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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.
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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.
My May Day Post: The Marxist Academy and the Myth of “Working Class Consciousness”
This May Day, as in all previous May Days going back almost to its establishment, will be marked by the indifference of the working class, at least in the United States, to its arrival. The odd thing about this is that May Day was born here in the United States as an expression of working class power and its determined struggle for the reduction in hours of labor. Yet here, more than in any other country, it passes almost unnoticed by the very class that created it through its own independent power. That it should be met with indifference here in the country of its birth is a paradox that requires explaining — if for no other reason than it points to a fundamentally troubling aspect of communist theory in its orthodox Marxist and anarchist variants: the apparent failure of the working class to rise to its historical mission as gravedigger of capitalism, to acquire what is commonly referred to as a class consciousness.
Part of this paradox can be explained by visiting a paper recently published by Alberto Toscano on the problem posed by Post-Workerism interpretations of Marx’s and Engels’ argument in which a worker, Nanni Balestrini, complains:
Once I went to May Day. I never got workers’ festivities. The day of work, are you kidding? The day of workers celebrating themselves. I never got it into my head what workers’ day or the day of work meant. I never got it into my head why work should be celebrated. But when I wasn’t working I didn’t know what the fuck to do. Because I was a worker, that is someone who spent most of their day in the factory. And in the time left over I could only rest for the next day. But that May Day on a whim I went to listen to some guy’s speech because I didn’t know him.
As I stated in a recent interview:
What I find interesting about this quote is that, obviously, May Day does not “celebrate work”, but celebrates a victory in the working class’s struggle for a reduction of hours of labor. What began as a celebration of a victory marking a step toward the abolition of labor became, over time, redefined as the celebration of the thing to be abolished, labor. But what is equally interesting about the quote is that the worker quoted, while apparently ignorant of this history, recognizes the idiocy of celebrating wage slavery. Even without realizing it, the worker reestablishes the original significance of the day.
This is an observation that seems lost on the critics of the Occupy and Tea Party movements.
Cat Brain at Work: How Chris Harman explains the “Marxist theory of stagnation”
As part of my continuing occupation of the Marxist Academy, I have been looking at various Marxist theories of the crisis of neoliberalism. I am now reading the late Chris Harman’s “The rate of profit and the world today”, written in 2007, just prior to the big crash. This is part two of my examination.
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Before we go any further, let me reiterate one thing: In Marx’s theory, the law of the falling rate of profit is not expressed in “stagnation of economic growth” directly or indirectly. The so-called “stagnation thesis” appears no where in the body of Karl Marx’s works on the capitalist mode of production spanning more than 40 years. Nor does it appear in any of Frederick Engels works on the same subject spanning nearly fifty-five years. It is not even an indirect result of the laws of motion of the capitalist mode of production. Moreover, in addition to the idea of “stagnation“, no Marxist can point to a single reference in the collective body of work by these two writers — together amounting to a century of research and publication — where either the terms “financialization” or “globalization” appear.
So, why the fuck are Marxist academics trying to explain these nonexistent phenomena? I think the answer to that question is simple: they are trying to explain stagnation, financialization and globalization because they can’t explain this:
Chasing Unicorns: Chris Harman and the “Marxist theory of stagnation”
"Friesian Unicorn" by Katrina Lasky
As part of my continuing occupation of the Marxist Academy, I have been looking at various Marxist theories of the crisis of neoliberalism. I am now reading the late Chris Harman’s “The rate of profit and the world today”, written in 2007, just prior to the big crash.
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Harman appears to be one of a group of the influential Marxist thinkers in the last quarter of the 20th Century, and especially the period leading to this crisis, who helped refocus Marxist academic attention to Marx’s rate of profit theory. In this paper, to some extent an outline of his book, published in 2009, on the same topic in the middle of the crash, Harman presents the result of his research on the rate of profit and offers some ideas to explain his findings.
In Harman’s view Marx’s argument that the rate of profit falls over the life of capitalism has far reaching implications because it argues capitalist crises result, not from some sort of failure in the mode of production, but from its successes:
The very success of capitalism at accumulating leads to problems for further accumulation. Crisis is the inevitable outcome, as capitalists in key sections of the economy no longer have a rate of profit sufficient to cover their investments. And the greater the scale of past accumulation, the deeper the crises will be.
For some reason Harman does not follow up on this very interesting argument — if in fact capitalism’s crises are not a sign of failure but a sign of success, this indicates capitalist crises themselves should not be the focus of attention when studying the mode of production.
Crises are no more than a interval during which the mode of production resolves the contradictions produced by its previous successes. As such, these crises cannot be the reason why Marx labeled the mode of production a relative, historically limited, form of development. While the recurrent crises of increasing scale demand our attention because they momentarily bring economic activity to a near standstill these crises in no way are the source of processes leading Marx to his conclusion regarding the fate of the mode of production.
