A Critique of Pure Bullshit, Part Three: Eichengreen on Ron Paul (A Tale of Two Monies)

I have been critiquing Barry Eichengreen’s unprincipled attack on Ron Paul and his demand for a return to the gold standard, but, so far, I have danced around the real question posed by this vicious hit piece. Eichengreen’s argument is not about whether or not Ron Paul’s ideas can be compared to the insanity of Glenn Beck, nor is it even about the criticism of the Fascist State proposed by the argument of Frederick Hayek, who plays in this venal attack only the role of betrayer — Ron Paul having based his argument on many of the insights of Hayek, is ultimately betrayed by him when the latter dismisses
the possibility of a return to the gold standard.

Hayek concedes, in other words, to the necessity of totalitarianism.

Ron Paul, having been deserted by Hayek, even before he begins his career as a politician, is left alone in the company of Glenn Beck, who (Beck) is trying to foist gold coin on you at an astounding markup. The implication of this being that if Ron Paul is not himself in cahoots with Glenn Beck, he is just another hopeless sucker to be played. Just another miser looking for a place to safely store up his accumulated wealth from the predations of the investment banksters.

All of this is nothing more than an attempt at misdirection, a ploy to distract you from asking the important question:

What is money?

Ask this question to Ron Paul, and he will tell you gold is money — honest money, not a fiction of money as is ex nihilo currency. When Ron Paul asked Fed Chairman Ben Bernanke if gold was money, the Chairman tried his damnedest to avoid giving a straight answer. The chairman knows that money can perform two useful functions: universal means of payment in an exchange, and store of value. Even if gold is not recognized as the official standard of prices in a country, it can still perform exceptional service as store of value. And, in this function, it entirely fulfills the definition of a money – moreover, it fulfills this function better than any other commodity. And, it certainly fulfills this function better than currency created out of thin air.

Yes. Gold is money. But, of course, that is not the question I am asking:

“What is money?”

Not what thing can serve as money, but what is money itself. No matter what serves as money, or the functions of money it fulfills; what is money itself, i.e., the functions to be filled by the things?

Simply stated: Gold is money, but money is not gold.

People always make this silly argument: “Why can’t dogs, or sea shells or emeralds be money?” Yes. Within limits, anything can serve as money; and, this fact makes the thing serving as money appear entirely accidental and arbitrarily established. So, for instance, whether gold or dancing electrons on a Federal Reserve terminal is money seems simply a matter of convenience and fit.

But, the real questions raised by this is why anything serves as money? That is, why money? This question appears to us entirely irrational. We take the existence of money for granted, and therefore, argue not about money itself, but the things to be used as money. Eichengreen wants us to believe the question, “What thing should serve as money?”, has no deeper significance but for a handful of scam artists and marks like Glenn Beck and Ron Paul. A fifty dollar gold coin (worth some $1900) is inconvenient for daily purchases; we should use dancing electrons on a Federal Reserve terminal.

But, why do we have to use anything at all when it comes time to fill up the SUV for a trip to the corner store? Why isn’t the gas free? In other words, what is money doing coming between us and the things we need?

“Because”, the economist Barry Eichengreen will tell us, “there is not enough of stuff to go around.” Well, how does Barry know this? Does he have some insight into how much of one or another thing is produced in relation to demand for that thing? No. He doesn’t. The function of money is to tell us which things are in shortfall relative to demand because those things have a price in the market place. Prices presuppose the existence of scarcity; of a relation to nature marked by insufficiency of means to satisfy human want. Money is not an attribute of a fully human society, but the attribute of a society still living under the oppressive demands of nature.

So, the question,

“What is money?”

really comes down to

“What is scarcity?”

And, this can now be answered: it is insufficient means to satisfy human needs. But, this answer is still insufficient, because we really have no way to know directly if scarcity exists, right? What we know is the things generally have a price, and we infer from this that things must be scarce. But, this too is a fallacy like “gold is money = money is gold”. I stated that prices presuppose scarcity — but I must now correct myself. Scarcity of means to satisfy human needs is necessarily expressed by prices, but prices do not of themselves necessarily express scarcity of means.

Catelization, monopoly pricing, false scarcity and the Fascist State

We know, for instance, near the turn of the 20th Century, certain big industries learned they could maintain artificially high prices on their products by creating entirely artificial scarcities. We know also how this expertise was put to use and the reaction of society to it. Or, at least, we think we do. Folks like Joseph Stromberg, Murray Rothbard, Paul Baran and Paul Sweezy tell a much different story than the official record. That alternative narrative is summed up brilliantly by Kevin Carson in his work here.

Carson argues:

But merely private attempts at cartelization before the Progressive Era–namely the so-called “trusts”–were miserable failures, according to Kolko. The dominant trend at the turn of the century–despite the effects of tariffs, patents, railroad subsidies, and other existing forms of statism–was competition. The trust movement was an attempt to cartelize the economy through such voluntary and private means as mergers, acquisitions, and price collusion. But the over-leveraged and over-capitalized trusts were even less efficient than before, and steadily lost market share at the hands of their smaller, more efficient competitors. Standard Oil and U.S. Steel, immediately after their formation, began a process of eroding market share. In the face of this resounding failure, big business acted through the state to cartelize itself–hence, the Progressive regulatory agenda. “Ironically, contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, but the lack of it.”

In fact, these folks argue, cartelization and monopoly pricing wasn’t very successful until the state stepped in at the behest of industry to organize them. Carson again:

The Federal Trade Commission created a hospitable atmosphere for trade associations and their efforts to prevent price cutting. (18) The two pieces of legislation accomplished what the trusts had been unable to: it enabled a handful of firms in each industry to stabilize their market share and to maintain an oligopoly structure between them. This oligopoly pattern has remained stable ever since.

It was during the war [i.e. WWI] that effective, working oligopoly and price and market agreements became operational in the dominant sectors of the American economy. The rapid diffusion of power in the economy and relatively easy entry [i.e., the conditions the trust movement failed to suppress] virtually ceased. Despite the cessation of important new legislative enactments, the unity of business and the federal government continued throughout the 1920s and thereafter, using the foundations laid in the Progressive Era to stabilize and consolidate conditions within various industries. And, on the same progressive foundations and exploiting the experience with the war agencies, Herbert Hoover and Franklin Roosevelt later formulated programs for saving American capitalism. The principle of utilizing the federal government to stabilize the economy, established in the context of modern industrialism during the Progressive Era, became the basis of political capitalism in its many later ramifications. (19)

But, there’s a problem with this cartel argument by Austrians, like Hayek and Mises, and Marxist-Keynesians, like Baran and Sweezy: Following Rudolf Hilferding, they describe prices realized by cartelization as “tribute exacted from the entire body of domestic consumers.”

The “monopoly capital” theorists introduced a major innovation over classical Marxism by treating monopoly profit as a surplus extracted from the consumer in the exchange process, rather than from the laborer in the production process. This innovation was anticipated by the Austro-Marxist Hilferding in his description of the super profits resulting from the tariff:

The productive tariff thus provides the cartel with an extra profit over and above that which results from the cartelization itself, and gives it the power to levy an indirect tax on the domestic population. This extra profit no longer originates in the surplus value produced by the workers employed in cartels; nor is it a deduction from the profit of the other non-cartelized industries. It is a tribute exacted from the entire body of domestic consumers. (64)

The problem with this theory is this: if we assume a closed system where the wages of the working class are the overwhelming source of purchasing power for the goods produced by industry, with prices of commodities more or less dependent on the consumption power of the mass of workers who produce them, these workers are unable to buy what they produce. The problem cited by Marx that the consumption power of society is an obstacle to the realization of surplus value is only intensified by cartelization.

Cartelization, even if it could be achieved in one or two industries, could not be the principle feature of any closed economy. Moreover, Marx’s theory predicts as productivity increased, and the body of workers needed to produce a given output shrank, this imbalance worsens. Even with the full weight of the state behind it, monopoly pricing would result in the severe limitation of the consumption power of society. This wholly artificial limitation on the consumption power of society would be expressed as a reduced demand for the output of industry and generally falling prices. So, in any case, the attempt to impose a general scarcity on society through cartelization alone must, in the end, fail miserably.

At this point it is entirely necessary to again ask the question:

“What is money?”

But, this time, not in the fashion we previously addressed it,

“Why is money coming between us and the things we need?”

We now can ask it in the form Barry Eichengreen wants us to consider it:

“What thing should serve as the money?”

As we just saw, cartelization must fail, even if it is sponsored by the state, owing to the artificial limits on the consumption of society. The limited means of consumption in the hands of the mass of workers must place definite limits on the demand for the output of industry.

But, what if — and this is only a silly hypothetical — another source of “demand” could be found within society? What if, out of nowhere, government should suddenly find itself in possession of a previously untapped endless supply of gold? What if, no matter how much of this supply of gold was actually spent, the gold coffers of the state remained full to the bursting point. Indeed, what if, for every bar of gold the state spent, 2 or 3 … or one thousand bars took the place of the spent gold?

In this case, the consumption power of society lost by cartelization and monopoly pricing could be made up for by judicious Fascist State spending, for instance on the military or building out an entire highway system or leveling the industiral competitors of entire continents in a global holocaust or pursuing a decades long Cold War/War on Terror/War on Democracy, to offset the limited demand of society. Since all gold bars look pretty much the same, no one need know that the state had a secret vault that produced gold as needed. No one need know that gold had lost its “price” as a commodity, because it was so incredibly abundant as to exceed all demand for it.

