and the dangers of further stimulus spending, leading to disastrously high levels of sovereign debt.”
“Those who hope for a Keynesian, government-stimulus-package way out of the crisis are bound to be frustrated by Mattick’s analysis. Though Keynesian policies saved capitalism from depression in the 1970s, such measures are virtually impossible for governments to execute today. Keynesians, Mattick claims, have refused to consider the ultimate costs of ever-increasing government debt, which in the U.S. has risen from $16 billion in 1930 to $12.5 trillion today.”
Is this Mattick’s argument? Does he actually believe Keynesian policies saved capitalism from depression in the 1970s? Well, it really doesn’t matter what he thinks. Keynesian policies did not prevent the depression of the 1970s, which was a replay of the Great Depression of the 1930s. The contraction lasted for ten years — more than twice as long as the Great Depression — and was deeper than even that depression.
Here is a chart of the 15 years leading to the end of the contraction phase of the Great Depression:
And here is a chart of the 15 years leading to the end of the contraction phase of the depression of the 1970s:
Everyone agrees the depression of the 1970s didn’t happen — it was somehow avoided by Keynesian economic policies. The problem with this view is that everyone is wrong – the depression happened but it was masked. How was the depression of the 1970s masked, Schulman offers an explanation:
“As Barry Finger has argued, fiat money—state currency not pegged to gold or any other currency or basket of currencies—gives Keynesianism much broader sweep…”
The secret of the missing depression of the 1970s is simply that during the Great Depression the currency was debased from gold – a process that was completed in the 1971 breakdown of Bretton Woods. If we use the same measure for both period — gold — the 1970s depression re-appears in the data. Keynesian policies don’t let capitalism avoid depressions, it simply papers over the depression with a slew of counterfeit currency. This is why scholars sense something changed in the economy in the 1970s, but can’t quite describe what it was that changed. Some talk about stagnation, others about the emergence of neoliberalism and financialization, but everyone realizes something happened.
Why is it important to understand that the depression was not avoided in the 1970s but only covered up by counterfeit currency? Because understanding this makes it possible to understand why Keynesian policies cannot work this time. As the chart below shows, the US economy has been in a depression since 2001:
This depression, like the one in the 1970s was masked by counterfeit currency printing of the US government. Only a big problem happened — a problem predicted since 2001 — the Keynesian system of masking depression through counterfeit crashed. It crashed beginning in 2007 with the collapse of the big investment houses on Wall Street. This crash was not just the crash of these banking firms, it was also the crash of the Keynesian system that had allowed Washington to conceal the depression through currency counterfeiting. People like Jason Schulman, who think the fascist state can return to Keynesian policies to recover from this crisis miss the point:
This is a crisis of Keynesian policy — a crisis of state management of the capitalist mode of production that has been the only thing standing between capitalism and its ultimate extinction for the past 80 years.
The fundamental problem of fascist state data
Interesting argument by Andrew Kliman in his book, “The Failure of Capitalist Production”: the rate of profit tends to fall; but this tendency is “reversed” by the destruction of capital. I keep looking at this statement because it seems suspiciously widely accepted by Marxists all of a sudden. Kliman states it this way:
“The rate of profit—that is, profit as a percentage of the amount of money invested—has a persistent tendency to fall. However, this tendency is reversed by what John Fullarton, Karl Marx, and others have called the “destruction of capital” —losses caused by declining values of financial and physical capital assets or the destruction of the physical assets themselves.”
I am not questioning the idea the rate of profit tends to fall nor that this fall leads to crises. The problem I have here is with destruction of capital and Kliman’s definition of profit. First, a lot of people have looked at this profit thingy, and some agree with Kliman, while others disagree. My problem is not whether one group is right and the other wrong — it is how can any of this be determined based on fascist state data on corporate profits.
If we walk away from this highly controversial category for a second and look just at employment in the United States there is the same problem. The data, as compiled by the fascist state, is absolutely worthless to address important questions of Marxist theory. The whole of government employment is unproductive labor, but bourgeois data makes no distinction between productive and unproductive employment. Profit can only be calculated on productive employment — so where does the whole of fascist state employment belong?
Second, Kliman talks about “profit as a percentage of the amount of money invested”, but in actuality he uses dollars instead of money. Everyone uses this measure, but Carchedi’s essay calls it all into question: Washington doesn’t use money to pay its debts. The dollars the fascist state uses to pay its debts are either the result of revenue raised by taxes, or dollars created out of nothing — but, as Carchedi notes:
“… one does not “create money out of nothing”, an absurd proposition. Out of nothing, one can create nothing.”