The conclusion resulting from this realization are pretty staggering: for all of its social consequences, the depression of 2001 is not the harbinger of the demise of capitalism, but an interval during which the mode of production prepares for its further expansion. This may explain why Marxists, when looking at the recurrent explosions of capitalism, see no reason why they cannot continue indefinitely.
They are looking at the wrong thing.
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).
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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.
Theories of the Current Crisis: David Harvey and the Left’s search for a new master
I have been reading David Harvey’s “Organizing for the Anti-Capitalist Transition” (2010). Harvey’s theory of the current crisis differs somewhat from the other Marxists I have been following. I actually rather enjoyed reading Harvey because he is simple to read without being simplistic like Wolff’s and Resnick’s piece. Harvey gave this originally as a talk to the World Social Forum in 2010,
Harvey opens his talk by stating boldly:
The historical geography of capitalist development is at a key inflexion point in which the geographical configurations of power are rapidly shifting at the very moment when the temporal dynamic is facing very serious constraints. Three percent compound growth (generally considered the minimum satisfactory growth rate for a healthy capitalist economy) is becoming less and less feasible to sustain without resort to all manner of fictions (such as those that have characterized asset markets and financial affairs over the last two decades). There are good reasons to believe that there is no alternative to a new global order of governance that will eventually have to manage the transition to a zero growth economy.
I liked his argument here, but, I think, he could have clarified things by explaining what he meant by “three percent compound growth…” Growth is one of those terms from bourgeois economics that has been adopted into the lexicon of Marxism as a category without critical examination. When Harvey then proposes that “compound growth” must sooner or later give way to “zero growth”, he unwittingly injures his own argument.
Theories of the Current Crisis: Saad-Filho and the “Crisis in Neoliberalism”
There is a lot of material out there produced by Marxists trying to get their head around Neoliberalism and its role in the current crisis. So as part of my Occupy the Marxist Academy I am going to do a few posts on it.
First up: Alfredo Saad-Filho’s “Neoliberalism in Crisis: A Marxist Analysis”, which can be found here. Saad-Filho argues Neoliberalism is not simply an ideology or a set of policies, but the “current configuration” of capitalist accumulation. In particular, Neoliberalism is a response to the “structural problems of capitalist reproduction after the displacement of Keynesianism”.
#OtMA: Wolff’s and Resnick’s “Marxian Interpretation” of the Crisis
I have been contemplating these two paragraphs for a week now, because they seem to me to sum up the disconnect between Academic Marxism and the actual problems facing the working class today. The quote is taken from an article written by Richard Wolff and Stephen Resnick in 2010, titled “The Economic Crisis: A Marxian Interpretation”.
Indeed, the repeated oscillations between the two theories and their associate policy prescriptions emerge also from a fundamental perspective both sides share. They largely agree that the market system is the best of all known mechanisms to allocate resources efficiently. Many would add that markets also allocate resources equitably. They claim that fully competitive markets enable those who contribute to wealth production to receive rewards (incomes) exactly equal to the size of their contribution. Where the two sides differ is in how to insulate and protect the market system from the criticisms and movements for state economic interventions that flow from citizens who suffer from the economy’s recurring recessions and inflations. Against the criticism and movement, one side argues to ‘‘leave the market alone so that it can find its way to a new, efficient, and just solution.’’ ‘‘No,’’ says the other. ‘‘We need state intervention to help guide the market’s search for a new and efficient solution.’’ Capitalism-defined as private enterprise and free markets-remains the optimum system for both sides in terms of wealth creation and social welfare.
Both sides thus share a profound conservatism vis-a`-vis capitalism, despite holding radically different views on the need for state intervention. The oscillation between them serves their shared conservatism. It prevents crises in capitalism from becoming crises of capitalism, when the system itself is placed in question. It does this by shaping and containing the public debate provoked by crisis-caused social suffering. When serious crises hit a deregulated capitalism, the two sides debate whether the solution is regulation or letting the system heal itself. When serious crises hit a regulated capitalism, the two sides debate whether the solution is deregulation or more or different regulation. This effectively keeps from public debate any serious consideration of an alternative solution to capitalism’s recurring crises: namely, transition to an economic system other than and different from capitalism.
The argument Wolff and Resnick are making is not particularly original; in fact it simply repeats, without any critical analysis, the received wisdom of the two alleged competing views of fascist state economic policy — Keynesian and neoclassical — regarding their policy differences. The Keynesian school wants to regulate the economy, while the neoclassical wants to deregulate it. The neoclassical school wants to leave the market alone, while the Keynesian school wants the state to intervene in the market.
