Posts Tagged ‘shorter work time’

Anarchists, Libertarians and Marxists need to change the debate on jobs and debt (2)

October 13, 2012 2 comments

We have to change the terms of the debate on jobs and debt. We need to insist a job is nothing more than wage slavery and we don’t need Washington’s effort to create more of it by adding to this wage slavery even with more debt slavery. It is not like we have to argue existing jobs need to go away; why is Washington creating more of them, when existing hours can be reduced to solve the problem of unemployment rather than more debt?

2. Monetary Policy, or what happens when a hyperinflationary collapse of the dollar is NOT the worst possible outcome

The media is abuzz with speculation following the Federal reserves announcement of quantitative easing version 3.0. This version calls for the Federal Reserve to pour unlimited quantities of currency created out of nothing into the market, buying up worthless assets on a monthly basis to the tune of $40 billion per month. The result could be the printing of nearly a half trillion dollars in new, freshly produced, token money being forced into the economy every year until further notice.

The implications of this monetary insanity can be understood simply by reading the opinions of any number of economists and market watchers who are very delicately raising the spectre of a Zimbabwe style hyperinflation. Still subdued but growing talk of such an event has moved from the periphery of “financial advisers” and gold bugs into the mainstream argument of some pretty staid experienced players.

Take, for instance, a recent comment by Art Cashin, a veteran of the stock market who has probably seen every high risk moment in the market since well before Nixon closed the gold window in 1971, up to and including witnessing the market plunge 25% in a single day in 1987.  Cashin oversees the management of more than $600 billion in assets and is not given to losing his head over every minor fluctuation in the S&P 500. A market crash is not Cashins concern, however — he fears hyperinflation. Cashin notes Weimar Republic hyperinflation did not burst out all at once, but was preloaded by continuous money printing that only made its way into the market over time:

“It (the inflationary spiral) was in fact delayed for a couple of years.  But once it started, it could not be taken back.  So here in the United States and in the European Union, there are very few, if any, signs of inflation because people are so concerned (that they are hoarding money).

“[You] will have to keep an eye on the velocity of money.  Watch figures like, here in the United States, the M2 (figure), and see if it begins to grow through velocity, and get very cautious at that point.  There are some potentially eerie parallels (today vs the Weimar Germany era).  The United States trauma was unemployment and deflation (in the 30s), but in Germany in the 20s, it was money that ruined an entire society.”

Events are not yet to the point where Cashin is advising his clients to take their worthless fiat currency and sell it for gold, silver and other precious commodities, but he is suggesting there is such a heightened level of potential for a monetary catastrophe at present to warn people should begin to look for indicators of hyperinflation in the data:

“I think you are certainly at a ‘flashing yellow alert.’  You have in place a variety of things that could begin to react somewhat domino-like.  As I said, there are measures and items that the listeners (and readers) can look for themselves.  Look at, what is the growth in the money supply, M2?  It comes out every week.

If [the M2 measure of the money supply] begins to grow rapidly, then the money that the Fed has created will be seen as moving through the system.  That will create the high risk of accelerated inflation, and perhaps, God forbid, runaway inflation.”

Even if we discount Cashin’s argument as just another example of fringe hysteria, Zero Hedge recently explained, there are voices within the Federal Reserve’s own research department that echo Cashin’s argument:

Yes, it is ironic that the Fed is talking about “common sense”, we know. But the absolute punchline you will never hear admitted or discussed anywhere else, and the reason why the Fed can no longer even rely on its models is that…

Carlstrom et al. show that the Smets and Wouters model would predict an explosive inflation and output if the short-term interest rate were pegged at the ZLB (Zero Lower Bound) between eight and nine quarters. This is an unsettling finding given that the current horizon of forward guidance by the FOMC is of at least eight quarters.

In short: the Fed’s DSGE models fail when applied in real life, they are unable to lead to the desired outcome and can’t predict the outcome that does occur, and furthermore there is no way to test them except by enacting them in a way that consistently fails. But the kicker: the Fed’s own model predicts that if the Fed does what it is currently doing, the result would be “explosive inflation.”

You read that right: if Bernanke does what he not only intends to do but now has no choice but doing until the bitter end, the outcome is hyperinflation. Not our conclusion: that of Smets and Wouters, whoever they are.

And these are the people who are now in charge of everything.

Is there anything worse than a hyperinflation for capitalism?

