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Deconstructing the main thesis of Andrew Kliman’s “The Failure of Capitalist Production”

December 22, 2012 3 comments

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)

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:

  1. 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;
  2. US trade deficits open up and widen;
  3. the US federal budget deficits also widen;
  4. 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.

Guglielmo Carchedi’s bad advice for activists

December 16, 2012 Leave a comment

kelley

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.)

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CLUELESS: QE to Infinity, or How national currencies die

November 16, 2012 Leave a comment

Based on what I have described of Bernanke’s policy failure so far, is it possible to predict anything about the future results of  an open ended purchase of financial assets under QE3? I think so, and I share why in this last part of this series.

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CLUELESS: Bernanke’s desperate gambit

November 14, 2012 2 comments

I stopped my examination of Bernanke’s approach to this crisis and the problem of deflation after looking at his 1991 paper and his speech in 2002. I now want to return to that series, examining two of his speeches this to discuss the problems confronting bourgeois monetary policy in the crisis that began in 2007-8.

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CLUELESS: “Deflation is bad. M’kay?”

October 21, 2012 Leave a comment

The world market had been shaken by a series of financial crises, and the economy of Japan had fallen into a persistent deflationary state, When Ben Bernanke gave his 2002 speech before the National Economists Club, “Deflation: Making Sure “It” Doesn’t Happen Here”. Bernanke was going to explain to his audience filled with some of the most important economists in the nation why, despite the empirical data to the contrary, the US was not going to end up like Japan.

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CLUELESS: How Ben Bernanke is managing the demise of capitalism

October 17, 2012 Leave a comment

So I am spending a week or so trying to understand Ben Bernanke’s approach to this crisis based on three sources from his works.

In this part, the source is an essay published in 1991: “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison”. In this 1991 paper, Bernanke tries to explain the causes of the Great Depression employing the “quantity theory of money” fallacy. So we get a chance to see this argument in an historical perspective and compare it with a real time application of Marx’s argument on the causes of capitalist crisis as understood by Henryk Grossman in his work, The Law of Accumulation and Breakdown.

In the second part, the source is Bernanke’s 2002 speech before the National Economists Club: “Deflation: Making Sure “It” Doesn’t Happen Here”. In this 2002 speech, Bernanke is directly addressing the real time threat of deflation produced by the 2001 onset of the present depression. So we get to compare it with the argument made by Robert Kurz in his 1995 essay, “The Apotheosis of Money”.

In part three, the source will be Bernanke’s recent speech before the International Monetary Fund meeting in Tokyo, Japan earlier this month, “U.S. Monetary Policy and International Implications”, in which Bernanke looks back on several years of managing global capitalism through the period beginning with the financial crisis, and tries to explain his results.

To provide historical context for my examination, I am assuming Bernanke’s discussion generally coincides with the period beginning with capitalist breakdown in the 1930s until its final collapse (hopefully) in the not too distant future. We are, therefore, looking at the period of capitalism decline and collapse through the ideas of an academic. Which is to say we get the chance to see how deflation appears in the eyes of someone who sees capitalist relations of production, “in a purely economic way — i.e., from the bourgeois point of view, within the limitations of capitalist understanding, from the standpoint of capitalist production itself…”

This perspective is necessary, because the analysis Bernanke brings to this discussion exhibits all the signs of fundamental misapprehension of the way capitalism works — a quite astonishing conclusion given that he is tasked presently with managing the monetary policy of a global empire.

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The Postone-Kurz synthetic model of value and the transformation problem versus SKYNET

October 3, 2012 8 comments

An explanation of capitalist prices or an explication of capitalist trajectory

I spent a sleepless night this week because it suddenly occurred to me that a synthesis of Postone’s and Kurz models of value is actually predicted by Marx’s transformation equation. If I had any competence in math, I could show why Marx is correctly accused of being “inconsistent” about the transformation of values into prices in the same way quantum mechanics is “inconsistent” in its description of the electron or photon.

Briefly stated when Postone’s definition of value is identical with Kurz’s definition of value; the sum of prices equals the sum of values and the sum of profits equal the sum of surplus value — and the condition for these three is the same: the rate of profit = 0.

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Reply to @sushi_goat: How does reducing hours of labor work?

September 28, 2012 11 comments

Tweep @sushi_goat asked me a series of questions regarding reducing hours of labor yesterday. I made a stab at it, but I want to give a fuller answer here.