Which is to say, no one need know that in gold-money terms, all other commodities, including labor power, were essentially being given away for free.

The only people who would know this would be the men and women who managed the vault. And, since they were getting a cut of every bar spent into circulation, they could be relied on to keep this a tightly held secret.

So, again:

“What is money?”

Is it gold, a commodity in limited supply, and requiring a great deal of time and effort to produce? Or, is it the dancing electrons on a computer terminal in the basement of the Federal Reserve Bank in Washington, DC? Is it real gold, available in definite limited quantities? Or, is it “electronic gold”, available in infinite quantities? The first choice makes it impossible for state enforced monopoly pricing and cartelization; the second makes it entirely possible.

So far as I know, I am the only one making this argument — Marxist or non-Marxist. But, it is the entire point of Ron Paul’s campaign. It is what makes his campaign a potentially revolutionary moment in American society. Of far greater importance than he imagines, because, like any petty capitalist, he is only looking for a safe place to store his wealth. The radical potential of a demand for the return to the gold standard, even from the mouth of this petty capitalist, this classical liberal is a dagger aimed directly at the heart of the Fascist State, and of its globe-straddling empire.

A Critique of Pure Bullshit: Part Two: Eichengreen on Ron Paul (Money and Crisis)

Austrian School economists Ludwig von Mises and his student Friedrich A. Hayek

Barry Eichengreen makes much of the role the theories of Friedrich Hayek play in Ron Paul’s world view for a reason that becomes immediately clear:

In his 2009 book, End the Fed, Paul describes how he discovered the work of Hayek back in the 1960s by reading The Road to Serfdom. First published in 1944, the book enjoyed a recrudescence last year after it was touted by Glenn Beck, briefly skyrocketing to number one on Amazon.com’s and Barnes and Noble’s best-seller lists. But as Beck, that notorious stickler for facts, would presumably admit, Paul found it first.

The Road to Serfdom warned, in the words of the libertarian economist Richard Ebeling, of “the danger of tyranny that inevitably results from government control of economic decision-making through central planning.” Hayek argued that governments were progressively abandoning the economic freedom without which personal and political liberty could not exist. As he saw it, state intervention in the economy more generally, by restricting individual freedom of action, is necessarily coercive. Hayek therefore called for limiting government to its essential functions and relying wherever possible on market competition, not just because this was more efficient, but because doing so maximized individual choice and human agency.

Yes, folks: Ron Paul is a follower of the very same theories recently endorsed by that cheap huckster of gold coin: right wing conspiracy theorist nut job, Glenn Beck.

Indeed, Ron Paul hails from that portion of the libertarian movement that is a reactive response to the growing role of the state in the economic activity of society. While Marxists predict this increasing state role — demanding only that state power must rest in the hands of the workers whose activity it is — libertarians of Paul’s type reject this role entirely and warn it can only have catastrophic implications for human freedom. Thus, these two streams of communist thought diverge less significantly in their respective diagnoses what was taking place in 20th Century than in their respective solution to it.

As Eichengreen points out, Ron Paul sees in the ever increasing interference by the state in economic activity a danger to individual freedom and a growing threat of totalitarian statist power, in which the state attempts to determine the individual and society rather than being determined by them. This has echoes among Marxists, who themselves had nothing but disdain for nationalization of industry, and by Marxist writers, like Raya Dunayevskaya, who, during the same period Hayek was developing his own ideas, observed an inherent tendency of the state to organize society as if it were a factory floor.

“At the same time the constant crises in production and the revolts engendered befuddle the minds of men who are OUTSIDE of the labor process… where surplus labor appears as surplus product and hence PLANLESSNESS. They thereupon contrast the ANARCHY of the market to the order in the factory. And they present themselves as the CONSCIOUS planners who can bring order also into ‘society,’ that is, the market.”

Paraphrasing Marx, Dunayevskaya points to the inherent logic of this process:

If the order of the factory were also in the market, you’d have complete totalitarianism.”

What Eichengreen wants to treat as an observation specific to the “loony right” turns out to be a view held in common by both the followers of Marx and the followers of the Austrian School. Moreover, it is not just the fringes of political thought who warned of growing convergence between the state and capital, the mainstream of political thought also recognized this inherent tendency, Eichengreen acknowledges, by citing President Richard Nixon’s famous quote, “we are all Keynesians now.” What emerges from this is a very different impression than the one Eichengreen wishes us to take away from his tawdry attempt to discredit Paul by noting his affinity with Glenn Beck for the writings of Nobel Laureate Friedrich Hayek and the Austrian School within bourgeois economics: As Engels predicted, the state was being driven by Capital’s own development to assume the role of social capitalist, managing the process of production and acting as the direct exploiter of labor power.

While mainstream bourgeois political-economy was treating the convergence of Capital and State power as a mere economic fact, the followers of Hayek and the best of the followers of Marx warn not merely of the effect this process would have on economic activity, but the effect it must have on the state itself — as social manager of the process of extraction of surplus value from the mass of society, the state must become increasingly indifferent to its will, must increasingly treat it as a collective commodity, as a mass of labor power, and, therefore, as nothing more than a collective source of surplus value.

Although lacking the tools of historical materialist analysis, that comes from familiarity with Marx’s own methods, libertarians, like Ron Paul, have actually been able to better understand the implications of increasing state control over economic life than Marxists, who, having abandoned Marx’s methods to adopt spurious theories propagated from whatever academic scribbler, still to this day have failed to completely understand the Fascist State.

*****

Eichengreen, worthless charlatan that he is, deftly sidesteps this critique shared by both Austrians and Marxists of the political impact of growing Fascist State control over the production of surplus value, and instead directs our attention to the entirely phony debate of whether gold as money serves society better than ex nihilo currency to abolish the crises inherent in the capitalist mode of production itself. He begins this foray by admitting the failure of of monetary policy to prevent the present crisis, but poses it as a non sequitur:

Why are Ron Paul’s ideas becoming more popular among voters?

The answer, as is Eichengreen’s standard practice in this bullshit hit piece, is to blame Ron Paul’s popularity on Glenn Beck:

BUT IF Representative Paul has been agitating for a return to gold for the better part of four decades, why have his arguments now begun to resonate more widely? One might point to new media—to the proliferation of cable-television channels, satellite-radio stations and websites that allow out-of-the-mainstream arguments to more easily find their audiences. It is tempting to blame the black-helicopter brigades who see conspiracies everywhere, but most especially in government. There are the forces of globalization, which lead older, less-skilled workers to feel left behind economically, fanning their anger with everyone in power, but with the educated elites in particular (not least onetime professors with seats on the Federal Reserve Board).

Only after we get this conspicuously offensive run of personal attacks on Ron Paul’s reputation, does Eichengreen actually admit: Ron Paul’s ideas are gaining in popularity, because the Fascist State is suffering a crisis produced by a decade of depression and financial calamity:

There may be something to all this, but there is also the financial crisis, the most serious to hit the United States in more than eight decades. Its very occurrence seemingly validated the arguments of those like Paul who had long insisted that the economic superstructure was, as a result of government interference and fiat money, inherently unstable. Chicken Little becomes an oracle on those rare occasions when the sky actually does fall.

Ah! But, even now, Eichengreen, forced to admit, finally, the present unpleasantness, cannot help but label Ron Paul a broken clock for having rightly predicted it in the first place. Okay, fine.

So, it turns out that the banksters really do extend credit beyond all possibility of it being repaid; and, it turns out that this over-extension of credit plays some role in overinvestment and the accumulation of debt, and, it turns out prices spiral to previously unimaginable heights during periods of boom — and, finally, it turns out all this comes crashing down around the ears of the capitalist, when, as at present, a contraction erupts suddenly, and without warning.

This schema bears more than a passing resemblance to the events of the last decade. Our recent financial crisis had multiple causes, to be sure—all financial crises do. But a principal cause was surely the strongly procyclical behavior of credit and the rapid growth of bank lending. The credit boom that spanned the first eight years of the twenty-first century was unprecedented in modern U.S. history. It was fueled by a Federal Reserve System that lowered interest rates virtually to zero in response to the collapse of the tech bubble and 9/11 and then found it difficult to normalize them quickly. The boom was further encouraged by the belief that there existed a “Greenspan-Bernanke put”—that the Fed would cut interest rates again if the financial markets encountered difficulties, as it had done not just in 2001 but also in 1998 and even before that, in 1987. (The Chinese as well may have played a role in underwriting the credit boom, but that’s another story.) That many of the projects thereby financed, notably in residential and commercial real estate, were less than sound became painfully evident with the crash.

All this is just as the Austrian School would have predicted. In this sense, New York Times columnist Paul Krugman went too far when he concluded, some years ago, that Austrian theories of the business cycle have as much relevance to the present day “as the phlogiston theory of fire.”