When the state was a tiny sliver of the economy, this was not a big problem — but now it is 50% of the US economy, with a deficit of between 7 and 10% of GDP. This entire mass consists of labor that is, by definition, not productive in the capitalistic sense, and is itself only a form of surplus value wrung from the productively employed workers. This must be true by definition.
Most surplus value is consumed unproductively by the fascist state
Now Marx’s formula for profit is s/(c+v); and a shit load of the “s” does not take the form of corporate profits. The greater mass of this “s” is in the form of fascist state expenditures. At least, this is what makes sense to me — I could be wrong, but this is how I read Marx.
In fact, employment in the form of government is one of the fastest growing sectors of employment in the post-war period. To be sure, by definition, this is a portion of surplus value that is not being reinvested in productive capitalization — by definition. It represents, therefore, a massive destruction of surplus value on a scale unequaled in the history of society — annually!
So far as I can tell, no Marxist scholar has tried to include the massive quantity of surplus value expended in the form of the state into the discussion of the rate of profit. How can you tell whether the rate of profit has risen or fallen without including the single largest form of surplus value in “the economy”.
The total government consumption of surplus value amounts to $6.3 trillion; by comparison consider that China’s total GDP is estimated at $7.3 trillion. The US government sector is by far, the largest consumer of surplus value on the planet, yet it appears in no Marxist estimates of the rate of profit that I have seen.
This is just another example of the resistance of the Marxist school to subjecting the fascist state to historical materialist analysis. Marxists treat the state as if it is outside the economic structure of class society and figures only as an ahistorical mechanism of class rule.
Kliman argues in the introduction to his book
“However, I do not want to overstate the role of methodological and theoretical differences Prior to analyzing the data, I had no prior belief that actual rates of profit had failed to rebound since the early 1980s, and I even wrote that “profitability has been propped up by means of a decline in real wages for most [U.S.] workers”
I take this to mean Kliman alleges those who come to conclusion other than his are engaged in wholesale distortion of the empirical data. Which is to say the differences in methodology and theoretical assumptions do not account for the different results on the rate of profit. Is there some justification for this conclusion? Perhaps.
Both Kliman’s data and Dumenil and Levy’s data depend not on Marx’s definition of surplus value, which must include the surplus consumed by the fascist state, but only various measures of reported profits assuming an economy solely composed of productive capitals. Since both begin not with Marx’s definition of surplus value but with the reported profits of private capitals they are both fundamentally flawed. The minor difference in their data at the end of this process conceals that both Kliman and Dumenil and Levy’s work are fatally flawed. For Dumenil and Levy this negates their conclusion entirely; however this is also true for Kliman’s conclusion — although he at least get the direction of the rate of profit correct.
In Kliman’s thesis, the rate of surplus value — not the rate of reported profits — is key to his argument. And his argument is that the fascist state is preventing the destruction of value, giving rise to stagnation and slow growth. In fact, it appears most surplus produced by the productive capitals is being destroyed by the fascist state but even this is not sufficient as the crisis demonstrates.
The rate of profit is indeed falling as Kliman alleges, and to a far greater extent than he even imagines. An ever increasing quantity of surplus must be absorbed by the fascist state solely to maintain capitalist relations of production. His theoretical assumptions led him to compile empirical data that actually weakens his argument. Moreover, Kliman misses the most important point buried in the data: the rate of profit is negative and has been negative since the 1970s!
A negative rate of profit?
As Kliman argues about growth generally,
“The generation of profit is what makes possible the investment of profit. So, not surprisingly, the relative lack of profit led to a persistent decline in the rate of capital accumulation (new investment in productive assets as a percentage of the existing volume of capital). Sluggish investment has, in turn, resulted in sluggish growth of output and income.”
This is the only conclusion to be drawn by the collapse of industrial employment since 1979. As can be seen in the BLS data below, employment in the goods producing sector of the economy (which I am treating as a proxy for productive investment in this note) peaked in 1979 and has been declining since:
Moreover, as is clear from the chart above, since 2000 this decline has become abrupt — which is also the time during which all the talk of deflation began. Kliman is likely not only correct in relation to Dumenil and Levy, he is likely more right than his pitiful charts on corporate profits demonstrate. Industrial employment has not been at this level since 1950 before the Cold War build out began. By the end of 2011, industrial employment has fallen 30 percent since its post-war peak.
During this period we see four things:
- despite the fall in goods producing employment, the rate of profit as measure by both Kliman and Dumenil and Levy and a host of others remains positive;
- US trade deficits open up and widen;
- the US federal budget deficits also widen;
- the world market is struck by a series of financial crises.