The warnings by Cashin and the writers at Zero Hedge suggest Bernanke’s Federal Reserve is engaged in an extremely risky gamble on a policy that could lead to the dollar replacing Kleenex as the preferred method of catching sniffles during cold and flu season. I think it is safe to say the Fed would not be undertaking this gamble just to move unemployment a few points. A high risk gamble on this scale with the world’s reserve currency clearly hints what is at stake is likely much worse than a mere outburst of hyperinflation.

So what is worse than a hyperinflation of the dollar? What threat could there be to capitalism right now that risks reducing the dollar to a worthless piece of scrip with no purchasing power whatsoever? How about, a hyperdeflation, an inverse condition where all prices instead of going to infinity and beyond go to zero?

But there is a big problem with this argument: There is not a single recorded instance of hyperdeflation in history, we are told, and logically it cannot happen. Zero Hedge remarks on the question in a caustically titled post “The Monetary Endgame Score To Date: Hyperinflations: 56; Hyperdeflations: 0”:

We won’t waste our readers’ time with the details of all the 56 documented instances of hyperinflation in the modern, and not so modern, world. They can do so on their own by reading the attached CATO working paper by Hanke and Krus titled simply enough “World Hyperinflations.” Those who do read it will discover the details of how it happened to be that in post World War 2 Hungary the equivalent daily inflation rate of 207%, the highest ever recorded, led to a price doubling every 15 hours, certainly one upping such well-known instance of CTRL-P abandon as Zimbabwe (24.7 hours) and Weimar Germany (a tortoise-like 3.70 days). This and much more. What we will point is that at no time in recorded history did a monetary regime end in “hyperdeflation.” In fact there is not one hyperdeflationary episode of note. Although, we are quite certain, that virtually all of the 56 and counting hyperinflations in the world, were at one point borderline hyperdeflationary. All it took was central planner stupidity to get the table below, and a paper with the abovementioned title instead of “World Hyperdeflations.”

The Cato Institute’s paper presents a very powerful empirical argument against the case for deflation and hyperdeflation. Unfortunately it rests entirely on two fallacies that are hidden in its very title: First, hyperdeflation has nothing to do with the fate of any fiat currency, even the world reserve currency, the US dollar. A hyperdeflation is not the death of any particular currency nor even a series of currency collapses — it is the death of money itself.

The second fallacy in the Cato paper will take a bit longer to explain and once explained will show why it is so important to every anarchist, libertarian and Marxist.

Can there be such a thing as a hyperdeflation?

A hyperdeflation might possibly be defined as a situation where prices of commodities declined even as the supply of money increased. As the Cato Institute paper explains — there is no recorded instance of a hyper-deflation in the historical record. Of course, mild and even very severe deflations did occur several times up until the Great Depression; but history has many more examples of hyperinflations, as the Cato paper argues.

The problem with the Cato paper, however, is that its argument rests on the “quantity theory of money” fallacy — which according the Wikipedia states “that money supply has a direct, proportional relationship with the price level.” Which is to say, the Federal Reserve can force prices to increase — create inflation — if it increases the quantity of currency in circulation. In fact, this theory is wrong. The prices of commodities do not depend on the quantity of money in circulation, but on the quantity of socially necessary labor time required for their production. And here, at least theoretically, the case against hyper-deflation falls apart.

Here is the problem at the end of capitalism’s life: If the Marxist writers Moishe Postone and Robert Kurz are correct, the socially necessary labor time of commodities now have two distinct and contradictory measures: its labor time as a simple commodity and its labor time as a capitalistically produced commodity — yielding two quite different potential prices.

To put this in simpler terms, the price paid in a store for a typical commodity like an iPhone is mostly a reflection of the costs of economically wasted labor. The iPhone itself takes very little direct labor to produce, but, if its production is to be profitable, the accumulated costs of waste within the economy requires a massive mark up in the price you pay for it at the checkout counter.

What is this waste? Well, one source is the overhead created by the costly burden of government at present. Since the government doesn’t produce anything, its entire cost is borne by the rest of society. If, for instance, government accounts for about 50% of GDP, this means every product has a 100% markup just to pay for the operating expense of federal, state and local government. So about half the cost of your iPhone goes to cover things like drone attacks on Afghanistan civilians or corn subsidies to agribusiness. These cost don’t appear anywhere unless it comes directly from your wages in taxes, but even in this case the costs must be passed on in commodity circulation and will accumulate there in the costs of each commodity.