(I think it is rather cute to see Eichengreen present himself as the disinterested referee between the warring factions of bourgeois political-economy, by gently chiding Paul Krugman for going too far in his criticism of the Austrians — after all, the Fascist State will have to borrow heavily from the Austrian School to extricate itself from its present predicament)

Where people like Ron Paul go wrong, Eichengreen warns, is their belief that there is no solution to this crisis but to allow it to unfold to its likely unpalatable conclusion — unpalatable, of course, for the Fascist State, since such an event is its death-spiral as social capitalist. Apparently, without even realizing it, this pompous ass Eichengreen demonstrates the truth of Hayek’s argument:  Fascist State management of the economy, once undertaken, must, over time, require ever increasing efforts to control economic events, and, therefore, ever increasing totalitarian control over society itself.

Eichengreen pleads us to understand the Fascist State does not intervene into the economy on behalf of Capital (and itself as manager of the total social capital) but to protect widows and orphans from starvation and poverty:

Society, in its wisdom, has concluded that inflicting intense pain upon innocent bystanders through a long period of high unemployment is not the best way of discouraging irrational exuberance in financial markets. Nor is precipitating a depression the most expeditious way of cleansing bank and corporate balance sheets. Better is to stabilize the level of economic activity and encourage the strong expansion of the economy. This enables banks and firms to grow out from under their bad debts. In this way, the mistaken investments of the past eventually become inconsequential. While there may indeed be a problem of moral hazard, it is best left for the future, when it can be addressed by imposing more rigorous regulatory restraints on the banking and financial systems.

Thus, in order to protect widows and orphans from starvation, the Fascist State is compelled to prop up the profits and asset prices of failed banksters and encourage the export of productive capital to the less developed regions of the world market — not to mention, leave millions without jobs and millions more under threat of losing their jobs. Eichengreen even has the astonishing gall to state the problem of moral hazard identified by Austrians, “is best left for the future, when it can be addressed by imposing more rigorous regulatory restraints on the banking and financial systems.” Eichengreen takes us all for fools — did not Washington deregulate the banksters prior to this depression, precisely when the economy was still expanding? If banks are deregulated during periods of expansion, and they cannot be regulated during periods of depression, when might the time be optimal to address moral hazard?

The question, of course, is rhetorical — and not simply because Eichengreen is only blowing smoke in our face. Eichengreen actually argues that Fascist State intervention prevented a depression!:

…we have learned how to prevent a financial crisis from precipitating a depression through the use of monetary and fiscal stimuli. All the evidence, whether from the 1930s or recent years, suggests that when private demand temporarily evaporates, the government can replace it with public spending. When financial markets temporarily become illiquid, central-bank purchases of distressed assets can help to reliquefy them, allowing borrowing and lending to resume.

And, here we can see the role of the thing serving as money and its relation to the crises inherent in the capitalist mode of production. Ex nihilo currency does not abolish crises, it merely masks them from view: while ex nihilo dollar based measures of economic activity indicate the economy suffered a massive catastrophic financial crisis in 2008, gold indicates this financial crisis is only the latest expression of an even more catastrophic depression that has, so far, lasted more than a decade.

NEXT: The tale of two monies

Eichengreen on Ron Paul and Gold: Part One: A critique of pure bullshit:

Washington has a problem, and Barry Eichengreen is doing his bit to save it. The problem’s name is Ron Paul, and this problem comes wrapped in 24 carat gold:

GOLD IS back, what with libertarians the country over looking to force the government out of the business of monetary-policy making. How? Well, by bringing back the gold standard of course.

Last week, Eichengreen published a slickly worded appeal to libertarian-leaning Tea Party voters, who, it appears, are growing increasingly enamored with Ron Paul’s argument against ex nihilo money and the bankster cartel through which Washington effects economic policy.

The pro-gold bandwagon has been present in force in Iowa, home of the first serious test of GOP candidates for that party’s presidential nomination. Supporters tried but failed to force taxpayers in Montana and Georgia to pay certain taxes in gold or silver. Utah even made gold and silver coins minted by Washington official tender in the state. But, the movement is not limited to just the US: several member states of the European Union have made not so quiet noises demanding real hard assets in return for more bailout funds for some distressed members burdened by debt and falling GDP.

No doubt, these developments are a growing concern in Washington precisely because demands for real assets like commodity money threaten to blow up its eighty year old control of domestic and global economic activity through the continuous creation of money out of thin air.

Although Eichengreen invokes the difficulty of paying for a fill up at your local gas station, “with a $50 American eagle coin worth some $1,500 at current market prices”; the real problem posed by a gold (or any commodity) standard for prices is that such a standard sounds a death-knell to a decades long free ride for the very wealthiest members of society, and would end the 40 years of steady erosion of wages for working people here, and in countries racked by inflation and severe austerity regimes around the world.

Make no mistake: Ron Paul is now one of the most dangerous politicians in the United States or anywhere else, because his message to end the Federal Reserve Bank and its control of monetary and employment policy has begun to approach the outer limits of a critical mass of support — if not to end the Fed outright, than at least to bring the issue front and center of American politics.

Eichengreen begins his attack on Ron Paul’s call for an end to the Federal Reserve by choosing, of all things, Ron Paul’s own writings as weapon against him:

Paul has been campaigning for returning to the gold standard longer than any of his rivals for the Republican nomination—in fact, since he first entered politics in the 1970s.

Paul is also a more eloquent advocate of the gold standard. His arguments are structured around the theories of Friedrich Hayek, the 1974 Nobel Laureate in economics identified with the Austrian School, and around those of Hayek’s teacher, Ludwig von Mises. In his 2009 book, End the Fed, Paul describes how he discovered the work of Hayek back in the 1960s by reading The Road to Serfdom.

For Eichengreen, Paul’s self-identification with Hayek is a godsend, because, as Eichengreen already knows at the outset of his article, Hayek ultimately opposed the gold standard as a solution to monetary crises:

At the end of The Denationalization of Money, Hayek concludes that the gold standard is no solution to the world’s monetary problems. There could be violent fluctuations in the price of gold were it to again become the principal means of payment and store of value, since the demand for it might change dramatically, whether owing to shifts in the state of confidence or general economic conditions. Alternatively, if the price of gold were fixed by law, as under gold standards past, its purchasing power (that is, the general price level) would fluctuate violently. And even if the quantity of money were fixed, the supply of credit by the banking system might still be strongly procyclical, subjecting the economy to destabilizing oscillations, as was not infrequently the case under the gold standard of the late nineteenth and early twentieth centuries.

Eichengreen pulls off a clever misdirection against Ron Paul by deliberately conflating the problem of financial instability with the problem of limiting Fascist State control over economic activity. Ron Paul’s argument, of course, is not primarily directed at eliminating financial crises, which occur with some frequency no matter what serves as the standards of prices, but at removing from Washington’s control over economic activity not just at home, but wherever the dollar is accepted as means of payment in the world market — and, because the dollar is the world reserve currency, that means everywhere. But, by conflating the question of Fascist State control over the world economy with solving the problem of financial and industrial crises that are endemic to the capitalist mode of production, Eichengreen takes the opportunity to foist an even more unworkable scheme on unsuspecting Ron Paul supporters: privatize money itself:

For a solution to this instability, Hayek himself ultimately looked not to the gold standard but to the rise of private monies that might compete with the government’s own. Private issuers, he argued, would have an interest in keeping the purchasing power of their monies stable, for otherwise there would be no market for them. The central bank would then have no option but to do likewise, since private parties now had alternatives guaranteed to hold their value.

Abstract and idealistic, one might say. On the other hand, maybe the Tea Party should look for monetary salvation not to the gold standard but to private monies like Bitcoin.

It is cheek of monumental — epic — proportion. Even by the standards of the unscrupulous economics profession — a field of “scholarship” having no peer review and no accountability — the sniveling hucksterism of Eichengreen’s gambit is quite breathtaking. However, not to be overly impressed by this two-bit mattress-as-savings-account salesman, in the next section of this response to Barry Eichengreen, I want to spend a moment reviewing his examination of the problem of financial instability, and the alleged role of gold (commodity) money in “subjecting the economy to destabilizing oscillations… under the gold standard of the late nineteenth and early twentieth centuries.”

Part Two: Money and crises

Marx’s Theory or Marxist Theory?: How Daniel Morley (mis)Educated Anarchists

As Marx observed, no society has imagined itself into existence, which is to say, women and men do not set out to build their society according to some preconceived blueprint. The social relations resulting from human action appear to us in later times as the preconceived ideas of the creators of those social relations when, in fact, the ideas never existed until the social relations had already come into being.

An error arises in historical study: we attribute to the earlier periods of history ideas that existed nowhere during that earlier period, but only arise as a result of human action during that period. In the United States, for instance, every sort of nonsense, including wars of aggression and relentless Fascist State expansion, are promoted and justified by reference to the Ideals of the so-called “founding fathers” — ideals of Liberty, Equality, Right, etc. Society appears always in the grip of long dead men, whose ideas hover over us like ghosts, guiding us along some preconceived path of development. We, on the other hand, are merely the possessed, who, having been invaded by the ideas of the dead, only act out these ideas — see, for instance, Francis Fukuyama’s “The End of History”, where, following Hegel, Fukuyama imagines the whole of social development after 1806 as only the universalization of the ideals of the French Revolution, and, which ends with the collapse of the Soviet Union.

Marx offered a counter-argument to the notion that history is the unfolding of the Idea in human society: these ideas themselves emerge out of the material social relations and circumstances of women and men.