How in Marx’s theory can we explain the fact that the profit rate, as different theorists measure it, remain positive despite the fall in goods producing employment? One possible explanation is to discount entirely the collapse of goods producing employment over the past 30 years. As Kurz demonstrates an increasing mass of productive capital itself is financed by fictitious capital and is itself fictitious. For instance, 8 aircraft carriers have been produced on orders by Washington since 1980 and three more are under construction, this completely wasteful expenditure is embedded in the data on goods producing employment. Although this employment produced a commodity (of sorts) it represented a subtraction from the mass of capital.
But this fact only adds to the problem: even employment that might be considered productive turns out to be unproductive. The decline of productive employment is actually greater than the data implies, and thus greater is the negative value of the rate of profit. This further conflicts with the positive measure of corporate profits as measured by a host of different scholars. And this difference cannot be blamed on their different methodologies, but on their basic theoretical assumptions regarding the fascist state.
Can the rate of profit be reversed?
This raises an additional question about Kliman’s thesis: How is the fall in the rate of profit “reversed” by the destruction of capital? If profit = s/(c+v), how does the destruction of capital lead to an increase in the profit rate? If I am wrong in this, please correct me, but I read chapter 15 as stating the fall in the rate of profit leads to a wash out in those capital not able to offset the fall in the rate of profit by an increase in the mass of profits — it does not lead to a recovery in the rate of profit. Is Kliman’s thesis just badly worded or does he read Marx as stating the fall in the rate of profit can be reversed?
And if the profit rate cannot be reversed, as my reading of Marx suggests, it must go to zero at some point, without more involved. At some point the rate of profit must equal zero; or as Marx puts it:
“… the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC.”
In other words, my interpretation necessarily leads to absolute overaccumulation of capital. Kliman’s and Simon Clarke’s arguments against absolute overaccumulation of capital requires the fall in the rate of profit can be reversed. The profit rate can never go to zero and the demise of capitalism is not inevitable.
In addition, if Kliman and Clarke are correct the very idea the profit rate is negative at this point is not only wrong, but absurd. And this means there has to be some other explanation than the one proposed by Kliman for the decline of goods producing employment investment. I would very much like to hear that other explanation by anyone in the Marxist academy.
A negative rate of profit is important because it means the total mass of employed capital has been shrinking since the 1970s. Once the rate of profit goes negative, the mass of productively employed capital must eventually reach zero. This calls into question another facet of Kliman’s thesis. According to Kliman the capital destruction necessary to “restore the rate of profit” during the depression of the 1930s was very large and the process very traumatic to society. Based on this Kliman argues:
“Policymakers have not wanted this to happen again, so they now intervene with monetary and fiscal policies in order to prevent the full-scale destruction of capital value. This explains why subsequent downturns in the economy have not been nearly as severe as the Depression. But since so much less capital value was destroyed during the 1970s and early 1980s than was destroyed in the 1930s and early 1940s, the decline in the rate of profit was not reversed. And because it was not reversed, profitability remained at too low a level to sustain a new boom.”
Based on Kliman’s view that Marx’s theory allows for restoration of the rate of profit, this is a convincing argument. However, if the opposite holds, no restoration of profits rates is possible, the argument collapses in on itself. In the latter case, if the fascist state does not prevent the destruction of capital, but facilitates it, this would as well explain why there has been no replay of the Great Depression. Since the destruction of capital is necessary to begin a new expansion phase, and since this destruction cannot be prevented, it is entirely possible that Keynesian policies work by accelerating the destruction of capital, not preventing it.
And how might this destruction be facilitated? Simply by lending it to the fascist state, which — according to Carchedi’s essay — does not produce value but only consumes it.
This would also explain why the rate of growth of the economy has slowed: since an increasing portion of the produced capital is being destroyed by fascist state expenditures, a declining portion newly produced surplus value is actually reentering capital reproduction.
The progressive reduction in socially necessary labor time
As Marx explains in chapter 15 of volume 3 of Capital, the cause of capitalist crisis is the reduction of socially necessary labor time brought on by the improvement in the productivity of labor. At the same time, capitalism tries to resolve the crisis by means that eventually only intensify the crisis: the further improvement in the productivity of labor, which must result in the further reduction of socially necessary labor time. For this reason Marx concluded:
“Capitalist production seeks continually to overcome these immanent barriers, but overcomes them only by means which again place these barriers in its way and on a more formidable scale.”
