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Deconstructing the main thesis of Andrew Kliman’s “The Failure of Capitalist Production”
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:
Goods Producing employment 1939 to 2012 (Source: BLS)
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.
Some notes on Marxism and social emancipation (3)
The impending implosion of the Marxist school
Historically speaking, for Marx, the capitalist mode of production, no matter its defects, could be justified on the basis that by ruthlessly exploiting the worker, stunting her development and reducing her to the status of a slave, it nevertheless brought about an increase in the productive capacity of social labor. It was admitted that this increase in the productivity of social labor was in no way the aim of the mode of production, but merely a byproduct of the unending search for still greater profits. On this basis Marx answered the critics of Ricardo:
“It is that which is held against him, it is his unconcern about “human beings,” and his having an eye solely for the development of the productive forces, whatever the cost in human beings and capital-values — it is precisely that which is the important thing about him. Development of the productive forces of social labour is the historical task and justification of capital. This is just the way in which it unconsciously creates the material requirements of a higher mode of production.”
When studying the operation of the capitalist mode of production, Marx was not given to outbursts of moral anguish about the capitalist mode of production and the results of the capitalist epoch. This is what separated him from the moralizers and utopian socialist of his day: that despite all the defects of the mode of production it carried the seeds of its own supercession by a higher mode of human society — the social individual.
What separates Marx from the Marxist academy, however, is that in his view capitalist relations of production were only historically justified to the extent they materially contributed to the development of the productive forces. The discussion of capitalist relations of production within the Marxist academy today takes no account of this. If wage slavery can be justified at all, it is only on the basis this wage slavery produces more material wealth than individual production. Individuals producing separately, whose activity only becomes social through exchange, cannot produce a material wealth anywhere near the scale of this same mass of individuals engaged in directly social labor. If the catalyst to the formation of directly social labor was found in wage slavery, we only inherit this as the premise of our own time to be abolished.
This is what is so amazingly stupid about Carchedi’s essay on the so-called Marxist multiplier: having demonstrated (as best he could) that fascist state economic policy cannot add to the wealth of society, but can only unproductively consume (destroy) it, he then adds this idiocy:
“The above should not be construed as if labour should be indifferent to state-induced capital-financed redistribution and/or investment policies. On the contrary, labour should strongly struggle for such policies. But this struggle should be carried out not from a Keynesian perspective but from the proper, Marxist, perspective.”
Mind you, Carchedi’s finding is not just that fascist state economic policy does not increase the wealth of society, he found, in addition to this fact, the fascist state only works by unproductively consuming wealth. Despite this finding, Carchedi recommends the working class ignore his results and “fight” for these policies. On what basis does Carchedi make his perverse recommendation?
“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.”
Of course, the fascist state cannot improve the worker’s lot without deepening the crisis, but the struggle to make the fascist state improve the worker’s lot can? How? The fascist state only destroys material wealth, but fighting for this destruction will produce an “antagonistic consciousness”? The crisis is wholly produced by the dependence of the production of material wealth on capitalist profits, but fighting for fascist state economic policies — which only destroys the wealth that can’t become capital — will foster an end to capitalist production?
An inversion of Marx
In the most amazingly brazen act of revisionism, Carchedi completely inverts Marx’s reasoning: where, for Marx, capitalist relations of production may be morally repugnant, but justifiable because they increase the productive power of social labor, Carchedi argues fascist state intervention does nothing to increase this productive capacity, but is justifiable because of a placebo effect. Although fascist state economic intervention cannot add to the production of material wealth, workers should fight for it because they think it will. Left political activity can, somehow, avoid the problem that no state action of any sort can “solve” the crisis, because this Left activity can produce a consciousness that is antagonistic to capitalism.
Once you realize this is Carchedi’s entire argument, you realize how completely bankrupt post-war Marxism really is.