History is nothing but the succession of the separate generations, each of which exploits the materials, the capital funds, the productive forces handed down to it by all preceding generations, and thus, on the one hand, continues the traditional activity in completely changed circumstances and, on the other, modifies the old circumstances with a completely changed activity. This can be speculatively distorted so that later history is made the goal of earlier history, e.g. the goal ascribed to the discovery of America is to further the eruption of the French Revolution. Thereby history receives its own special aims … while what is designated with the words “destiny,” “goal,” “germ,” or “idea” of earlier history is nothing more than an abstraction formed from later history, from the active influence which earlier history exercises on later history.

Not according to the Marxist Daniel Morley, however. In contrast to Marx himself, Daniel argues that the communist movement of society consists entirely of the development of ideas: the communist movement of billions of people is already prefigured in the ideas of Karl Marx — society are only acting out these ideas; incompletely for the most part, with a great deal of hesitation, and, on occasion, by going back over the same ground twice. Thus, the refusal of Anarchists to acknowledge the role of theory — and, in first place, Marxist theory — is the source of much dissatisfaction on Daniel’s part.

…there is a strong tendency in Anarchism to reject theory as a scientific study of society, as they associate this with the intellectual elite and inaction. For this reason they tend to see all talk of ‘historical laws’ in society, and of the objective roles of various classes, as intellectual charlatanism, as an idealist … invention with which to confuse the masses into accepting our leadership…

Because of their rejection of theory, many Anarchists have resorted to simply describing the problems of capitalist society, and proposing antidotes as superficial as the act of simply inverting the names they give to capitalist oppression…

Rather than study the causes for all these social problems, the Anarchists would treat them as arbitrary, and all that is needed to overcome them is for society to somehow collectively realise that it is suffering under some arbitrary injustice, and then collectively liberate itself. Political ideas, if they are complex … are complex because society itself is extremely complex, has a long history, and demands that serious attention be paid to it if it is to be changed in accordance with our wishes.

Morley’s argument here is simple: society is so complex that without theory a stateless and classless society will not emerge. He chides the Anarchist movement for its refusal to understand this important fact.

The problem with this sort of thinking, of course, is that it is Marx himself who exposes this idealist conception of human history for what it is: a sham, an inversion of the real movement of society, and, hence, to be explicitly rejected. If Marx is to be understood by Marxists, they will have to address this logical loop introduced by Marx himself into his work: if his theory and methods are indeed scientific, they are unlikely to have any significant impact on the revolutionary transformation of society. Communist theory is not only unimportant to the process of social development as a result of its faint influence on events, according to Marx it must be unimportant to this process.

Both the strength and the weakness of theory is that it brings us to conclusions that are counterintuitive — that are not empirically derived. Precisely when communist theory could make the greatest possible contribution to the communist movement of society theory will probably have its least impact. For example, the movement of the unemployed in this crisis aims at precisely the goal theory states it should not. While the unemployed are demanding increased Fascist State spending to create jobs or provide a subsistence income to the unemployed, theory argues for a general reduction of both Fascist State expenditures and hours of labor. Communist theory is inconsequential to the process precisely because no one but Marxists, Anarchists and Libertarians, is consciously trying to create a communist society. Society at large are mainly responding to their immediate empirical circumstances. If these empirical circumstances did not, of themselves, lead to a communist movement of society, there is nothing communists could do to impose it on society.

In Daniel’s view the problem created by the counterintuitive nature of revolutionary social theory can be circumvented by a committed cadre of women and men who have both achieved some degree of familiarity with the theories of thinkers like Marx, Rothbard or Kropotkin, and who have won positions of political leadership among the larger mass of the working class. Indeed,  Daniel argues the requirement for such a leading group of committed theoretically adept activists is so obvious that Anarchists, despite their explicit rejection of this “vanguard party” model, nevertheless also embrace it in one guise or another:

Contrary to Anarchist hopes, political leadership in our society is necessary for the working class. It could only be discarded, made superfluous, if the working class had the time and inclination to collectively develop revolutionary theory, collectively grasp the need for a revolution, and therefore organise it at once. The very existence of famous theorists such as Marx and Bakunin, who do play a leading role (whether they like it or not) by developing theory with which to educate the movement, is proof that in capitalist society this is not the case. Some Anarchists propose that, instead of a leadership of people, we have a leadership of ideas. Actually, this shows how the objective necessity for political leadership forces its way into Anarchist theory all the time. Only they give it another name instead. Anarchist theorists, themselves acting as leaders by developing theory to influence society, have variously made use of concepts such as ‘helpers’ of the working class, working class ‘spokesmen’, revolutionary ‘pathfinders’, the need for a ‘conscious minority in the trade unions’, or Bakunin’s concept of a disciplined Blanquist ‘directorate’ for the revolution. They use these terms but do not explain why they are necessary and how they really differ from political leadership. Why does the working class need helpers, pathfinders, a directorate, spokesmen, or a conscious minority? And what role would such people play? And if we merely have a leadership of ideas, then what of the people who developed those ideas (for they weren’t developed by the whole working class in a collective, uniform way), who presumably can explain them best, who can be most trusted to put the ideas forward in trade union negotiations, which, after all, cannot involve the whole working class at once? To change the name of something is not to change its essence.

The problem with this is not, as Daniel alleges, that Anarchists actually do follow a model only superficially different from Marxists, it is that he attributes the general lack of revolutionary theoretical development among the working class as a whole to the lack of time in which to develop this theory. Daniel’s argument that working people “lack the time” to develop revolutionary theory also appears earlier in his essay to explain why working people cannot directly manage production:

It is class exploitation and long hours of work that mean that in our society, workers cannot plan and direct production themselves, firstly because the capitalist class produces for their own private profit, and so cannot permit workers a say in controlling that profit, and secondly because workers do not have the time to democratically plan society … Only a globalised economy, a global division of labour … harmoniously planned on a global scale … can liberate the working class and put ordinary people in control, since only the high productivity it creates, and the technological sophistication involved, can shorten the working week to allow for mass participation …

The argument comes off as strained in both cases: owing to long hours of labor the workers lack the time to develop revolutionary theory on their own, and they also lack the time to democratically plan and direct production. If they had the time, and if they had the inclination, and if the capitalist class did not direct production for the sake of profit, the working class would not need theorists like Marx, nor the management of production by capitalists and communist technocrats. Since historical development is only the unfolding of a preconceived revolutionary blueprint for a new society through the activity of working women and men; and, since, owing to the lack of time, inclination, and the profit motive, working women and men cannot develop the blueprint they must afterward unfold through their activity, the theories of Marx and Bakunin become vital, and, with this, a committed cadre who have mastered the blueprint and can direct the rest of the working class in its realization.

The problem with this Marxist model is that Marx himself was not the kind of arrogant imbecile who thought he could dictate the course of human history, so he never left a theoretical blueprint for a new society. He did not even operate in such a way during his lifetime to impose some necessary model of the unfolding class struggle on the class struggle. He decried sects and sectarianism within the working class movement, which he described as those who, “demanded that the class movement subordinate itself to a particular sect movement.” In 1868 he wrote of one such sectarian incident:

You yourself know the difference between a sect movement and a class movement from personal experience. The sect seeks its raison d’être and its point d’honneur not in what it has in common with the class movement, but in the particular shibboleth distinguishing it from that movement. Thus when, in Hamburg, you proposed convening a congress to found trades unions, you could only suppress the opposition of the sectarians by threatening to resign as president. You were also forced to assume a dual personality, to state that, in one case, you were acting as the leader of the sect and, in the other, as the representative of the class movement.

The dissolution of the General Association of German Workers provided you with an opportunity to take a big step forward and to declare, to prove s’il le fallait [if necessary], that a new stage of development had been reached and the sect movement was now ripe to merge into the class movement and end all ‘eanisms’. With regard to the true content of the sect, it would, like all former workers’ sects, carry this as an enriching element into the general movement. Yet instead you, in fact, demanded that the class movement subordinate itself to a particular sect movement. Your non-friends concluded from this that you wished to conserve your ‘own workers’ movement’ under all circumstances.

Compare Marx’s attitudes toward sectarianism within the working class movement to Daniel’s view of the role of Marxists and Anarchists cadre within the working class movement:

Syndicalist Anarchists propose that a general strike, involving the vast majority of the working class, can be sufficient to overthrow capitalism, and moreover has the advantage of doing so without a party leadership. But the history of general strikes teaches otherwise – both in that on their own they are insufficient to overthrow capitalism (for we have had many general strikes but still have capitalism) and in that trade unions do have political leadership in them. Unfortunately, this leadership rarely has a determined revolutionary mission and tends to sell out general strikes. So the demand for a general strike must also be accompanied by a political struggle against the ideas of the reformist trade union leadership. But history has shown that such a struggle does not emerge, and certainly does not succeed, in a purely automatic fashion. In a general strike some organised political grouping must raise the idea of the need to use the strike as a launch pad to overthrow capitalism so that the working class can build socialism. And such an organisation would therefore be playing a leading role. Its task must be to win the struggle, to defeat the reformists by convincing the mass of the working class that its ideas are correct and necessary, in other words its task is to lead the working class to take power and overthrow capitalism.