My argument on the impact of a shorter work week on “the economy” is based on Postone’s and Kurz’s analysis of superfluous labor. In his magnificent book, “Time labor and Social Domination”, Postone showed that superfluous labor is a necessary result of late capitalism and includes labor time that is necessary from the standpoint of the capitalist mode of production but superfluous from a higher mode of production. To call labor superfluous therefore does not imply that it appears empirically in this form within the capitalist mode of production itself. Within the capitalist mode of production this superfluous labor appears to be necessary.

In his own groundbreaking essay, “The Apotheosis of Money“, Kurz further defined this category from the standpoint of a theory of capitalist circulation as a whole. While he enumerated how this form appears in the form of many particular and obvious types of labor time, his real contribution was to nail down its implications for the capitalist mode of production. What Kurz showed is that this superfluous labor time consists in the production of values that do not reenter the capitalist reproduction process. To give an example: the production of an ear of corn is the production of a value; but if the corn is not consumed by a worker productively employed in the capitalist production process, it cannot reenter capitalist self-valorization. The corn could be eaten by a soldier, but the soldier as living labor does not replace the ear of corn in the capitalist production process, thus the value is consumed unproductively.

Unfortunately, what Postone has not done (yet?) nor Kurz before his death is extend this analysis to the category of Marx’s organic composition of capital. If this had been done, I think it would have yielded very important results regarding the significance of their ideas.

First we begin with three important formulas in Marx’s theory:

1. c:v, or the organic composition of capital. This is the ratio of constant capital (c) necessary to set in motion a given quantity of living labor (v). In Marx’s theory, this ratio is always increasing.

2. s/v, or the ratio of newly produced surplus value (s) to the mass of living labor expended in its production (v).

3. s/(c+v), or Marx’s formula for profit, expressed as the ratio of newly produced surplus value (s) to the mass of constant capital used up in production (c) and the mass of living labor expended in this production (v).

For the purpose of analysis, I assume the total labor time of society can be divided into a mass of productively expended labor time (Vp) plus a mass of unproductively expended labor time (Vu). In other words, let the mass of the total labor time of society be represented by V, this total labor time can be further divided into productively employed labor time (Vp) and Postone’s and Kurz’s unproductively employed labor time (Vu)

On this basis the total labor time of society can be represented by the equation

4. V = Vp+Vu

Again on this assumption, the organic composition of capital (C:V), can be further defined as:

5. C:(Vp+Vu)

The problem here is that in Marx theory the organic composition of capital can only refer to capital’s self-expansion, which implies all labor is employed productively. So, the formula, C:(Vp+Vu), must be understood only as the prospective (or fictitious) organic composition of capital. Which is to say, this formula applies only to how the organic composition must appear, consistent with capitalist relations of production.

In this formula, however, it appears the expenditure of unproductive labor time reduces the organic composition of capital — as several writers have asserted, most notably Chris Harman, who argued:

“There is a vicious circle. Reactions by individual firms and states to the falling rate of profit have the effect of further reducing the resources available for productive accumulation. [47]

“But the effect of unproductive expenditures is not only to lower the rate of profit. It can also reduce upward pressure on the organic composition of capital. This was an insight used by Michael Kidron to explain the “positive” impact of massive arms spending on the system in the post-war decades. He saw it, like luxury consumption by the ruling class and its hangers-on, as having a beneficial side-effect for those running the system – at least for a time.

“Labour which is “wasted”, he argued, cannot add to the pressure for accumulation to be ever more capital intensive. Value which would otherwise go into raising the ratio of means of production to workers is siphoned out of the system. Accumulation is slower, but it continues at a steady pace, like the tortoise racing the hare in Aesop’s fable. Profit rates are weighed down by the waste, but do not face a sudden thrust into the depths from a rapid acceleration of the capital-labour ratio.”

In fact, this was complete nonsense. The organic composition of capital is not affected by the growth of superfluous labor time. So-called “economic growth” appears to stagnate not because superfluous labor makes capital less productive, but because the increase in the productive capacity of labor requires increasing quantities of unproductive labor time.

In the capitalist mode of production Vp+Vu can only appear as V — which is to say as abstract homogenous labor in general. It cannot, under any circumstances appear as discrete quantities of qualitatively differentiated labors Vp and Vu. On the other hand, only productive labor can produce surplus value; unproductive labor as Kurz argues, does not produce surplus value but only mediates its distribution. This has implications for my analysis.