Carchedi’s argument is not the only expression of this problem. The blog, The Commune, shows how Carchedi’s findings are being welcome within the Marxist school:
“Carchedi has recently argued in the International Socialism Journal that Keynesian measures “cannot end the slump, but they can surely improve Labours Conditions and given the proper perspective, foster the end of Capital” But he fails to inform us how Marxism can be reconciled with Keynesianism, particularly in the light of his demonstration in the same article, with his Marxist multiplier, that the economics of Marx and Keynes are incompatible. But it does not prevent him from speculating that “from a Marxist perspective state induced capital financed distribution and investment policies need not carry the ideological content attached to the word, the community of interests between two fundamental classes”. It seems, Keynesian reformism or looking to the Capitalist state for reforms can be given a Marxist twist. “
The writer complains Carchedi fails to reconcile Marxism with Keynesian policies, but the real subtext is a plea for a proposal on how the Left can avoid the necessary conclusion that state action of any sort cannot have a positive result. If Carchedi’s conclusion is to be accepted, the Left has no choice but to accept that political demands for state action are worse than useless. In this case the Occupy, who resisted advancing any demands, were instinctively correct, and the Marxist camp was wrong.
Further, the alleged distinction between so-called limited reforms and revolutionary demands dissolves into nothing. There are no reforms short of abolition of capital possible, since Carchedi’s argument demonstrates nothing short of getting rid of wage slavery and the profit motivewill do. Moreover, Carchedi’s findings are not limited to the inability of the state to solve the crisis — although the idiot never noticed it — he actually proved the state can only destroy material wealth, it can only consume existing material wealth without replacing it.
This is the point of Carchedi’s essay: even if you could improve the lot of the worker, you would only reduce profits. Once profits are reduced, the crisis intensifies — more workers are thrown out of work. Political demands for state intervention into the economy, therefore, have only the perverse results of destroying the very material wealth activists demand be redistributed. Fighting for reforms only produces reforms, and these reforms only destroy material wealth.
A deep crisis with Marxism
Carchedi’s argument is, therefore, an expression of a deep crisis within Marxism. Marxism is a political critique of capitalism, but politics itself is dead — it cannot in any way improve the lot of the working class. Without politics, Marxism is dead and Carchedi has unknowingly composed its obituary.
There are no demands to be made on the state to address the crisis because the state’s own actions only express the crisis and deepen it. The Left is in the unenviable position, however historically necessary, to embrace Reagan’s argument:
“Government is the problem”
What is destroyed by the state is not so much the means of consumption but the means to produce consumption — labor and capital. The impact of this destruction is doubled by the fact it cripples future consumption as well. So much of today’s labor is diverted from production to unproductive consumption reducing tomorrows consumption. This is the aspect of the problem Carchedi never makes clear because he wants to justify reformist political activity.
Similar to Carchedi, Kliman argues any successful attempt to redistribute income downward will lead to a deepening of the capitalist crisis. However, Kliman is not so stupid as Carchedi and points out the logical result of reformist political action that must only intensify and deepen the crisis.
“If my argument is sound, what are the consequences? Well, under capitalism, a new economic boom requires the restoration of profitability, but downward redistribution of income will reduce profitability. It will therefore tend to destabilize capitalism even further. It might trigger renewed panic in the world’s financial markets, and who knows what will happen then? In this way, or by causing investment spending to fall, downward redistribution could lead to a deep recession, even a depression. And because progressive policies will have failed, again, to make capitalism work better—for itself—the stage will have been set for other people and other ideas to come along and fix the mess. Even fascism might become a serious option, as it was in Europe during the Great Depression.”
(NOTE: With Kliman, as with Marxists in general, fascism is always only a threat waiting in the wings — they can’t admit present political relations are entirely fascistic for the same reason they cannot admit political action is entirely useless: They have no Plan B.)
Kliman has a solution to this dilemma but it doesn’t appear to include openly stating Keynesian policies must be opposed and the state must be abolished:
“Working people need to be prepared to confront the fact that their struggles to protect themselves in the face of the economic slump are not in the system’s interests, and that successful struggle might well set off a virulent reaction.”
(WTF is “the system”? Never mind, I don’t want to know.)
Having decided, like Carchedi, that “the system” will not tolerate an increase in the consumption of the working class, (an observation that is entirely valid BTW), Kliman offers what alternative? In a long passage during which Kliman wrestles with himself and his dilemma, Kliman admits,
“It is one thing to recognize the instability of capitalism, but another to show that an alternative to it is possible.”
