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Can Capital survive the abolition of the State?

December 30, 2010 Leave a comment

I recently came across this excerpt from a short paper by the Marxist writer, Raya Dunayevskaya. The argument is a very dense consideration of a fundamental point of Marx’s theory. If it appears obscure and incomprehensible, that is okay; I offer it only as a reference for those familiar with the more arcane points of Marx’s theory. For everyone else, you can skip below, where I will address it directly in a way that makes its import both obvious and rather astounding:

Let me state right here that we have greatly underestimated Volume III of CAPITAL, which deals with these transformations. It is true that we caught its ESSENCE when from the start we put our finger on the spot and said the DECLINE in the rate of profit is crucial; the average rate of profit is completely secondary. Look at the mess we would have been in if we had not seen THAT and suddenly found ourselves, as did the Fourth [International], tailending the Stalinists’ sudden “discovery” (which had been precisely the PERVERSION with which the Second International PLANNERS had long ago tried to corrupt Marxism) that it was the AVERAGE rate of profit which was the “law of capitalism.”

Good, we saw the essence, but that is insufficient, and because that is completely insufficient, we were incapable of being sharp enough even here. For it is insufficient merely to state that the decline [in the] rate of profit, not the average, is crucial for understanding VOLUME III. The full truth is: JUST AS MARX’S THEORY OF VALUE IS HIS THEORY OF SURPLUS VALUE, SO HIS THEORY OF SURPLUS VALUE IS IN REALITY THE THEORY OF THE DECLINING RATE OF PROFIT.

Why couldn’t we state it this simply before? It is because we have been too busy showing that profit is only a disguise which surplus value wears and must be removed, again to see “the real essence”: exploitation of labor. Because the opponents we were facing were Workers Party underconsumptionists, we had to overemphasize this EVIDENT truth. But to overemphasize the obvious means to stand on the ground the opponents have chosen. Freed from these opponents and faced with PLANNERS WHO ARE NOT UNDERCONSUMPTIONISTS the greater truth of what Marx was saying suddenly hits us in the eyes with such force that now we can say: How could we have not seen what Marx was saying? It is all so clear: Since the realization of surplus value IS the decline in the rate of profit, the poor capitalist MUST search for profits.

The argument Dunayevskaya is making here is simple: Marx proposed that capitalism would be increasingly hamstrung by a decline in the rate of profit. This decline was not an accident or aberration, since it rested on a fundamental feature of the economy: On the one hand, the capitalist was always seeking to maximize his profits by reducing labor costs. This drive leads businesses to produce more output with fewer workers. On the other hand, the source of profits were the unpaid labor time of the employed workers. Thus, even as the capitalist tried to maximize profit by reducing its work force, its success at reducing its work force reduced the pool of unpaid labor time that was the source of its profits.

So far, not much of interest, right? Just another cat fight among the followers of Marx over interpretation of his theory; and Marxists are, if anything, more prone to cat fights than a bag of wet cats. But, then Raya does something jarring: she throws in that sentence at the end and changes the entire nature of the argument:

Since the realization of surplus value IS the decline in the rate of profit, the poor capitalist MUST search for profits.

Let me perform an intellectual shortcut here: Although it may not be obvious what she has just done, Raya has just stated that Marx is setting the reader up, not for an explanation why prices of goods reflect the values of those goods, but why they can never reflect the values of those goods. On a micro-level, Marx is explaining why that $600 iPad you got for Christmas probably cost no more than $3 to manufacture in China.

To put this another way: Marx was describing why the actual labor time expended in a capitalist economy must always and increasingly be greater than what is socially necessary. The tendency built into a capitalist economy toward a secular decline in the rate of profit produces its opposite: a mad scramble on the part of each capital, and all of them together, to find every avenue to maintain profitability in the face of this tendency; and this tendency can only be countered by effort to extend the social work day beyond what is actually required by society. As we have argued elsewhere, if Marx is correct in his analysis, there is a vast pool of superfluous labor within existing society that can be abolished without touching on the material living standard of society.