Ultimately, the very methods capital introduces to emerge from a crisis sets the stage for the next crisis. The proximate cause of the crisis itself is the fall in the rate of profit, so, naturally, Marxists spend an incredible amount of time trying to prove (see, Kliman, Carchedi etc,) or disprove (see Dumenil and Levy) this fall. It never occurs to these idiots that the fall in the rate of profit is itself only of secondary consequence, since it is only an expression within capitalist relations of production of a more fundamental process: the development of the productive forces of society and the consequent reduction in socially necessary labor time.
Since the fall in the rate of profit is only the specifically capitalistic manifestation of the later process, even in the absence of capitalist relations of production, this latter process must still be expressed. The development of the productive forces and the consequent reduction of socially necessary labor time not only causes crises in the capitalist mode of production, but also brought down the Soviet centrally planned economy. But not only this: even if we assumed a proletarian revolution in the capitalist countries, this revolution would immediately be forced to reduce hours of labor, no matter what its other professed aims.
The development of the productivity of labor and the reduction of socially necessary labor time is a material barrier limiting the work day no matter the relations of production that prevail in a given society. In a society where all needs of the community are satisfied within more or less limited condition — kinship, etc. — this limit was probably naturally apprehended simply as the point where the need for more labor ends. Similarly, in a communist society of the future the end of the work day appears as simply the end of the need for work.
The reduction of socially necessary labor time and the collapse of the Soviet system of production
However in both capitalist and Soviet centrally planned economies, where the aim of labor is not the needs of the producers but the production of a surplus product it is otherwise: The end of socially necessary labor time appears as an obstacle to the expenditure of surplus labor time. Certain Marxists academics, like David Kotz, want to deny the Soviet Union collapsed for the same reason US capitalism will collapse. In this argument, the Soviet Union did not collapse but was dismantled by the managerial elite who wanted to become capitalists.
“The received wisdom is that the pro-capitalist group was able to win for two reasons. First, it is alleged that the Soviet planned economy collapsed, leaving no alternative but to adopt capitalism. … However, there is no support in the historical record … As we show in Kotz and Weir (1997, ch. 5), the Soviet planned economy did not collapse. Despite some disruptions from economic reform legislation that took effect in 1988, real output and real aggregate consumption grew continuously from 1985 through the first half of 1990. At that point, although Gorbachev still held power in the Union state, Boris Yeltsin and the pro-capitalist coalition he led won political power in the Russian Republic of the Soviet Union and was able to use that power to begin dismantling central planning. That, along with other related developments, produced the first decline in output of the postwar period (at a 2.4% annual rate for 1990). The output decline accelerated in 1991 (to an estimated 12.8% rate of decrease) as central planning was fully dismantled and it became clear that privatization of Soviet industry lay ahead (Kotz and Weir, 1997, p. 75). The record shows that the Soviet planned economy did not collapse — it was dismantled through political means, as power shifted from Gorbachev to Boris Yeltsin and the pro-capitalist coalition.”
Okay fine — have it your way. So David, if the Soviet economy was not already headed toward collapse before Gorbachev and Yeltsin, what forced the reform effort in the first place?
In any case the collapse of the Soviet Union only prefigured the collapse of western capitalism. The Soviet system collapsed first not because it was less efficient, but because it was a vastly superior producer of social surplus. Marxist, like bourgeois economists, cannot get it through their thick skulls that what counts in a surplus producing system is not the production of material wealth, but social surplus. The lack of consumer goods on the shelves was not a testament to the inefficiency of the soviet system, but the way the system of surplus production at the expense of the mass of society worked.
“The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and the purpose of production; that production is only production for capital and not vice versa, the means of production are not mere means for a constant expansion of the living process of the society of producers.”
Social production and the material limit of the working day
Within the capitalist mode of production the only equilibrium point possible is that point where the labor time of society is equal to the value of the mass of wages of the productively employed workers. But this is also the point where the rate of profit is equal to zero. The capitalist mode of production, therefore, can only produce surplus value provided this surplus becomes materialized in an increased mass of productively employed labor power.
Each increase in the productivity of labor must be expressed in a corresponding increase in the mass of employed labor power. When this does not happen, or is only partially realized, capitalism suffers a crisis of a greater or lesser duration. The proximate cause of this crisis is the fall in the rate of profit, when the mass of surplus value cannot be realized as profit. Although the crisis appears to result from the fall in the rate of profit, the rate of profit falls because the expenditure of social labor has exceeded the needs of the producers — the duration of labor time is longer than is required to meet the needs of the mass of workers. But it is precisely this duration — in excess of the needs of the mass of workers — that constitutes the aim of capitalist production.