Wolff and Resnick then tell us that the two schools share a common belief in “private enterprise and free markets”, that makes them conservative capitalist alternatives, because they prevent crises from developing to the point where “the system itself is placed in question”, “by shaping and containing the public debate provoked by crisis-caused social suffering”.
Frankly, I don’t know what to make of this “Marxian interpretation” of the division within fascist state economic policy pundits.
First, even if Wolff and Resnick were correct that there is indeed two wings within fascist state economic policy pundits, it is not at all clear to me that these differences amount to “Regulate, regulate” versus “Deregulate, deregulate”. Wolff and Resnick never even bother to discuss whether there even is “private enterprise and free markets”.
Second, Wolff and Resnick argue these differences play merely an ideological function of containing the debate in society within certain tolerable limits. Their argument seems to suggest the point of the division itself is to serve as a safety valve that allows dissent from placing the “system” in question by redirecting public debate. Are there really no policy differences of material significance between the two schools? Is the debate over fascist state policy really all just misdirection?
Third, the last question gets to the heart of what is wrong with this “Marxian interpretation”: Wolff and Resnick offer an argument of sorts the explains the prescription differences within fascist state economic policy, but it does not explain fascist state economic policy itself. Why is there fascist state economic policy? Why was it necessary for the state to undertake a more or less continuous intervention in the economy since the Great Depression?
By contrast, Engels, speaking from the grave fully fifty years before the state undertook this continuous intervention in the economy, described it as the inevitable result of the working out of the historical materialist law of value:
In any case, with trusts or without, the official representative of capitalist society — the state — will ultimately have to undertake the direction of production. This necessity for conversion into State property is felt first in the great institutions for intercourse and communication — the post office, the telegraphs, the railways.
If the crises demonstrate the incapacity of the bourgeoisie for managing any longer modern productive forces, the transformation of the great establishments for production and distribution into joint-stock companies, trusts, and State property, show how unnecessary the bourgeoisie are for that purpose. All the social functions of the capitalist has no further social function than that of pocketing dividends, tearing off coupons, and gambling on the Stock Exchange, where the different capitalists despoil one another of their capital. At first, the capitalistic mode of production forces out the workers. Now, it forces out the capitalists, and reduces them, just as it reduced the workers, to the ranks of the surplus-population, although not immediately into those of the industrial reserve army.
But, the transformation — either into joint-stock companies and trusts, or into State-ownership — does not do away with the capitalistic nature of the productive forces. In the joint-stock companies and trusts, this is obvious. And the modern State, again, is only the organization that bourgeois society takes on in order to support the external conditions of the capitalist mode of production against the encroachments as well of the workers as of individual capitalists. The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over. State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.
Not to be misunderstood, Engels emphasizes in a footnote that this intervention would mark a new and different stage for the mode of production and would not just be a policy preference designed to play some ideological function:
I say “have to”. For only when the means of production and distribution have actually outgrown the form of management by joint-stock companies, and when, therefore, the taking them over by the State has become economically inevitable, only then — even if it is the State of today that effects this — is there an economic advance, the attainment of another step preliminary to the taking over of all productive forces by society itself.
Engels argues the continuous intervention in the economy forced on governments in all countries, beginning with the Great Depression, was the inevitable result of economic laws, having nothing to do with containing public debate within tolerable limits. He stated it would mark the displacement of the capitalist class by the state, which would from that point itself function as the capitalist exploiting labor. His argument suggests the debate between the camps within fascist state policy pundits is not merely playing the role of misdirecting public opinion. Instead, these two wings are arguing among themselves over the best policy the fascist state should adopt to maximize the exploitation of the working class.
#OtMA Why George Washington was a Revolutionary (according to Marx) and Why Marxists Just Don’t Get It
This is my second response to JMP, who answered my previous response, #OtMA: A Reply To JMP, with the following statement: “Oh it’s all fine and good to call yourself an historical materialist, but if you make bizarre statements about the American Revolution, fail to understand its class content or the theory that was actually and HISTORICALLY used to structure said revolution, then you’re not a historical materialist. You’re an idealist and your “historical materialism” is the historicism of Hegel, or at least Feuerbach. Furthermore, when you ignore the content and meaning of world historical revolutions––those locomotives of history which form the principle of change for the historical materialist––then you are disappearing even further into the idealist universe. To be an historical materialist is not to wax eloquent about what you think the theory is, but to engage the crude matter of history in an historically materialist manner: which that article failed to do in any way shape or form. One must engage concretely with history and draw concrete concepts, not simply declare positions already proven erroneous by the momentum of revolutionary history.”
This is my response to JMP’s argument:
Re: The People 
Marxism: Should Marxists rethink it or or just dump it altogether?
I want to take a moment to sum up some of my thoughts regarding Marxism that has occurred to me during my occupation of the Marxist Academy. This is only a rough outline of those ideas and I welcome comments on them from readers of this blog.
Read more…