Such is Daniel’s elaboration of the Marxist model of the relation between revolutionary theory and the working class movement. In contrast to Marx’s own view that sects are poisonous to the working class movement and should merge themselves into the broader working class movement, Daniel argues Marxists and Anarchists should “win the struggle, to defeat the reformists by convincing the mass of the working class that its ideas are correct and necessary…”

And, if the overthrow of capitalism requires the leading role of a sect utilizing the theoretical insights of Marx, Proudhon, or some other writer, how much more necessary would this sect be to managing the post-revolutionary society as it attempts to actually build a stateless and classless society. Thus, after the overthrow of the capitalist state, the working class is subject to more or less the same limitations as prevent it from theoretically preconceiving the overthrow of capitalism — it lacks the time to learn how to manage a complex, sophisticated society, and cannot manage the new society directly until the development of the productive forces of society allows for a general reduction in hours of work:

But a workers’ state, and genuine revolutionary working class leadership, is not the end goal for Marxists; we too see the need for a stateless society. That can exist only when the objective conditions that require a state apparatus (class struggle) have disappeared. In other words, when the working class has dissolved itself as a class by dissolving all classes, by uniting humanity in a global plan of production that leaves no lasting material antagonisms between classes or nations, and when production has attained such a level that the working week is sufficiently shortened so that all may participate in education and running society, then coercion and subjugation will have no objective role, and become worthless.

The problem, of course, with this model of a necessary leading role of a committed cadre to realize a stateless and classless society is that it is a complete fantasy that appears nowhere in Marx’s writings!

Since, Marx affords no role to revolutionary theory in his model of a communist movement of society, he did not propose a necessary role for a theoretically developed vanguard to lead the working class either before or after this revolution had erupted, nor did he propose that the present state should be replaced by anything other than the management of society by an association of society. This so-called theory of Marx is nothing more than an invention out of whole cloth by an insignificant sect that purports to speak in his name, but has yet to understand a single word he actually set to paper.

In Marx’s theory the stateless and classless society emerges directly out of the ruins of capitalist society. It arises not out of some theoretical insight into the inherent laws of capitalist society, but out of the practical experience of the members of society. True to his rejection of the Idealist model of history, the actual development of society places its members in circumstances where the actual necessity of a classless and stateless society is grasped empirically by them and does not arrive as the received wisdom of a handful of sectarians. This event presupposes, as Marx argues in the German Ideology, the actual empirical existence of women and men in their World Historical circumstances, which again presupposes that profit has ceased to be the motive force of production precisely because the actual development of the productive capacity of society has already made such motive impossible to continue not just in one or a few countries, but throughout the World Market as a whole. This latter condition presupposes that production of wealth itself is no longer compatible with the capitalist mode of production — that it cannot continue in the form of capitalist wealth, and, if it is to continue at all, must take the form of immediately material wealth, of mere means subordinated to the needs of the members of society, rather than an alienated power standing over them.

Marx’s differences with the other leaders and theoreticians within the working class movement did not hinge on their acceptance of his model of historical development — which model plays absolutely no role in society’s actual development — but with their insistence on one or another blueprint for a new society as the mode of society’s necessary activity. In the German Ideology, he expresses this disagreement directly:

Communism is for us not a state of affairs which is to be established, an ideal to which reality [will] have to adjust itself. We call communism the real movement which abolishes the present state of things.

Until Marxists grasp the importance of this statement and shed their sectarian attitude toward other trends of communist thought, and toward the working class movement in general, it will not simply be in violation of Marx’s revolutionary spirit, but also in violation of his actual theory. In Marx’s theory, there is no basis for a sectarian division among the various threads of communist thought — Marxist, Anarchist or Libertarian — nor any basis for a sectarian division between these threads of communist thought and the working class movement.

It is up to Marxists to take the first step in the direction of ending the sectarian division within the working class by dissolving their trend and its innumerable petty organizations entirely.

Class War in Madison? Not so fast… (Part four)

In part one, two and three, I have made several observations which can be summarized this way:

First, the argument that the event unfolding in Wisconsin, Ohio and other states are a battle over public union rights is disproved once we realize that these public unions are not and never were unions. The public unions are organs of the State, no different than the unions of the old Soviet Union, or the People’s Republic of China — organs for the management of public labor, entirely composed of a portion of the working class who, under this miserable mode of production, live on the surplus labor of the productively employed portion of that class. Although we may violently disagree with Walker and his political thugs, we still must acknowledge that the fight to defend the unions is essentially, and for all practical purposes, nothing more than a fight to defend the State itself and its parasitic domination of society.

Second, by the same token, without in any way standing with capitalists like the Koch Brothers, the argument that, in their hostility to the burden of the State, the Koch Brothers’ libertarian attitudes differ significantly from working class dissatisfaction with the burden of the State is belied by the very slogan raised by supporters of the working class themselves, “Make the Rich Pay”. Although the Left makes the argument that the hostility of capitalists like the Koch Brothers to the State is unique to the capitalist class, in the very slogans they raise the Left actually acknowledge this same hostility to the State among the working class. Neither of the two classes want to bear this burden; particularly in times of economic distress every member of society seeks to minimize the tax bite of the State. This reaction from the mass of the working class was entirely predictable, and explains the reluctance of writers like Felix Dzerzhinsky to wage the battle over austerity on the flimsy basis of defense of the public unions.

I now turn to the question of how this fight must resolve itself, and why, as events are proving in both the United Kingdom and Ireland, the austerity currently being pursued by Walker cannot work.

While the battle over the burden of the State on society assumes the form of a conflict between the classes over how this burden should be distributed, it would be wrong to say the events in Wisconsin arise from the conflict among members of society over the division of this burden between the two classes; rather, the truth is precisely the opposite: the conflict between the two classes produces a tendency toward the expansion of the State. We should not mistake the two: what is expressed in the austerity battle is not the conflict between the two classes, but their common hostility to the burden of the State; but, this ever expanding State is itself only the general social expression of the irreconcilable conflict between the two classes. The State is at once both the constantly expanding expression of the conflict between the two classes and a burden on them that each tries to cast off.

These two aspects of the relation between the State and society do not simply exist side by side, but influence each other: on the one hand, the growing conflict between the two classes presupposes the growing fascist character of the State — what Marx refers to as the employment of “democratic-republican institutions .. as a means, not of doing away with two extremes, capital and wage labor, but of weakening their antagonism and transforming it into harmony.” This implies the constant expansion of the State. On the other hand, this growing domination increases the burden of the State on society, and, therefore, the conflict between the two classes over the division of this burden; as well as the more or less constant struggle by each class to cast that burden off entirely.

At the same time, since the expansion of the State is the increasingly necessary condition for the relation between the two classes — the increasingly necessary condition for the purchase and sale of labor-power, without which neither class can exist; and which implies the further reproduction of all the fundamental contradictions within Capital on an increasing scale — the expansion of the State presupposes the further immiseration of the mass of workers and the further centralization and concentration of capital into fewer hands. Any given expansion of the State, therefore, is always insufficient, and merely intensifies the inherent tendency toward the law of the falling rate of profit even as it works to counter this tendency; producing still more pressure for the further expansion of the State and of the World Market. Each new expansion of the State and of the World Market merely compels the further expansion of both.

What makes this a crisis of the State, i.e., something more than a mere economic crisis, is that it presupposes certain definite economic conditions which, on the one hand, cannot be resolved simply by austerity, i.e., reducing the total wages of the working class, as might be sought by capitalists like the Koch Brothers; nor, on the other hand, can it be resolved simply by reducing or taxing the excessive profits of capital, as is demanded in the sophomoric slogan, “Make the Rich Pay”. Only by imposing such conditions as reduce both the mass of wages and the mass of profits together and simultaneously — that is, by the devaluation of both variable and constant capital — through the expansion of purely wasteful State expenditures — by the still greater accumulation of absolutely superfluous labor; of labor-power that neither serves to produce new value, nor, on this basis, as self-expanding value, as capital — is the resolution of the crisis possible.

If those who want a stateless society are to offer a way out of this nightmare, it can be done only on the basis of a clear-headed understanding of the unfolding process. We cannot simply base our advice to working men and women on stupid progressive slogans. And, this is the subject of the final part of this series.

To be continued

Class War in Madison? Not so fast… (Part three)

I stated earlier that I think the Koch Brothers are being framed for the events in Wisconsin, but I don’t want you to get me wrong here: the Koch Brothers will get no defense from me — nor would they need or want one. They are libertarians who really do want to get rid of the welfare state — or at least the parts they find offensive to their property rights; but show me an election where the libertarians have garnered more than two percent in any national election contest.

Still, I do not offer the argument that the Koch Brothers are innocent of this attempt to break the unions and impose austerity on working people. And, why would I offer that argument in any case? Isn’t it obvious already that the capitalists in their battle against the laborers always seek to reduce wages to the lowest possible sum? What do we add by jumping up and down like imbeciles wagging our fingers in their faces declaring, “You want to starve us!” like a bunch of naive progressives who believe the antagonism between capital and labor can be overcome at the negotiating table? The point isn’t that the capitalist always and everywhere wants to maximize profits by reducing the wages of the working class to the barest minimum, but that it is precisely this effort that constitutes the historical mission of that class — they are compelled by this insatiable hunger for profit to develop the productive capacities of society!