So every commodity essentially has two prices: the one that you pay at the checkout counter, which includes all the wasted economic activity in society, and the other, hidden, true price, which is the actual direct cost of producing to commodity. Surprisingly, this latter price is now only a negligible fraction of the total price of an iPhone, a pair of shoes, or even an automobile — the overwhelming bulk of the price of every product you buy consists of the hidden costs of economic waste within society that has accumulated over the past eighty years.

This is why, as I discussed in part one of this series, it now takes as much as seven dollars of debt, or even more, to create a single dollar of wages through fascist state economic policies designed to create jobs. Simply put, this internal discordance in the price of every commodity is a hyperdeflation weapon of mass destruction just waiting for a triggering event. What is making the Federal Reserve risk even the total collapse of the dollar on an insane gamble is the fact that this implosion can be triggered by the mildest hint of deflation. To prevent this event, the Federal Reserve must restart the failed system of debt accumulation that crashed in the financial meltdown of 2008.

Anarchists, libertarians and Marxists have a chance to put sand in the gears of the fascist state and bring it down along with the entire mode of production. All it requires is for us to change the debate over jobs and debt — opposing both Federal Reserve monetary and Washington fiscal policy aimed at expanding still further the system of wage slavery through policies designed to promote economic waste and debt.

But we can do this only if we are willing to take capital and the state head on by demanding an immediate reduction in hours of work until everyone who wants to work has a job, along with the elimination of all public and private debts, and abolition of all taxes.

Value and the Demise of Capitalism: Reconciling Postone and Kurz

September 20, 2012 3 comments

Posted on the blog, principiadialectica, is a question to Robert Kurz about his differences with Postone on value and the current crisis that is bugging the hell out of me. In an interview conducted in 2010, Kurz is asked to explain his differences with Postone regarding the impact improvement in the productive power of labor has on value:

“For you, with the gains of productivity, capital loses its substance (abstract work) and, with the third industrial revolution, it loses it absolutely. For Moishe Postone, on the contrary, the gains of productivity increase value, but provisionally. According to him, as soon as the gain of productivity has generalized itself, the growth of value is cancelled, the basic unity of abstract work (the hour of work) having been brought back to its initial level. Thus, for you, value is collapsing, whilst, for Postone, value is growing continually then comes back to its starting point. Hence the question: doesn’t that break down the plausibility of the critique of value? Or should we see in this a point undecided at the moment?”

In Kurz’s argument, the gains of productivity gradually result in capital losing its value content; while, for Postone, the gains in productivity result in the expansion of prospective value until the social relation reaches its endpoint. Although both writers end up at the same point — capital is abolished by its internal laws — the description of the process differs in the perspective of the two writers.

The question posed in the interview is which of these two theoretical approaches is valid for the period leading to the demise of capitalism.

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Social emancipation cannot be founded on labor

September 14, 2012 9 comments

Disconnection from the current relations of production is easier said than done in Kurz’s opinion. It is not a matter of simply seizing a single factory, a retail outlet, an office or a school, nor even of seizing all the factories, retail outlets, offices and schools altogether in a simultaneous uprising in all countries at once. These institutions evolved within the context of commodity production and exchange and are fit only to function within this mode of production. It is not simply a matter of laying hold to them on the day after “the revolution” and employing them for the cause of social emancipation. Says Kurz,

The difficulty consists in the fact that the capitalist form of the functional division of society, as in the case of the capitalist structure of use value, cannot be assimilated, without alterations, into an emancipatory reproduction.

If this argument sounds familiar to you, it should; it is precisely the difficulty the Communards faced in Paris when they took control of the old machinery of the state. They were compelled to dump that entire structure and create a new one on the fly to suit their specific needs. Marx concluded from that experience that the working class could not simply lay hold of the existing machinery of state and wield it for its purposes — that machinery had to be broken. Kurz is extending Marx’s argument well beyond the state to encompass the entire economic mechanism bound up with the capitalist mode of production. And he gives several pretty convincing reason for his conclusion:

First, if a group of workers could seize their own factory, office or school, this institution could not be pulled out of the commodity production system, because the workers don’t produce anything they directly consume. This is already obvious in an office or a school since nothing material is produced in those institutions at all — they only serve as moments in the overall system of commodity production. But, it is also true for workers in an auto factory, a packing plant, or an industrial farm.

Second, even if we assumed a global movement of factory, office and school expropriations that succeeded throughout the world market, we would still be presented with a very great difficulty. Many of these firms engage in business that are absurd outside of commodity relations — like a human resources firm, a private security firm, or contractors supplying the needs of the fascist state military for “commodities” like trident nuclear subs or predator drones. Others pose an ongoing hazard to the public, like GMO producers, pesticides manufacture, or firms constructing and operating nuclear power plants.