As I said in my previous notes both Marxism and bourgeois economists argue there is no material limit to the duration of socially necessary labor. While a material barrier to the limits of the labor day can be seen in each crisis, this limit is only a relative limit which must be overcome in the next phase of expansion. Carchedi gives voice to this argument in his essay:
“In fact, we have seen that state-induced capital-financed investment cannot restart the economy. At most, it can postpone the explosion of the crisis. Then, if either pro-labour or pro-capital anti-crisis policies are impotent against the slump, the crisis must run its course until it itself creates the condition of its own solution. This is the destruction of capital. Only when sufficient (backward) capitals have been destroyed (have gone bankrupt) can the more efficient productive units start producing again on an enlarged scale.”
Carchedi’s argument appears to notice no material limits to the labor day, he places the entire weight resolving the slump on the destruction of capital. But why must this capital be destroyed in the first place? Because it is excess capital and can no longer function as capital within the existing limits of existing hours of labor, of course. According to this view, although the capital is excess in a relative sense, it cannot be excess capital in the absolute sense. This argument is only the Marxist variant of Say’s Law, which stated:
“It is worthwhile to remark that a product is no sooner created than it, from that instant, affords a market for other products to the full extent of its own value.”
In Carchedi’s variation of Say’s Law, the older less efficient capitals must give way to the new more efficient capital, but this having been accomplished capital is able to produce again on an enlarged basis. The problem with Carchedi’s argument here is that by production on an enlarged basis he means the production of surplus value. In the new conditions established by the new and more efficient capitals, there is a higher rate of surplus value — consequently the enlargement of the mass of surplus value requires an increased mass of variable capital. Which is to say, the increase in the productivity of labor must be offset by an increase in the mass of employed labor powers. The mass of productively employed workers must constantly increase if capitalism is to survive each crisis. Is Carchedi’s argument supported by empirical data? Has the mass of productively employed labor powers increased since the Great Depression? Marxists theorists like Carchedi, Kliman, Heinrich, Dumenil and Levy don’t even make the slightest find out whether the empirical data supports this argument.
We are, therefore, left not with a “Marxist multiplier” but the Marxist variant of Says Law: Capital is no sooner created than it finds a place in the system of capitalist production. The logic of this reasoning is stated this way by Carchedi:
“In fact, we have seen that state-induced capital-financed investment cannot restart the economy. At most, it can postpone the explosion of the crisis.”
In this argument, the fascist state can postpone the crisis by subsidizing older less efficient capitals and preventing their bankruptcies. Andrew Kliman continues in a similar vein:
“They intervene with policies that throw debt at the problems and ‘kick the can down the road’. So we don’t get a slump that’s anything like the depression. But we also don’t get a new boom like the one that followed the depression and World War II. The debt build-up prevents a recurrence of the massive destruction of capital value that occurred then – bankruptcies, falling asset prices, and so on.”
This is not Marx’s labor theory of value; it is Austrian school gobbledeegook.
Marxist and Austrian schools similarities
The state intervenes to prevent the necessary destruction of capital that would allow the capitalist production process to restart. Anyone familiar with Austrian economic theory will realize this is a variant of that theory — a theory that embraces Say’s Law as well. In Austrian economic theory Keynesian/neoliberal intervention of the state in the economy leads to malinvestment — the production of commodities for which there is no social necessity. In this Marxist variant of the same theory, state intervention prevents the destruction of the capitals creating the unnecessary commodities.
In both theories, the problem is presented exactly opposite the actual progression of the crisis: instead of the state intervention leading to a mass of superfluous capital and commodities as the Austrian and Marxist schools contend, a mass of superfluous capital and commodities requires the intervention of the state. In the crisis theory proposed by the Marxist academy Say’s Law is overthrown only to be resurrected as the infinite return of capital.
Capital, these Marxists concede, can have general crises of overproduction, but this crisis can never become absolute overproduction. It can never proceed so far as to cause not just a general crisis of overproduction, but an absolute overproduction (overaccumulation). When Marx himself proposed just this result:
“There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0.”
his argument is dismissed by Marxists as a thought exercise. For instance, Simon Clarke wrote:
“Marx makes it quite clear that this is a discussion of a purely hypothetical case, based on `the most extreme assumptions that might be made’ (ibid., 364), and one which conflicts with his earlier characterisation of the historical tendencies of accumulation, which are to create an `increased and even excessive working population available for exploitation’ and `a growing absolute mass of profit’ (ibid., 325), so that `nothing is more absurd, then, than to explain the fall in the rate of profit in terms of a rise in wage rates, even though this too might be an exceptional case’ (ibid., 347).”