Since, Vp+Vu can only appears as V, it would appear that a reduction of labor hours imposed on capital must result in a proportional reduction of both productive and unproductive labor. For instance, it would appear reducing hours of labor from 40 to 24 would have an equal impact both on General Motors and Federal employment. In fact, this cannot happen: General Motors as a productive capital produces surplus value that is distributed as the profit of GM and state expenditures. Given this, the effect of reducing hours of labor must have a greater impact on the state, or a defense contractor, than it has on productively employed capital.

Why? If we plug our substitute for V into Marx’s formula for surplus value, it might become clearer:

The formula 2. s/v becomes:

6. s/(Vp+Vu)

In this case, only Vp produces the surplus value shared between both sectors Vp+Vu.

And the formula for profit s/v+c becomes

7. s/c+(Vp+Vu)

Since the aim of capital is self-expansion, and, therefore, of the production of surplus value, this has implications for the impact a reduction of hours has on the mode of production. Labor time Vu produces no surplus value, although it will mediate the distribution of the surplus value produced by Vp. The reduction of total hours of labor will not have a proportional impact on the two mass of labor time, Vp and Vu, but a disproportional impact — reducing the relative proportion of labor time, Vu against Vp.

This is because, 1. a reduction of labor time Vp, reduces the mass of surplus value, and therefore, the mass of s in the formula for profit, s/c+v; while, 2. the reduction of labor time Vu, has no impact on the mass of surplus value, and, therefore, no impact on the mass of s in the formula for profit, s/c+v. On the other hand, the increase in the mass of labor time expended productively (Vp) will increase the mass of surplus value s, while the increase in the mass of unproductively expended labor time (Vu) will not.

The distribution of the mass of profit produced by productively employed capitals is, in part, settled by competition between the class of owners of capital. Under conditions of a general and comprehensive reduction of hours of labor, productively employed capital can increase their profits by reducing the expenditure of labor in unproductive forms, such as the state sector. While the state is incapable of increasing itself, by increasing its unproductive consumption of the surplus value produce by productively employed capital, i.e., by raising taxes or borrowing.

In the first place, a general and comprehensive reduction of hours of work — e.g., from 40 to 24 hours — must result in a reduction first of the state sector. In the second place, it must result in massive shift of the employment of labor from unproductive capitals (e.g., finance) to productive capitals. The losers in such a reduction would be first the state, second those capitals producing for the state (defense contractors) and financing it (Wall St.). By contrast, the productive employment of capital becomes more profitable, although the actual quantity of surplus value produced is smaller. Although less actual surplus value is produced, less also has to be shared with a mass of unproductive capitals and the bloated state.

This must increase demand for the productive employment of labor power, along with an increase in the wages. The rise in wages would in turn force productively employed capitals to further rationalize expenditures of labor through methods that improve the productivity of labor. Although employment is rising, along with wages, the actual improvement of the productivity of labor compels the further reduction of hours. In this way, there is both a rapid increase in the material living standards of the mass of society and more disposable time.

Reducing hours of labor not only means free disposable time for the mass of society, it pays for itself by compelling capital to revolutionize the labor process and increase the efficient employment of existing labor power. In Capital somewhere, Marx argues the capitalist class is, historically speaking, only the stewards of the total capital, who used their position to the disadvantage of the mass of society. This might not have been obvious in his day, but with the professional class of managers who have since arisen and now shuttle between Washington and Wall Street, and the resulting division of ownership from effective control of capital, it is clear this is all that class ever was. Paris Hilton’s family has long since retired to the vocation of coupon-clipping, while her functions have been assumed by these parasites.

For this reason, I think the most fanatical opponent to reducing hours of labor will be the state itself, and, in second place, the managers of the capitalist firms directly dependent on the state. Reducing hours of labor cannot be thought of as a political demand; it is, rather, a textbook example of what Kurz called antipolitics.

The key thing to understand here is that with Postone and Kurz we get two entirely antithetical forms of labor time that result in two contradictory definitions of value.

Marxists have yet to integrate Postone’s and Kurz arguments into an updated analysis of capital in the tradition of Marx reflecting post-war capitalism, although both arguments rest directly on Marx’s own analysis. It makes it difficult, if not impossible, therefore, to convince Marxists of the significance of a demand for reduction in hours of labor.