So I am amused by the meaningless statement by Felix Dzerzhinsky, in his post, Two, Three, Many Wisconsins on the Kasama website that, “we need to put the demand to make the rich pay at front-and-center…” It is a naive slogan almost universally reflected in the posts of Left-leaning writers who invariably point to the same shopworn examples of efforts by Capital to reduce their taxes:

Today’s “debt crisis” is the culmination of the long-term “starve the beast” strategy from an organized corporate-conservative movement. By cutting taxes for the wealthy they have starved the government, created massive debt (guess where the interest payments go) gutted the infrastructure, and put our country on the road to third-world status. This conservative movement has an agenda, and is not interested in working out “bipartisan” compromised.

All of this is incontestably true, but how does this effort on the part of Capital lead to the slogan, “Make the rich pay”? This sophomoric progressive slogan has nothing to do with communism. Pay with what? Every dime the rich have they have extracted from the labor of the working class. They “pay” for nothing — not even for the labor power of their wage slaves. That this demand, which is nothing more than the silly delusion of the progressive wing of the Democratic Party, should be uttered by a communist is not just silly, it is incomprehensible.

Even for those with only cursory knowledge of Marx’s writings it is obvious that, in his theory, the entire cost of the State are nothing more than proceeds of the unpaid labor of one portion of the working class paid out as wages or subsistence income to another portion. That the capitalist class should want to shift these costs directly to the productively employed working class — to reduce their consumption by an amount proportionate to these costs, and therefore allow the wages of one worker to suffice for two — doesn’t require a degree in Hegelian philosophy. It only requires commonsense.

The capitalist class would be more than pleased to see the costs of the imperialist adventures in Iraq and Afghanistan, the countless military bases encircling the globe, and the ever increasing burden of debt service, deducted directly from the wages of the working class, and to not be forced to see their plunder of working people shared with the vile, parasitic organs of the State. My argument has nothing to do with entirely predictable attitudes of the Koch Brothers. I don’t think the Koch Brothers family agenda is the only force behind Walker’s provocation, and, the drive for austerity in general, as many on the Left imagine.

As the slogan, “Make the rich pay”, implies, the working class has no more desire to absorb the cost of the State than does the capitalist class.

Thus, we are left with no other conclusion but that both Capital and Labor — each class driven by its own empirical needs — are trying to throw off the burden of the State. That, in a society founded on class conflict, this general attempt by society to throw off the cost of this parasitic and wholly unproductive organ takes the form of a conflict between classes on how to divide this burden, should be no mystery to communists.

So long as fascist State economic policy assures an expansion of economic activity, the conflict between the two classes exists only in its latent form — the State issues lucrative contracts to capital; and, directly and indirectly prompts ever greater employment of redundant, superfluous labor-power. The two classes settle, into a more or less uneasy coalition made possible by the fact that each finds the essential condition for its existence — the purchase and sale of labor-power — relatively stable and expanding.

It is only when State economic policy runs into difficulty, when, for a shorter or longer period, the State is incapable of realizing general economic expansion, and when, therefore, the purchase and sale of labor-power is threatened on a more or less universal basis, that the contradiction inherent in the capitalist relations is again brought to the fore, and society descends into open class conflict.

During this period, when the economic crisis has assumed its sharpest form, the burden of the previous accumulation of superfluous labor, and of the costs associated with this superfluous labor, become intolerable and must be cast off. The mode of this casting off is already given in the contradiction inherent in capitalist relations themselves, as each class attempts, by all the means available to it, to push off onto its opposite the burden of the crisis.

The class conflict resulting, which must threaten the existence of the State itself, cannot be resolved simply by passing the burden from one class to the other, but only by the further expansion of unnecessary labor, and by expansion of the State — if this cannot be accomplished, or can only be accomplished in part, the crisis must lead to an unwinding of a part, or even all, of the accumulated superfluous labor, and the abrupt devaluation of both existing capital and labor-power — the form of resolution I turn to in the next part of this series.

To be continued

Class War in Madison? Not so fast… (Part two)

Call me unnecessarily skeptical about these things, but when I run into a narrative that fits neatly into my assumptions I immediately begin to question my assumptions.

The cartoonish battle unfolding in Madison just does not hold up to scrutiny: we have unions that are not unions and only exist because the state of Wisconsin granted them the right to organize the labor force. These unions have no protection under the law and were expressly excluded from the Wagner and Taft-Hartley slave labor acts.

We also have two-bit players in the oil industry, who, despite resounding rejection in an election contest, have managed to rise to the position of the cutting edge of the capitalist onslaught against labor — setting the agenda of the fascist State.

Excuse me, but, as a jury member, I am not buying the circumstantial evidence.

I often like to surf Marxist sites and tweak their noses by crapping on their archaic analysis of the world around them. Despite years of painful self-examination these Marxists insist on donning the blinders worn by generations of predecessors regarding the State.

In a recent foray, I visited the Kasama site to see how they were covering the events in Madison and was greeted with pretty much the same insipid analysis as that presented by labor historian and author Peter Rachleff in the first section of this piece. One writer, Felix Dzerzhinsky, has called for, “Two, three, many Wisconsins”; a play on Che Guevara’s call for revolutionaries to emulate Vietnam in its resistance to American imperial aggression in the 1960s. Of the prospect for a successful outcome in Wisconsin, Dzerzhinsky dutifully writes:

All of this could change for the better or worse tomorrow. Everything depends on the ability of workers to maximize the disruption of business as usual in the state: keep the Capitol shut down, keep as many schools as possible closed and teachers and sympathetic students at the Capitol or in the streets, etc. The rest of the country is watching, and the activists among us are wondering if we’ll be able to reproduce this level of constructive anger in response to the attacks that we face.

Predictable Marxist pap, but what is interesting about Felix’s analysis — why I am fascinated by it — and what escapes most of the idiots on the Left, with their knee-jerk support for the Potemkin village unions currently battling Walker’s assault, is that Felix alone seems to have an inkling that defense of these worthless company unions was precisely the wrong place to begin the fight against austerity.

Why has Wisconsin risen up? I’m happy to report that they were able to start in a place where I suggested we not start: with a militant defense of the rights of public-sector workers. Economic hard times, I wrote, mean that this is a bad place to start, because so much of the public resents public-sector workers who have benefits that they do not have. Better to defend public-sector workers only in the context of a broader fight against service cuts, I said, and then we need to put the demand to make the rich pay at front-and-center, lest we lose too many people to capital’s mystifications about taxes. I still think a lot of this holds true going forward, but I also think I underestimated the catalytic potential of public-sector workers. After all, their unions are still the big battalions of the fight to defend public services. And perhaps more crucially, no matter where you are, everyone knows a teacher. Everyone knows a city trash collector or state worker. Everyone knows a firefighter; they were exempt from Walker’s direct attack, but they know the meaning of solidarity, and are aware that their own bargaining positions will be weakened if other unions are weakened, so they showed up at the Capitol in some strength. And yes, everyone knows a cop: they were also exempt from Walker’s attacks, but reports indicate that plenty of them showed up to support the other unions as well — out of uniform, of course, but thereby marking the first time you were ever grateful to see a plainclothes policeman at a demonstration.

Despite his insight regarding the danger of letting the battle against austerity turn into a battle for the defense of the public unions, Felix welcomes this disastrous turn of events. The reason why this is a disaster still holds, he acknowledges, but, blinded by the apparent numerical strength of these fictitious unions, and their enthusiasm, he gets swept up in the unfolding events.

Moreover, it never seems to occur to Felix that this was the entire motive of Walker’s unnecessary, and wholly gratuitous, attempt to remove the bargaining rights that, as I have already shown, the public unions never really had in the first place. The attack on bargaining rights was an ambush; a deliberate provocation designed to bring the unions into the streets. Walker wanted to goad the public unions into a fight they could not win so he could paint them as the face of the public sector. The public unions are to serve as the black welfare queen of the 21st Century — the racist stereotype of the single mother introduced by the Reagan administration — and which stereotype was confirmed by President William Clinton when he signed the Personal Responsibility and Work Opportunity Act into law — with the strategic placement of smiling black women on either side of him.

The union leaders — instead of warning their members, and admitting the reality of the unions’ cardboard existence — led them into a fight in which they are outclassed and have already lost.

Is it possible to recover from this disaster? Frankly, it doesn’t look good.

According to Kasama, “The 97-union South Central Federation of Labor voted Monday night to prepare for a general strike that would take place if Gov. Scott Walker succeeds in enacting his budget repair bill, which would strip most bargaining rights from most public employee unions.” Only about 15% of workers in Wisconsin are covered by unions — a percentage that is higher than the average for the United States, but down from the more than 20% union membership rate in 1989. Moreover, a spokesman for the Federation was unclear on how many of its 385,000 members would actually take action, nor did he give an estimate of how many of the more than 2.2 million non-union labor force could be expected to join.

Finally the spokesman provided little information on what strike action would take place or its target:

“It doesn’t mean that everyone is going to stop working on a particular moment or day,” Aniel said. “It means that we are preparing so that the decisions are made in a very significantly different way so that it protects the people of Wisconsin.”

But some services would be shut down, he said. The labor group would still have to determine which services would be shut down, he added.

“If it was decided the governor’s mansion really wasn’t that important and it wasn’t that important to heat it or give it electricity or to guard it, then those things wouldn’t happen,” Aniel said.

Two or three more disasters like this? We can only hope not.