I have looked for Clarke’s sources for this interpretation, or even some line of argument that approximates such an interpretation, but have not been able to find it in Capital. I can find no place where Marx states, or implies, absolute overaccumulation was a “purely hypothetical” line of argument. Unless I can be shown where Marx himself makes this concession, I continue to believe Clarke invented his interpretation out of whole cloth. There is no doubt Marx thought this was an extreme example, but this does not in the least imply it was not inevitable. It only suggest the event, if it should arise, is incompatible with the continued existence of capitalist relations of production.
And, yes, that means I think Simon Clarke is full of shit and distorting Marx’s argument, but he would not be the first in the Marxist academy to do so. The argument fits with the predominant Marxism ideology that sees the end of capitalism only being made possible by a political revolution. Capitalism, it is said, cannot collapse on its own, but endlessly returns until it is overcome by working class political action.
Fine. Well I hope that works for you guys — I am so sure any day now the working class will stop demanding jobs and demand an end to wage slavery.
Of course, Clarke is correct in one sense: absolute overaccumulation of capital does not result from a high demand for labor and high wages. Instead it occurs in conditions, as can be seen in Spain or Greece, where despite high unemployment, wages are “still too high”; when, despite massive depression, idled capital and steep unemployment, the basis for a return to profitability is still not achieved. Given the logic of Marx’s argument, it is no surprise to find Keynesian-style state intervention in the industrial economies occurs for the first time precisely in those conditions during the Great Depression, when the fall in the rate of profit never recovered.
Not-labor time as emancipation
One of the most influential things in my thinking was coming across this passage from Marx:
“The creation of a large quantity of disposable time apart from necessary labour time for society generally and each of its members this creation of not-labour time appears in the stage of capital, as of all earlier ones, as not-labour time, free time, for a few.”.
In my opinion this passage capture the essence of class society: the effort to deny the mass of society free time away from labor. Capital wants to dominate every waking moment of the workers life and convert each and every minute of the day into surplus value.
The response of the Left to this madness is to declare they have a better way of managing every minute of the worker’s life. Well, fuck you and your ideas for a better way of organizing slavery. This why on the Left there are those who demand emancipation from the state or from capital, but no one who demands emancipation from labor. Everyone on the Left has their own formula for reorganizing slavery and a plan for how it can best be accomplished. Some want labor organized by the party-state, others want it managed by the democratic state, still others as a cooperative, while there are those who conceptualize society as a collections of individual producers, acting autonomously, who only enter into any relation at all through exchange of products.
They oppose these “new” ideas for organizing labor to the capitalist organization of labor and feel good about themselves. Most Leftists act like the typical job held by members of society was vital to the existence of mankind — not mostly answering emails and sitting in team meetings. In fact, at least ninety percent of jobs in the economy at present produce nothing and serve no purpose in society. Our jobs are useless and our only tie to these jobs is the check we get at the end of the week.
Socially necessary labor time as the precondition for wages and profits
The critical problem ignored by Marxist theorists in the Academy is not the effect of the falling rate of profit in producing crises. Rather, it is the process behind this falling rate of profit: the continuous diminishing of socially necessary labor time in general. The falling rate of profit is only the impact of the general fall of socially necessary labor time reflected in the mass of surplus value. Since socially necessary labor time in general is falling, the portion of labor time that accrues as profits in particular must also fall.
The growth of profits, of surplus socially necessary labor time, must increase despite the general fall in socially necessary labor time. This implies that the wages portion of socially necessary labor time must fall more rapidly than socially necessary labor time in general. In any given period of time the value of social product produced is the socially necessary labor time expended on its production. The decrease in this value of this social product over time is a function of the improvement in the productivity of labor. However the value of this social product includes both the mass of previously expended labor time plus the mass of newly expended labor time. The mass of profits and the mass of wages only involves the latter — newly expended labor time.
Improvement of the productivity of labor is expressed in the continuous reduction of this portion of the value of the total social product. Over time then more of the total value of the social product is the result of previously expended labor time, while less of this total social product is the result of newly added labor time.
If the value of the total social product is 100 hours and previously expended labor time is 50 hours, the value accounted for by newly added labor time is 50 hours of fifty percent of the value of the commodity. Fifty percent of the value of the social product is previously expended labor time and 50 percent is newly expended labor time. This latter fifty percent accounted for by newly expended labor time is then divided between profits and wages.