He adds,
“It would be disastrous merely to call for socialism while ignoring the problems of mass unemployment and foreclosed homes that may well persist for many years to come. Merely thinking about alternatives to capitalism while ignoring these problems is no solution either.”
Kliman is clearly having a problem here with his own theoretical dead-end: he knows state intervention in the economy doesn’t work but neither does merely demanding socialism. However since he is such a simpleton Marxist academic, he can only think in these two superficially contradictory forms. Still, he argues,
“Yet it is wrong to counterpose thought and activity in this manner. They are not opposites, but go hand-in-hand.”
Which is to say, the theoretical conclusion that there is no alternative to communism and the practical fact that there is no communist alternative go hand in hand. A page or two passes in his book, and still Kliman has no idea how these “not-opposites” facts can actually becomes not-opposites. A few pages later we learn the emancipation of the working class must be its own act — a truth not evident until Kliman told us, I guess. Now drifting helplessly, Kliman tells us we need to figure out how a society can be organized without capitalist relations of production — completely forgetting that is why the reader picked up his book in the first place. Finally, Kliman throws in the towel, stating
“I am painfully aware that these reflections are not yet an answer to the ‘Like what, exactly?’ question.”
Really, Andrew, I am pretty sure you did not experience the pain your readers must feel following this long-winded bullshit. In the end Kliman admits he hasn’t any more clue than Carchedi to the problem posed by the Marxist critique of Keynesian theory:
“Unless and until a credible answer is worked out, it seems to me that the most likely alternatives we face are either full-scale destruction of capital value, or persistent economic sluggishness, mounting debt burdens, and recurrent financial crises and downturns.”
The Marxist fraud
It is almost as if Carchedi, Kliman and the Marxist school were completely unprepared for the results of their own finding. Which, of course, means they never had any idea on measures short of useless demands for FULL COMMUNISM than equally useless demands for Keynesian reforms. This is an indication that the Marxist school has hit bottom and is now lying in the gutter — with Carchedi’s critique of Keynesian theory, Marxism is exposed as a fraud. It never had any answers to the crisis that were not simply a variation of Keynesian economic policy prescriptions.
The previously mentioned blog argues along the lines of Kliman and Carchedi:
“Capitalist accumulation has crisis written into its DNA. To survive there has to be the destruction of capital, so that it can revive itself for another round of accumulation. That means idle machinery, derelict buildings, unused materials, speculative bubbles bursting, high unemployment to lower wages, inefficient capitalists going bankrupt. After all, fiscal stimulus and the New Deal did not bring capitalism out of depression in the 1930’s. It was the material destruction of the second world war, the destruction of capital, and the defeat of the European workers movement by fascism. But despite this, some on the left still argue for a more militant and more full blooded version of Keynesianism advocated by the trade union bureaucracy, which is really nostalgia for the golden age of capitalist prosperity.”
Of course, the argument advanced here assumes even the destruction of capital can lead to revival of capitalism. This is not at all the case. While destruction of capital in this crisis is in theory necessary, there is no actual level of destruction of capital that is sufficient to allow for the revival of capitalism. By definition no amount of capital destruction can revive capitalism after the onset of absolute overaccumulation.
To an extent the lack of a Marxist alternative to fascist state economic policy was concealed by the success of fascist policies. Marxists were relieved of a need to offer an alternative short of communism because the crisis always resolved before the subject came up. But this depression is not going away, Marxist are having to face the fact that Keynes is not a solution to capitalist crisis and they don’t have one. Now that fascist state policies are failing to bring about a recovery, Marxists are being forced to admit they never had an alternative. And they haven’t a clue what an alternative even fucking looks like.
The complete fraudy of Marxism was concealed by the fact they could simply demand redistribution in favor of the working class and quietly ignore the massive destruction of productive capital the fascist state actually employed to recover from the crisis. Now that they have to face their theoretical poverty, they go on and on about the development of ‘antagonistic consciousness” and “workers’ can only emancipate themselves” and every other sort of useless bullshit.