Third, Kurz argues there is a grotesque ignorance on the part of capitalist society and its members concerning how the current system as a whole actually functions. Most firms know little about the larger material requirement of their own activity beyond their own suppliers and clients. Frankly, what keeps capitalism working is not the conscious action of the individuals within it, but blindly acting forces operating behind the backs of the members of society. The relations between billions of daily separate acts of production only become visible in the form of innumerable transactions and capital flows.

Fourth, these billions of separate individual acts of production could only be mediated by money relations or, in the best possible outcome, by a new political structure of planning and control, which would have to intervene in social production and would, because of this, bring in its trail the danger of a new managerial elite always ready to usurp control on its own behalf. Moreover, planning, in old Marxist theories of transition, does not overcome the problem of commodity production, but merely mediates it. It simply replaces the role of prices in commodity production with the plan itself as regulator of billions of acts of production. And the plan itself is as much subject to the law of value as are the fluctuations of prices in unplanned social production. By definition, “The Plan” must be the plan of “society” as a whole, in direct opposition to the free conscious self-activity of society’s billions of individual members.

Kurz concludes from this that social emancipation cannot begin, as traditional Marxism holds, with seizing this machinery of production, but only where the act of production bound up with capitalist relations ends:

“An embryonic form such as that of a “microelectronic natural economy”, which supersedes private property in the means of production, cannot be represented at isolated points within the structure of reproduction (which at the beginning only exist in a capitalist form), but only at its end-points—where production becomes consumption. Only at these points is the constitution of a social space of cooperation possible whose activities do not lead back to the market, but are preferentially consumed, in their results, by the members themselves.”

Which is to say, this new form of organization of society must be a self-contained, autonomous, space situating entirely outside capitalist structures. Unfortunately, Kurz fails to actually come up with a model, I think, because he neglects a simple logical implication of his own analysis. In this passage, Kurz treats the material side of capitalist production and consumption as the production and consumption of material objects that can, somehow, be removed from the process of capitalist production as a whole, when it is actually inextricably connected to the production and consumption of values in the process of capitalist reproduction.

This is a common enough mistake — we all make it — but in this case it damages Kurz overall magnificent analysis. Insofar as capitalist production and consumption is conceived, it must be conceived simultaneously as the production and consumption of values, and of material objects. Thus, with regards to this capitalist act, social emancipation should be conceived as having nothing to do either with production or consumption in any form, nor as beginning with consumption, nor with regards to the nexus between the two. This must include both the production and consumption of values and also the material objects in which these values are embedded.

My argument on this point requires us to expose the mystified form on which the entire notion of value rests. Value is not a substance embedded in the commodity itself, as Marx explains in volume 1 of Capital; it is nothing more than the amount of labor time required for the production of the commodity. It, therefore, cannot be separated from the existence of the commodity itself. A society governed by value is nothing more than a society governed by the labor time required for the production of its material needs. It is silly to keep discussing value in its mystified form, as a quality of commodities, once Marx demonstrated this fact. Ninety-nine percent of the stupidities passing the lips of a Marxist consists of treating value as some ethereal substance that permeates the atmosphere of capitalist society.

As a result of this mystification of value most Marxist theories of social emancipation consists of various schemes to set labor on a new foundation when the point of the fucking exercise is to abolish labor entirely. social emancipation is not, and cannot exist, as a new foundation for labor — communist society is not a fucking society of labor. Social emancipation begins and can only begin where the socially necessary labor time of society ends — and this is the whole meaning of the present crisis.

The labor time of society has been pushed well beyond its necessary limit and this has resulted in the formation of a mass of superfluous workers and capital — as many writers like Kurz have demonstrated. The argument of bourgeois thinkers (and in this sense we must include both Marxist and alternative theorists) consists in their refusal to recognize any limits to capitalist accumulation. A society whose thinking is conditioned by the value fetish is a society whose thinking is conditioned by labor — simply put, it is a society conditioned by inescapable material want.

The true perversity of this material want is not that it exists beside actual and real wealth, but that it cannot conceive of wealth in any other fashion than universal want. It, therefore, takes the absence of want as the premise of a social catastrophe that threatens the existence of civilization itself. On all accounts, this universal want, which is the only conceivable form of wealth in a society regulated according to the law of value, must be imposed with all the means available to society.