If the productivity of labor is improved so that now 60 percent is accounted for by previously expended labor time and 40 percent is now accounted for by newly expended labor time, profits and wages are now divided among only the 40 percent of new labor time. No matter how this forty percent is divided between wages and profits, the portion of total value to be divided has fallen from 50% to 40%. This is already given by the improvement in the productivity of labor.
There is no way to avoid this reduction since the reduction itself depends solely on the improvement in the productivity of labor and has nothing direct whatsoever to do with the struggle over the division of the social product between wages and profits. Socialists and those on the Left can whine and stamp their feet all they want, the total labor time has been reduced no matter its division; capitalists and those on the Right can do likewise without changing this fact. The improvement in productivity of labor imposes itself on both classes and the whole of society without regards to their petty conflicts.
Productivity and capitalist relations of production
Moreover it is not just that the conflict between the two classes has no direct impact on the result of the increase in the productivity of labor, the conflict between the two classes is itself the very engine driving the continuous improvement of labor productivity. The greater the conflict between the classes, the more improvement in labor productivity reduces the labor time to be divided between them.
The argument against this view, raised by the apologists for both capital and labor alike, is that despite this reduction of socially necessary labor time embedded in each commodity, the demand for commodities must constantly increase. If capital and labor must make do with 40% of the total social product instead of 50%, the mass of social product increases from 100 to 150. In this case, 50% of 100 hours of labor equals 50 hours of labor time, while 40% of 150 equals 60 hours of labor time. According to this view, while the relative proportion of newly added labor time has fallen, its absolute mass will always increase. This is the logic of Fordist ideology, which proposes socially necessary labor time must increase because needs always increase.
The attention of Marxists and the Left generally, therefore, has been focused on the division between capital and labor of the shrinking social product. In fact, this focus is what defines Marxism and defines the Left — a singular focus on the division between wages and profits. The limitation imposed on the conflict between labor and capital by the improvement of the productivity of labor is only vaguely sensed. This foreboding increases in times of crises when there is a sudden appearance of both surplus capital and surplus labor power. The sudden appearance of both surplus capital and labor power, however, is only the material form given by the increase in productivity within capitalist relations of production, expressed as the redundancy of both classes.
The secret of this sense however — its reactionary content — can be seen in the fact that Marxism still has not yet grasped that socially necessary labor time itself is anachronistic. The anachronistic nature of socially necessary labor time is expressed in the material form of surplus capital and surplus labor power. There is no lack of means to satisfy social needs, but a lack of socially necessary labor time. Socially necessary labor time itself, value, the general lack of it from the viewpoint of both classes, becomes the need to be satisfied.
In times of crisis it is not labor that is the problem, but the lack of social necessity for labor that is expressed in the crisis. Both classes — each one for its own ends — demands labor be reestablished as an absolute social necessity imposed on society as a whole. And this is because there is a general lack of socially necessary labor time that can be converted into wages and profits.
Excess Capital, the state, and destruction of material wealth
The conflict between the two classes over the division of the social product gives rise to a new round of improvement of productivity. And this improvement itself leads to a decrease in socially necessary labor time: producing another mass of surplus capital and labor power. Out of this increased mass of superfluity of capital and labor, the conflict between the two classes is given greater momentum.
Political relations must express the shrinking necessity for labor and they do: in the form of state intervention to offset the reduction of socially necessary labor by a demand for superfluous labor and capital. The state becomes critical to absorbing (directly or indirectly) the labor power and capital thrown off by the improvement in productivity. As should be obvious, the state only absorbs the superfluous capital and labor thrown off by society and this absorption does not and cannot add to the production of value, i.e., to the mass of socially necessary labor time from which both profits and wages are drawn.
For this reason the state’s absorption of the mass of superfluous capital and labor power is not just or even primarily the destruction of a mass of superfluous value — value which could not become self-expanding value — but above all (from the standpoint of Marx’s theory) the wholesale destruction of material wealth — deliberate, unconscionable, barbaric. It is material wealth destroyed for none other than the perverse reason that it could not become wages and profit!
In the first place, the destruction of material wealth is a mass of workers employed to do absolutely nothing of material value because reducing hours of work must lead not only to the fall of profits, but, just as politically significant, wages. But even though the state’s role is necessary for both wages and profits, it must still lead to the fall of wages, since employment is always dependent on the realization of some given mass of profits. It is only after this that the mass of profit must also fall — leading to a crisis that produces a new mass of surplus capital and labor.