To put it bluntly, Marx’s law of the tendency toward a fall in the rate of profit predicts that if total debt, total consumption and total hours of labor don’t constantly increase capitalism will collapse. The social relation is not only incapable of achieving equilibrium, but it becomes increasingly self-disequilibrating as the productivity of labor increases. Assuming Raya was saying what I understand her to be saying, I think this self-induced, self-reinforcing, disequilibrium results in, at least, the following 5 symptoms:

  1. The Market for output must constantly expand.
  2. Total employment must always rise more quickly than productive employment. And, total hours of labor must always increase more quickly than productive hours of labor.
  3. Because of the above, total consumption must always increase more rapidly than necessary consumption (i.e., production). Which is to say, waste and unnecessary consumption becomes a matter of life or death for the economy.
  4. Since waste becomes a permanent feature of the economy and the rising cost of wasted effort must be borne by society, total prices must always increase more rapidly than total value.
  5. Since, wasted effort itself produces no new value, exchange itself is increasingly founded on debt; hence, the financial sector must always increase more rapidly than the industrial sector, and debt more rapidly than equity — leverage, which is, at root, only the relation between the sum total of social labor to the sum total of productively employed labor, must always increase.

Assuming I am correct about Raya’s comments about Marx’s third volume of Capital, and, that she is correct in her reading of the volume — two very big ifs, I admit — in his third volume of Capital, Marx is setting us up to understand how the State becomes an absolutely critical and absolutely necessary feature of capitalist society — a matter of life and death for capital. Each of the five symptoms of modern society I cited above are no more than functions taken on by the State to manage capitalist society through its increasingly devastating cycles of booms and busts.

Marx’s law of the tendency toward a decline in the rate of profit is, in reality, a theory of the State. To extend Raya’s statement: Marx’s theory of value is the foundation for his theory of surplus value; his theory of surplus value is the foundation for his theory of the decline in the rate of profit; and, finally, his theory of a decline in the rate of profit is the foundation for his theory of the modern State.

Powerful support for my interpretation of Raya’s argument can be found simply by looking at the title of the paper from which the above quote was drawn: “The despotic plan of capital vs. freely associated labor”. In this paper, Raya counterposes the modern State to the free association of individuals, explicitly arguing that planning arrived at by free association is completely incompatible with the various forms of State management of the economy with which we are familiar: everything from the centralized planning of the Soviet type to the fiscal and monetary levers of neoliberal political-economy. In 1950, with the ink still drying on National Security Council Report 68, Raya was making the argument that, in her words, “If the order of the factory were also in the market, you’d have complete totalitarianism.”

Effort by the State to manage the economy, as envisioned by the Truman administration, had to lead to an increasingly totalitarian reorganization of society. This, apart even from consideration of the aim of that management — which, for Truman, was a means of accruing the resources for a long-term conflict with the Soviet Union — implies the subjugation of the whole of social relationships to the despotism of capital.

Marxists and progressives who see in the increasing entanglement of the State in the economy — as borrower, lender, consumer and employer of last resort — some realization of the possibility for a humane society are not only wrong, but dangerously misguided in their approach to every social issue from the present intractable unemployment, to poverty, to every form of inequality, the environment and global relations. They are trying to use as a solution the very instrument of society which maintains those evils and makes their continuation possible.

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Richard Trumka: How a tired old union hack misses the point completely

November 20, 2009 2 comments

Once upon a time, the union boss was hated and feared on Wall Street, now he or she is just ridiculed or ignored – or propped up in front of the TV cameras to serve as a convenient scapegoat for why you’re paying for Wall Street failures.

Little does the Party of Wall Street suspect that, indeed, they are right – union hacks like Trumka are precisely the reason why you are footing the bill for GM mismanagement, and Goldman Sachs’ venality. The unions sold you out to cash in on the virtuous cycle of ever bigger defense budgets, rising employment fueled by wars and economic predation, and an ever growing slush fund of union dues.

Now the bills have come due, and Goldman Sachs wants to blame the UAW because Ford, GM and Chrysler can’t build a decent automobile at a competitive price – a price that requires that an American standard of living be readjusted to conform to Chinese wage levels.

Watch below as Richard Trumka whines like a bitch for a return to the good old days when American union bosses marched hand in hand with corporate predators in support of the Johnson-Nixon carpet bombing of Vietnamese villages.

Richard L. Trumka’s remarks at the Spotlight on Jobs Crisis forum.

Vodpod videos no longer available.