The real problem is that they have been sleeping with the fascists on the pretext there were worse fascist (alternately described as neoliberals, minarchist libertarians, militarists — really take your pick ) lurking in the background. They argued the reduction of wage labor was worse than wage slavery and on par with unemployment. They bought into the argument that the fascist state could increase economic activity, that the distribution of the social product could be changed by government, and that employment could be increased by state spending. They even bought into the bourgeois myth that a reduction in hours of labor could lead to a fall in the consumption of the working class.
As if the activity of the working class had any connection whatsoever to do with the consumption of the working class.
As if it this activity was not aimed solely at the production of a surplus over their consumption.
As if a reduction itself did not have to reduce the mass of surplus value first before it ever touched on the mass of wages.
Surplus value results solely from that portion of the labor day beyond the period the value of the worker’s wages are produced. Reducing hours of labor cannot reduce wages unless it proceeds so far as to reduce necessary labor time.
The cause of capitalist crisis is always capitalism itself
In labor theory these three propositions must be true:
- The resolution of the crisis requires the destruction of capital;
- the capital that must be destroyed is the product of surplus labor time;
- the surplus labor time that produces the capital that has to be destroyed can only be reduced by reducing hours of labor
I really am not sure what is so fucking difficult about this for Marxists to grasp — even assuming they are simpletons. This is not some mysterious formula hidden in the crannies of macroeconomic calculus, it is simple labor theory of value. All the elements of this argument can be grasped without reading beyond the first few chapters of Capital. What amazes me is the some of these folks, like Kliman, actually hold positions in universities and can’t connect the dots. Instead we get pages of nonsense before Kliman finally runs out of ink and is forced to admit: “I am painfully aware that these reflections are not yet an answer to the question.”
Now that Keynesian economic theory has been debunked by Carchedi the real problem for Marxism emerges: In addition to having to define the aim of social emancipation, Marxism is now also confronted by a need to constitute goals short of this. As Kurz explained, Marxism’s fraudulent pose always rested on answering the problem of social emancipation after seizure of state power. The struggle for reforms short of complete emancipation was held to be the path forward, culminating in the seizure of political power. Only once this phase of struggle had been completed, and power lay in the hands of the working class, the real task of emancipation would begin.
With the complete debunking of the Keynesian scam, Marxism is now left without any narrative for the path to political power. And it should be seen precisely as a narrative, since no Marxist ever really had any idea how progressive reforms would produce a revolution. The idea that the struggle for reforms eventually end in revolution was a myth story Marxists told themselves in the absence of a real path. You cannot reform away money-relations, wage labor, commodity production, the machinery of state, etc. The Commune did not reform the state, it abolished it outright. Soviet production did not reform money-relations, the relations were abolished and replaced by a plan.
Some notes on Marxism and social emancipation (2)
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.
Marx explained,
“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.
In which Jehu finds G:D on a rainy Sunday morning, thanks to Andrew Kliman and @BrianGallaghe17
Tweep @BrianGallaghe17 sent me this tweet the other day:
@ReThePeople Kliman interviewed about his new book in which he claims the profitability crisis is from the 70s
So I went to see what Kliman is up to now. In the interview, Kliman makes this statement:
So what we have is a major debt crisis. I don’t think it’s very likely that we’ll have a sustained boom unless and until the debt problem and the deeper, underlying problem – the profitability problem – are resolved. We may have a long period of very weak growth, as Japan has had ever since bubbles in its real-estate and stock markets burst at the start of the 1990s, or we may have something worse. Given the magnitude of the bust in the US construction industry and the magnitude of the recession in general, it would have taken a long time for production and employment to return to pre-recession levels in any case. It’s likely that the persistent debt problems and pessimism about the future have slowed down the recovery, and that they’ll continue to do so. Real gross domestic product in the UK and most other major European countries is still lower than before the recession. And even in countries where that’s not the case, like the US and Germany, GDP growth is still quite slow.
I wondered if in the US case GDP grew at all, much less growing slowly, since 2007. In 2007, GDP was estimated by the BEA at $14.028 trillion versus $15.075 trillion in 2011, an increase of $1 trillion or so in output. As far as Kliman is concerned, that pretty much settles it, because the fascist state says dollars are money, not tokens of money. We can, therefore, assume that these dollars measure “real” economic activity, without more inquiry.