This provides with a practical route to what Kurz called the internal breach in the capitalist mode of production itself:

Where and how to begin, within the existing capitalist form of socialization which rules over all reproduction, with the intention of finding in the latter, so to speak, an internal breach and to break free of it, to take the first step, to point out a formulable beginning for social emancipation?

Clearly, this crisis presents us with a mass of unemployed workers, who are having great difficulty finding work in the advanced countries, side-by-side with a regime of austerity that only promises to intensify unemployment. If this breach can be exploited by a concerted call on the Left for a reduction in hours of labor, the stage may be set for a series of events carrying all of society beyond this historical phase.

The Democrats’ meltdown moment — what will progressives do?

December 10, 2010 Leave a comment

Permit me to offer a prediction. Despite the temper tantrum in the House yesterday, it will pass something similar to the agreement made between President Obama and the Party of Wall Street.

Let’s look at the ugly reality in cold hard terms: The House Democrats are split, the Senate Democrats are incapable of passing any legislation that does not have the support, or at least acquiescence, of several Republicans, and the President is moving to make a separate accommodation with the GOP — because he has to. Add to this: passing something now that is capable of also passing the Senate is the only option House Democrats have to put their stamp on this legislation, since, come January, they will have no leverage and Senate Democrats will be even weaker and more disorganized.

Do I have all of this right?

That leaves progressives out in the cold, in the middle of what is likely to be a harsh winter for the 99ers, the public unions, and just about everyone without a private island in the Caribbean.

If progressives refused to see the writing on the Wall Street during the health insurance reform debate, a sober assessment of their prospects now is absolutely necessary: You were always the enemy!

Nobody in Washington wanted Obama’s supporters to come rolling into Washington, hopped up on that “hopey-changey stuff”, to dismantle the unholy intersection between Washington policy and Wall Street bankster mafia interests.

As the organizers of the December 16 rally state, the Obama administration and the Democrat mainstream:

… has advanced repeated assaults on the New Deal safety net (including the previously sacrosanct Social Security trust fund), jettisoned any hope for substantive health care reform, attacked civil rights and environmental protections, and expanded a massive bailout further enriching an already bloated financial services and insurance industry. It has continued the occupation of Iraq and expanded the war in Afghanistan as well as our government’s covert and overt wars in South Asia and around the globe.

Along the way, the Obama administration, which referred to its left detractors as “f***ing retarded” individuals that required “drug testing,” stepped up the prosecution of federal war crime whistleblowers, and unleashed the FBI on those protesting the escalation of an insane war.

Obama’s recent announcement of a federal worker pay freeze is cynical, mean-spirited “deficit-reduction theater”. Slashing Bush’s plutocratic tax cuts would have made a much more significant contribution to deficit reduction but all signs are that the “progressive” president will cave to Republican demands for the preservation of George W. Bush’s tax breaks for the wealthy Few. Instead Obama’s tax cut plan would raise taxes for the poorest people in our country.

The election of Obama has not galvanized protest movements. To the contrary, it has depressed and undermined them, with the White House playing an active role in the discouragement and suppression of dissent – with disastrous consequences. The almost complete absence of protest from the left has emboldened the most right-wing elements inside and outside of the Obama administration to pursue and act on an ever more extreme agenda.

You went to Washington to dismantle an empire, and ended up fighting for deliberately crafted Trojan Horse wedge issues like whether gays qualified to expand it, or whether foreign born youth could join in its bloody imposition. You went to Washington to dismantle the unholy intersection, but were offered entertaining sound bites ridiculing Sarah Palin until you found yourself politically kettled and isolated.

Quite frankly, you were played.

If you are going to stop being played, you’re going to need some issue to address this crisis that does not end up being a compromise between giving the unemployed 300 dollars a week in return for a second private island for billionaires.

I urge you, once again, to stand for real change — reducing hours of work to 32 hours to start — so we can bring the unemployed back into the economy and rescue millions of youth from their endless confinement to the purgatory of having never held a job and no prospects for one.