Six degrees of Larry Summers…

August 1, 2009 Leave a comment
LSummers

Click picture to go to Muckety

We thought you might want to know a little more about the economic adviser to the Messiah, Larry Summers, since he does play such a unique role in contemporary American economic history.

If you trace his connection to Robert Rubin – his mentor – you will find how he comes to be associated with the Wall Street octopus known as Goldman Sachs, and the manipulation of global markets which serve to keep the dollar as world reserve currency.

Trace his connection to Paul Samuelson, and Kenneth Arrow, and you will find he is the nephew of two Nobel Prize winners – one who is probably most responsible for formulating the political-economy of the American Empire, as it has been used to destroy the minds of several generations of young economists; the other, Kenneth Arrow, who first formulated a theory for why the current collapse of capital is not really happening.

He comes from good stock…

For a fun time, click on the name H. Rodgin Cohen, an adviser to Larry, and find out who advises him…

The Wiki has this to say of Mr. Cohen:

Regarding the worst economic crisis in 80 years, Cohen defended the financial system and Wall Street: “I am far from convinced there was something inherently wrong with the system.”

Cool tool! Enter your favorite A-list pond scum and find out how they’re being bred…

The Wall Street Crisis: How Washington was slowly starving you

January 25, 2009 Leave a comment

bank_dees

Wall Street is broken – this much we know because assholes in very expensive business suits keep coming before one congressional committee after another to repeat it.

But, what does it mean to say Wall Street is broken? What does a broken Wall Street mean to us, the collective body of penniless uneducated fucking hillbillies.

We didn’t work on Wall Street anyways. We didn’t collect the big bucks for seducing wealthy widowed Miami Beach retirees and pension funds to invest in ponzi schemes.

At best, we used our credit cards more than we should have and ended up in a hole as our creditors jacked rates to levels unheard since Mohammed preached against usury.

This blog holds to the idea that the statement, “Wall Street is broken,” essentially means, at least, “The domestic funding mechanism of the American Empire is broken.” Wall Street has, for the last sixty years or so, functioned mainly as the pump through which Washington siphoned off a massive amount of the social product of economic activity to maintain its unique position as global hegemon.

All the concern in Washington regarding a broken Wall Street is less about the suffering of Main Street than it is about the greatly reduced prospect for this economic strategy.

Using data provided by Washington, John Kemp shows us that in the period since the implementation of National Security Council Memorandum 68 Wall Street has benefited fantastically by serving as the essential mechanism for gaining access to trillions of dollars of global resources.

As shown in the following graph, Washington’s dependence on Wall Street has led to the massive expansion of the financial sector of the economy, which grew much faster than the overall economy for the last sixty years.

growth-of-financial-sector

Reading Kemp’s article it is fairly obvious the rapid growth of the financial sector has been powered mainly by the fantastic expansion of a disguised form of debt peonage: a permanent state of indebtedness, which ties no single working stiff to the company store of any particular employer, but enslaves all of them together to the continuous extension of their working time despite improvements in productivity.

Output rose eight times between 1975 and 2007. But the total volume of debt rose a staggering 20 times, more than twice as fast. The total debt-to-GDP ratio surged from 155 percent to 355 percent. Second, almost all this extra debt has come from the private sector. Take a look at Chart 2.

growth-of-private-debt-burden

Kemp notes:

Despite acres of newsprint devoted to the federal budget deficit over the last thirty years, public debt at all levels has risen only 11.5 times since 1975. This is slightly faster than the eight-fold increase in nominal GDP over the same period, but government debt has still only risen from 37 percent of GDP to 52 percent.

Instead, the real debt explosion has come from the private sector. Private debt outstanding has risen an enormous 22 times, three times faster than the economy as a whole, and fast enough to take the ratio of private debt to GDP from 117 percent to 303 percent in a little over thirty years.

To repay the total accumulated debt of individual working families and corporations would now require more than the gross output of the United States for three years – including the federal, state and local revenue share of this GDP.

For the working family this debt burden has meant the forced entry into the labor force of millions of mothers with young children, the contracting out of household tasks, such as childcare, cooking, etc., and the lifelong struggle to maintain employment amidst the rising tide of mortgage, credit card, auto, and other forms of personal debt.