However, Marx said money had to be a commodity — and no matter how much Kliman might trust Washington’s monetary policy, good analysis suggests we should at least check GDP using a commodity money to see if we can confirm Washington’s numbers. In 2007 one ounce of gold fetched a price in the market of $695.39, however by 2011, that same ounce of gold was priced at $1,571.52. So, during the same period that GDP rose 7.5% in nominal dollars, these same dollars depreciated to less than half their former purchasing power against gold.
Now before I read and compared Kurz to Postone, I would have suggested dollar denominated measures of GDP were completely bogus. But, no more — I am reformed, I have seen the light! Thank you Jesus! I have come to the conclusion that, in fact, both are right, Halleluiah!
Can I get an Amen?
Which means, quite oddly, that the US “economy” has both grown and shrunk during the same period 2007 to 2011. So things are a bit more complicated than simply stating the economy grew or shrank during some period of time. By one measure it has grown and this has implications, but by another measure it continues to shrink and this has other implications. If we say it grew, simply because dollar denominated values have increased, we miss that it shrunk in commodity money terms. On the other hand, if we say it shrunk in commodity money terms, we miss the fact that it grew in dollar denominated terms.
We end up dissing either Postone or Kurz, and I kind of like both of them.
It occurred to me while reading the Kliman interview that we need a measure that captured this relationship in terms of the historical trajectory of value. Something along the lines of Marx’s organic composition of value, c:v. This measure would reflect the dollar denominated value of output as a ratio to the commodity money value of this same output.
But how would it be structured as a ratio? Gold to dollars, or dollars to gold? Bourgeois economics places the relation as the dollar price of gold, i.e., the value of gold is measured in some quantity of dollars. This relationship can be expressed as dollars per ounce of gold. This is precisely the question I am interested to know when i am trying to stock my gulch with beans, guns and gold for the coming global apocalypse that threaten civilization itself.
However, Sam Williams and I have suggested the actual relationship is reversed: it is actually some physical quantity of gold per dollar; which is to say, dollars do not denominate the price of gold, gold denominates the price of dollars. I am proud to say I blatantly stole the idea from FOFOA, the Austrian school blogger, where he quotes his mentor, Another:
Another:
Gold! It is the only medium that currencies do not “move thru”. It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say “gold moves thru paper currencies”.
FOFOA:
Dollars bidding on MSFT stock set the value of that stock. If dollars are frantically bidding on MSFT (high velocity), the stock skyrockets. If dollars stop bidding for MSFT all at once (low velocity), the price falls to zero. This is true for everything in the world **except gold**.Gold bids for dollars. If gold stops bidding for dollars (low gold velocity), the price (in gold) of a dollar falls to zero.
And he arrives at the conclusion that:
All Paper is STILL a short position on gold!
Which is to say, fiat currencies do not express the value of gold, but only symbolically represent some magnitude of value denominated in a physical quantity of gold. Employing this method, I think, but I am not sure, that the ratio should be set as G:D — which is a bizarrely pseudo-religious formulation. If we used this to measure the value content of a single dollar, this is how GDP has actually changed since 2000:
That is also the value content of US GDP over the same period. If we look at how the value content of the dollar has fallen since 1970, the results are even more starkly represented.
During this same period, 1970 until 2011, the nominal GDP of the United States has almost increased every year, but the value content of this GDP has fallen for most of that period. This graphically represents the relation between Postone’s and Kurz’s definitions of value as a relation between gold and the dollar. It confirms, I think, the argument of both that the value form, measured in dollar, and the content of this form, measured in gold, have become completely disconnected from one another.
Worthless money as a rational absurdity
INTRODUCTION
For a while now, I have been trying to come to grips with the neoclassical theory of money, which states anything can serve as money and that money doesn’t have to be a commodity. The theory is patently theoretically absurd, contradictory and internally inconsistent as John weeks explains in the paper I discuss in my post. Despite these defects, however, neoclassical money theory not only maintains its dominance in economics, its alternative, commodity money theory, is ridiculed and marginalized even among Marxist theorists.
While reading the John Weeks paper, it began to dawn on me why this is true. I had been spending my effort trying to argue for the superiority of commodity money theory, when I should have been trying to understand the circumstances under which neoclassical money theory made sense. Weeks, in his paper, explains two assumptions which are necessary for neoclassical money theory: 1. the economy has to produce only one composite commodity; and 2. the state must be able to control the money supply.