To be continued

Class War in Madison? Not so fast… (Part one)

The battle lines seem familiar enough: on the one hand we have a coalition of the most regressive right wing forces who have set out to destroy unions and the rights of labor generally; and who appear intent on driving wages to levels commensurate with those of the age of robber barons. On the other hand, a coalition of unions who are bearing the brunt of this unrelenting assault, and who, inspired by events in Egypt, Tunisia and Libya are making a determined stand against it.

Labor historian and author Peter Rachleff provides us with an overview of the forces arrayed in this battle, which, at first glance, seems less like David and Goliath, and more like a collision of two massive powerful sumo wrestlers:

WITH THE Koch Brothers footing the bill for his campaign, Scott Walker assumed the governorship of Wisconsin on January 7, 2011. Walker’s first action as governor was obeisance to the corporate class that that put him in office: he gave $140 million in tax breaks to businesses, including WalMart, and then screamed “budget crisis!” This move allowed him to introduce his “budget repair bill,” which would require state workers to pay $5,000 to $7,000 a year towards their health insurance benefits and pensions.

Uninformed, public-sector-bashing Walker supporters see this as an overdue come-down in public sector workers’ unfair advantages. But the scope of Walker’s bill is much broader than public sector wages, benefits and unions. It is a salvo in the broader Republican war against working people and all unions, proposing radical positions in the right’s plan to create a permanent under-class of non-unionized workers: 1) reduce public employee collective bargaining strictly to wages; 2) prohibit all public employee strikes (the National Guard is on stand-by in Madison); 3) eliminate automatic deductions for union dues; 4) limit collective bargaining contracts to one year; and finally, 5) require union members to vote each year to “re-certify” bargaining units.

Of course, the bill also proposes cuts in public education and public services. And right behind Walker’s “budget repair bill” is an additional bill to make Wisconsin a “right-to-work” state, which would severely limit the powers of private-sector unions. The one-two punch.

Giddy with the alignment of Republicans behind him in the House and Senate, Walker called a special session to demand immediate passage of his “budget repair bill.” Simultaneously, he sent a letter to every state worker, warning that there would be no extensions of current contracts beyond March 13–a decree which would eliminate collective bargaining. He declared all of this non-negotiable.

Look for the Union Label

The sheer breadth and depth of Walker’s comprehensive demands on the unions should be enough to alert us that, though formally appearing as equals on the plain of battle, the unions are far from equal to the forces Walker has deployed against them. Walker has essentially demanded that the unions cease to exist: constantly fight for their life as organizations by stripping off the routine automatic deductions that fund their operations; seek annual recertification from their members; and make it impossible for them to enforce any of their demands by threat of strike. Such demands as he made would be unthinkable had Walker confronted labor organizations capable of fighting back and both willing and determined to bring Wisconsin government to its knees to defend themselves and their members.

Simply placing these demands on the unions, Walker exposed them as coddled, dependent in-house organizations, that survive and operate only at the pleasure of the State. The demands are excessive not by reason of the comprehensiveness of the  ultimatum, but because the comprehensiveness of the demands themselves demonstrate how little need there was for the demands in the first place. These organizations were never unions, they were in-house organs for the management of public employees by the State.

The Union-busting Kochtopus from Hell

If you want poster boys for the Right-wing conspiracy against working people, you need look no further than Charles and David Koch. Name an organization on the Right that wants to strip workers’ rights and turn the economy into a vassal-state of Capital, and more than likely you have named an organization receiving contributions from the Koch Brothers.  They have been linked to astroturf organizations like Americans for Prosperity, Patients United Now, Citizens for a Sound Economy, and Citizens for the Environment.

According to the Wiki:

Charles and David Koch also have been involved and have provided funding to a number of other think tanks and advocacy organizations: They provided initial funding for the Cato Institute, they are key donors to the Federalist Society, and also support the Mercatus Center, the Institute for Humane Studies, the Institute for Justice, the Alexis de Tocqueville Institution, the Institute for Energy Research, the Foundation for Research on Economics and the Environment, Heritage Foundation, the Manhattan Institute, the George C. Marshall Institute, the Reason Foundation and the American Enterprise Institute.

With billions of dollars at their disposal and a family history of extreme Right-wing causes — including the founding by Papa Fred Koch of the John Birch Society — the family has long been opponents of the post-war statist agenda.  In 1980, Charles Koch was candidate for president on the Libertarian Party ticket and has long advocated not only the abolition of Social Security, but also public education and even the Central Intelligence Agency. In the 2010 election cycle, according to the wiki, the Koch Brothers backed Scott Walker’s campaign and one of their related organizations, Americans for Prosperity, lobbied for Walker’s public union-busting plan.

Today, Charles and David Koch must feel a little like a young black man on trial: convicted of an as yet unknown crime before the trial has even started.  On the Left, almost unanimously, they are being singled out as the chief instigator of the unrelenting assault on the company unions in the public sector. Somehow, against alleged widely held, long-standing, liberal society expectations, these minor bit players in the oil industry, who barely garnered one percent of the vote in the 1980 presidential election, have managed to change the terms of the debate in all of society against the public unions who compose half of all unionized workers in the country.

Frankly, I smell a frame-up.

To be continued

The Value of Nothing: Rethinking Marx, Liberty, the Individual and the State

In the first part of this series (here) I argued that Karl Marx’s Individual is the same Individual who appears in the writings of 18th and 19th Century thinkers. Moreover, Marx’s assumptions imply an environment of Hobbes’ war of all against all and an increasingly illiberal, repressive and aggressive, parasitic State.

In the second part of this series (here) I argued that Marx never believed that there would need to be a period of state socialism to achieve a stateless society. His model of a revolutionary reconstitution of society rested on the idea of a free voluntary cooperative association, which emerges directly out of capitalist society and, which would be the only form of social organization in this stateless community. Marx’s model of the emergence of this voluntary association assumed it occurred empirically, i.e., as an act of commonsense necessity to everyone.

In the third part of this series (here) I argued that Marx did far more than merely uncover the secret of the worker’s exploitation. Marx’s theory is not a theory of labor’s exploitation under the capitalist system but a theory of social decomposition and transformation of labor activity: ripping the producers from their property; casting them into the ranks of the Proletarians; molding their activity through centuries of despotic capitalist rule into directly social cooperative laborers employing means of production that could only be put into motion by their combined cooperative effort. The transformative process comes to an end when it is no longer profitable to employ labor power under any circumstances — an event which compels the proletarians to take control of their own productive capacities as individuals and organize their activity in free voluntary association.

In this part I will show why Brad is wrong when he states that Marx’s theory requires an unusually altruistic individual to realize the voluntary association. Marx’s theory does not in any way involve a society of unusually altruistic individuals, because it rests on the assumption that scarcity itself has been abolished.

Brad, in his post, “Marxism And Libertarian Exploitation Theory”, argues:

[Marx’s] analysis does not take into account individual goals, which is a very human desire to maximize gains for one’s self and one’s own. Humans are cooperative, but we are cooperative individuals. Cooperation can be sustained in a system of mutual benefit, but humans typically have a difficult time sacrificing for the collective over the long haul. Anarcho-socialism relies on such mutual cooperation (and sacrifice) in the absence of a coercive entity, and thus relies on human nature to be compatible with such a system.

Is this assumption actually correct? Does Marx’s theory assume that the individual sacrifice for the collective over the long haul? Let’s begin by returning to Marx’s sketch of the circumstances surrounding the birth of a society founded directly on voluntary association.

In Marx’s model of the State, this parasitic entity appears to hover over society. This separation of the State from Civil Society is in some sense real and in another sense only apparent: as Brad Warbiany demonstrates, the best writers of the time saw in many State actions of the 18th and 19th Century the expression of some definite interest of specific groups in society — a trail of evidence that could probably be traced to the actual motives of specific individuals, as some have argued in the case of our own War on Terror. However, even with these observations it is far from correct to view the State as a mere instrument of any given interest within Civil Society — that it always expresses, for instance, the will of the capitalist class against the working class in some vulgar fashion. It is closer to the truth to understand that the State is the expression of the interests of Capital — a social relationship between and within the two classes, which is not, nor can it be, identical with the interests of either class, nor any particular faction of either class.

If some particular State action can be traced to the interests of one or the other class, and to one or another faction or groups of individuals within either class, it is necessary to point out that it represents those interests within the limits imposed on it by Capital itself. It is possible, therefore, for the State to both express the general interest of all social classes within the limits of capitalist relations, and, simultaneously, appear indifferent, hostile, and an increasingly intolerable burden to the whole of society. Thus, while bourgeois writers after Marx increasingly explain the actions of the State by reference to the interests of one or another faction of society — for the Nazis, it was Jews and communists; in our own time it has been black helicopter conspiracies, the Illuminati, or some other such nonsense — Marx’s theory explains those actions by referencing the general conditions prevalent under capitalist social relations.

I believe the above picture of the relation between the State and Civil Society has implications not only for the politics of capitalist society, it has implications for the manner in which the category Value expresses itself as well. Moishe Postone, in his painstaking reconstruction of Marx’s thinking on Labor as a Value creating activity, “Time, Labor, and Social Domination”, showed that Value — which Marx defined as the socially necessary labor time required to produce labor-power — was not only the basis for the exploitation of the worker in the form of surplus labor time — which, in his model, is the source of profit, interest and rent — but also the basis for a peculiar form of labor activity: superfluous labor time; the period of labor activity which is entirely superfluous to the productive employment of labor power either for the production of wage goods or capital goods.