When you go to the December 16 rally — and, we think you should — you should be raising the single issue that will get Wall Street’s attention:

32 Hours of Work and no more!

Tax cuts for the rich?: the endless debate

December 9, 2010 1 comment

There is an ongoing argument between the Left and the Right which can be summed up thus:

Tax Cuts Do Not Work

and, its opposite:

Tax Increases Do Not Work

Tony Wikrent makes a powerful argument for the Left in his post, The Obama tax deal with Republicans is insane:

The central premise of U.S. economic policy since the election of Ronald Reagan in 1980 has been that the people in the private sector who know how to invest – the rich – do a much better job allocating society’s financial resources than the federal government. In fact, Reagan told us in his first inaugural address, “government is the problem.”

In order to get as much of society’s financial resources into the hands of the rich – the people in the private sector who supposedly would do a better job investing it – Reagan, the Republican Party, and American conservatives in general developed a simple-minded faith in tax cuts, especially in reducing taxes on the highest incomes.

What are the results of this thirty year experiment low taxes? The Reagan / Republican / conservative theory DOES NOT WORK. For the first time in American history, we now have a generation that has less education and worse economic prospects than their parents did thirty years ago.

In all the hub-bub and brou-hah-hah of the tax debate the past few days, weeks, and months, hardly anyone has put forward the clear and unambiguous information that

TAX

CUTS

DO

NOT

WORK.

The definition of “work” is, of course, subtly redefined by each side in the debate, as would be expected, since the object of the debate is to obscure rather than enlighten. By the same token, measurement of “work” requires some consistent standard, but this is an ideological debate, not a scientific one, so each side also has its own set of measures by which it judges “work”.

However, both sides agree that they are talking about The Economy, which is to say, both sides are talking about capital – a distinct set of social and material relations among the members of society that are established between these members through their activity. So, in some sense, by “work” we can deduce each side is asking the question:

“Which policy makes capital work better as capital: tax cuts or tax increases?”

As with any argument of this sort, the answer is undefined. Under certain circumstances, tax cuts will make capital work better as capital. And, there are certain circumstances where tax cuts will make capital work less well as capital. There are also circumstances where tax increases will make capital work better as capital, as well as the reverse.

Finally, there is a circumstance where neither cuts nor increases will have an effect on capital. We are in that circumstance now.

Since capital is a very complex social organism with its own historical trajectory there is no hard and fast rule on what will be most conducive to its operation at any given time. It is not possible, for instance, to draw any hard or fast rule about the usefulness of tax cuts for the very wealthy by examining the economic policy of the Reagan or Clinton Presidencies. The Reagan Presidency began just as the nation was emerging from the severe depression of the 1970s, while the Clinton Presidency covered the peak period of that same expansion.

The Bush II Presidency began just as the peak expansion came to an end, resulting in a depression that, so far, has lasted from 2001 to the present. By the time Barack Obama took office, not only was the world market firmly gripped by this depression, but the very mechanisms of economic management — fiscal and monetary policy — had broken down in the ruin of the Great Financial Crisis.

The GFC is a rather unprecedented set of circumstances precisely because the entire structure of modern society now rests on the capacity of the State to counter the capitalist breakdown by managing the continuous expansion of superfluous labor. This superfluous labor is most familiar and obvious to us when it takes the form of Minsky’s Ponzi debt growth, but that is only its monetary expression.

Suppose, we zeroed out taxes for the entire top five percent of society, federal, state, and local (we might argue, as the Right do,  that they already perform an incalculable service to society by employing the bottom 95 percent), would this make capital work better as capital? I would argue, “No.” Capital would continue to operate pretty much as it does. Likewise, were we to zero out the taxes of the bottom 95 percent (we might argue, as the Left do,  that those who make more should pay more), and levy taxes solely against the top five percent, capital working as capital would be unchanged.

The reason for my conclusion is that capital working as capital is no more than a tiny slice of the wealth in society — it is only that portion that is actually put into circulation as self-expanding value — that is, productively employed labor. The reason why government economic policy became so important to the economy was not to increase the productive employment of labor, but to manage and grow the massive expenditure of superfluous, or unproductive labor.

The severe damage to government management of the economy using fiscal tools like tax cuts or increases, which was caused by the Great Financial Crisis, has hurt the productive employment of labor (capital) only because the constant expansion of unproductive employment of labor is the fundamental condition for capital’s operation.

To put this another way: it take so little productive employment to produce everything we need, that only by employing the vast majority of people unproductively can they acquire the wages to buy it.

And tax policy won’t fix this.