Weeks thinks both of these conditions make neoclassical money theory wrong, but now I believe he is wrong on this. In the capitalist mode of production, the only true commodity is labor power — the single composite commodity required by neoclassical theory. Moreover, contrary to Weeks’ assertion, the state can control the money supply, if we a speaking of classical commodity money. It need only declare commodity money is not money and replace this money in circulation with its own token, i.e., impose an inconvertible currency in place of gold. This was done in the 1930s in the US and Europe. The state can control the money supply, if by “control” that term includes also setting that supply to zero.
The result was a bit of an epiphany for me, since Weeks is describing how Washington directly manages the US economy as a single giant corporation, despite the economy appearing superficially as numerous separate capitals.
The article was rushed and is in need of serious editing, but I welcome criticism and challenges to this idea.
*****
Weeks tries to make sense of a troubling rejection by neoclassical economic theory to admit to the obvious internal consistency of Marx’s commodity-money theory:
Th[e] theoretical superiority of commodity-based monetary theory has had little practical impact because of a perceived empirical absurdity of the commodity money hypothesis.
I came to my understanding of fascist state issued fiat money based on one closely held idea that neoclassical economics is not irrational, capitalism is. Yes, capitalism is as irrational as it has been declared by Marxists to be, however no one but an idiot would buy into the neoclassical argument unless it made sense in the context of fascist state economic policy. Since capitalism itself is irrational, a rational person looks like an idiot when he buys into its propositions; on the other hand, accepting the irrationality of capitalist relations of production as the basis for formulating fascist state economic policy is rational.
Marxist Academic Error 101: “A term is undefined and has no properties”
As part of my continuing occupation of the Marxist Academy, I have been looking at various Marxist theories of the crisis of neoliberalism. This is the final part of my critique of Andrew Kliman’s “Neoliberalism, Financialization, and the Underlying Crisis of Capitalist Production” (PDF).
*****
As can be seen in the chart above, most bourgeois economists look at fascist state economic data and conclude we are experiencing nothing like the sort of economic event that occurred in the Great Depression. The Great Depression was just that — a depression — while what we are experiencing is perhaps a more severe than normal recession generated in the aftermath of a financial crisis. For the bourgeois economist this description of the situation may or may not be entirely satisfactory.
For anyone attempting to understand the fascist state economic data using Marx’s theory of the capitalist mode of production it is less than worthless — it can turn Marx’s theory into a useless glob of shit that describes nothing — least of all what is occurring within the capitalist mode of production.
Marxist Theories of the Current Crisis: Andrew Kliman and the curious case of the missing Capitalist Boom
Next up in my survey of academic Marxist theories of the current crisis is Kliman’s “Neoliberalism, Financialization, and the Underlying Crisis of Capitalist Production” (PDF).
Kliman’s argument is by far the most interesting explanation for the present crisis I have read so far. Far from seeking to merely explain the present crash, Kliman is essentially asking another and for more provacative question:
“What the fuck happened to the capitalist boom period after the last crisis?”
The Trouble with Marxism (Part Two)
The portion of the labor day that is socially necessary as a percentage of GDP
So, I got feedback from three people who, in one way or another, say they don’t understand my last post on my conversation with Andrew Kliman. One person posting on Reddit, complained it was too dense; another wondered if I was advocating a return to the gold standard; a third person, who I asked to read it and give me feedback, began to have difficulty with it about halfway through it. Specifically that person had difficulty understanding my discussion of the “transformation problem”.
This is three more examples of my “tin-ear”, which expressed itself in my disagreement with Andrew. I have not been able to explain “my point” in a way that is not abstract, or explain the relevancy of the various statements I make to real events within society. Part of this is because I am a “Marxist” in the same way I could be considered a “Darwinist” — I am not an expert on either. The theory makes sense to me, and I accept it as a reasonable explanation for how the world works.