Where does this superfluous labor time come from?

With the increasing productivity of social labor, an increasing share of the existing labor-power can no longer be profitably employed, i.e., employed by capitals for the purpose of creating surplus value. Capital begins to exhibit symptoms of relative breakdown: an entirely superfluous mass of proletarians who cannot find employment, a mass of machinery which can no longer be put to use by these proletarians, a mass of money-capital which cannot find profitable investment opportunities, and a mass of commodities which cannot be sold.

On the one hand, this so-called deficit in “aggregate demand”, Marx declares, is nothing more than the necessity for a general reduction in hours of work expressed in the form of the law of Value prevailing in capitalist society. On the other hand, since, the purchase and sale of labor power remains essential to Capital itself, and the basis for both the subsistence of the proletarians and the extraction of surplus value by capitals, the necessity for a general reduction in hours of work takes its opposite form: A general social demand from the two great classes in capitalist society for intervention by the State to increase “aggregate demand” by various measures — in other words, for action by the State for active economic policy intervention designed to ensure that the essential condition of Capital — the purchase and sale of labor-power — can continue uninterrupted.

This intervention, which is essentially fascistic, accompanies the rise of the Fascist State, and rests on the interests of both great classes in capitalist society insofar as they are considered only as poles of the relation, Capital, explains the astonishing growth of the State in the 20th Century, which expands from an estimated mere 3 percent of United States Gross Domestic Product to approximately 43 percent in 2010, with an accumulated debt that is greater than the total annual output of the United States’ economy — and currently increasing at the unprecedented rate of more than ten percent per year.

It is precisely in this unprecedentedly enlarged cancer on society that what Michael O. Powell, in his post, “Rethinking Marx”, calls the “high degree of capital to fund” voluntary association is already present in its latent form, as an constantly increasing mass of productive capacity being expended in the wholly unproductive — and from the standpoint of a voluntary association, wholly unnecessary — form of State expenditures. The conversion of the relative breakdown of Capital into its absolute form, which implies the collapse of active State intervention in the economy, frees the entirety of the productive capacity of society from both the dependence on profit as the motive force of productive activity, and the overwhelming mass of this capacity from its wasteful and superfluous employment by the State.

The members of society, who are by this collapse, compelled to create a voluntary cooperative association, find themselves awash in an abundance of productive capacity exceeding, by far, any measurable need for it. With the abolition of the State, the need for Labor itself disappears, taking with it the epoch of scarcity,the Law of Value, Class society, and all the ugly muck of ages.

“All I know is that I am not a Marxist!”: Rethinking Marx, Liberty, the Individual and the State

Now, perhaps it becomes clearer why Marx, in his exasperation with his own followers, declared, “All I know is that I am not a Marxist.” It was never about the machines, the buildings, the banks, the factories, the farms or profit, taxes and wages — it was about the Individual and her relationship to other Individuals and Society.

In his writings, Marx sets for himself an apparent impossibly wide chasm across which he has to build a theoretical bridge. In this, he does not allow himself to take any shortcuts through some inventive sham of attributing to human beings some quality that has not, as yet, been discovered by political-economy, nor of some revolutionary party for whom the future appears with a clarity that none of the rest of society can experience.

On the one side of this historical chasm, which Marx must bridge theoretically, is a stateless, classless society of amazing abundance, wherein the individual is able to develop her capacities in an environment of complete freedom, unimpeded by any external compulsion, be it natural or social, and in a free voluntary cooperative association with others in society. Her activity springs entirely from herself, and expresses only her interest as a well-rounded human being in the social and cultural wealth that is freely available to her, and to which she can freely contribute should that be her desire.

On the other side of this chasm is the Hobbesian nightmare we call present day society.

Faced with the seemingly impossible task of conceptually bridging these two models of society, Marx begins with nothing but the categories of political-economy discovered by the great classical liberal thinkers of the 18th and 19th Centuries — the Individual, the State, Civil Society, Classes, Property, Liberty — Marx does not invent these categories but imports them into his model.

• The Individual who appears in political-economy — the abstract human being shorn of any identity or ties of affinity to family, gender, community, religion, language, race, nation — is the Individual alone who appears in his writings.
• The State, which is already becoming characterized by illiberality, repression, aggression and totalitarianism, is the sole form of State in his writings. He does not, on any account, imagine some future benign State that can serve as a nanny for society while it finds its cooperative legs.
• Classes, and Civil Society generally, are constantly being subjected to the intolerable stresses of the developing economic structure of society, in which no individual, group of individuals, nor all of them together, can establish control over the processes unleashed by their own productive capacities — and which capacities loom over them as if some impersonal god who mercilessly sweeps away their undertakings like Yahweh swept away Sodom and Gomorrah.
• Even the heroes of this theory — the Proletarians — are deformed, stunted, broken fragments of human beings whose constant defeat is the mode of Capital’s own self-expansion — who rise each time from their knees, their ranks more numerous than before, to stand bloodied and bruised, and to again demand what belongs to them, but who are each time knocked down by a capital that is no more than their own capacities facing them in the alien but recognizable form of the capitalist.
• Finally, Value: that one category discovered by these great liberal thinkers that the whole of bourgeois political-economy after Marx was forced to reject, disown, and abandon.

Why is it that among all the categories of classical liberal thought Value alone was declared to be false and expelled from political-economy? What fear does it still strike in the hearts of economists? Why was it necessary to declare unremitting war on the category Value to this day?

Because this category of political-economy alone stripped all the other categories of their attribute of being Eternal Truths. Value declared all of these categories to be historically specific to the capitalist mode of production and, therefore, doomed to disappear taking with it the entirety of the inhuman Hobbesian environment that political-economy understood to be the permanent condition of mankind.

Value, Ricardo and the other classical thinkers declared, was the Individual’s own productive activity confronting her in the form of a commodity. Capital, Marx demonstrated, was simply Value that existed solely for its own self-expansion. It was nothing more than the activity of the men and women of society under conditions where their own activity, and all of the relations established by this activity, existed as a world for itself — impersonal, relentless, as formidable as any law of nature.

The Proletarians were simply former property-owners and their descendants who already had been stripped of their property, under whatever circumstances, by the brutal competition raging among the owners of property; with the fresh addition of former property owners added daily by Capital itself, society was being progressively turned into one propertyless mass. These former property-owners, now stripped of any independent means of “making a living”, were reduced to hiring themselves out as slaves in return for the means of life necessary to their survival.

(As an aside, Brad should not be confused by the much hyped expansion of the ranks of “property-owners” with those wage workers who are accumulating fictitious shares in companies through their 401Ks or, indirectly, through their pension funds — history shows that the big owners of property are always willing to offload these worthless paper claims to the sheeple at a good price, particularly when it is clear that the market is going to nosedive.)

Capital was only the result of this exchange, but, as a relentlessly expansionary social form, it required the continuous expansion of the ranks of proletarians — by outward aggression, for sure, but also by grounding under those property-owners with the misfortune to find themselves on the wrong side of its self-expansion. Thus, the process by which Capital satisfies its need for new material for its self-expansion not only implies the relentlessly aggressive and expansionary State, but the progressive concentration of property into the hands of an ever smaller circle of property-owners, as one after another they are cast into the ranks of the Proletarians.

However, the Proletarians, Marx wrote, were not simply being exploited — in all of written human history, no matter the stage of development, nor the mode of its realization, the labor of one portion of society has always been exploited by another section of society — with the capitalist mode of production the productive activity of the Proletarians was being transformed by Capital into directly social cooperative labor:

Hand in hand with this centralization, or this expropriation of many capitalists by few, develop, on an ever-extending scale, the cooperative form of the labour process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable in common, the economizing of all means of production by their use as means of production of combined, socialized labour, the entanglement of all peoples in the net of the world market, and with this, the international character of the capitalistic regime. Along with the constantly diminishing number of the magnates of capital, who usurp and monopolize all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working class, a class always increasing in numbers, and disciplined, united, organized by the very mechanism of the process of capitalist production itself.

Time and again, the revolt of this mass of Proletarians might fail — would fail — but with each failure, Capital advanced the conversion of their activity into a single, globe-straddling act of cooperative social production. With each defeat, he explained, their ranks were being added to by the ongoing decomposition of the class of property-owners, and the expansion into new territories; and, with each defeat, this mass of property-less individuals were being converted into a single social laborer.

Marx, like Smith, Ricardo, Mill, Jevons and other classical liberal thinkers, theorized that capitalist society was headed toward a catastrophic event — a breakdown resulting from the logic of the category Value itself, where it would no longer be profitable to employ wage labor under any conditions. Ultimately, Capital would run up against its limit of expansion, when, as David Harvey put it, it would be clear to all members of society that “compound growth for ever is not possible: capital accumulation can no longer be the central force impelling social evolution.” In very stark terms, Marx described what this event would look like:

“…the utterly precarious position of labour–power on a mass scale cut off from capital or from even a limited satisfaction and, therefore, no longer merely temporarily deprived of work itself as a secure source of life…”

At this point, the propertyless mass of society — who had been conditioned to cooperative labor through several centuries of despotic rule of the capitalist, and who, as a result, were entirely at home cooperating in a common act of social activity — would be compelled, on pain of starvation, to assume control of their own productive capacities and employ them in a cooperative manner.