The intervention by the state, therefore, leads only to more intervention by the state and to cries the state is too invasive (the winners) and not yet invasive enough (the losers). The intervention of the state, since it is always driven by the accumulation of surplus capital and surplus labor power, is not determined autonomously by policy preferences as most economists believe. Once it emerges and has established itself as necessary to the continuing function of the capitalist mode of production, this intervention is determined by the laws that determine the mode of production as a whole. As it develops this state intervention assumes the character of a force operating independently of political forces and opposed to them.
This calls into question political action itself, since even in a democracy politics has increasingly less impact on how the state functions. The indifference of the state to society is determined first by the fact that an increase in the productivity of labor must lead to an increase in mass of superfluous labor power and capital absorbed by the state. Second, this indifference is determined by the conflict within and between the two classes over division of the social product, which must result in the constant improvement of productivity, and thus to a new fall in the value of labor power. In third place, it is determined by the limits of the socially necessary labor day, which ultimately must equal the value of labor power alone.
The material limits of socially necessary labor
The material limits of the socially necessary labor day cannot extend beyond the limits of the value of the mass of productively employed labor power (of their wages). The fact this truth appears nowhere in present Marxist literature is an expression of the complete and utter bankruptcy of post-war Marxism. But, the intervention of the state in the economy becomes necessary precisely at the point where the profit rate falls to zero — that is, when the mass of value produced equals the value of the wages of the existing workers who produced it — producing beyond this only the permanent formation of a mass of excess capital as well a mass of unemployed labor powers.
This gives rise to the oddest fucking behavior: apologists of the fascist state who, on the one hand, demand ever greater intervention by the state to “stimulate” the employment of labor and capital, yet who, on the other hand deny any possibility of a general reduction in hours of wage slavery. This bizarre behavior can only be explained by the identification of productive human activity in every form with wage slavery itself. Which is to say, for these insane Marxists, the only labor to be considered productive is labor that produces surplus value. Their very conception of human activity is slavery — and they raise slavery to an ideal form of human society. Thus even when they consider society after capitalism, they can only consider this future as labor without the defect of capitalism. These idiots actually believe they have accomplished something when they demand even domestic slavery be considered on par with wage slavery. This is why they spend so much time wondering how fucking Wal-Mart or General Electric will be organized in a post-capitalist society: the only difference between capitalist society and a post-capitalist one is how the checkout at fucking Wal-Mart is managed.
According to Marx a commodity cannot have value without having use value; however, the case is not the opposite. A use value need not have any value at all — the work that produces a use value, is not necessarily labor, i.e., value producing activity. Marx’s criticism of capitalism is that it simultaneously tried to abolish labor (value producing activity), yet rested on labor. Its historical trajectory was, therefore, limited, since it could not actually abolish labor, which is to say it could not actually put an end to value producing activity.
His argument here was not that the creation of use values — material wealth — came to an end, but that this creation was increasingly limited by the need for production to create these use values in the form of values. Capitalism increases the productivity capacity of society, the raw ability of society to produce use values, but, at the same time, confined this increase in productivity solely to the creation of values. His argument implies the abolition of capitalist relations of production does not result in scarcity — a lack of material wealth. Rather it implies the abolition of these relations must lead to an explosion of productive energy, which has, to this point, been confined within increasing restrictive limits.
Was he blowing smoke on this? Was he full of shit? I will let you decide, but my analysis leads me to conclude the economic function of the fascist state is to destroy excess material wealth in order to keep the productivity of labor confined within the limits of capitalist relations of production. The question is not “How will we eat” in the absence of capitalist relations of production; but how will we eat if they continue?
As the productivity of labor increases the need for the state to destroy material wealth increases along with it — this is a problem. It is a problem Marxists don’t even realize exists, except in some very limited fashion and mostly in the form of a demand for more labor. These Marxists demand, in other words, an increase in the very activity that is creating the crisis.
Keynesian economic policies don’t work, but fighting for these policies will?
Guglielmo Carchedi’s essay on the so-called Marxist multiplier has me bugging. He is handing out bad advice to activists in the social movements and telling them this bad advice is based on Marx’s labor theory of value. The bad advice can be summed up concisely: Keynesian policies do not work and cannot work, but the fight for these policies (as opposed to neoliberal policies) can help end capitalism:
From the Marxist perspective, the struggle for the improvement of labour’s lot and the sedimentation and accumulation of labour’s antagonistic consciousness and power through this struggle should be two sides of the same coin. This is their real importance. They cannot end the slump but they can surely improve labour’s conditions and, given the proper perspective, foster the end of capitalism.
Frankly, Carchedi’s advice is the Marxist academy’s equivalent of medical malpractice. (For the record, Michael Robert’s has his own take on the discussion raised by Carchedi’s essay.)