But, if someone argued a eugenics distortion of Darwin, I could not argue against that person by quoting Darwin. And, if someone argued a Keynesian distortion of Marx, I probably could not argue back using quotes from Marx. Until recently I was more a leninist than a “Marxist”; having read a lot of Lenin, but little more of Marx himself than the Communist Manifesto. And, neither of them had I read for more than two decades.
The Trouble with Marxism (Part One)
Well, I have just about had enough of my conversation with The Andrew Kliman, so I thought I would try to assess what it accomplished instead.
My ‘tin-ear’ with Andrew began after a conversation with @skepoet on twitter about the odd divergence between gold and dollar measures of economic activity since the Great Depression of the 1930s. The dollar measure of US GDP has risen almost uninterrupted since the end of the contraction phase of the Great Depression; while the gold measure of GDP rose from 1934 to 1971, then fell until 1980, rose again from 1980 to 2001, and has been falling since.
Interesting enough, the gold measure of GDP exhibits a classic pattern of boom and bust typical of the economy prior to the Great Depression, but the dollar measure of GDP shows an almost disturbingly smooth continuous upward sweep, until the most recent difficulties of 2008. What I find most interesting about the two measures of economic activity is that, until 1933, both gold and the dollar measures of GDP exhibited the same behavior. However, this identical pattern broke down in 1934.
What accounts for this sudden divergence?
Re: The People 
Jehu’s disgusting diatribe
by Anne Jaclard, Organizational Secretary, Marxist-Humanist Initiative
Jehu’s disgusting diatribe thoroughly misrepresents Kliman and Marxist-Humanist Initiative. Moreover, he neglected to cite the publication in which the article in question originally appeared, Marxist-Humanist Initiative’s web journal, “With Sober Senses” http://www.marxisthumanistinitiative.org/our-publication (so did Libcom, which is what he cited). By violating our re-publication policy, he deprived readers of an opportunity to examine our site and to judge for themselves if his charges against us are true.
The URL of the article is http://www.marxisthumanistinitiative.org/alternatives-to-capital/the-make-believe-world-of-david-graeber.html
If he has any thoughtful readers, they may be interested in the discussion taking place in the comments that follow the article. Those do much to articulate and to clear up some misconceptions about it, including some people’s initial difficulty in understanding how one can critique Graeber’s theory and support the Occupy Movement.
His serious accusation against Marxist-Humanism of being one-sidedly concerned with theory and not practice is untrue. A cursory glance at our website will show some of the movements we have been involved in and support, including Occupy Wall Street, international solidarity work, strike support, and many more. One can also see discussions of Raya Dunayevksaya’s philosophy, which is based in a developing interrelationship between theory and practice; in fact, her concept of “a movement from practice that is itself a form of theory,” articulated 60 years ago, has been copied by many spontaneists ever since. If we talk about theory a lot, that’s because what she called “the movement from theory” has not received the same attention, and that failure is holding back the development of mass movements. One need only observe today’s activists repeating the failures of the 1960s and 70s by thinking that more and more activity will get us to a revolution without the need for a new interrelationship with Marx’s philosophy of human liberation.
Jehu’s personal attacks on Kliman are completely inappropriate to reasoned discussion. Taking one small example: does it turn Jehu into a man of the people to keep calling Kliman “professor,” a designation Kliman doesn’t use outside of academic settings? Kliman teaches for a living because he has to earn a living; maybe Jehu doesn’t work because he is independently wealthy, who knows? How come Jehu doesn’t call Ollman and Zizek “professor”? Should we judge people’s ideas by their occupations, and rule out all ideas from people who teach college for a living? Or is the real message simply the virtues of anti-intellectualism?
Here are just a few of Jehu’s misrepresentations:
· Kliman does not say that the Occupy movement failed.
· It is incorrect to claim that the movement, even OWS in NYC, chose Graeber as their leader or appointed him to anything.
· MHI does not and Kliman does not have anything in common with the straw man position that people “are hopelessly retarded children who must be led by a self-annointed vanguard sufficiently theoretically developed to uncover the path mankind must take to freedom” and “proles are imbeciles incapable of discovering their own wants.”
· Marx did not argue that the Communards “were already this new social organization of society themselves.” He said that the Commune was “the *political* form at last discovered under which to work out the *economical emancipation* of labor.” There’s a world of difference between these statements.