Kemp continues:

This created a dangerous interdependence between GDP growth (which could only be sustained by massive borrowing and rapid increases in the volume of debt) and the debt stock (which could only be serviced if the economy continued its swift and uninterrupted expansion).

The resulting debt was only sustainable so long as economic conditions remained extremely favourable. The sheer volume of private-sector obligations the economy was carrying implied an increasing vulnerability to any shock that changed the terms on which financing was available, or altered the underlying GDP cash flows.

None of this was an accident: By pursuing the kind of permanent economic expansion, out of which it could siphon off ever greater amount of economic output to fund its empire, Washington was, at the same time, slowly impoverishing you.

You responded to this slow economic asphyxiation by joining your husband in the workforce to increase your family earnings, and by financing more and more of your consumption with debt – hoping to keep your head above the debt tide with longer hours of work involving more family members.

We note: None of this was ever forced on you. Nobody came to your house and threatened to arrest you if you did not charge that 42 inch, wide-screen, high-definition plasma television on your Visa card.

You are ultimately responsible for the mountain of debt you have accumulated and which compels you to sell yourself out each day like a two dollar hooker to men in very expensive suits who now come before congressional committees begging for handouts like platinum plated hobos.

By the same reasoning, however, Washington and its coterie of filthy, boot-licking, whore-economists never once explained to you that the mountain of debt under which you labored was the direct result of Washington’s subtly tightening choke hold on the material living standards of your family.

Washington was slowly starving you and your family to encourage you to accumulate that debt.

Every time economic output faltered, Washington quietly increased the pressure on your family, and, at the same time, eased a little on interest rates, while making ever greater sums of money available to be lent to you through its debt manufacturers on Wall Street – Home mortgages, auto loans, student loans, small business loans for nail and tanning salons, restaurants and the like: whatever it took to drive you deeper in debt, compel you to work longer hours, and siphon off the revenues to fund its empire.

What a fantastic scam! The harder they squeezed, the more debt you took on.

Soon they were handing you cash based on the quality of your smile, not caring whether you had the means to repay or not; not caring whether what you wanted to buy (house, car, plasma television) was even worth the money to be paid for it; not caring whether that restaurant you always dreamed of opening would close in bankruptcy – as 6 out 10 did – in the first 3 years.

The proximate trigger of the debt crisis was the deterioration in lending standards and rise in default rates on subprime mortgage loans. But the widening divergence revealed in the charts suggests a crisis had become inevitable sooner or later. If not subprime lending, there would have been some other trigger.

So it has come crashing down – and the extent of this crash has still not even begun to make itself felt.

Wall Street is now broken, but more than this is the collapse of the very mechanism Washington employed to compel you to work longer hours by slowly starving you and your family and pushing you into debt to survive.

This is what Washington thinks it can fix with a $700 billion gift to Wall Street, and another $825 billion in Barack’s stimulus package.

It is not going to work – period, full stop.

The debt, as Kemp tells us,

…is so large it will stretch even the tax and debt-raising resources of the state, and risks crowding out other spending.

Trying to cut debt by reducing consumption and investment, lowering wages, boosting saving and paying down debt out of current income is unlikely to be effective either. The resulting retrenchment would lead to sharp falls in both real output and the price level, depressing nominal GDP. Government retrenchment simply intensified the depression during the early 1930s. Private sector retrenchment and wage cuts will do the same in the 2000s.

The solution must be some combination of policies to reduce the level of debt or raise nominal GDP. The simplest way to reduce debt is through bankruptcy, in which some or all of debts are deemed unrecoverable and are simply extinguished, ceasing to exist.

This debt has to be abolished, and working hours severely reduced. This is the only solution for you, your family, and your future.

Will Barack follow this solution?

We prefer to think of him as a modern Lincoln – although he may turn out to be a 21st Century Ford. We prefer in other words to believe that he will be driven, as Lincoln was driven, to do the unthinkable.

In Lincoln’s case, it was the abolition of slavery, which he refused to address until it was forced on him by secession and war.

For Barack, the abolition of debt and the reduction of working hours will likely not come as the result of secession and war, but the failure of economic policy to reinstate the essential material condition of empire – the ever increasing domination by Washington over the billions of unpaid hours of work.