It is only on this premise that the insane logic of fascist state economic policy can appear rational by a society drowning in unemployment, overproduction and the filth created by its own productive capacities. Marx explains this in the Grundrisse, where he writes that capitalism creates, for the first time in human history, the possibility of free disposable time for the mass of society, but only in the form of surplus labor time by this mass:

“The creation of a large quantity of disposable time apart from necessary labour time for society generally and each of its members (i.e. room for the development of the individuals’ full productive forces, hence those of society also), this creation of [non-labour] time appears in the stage of capital, as of all earlier ones, as [non-labour time], free time, for a few. What capital adds is that it increases the surplus labour time of the mass by all the means of art and science, because its wealth consists directly in the appropriation of surplus labour time; since value [is] directly its purpose, not use value. It is thus, despite itself, instrumental in creating the means of social disposable time, in order to reduce labour time for the whole society to a diminishing minimum, and thus to free everyone’s time for their own development. But its tendency always, on the one side, [is] to create disposable time, on the other, to convert it into surplus labour. If it succeeds too well at the first, then it suffers from surplus production, and then necessary labour is interrupted, because no surplus labour can be realized by capital. The more this contradiction develops, the more does it become evident that the growth of the forces of production can no longer be bound up with the appropriation of alien labour, but that the mass of workers must themselves appropriate their own surplus labour. Once they have done so – and disposable time thereby ceases to have an antithetical existence – then, on one side, necessary labour time will be measured by the needs of the social individual, and, on the other, the development of the power of social production will grow so rapidly that, even though production is now calculated for the wealth of all, disposable time will grow for all. For real wealth is the developed productive power of all individuals. The measure of wealth is then not any longer, in any way, labour time, but rather disposable time. Labour time as the measure of value posits wealth itself as founded on poverty, and disposable time as existing in and because of the antithesis to surplus labour time; or, the positing of an individual’s entire time as labour time, and his degradation therefore to mere worker, subsumption under labour. The most developed machinery thus forces the worker to work longer than the savage does, or than he himself did with the simplest, crudest tools.>”

Social emancipation consists in no more than the mass of society’s members wresting this free disposable time back from capital. This is not time spent in capitalist production (which, as Kurz explains, must be understood as both production and consumption bound up with capitalism, or commodity production generally) but in non-labor for the mass of society, freeing them to develop their own capacities apart from labor.

This self-development has no aim other than that given to it by the individual herself. It is, therefore, no longer “productive” in any sense of that term — neither materially or value-producing — but only the free individual unstructured activity of the members of society. As can be now seen, by resting the premise of the inevitability of the collapse of capitalism on the productive forces created by the digital revolution, and the resulting mass of superfluous workers and capital, Kurz also rendered his argument for a positive program of social emancipation unnecessary. The material for the supercession of capitalism by social emancipation is already given in the form of a mass of superfluous labor and capital produced by the material impact of the digital technology itself. To realize this new stage of society, we need only reduce hours of labor within the logic of value production and realize the result as free, disposable time of each individual.

This is why bourgeois economists, like Paul Krugman, condemn every suggestion that unemployment can be ended by a reduction of hours of labor. This proposal is routinely disparaged by the advocates of fascist state fiscal and monetary policy, who call it a proposal based on the “lump of labor fallacy” that there can be an end to the need for labor. For the apologists of the capitalist mode of production any suggestion hours of labor can be reduced is tantamount to a suggestion there is a limit to capitalist accumulation. And it is why even academic Marxists like Michael Heinrich must denounce Kurz’s analysis and posit in its place (as the blog principia dialectica delightfully put it) a theory of “the eternal return of capitalism”. As Kurz argued, no less than bourgeois economists, “historical materialism “pisses its pants”, so to speak, as soon as it is called upon to define the so-called socialist revolution.” And this is because it is incapable of conceiving human activity outside the fetishistic structures of value production.

The Marxism of the 20th Century is dead and its foul rotting corpse is stinking up the very air we breathe. All the categories of traditional Marxist analysis, having reached the theoretical limits of the expansion of human activity under the value form, can offer no help in defining social emancipation insofar is this emancipation actually crosses the threshold of communist society itself. A completely new discourse is necessary formulated in the concept of freely associated individuals, for whom activity serves as forms of self-development of each individual; and of the further development of society within these forms. This discourse, contrary to most Marxist assertions to the contrary, is littered throughout Marx’s own argument and is the premise of his own critique of social emancipation (i.e., Utopian Socialism) from the start of his career to its end.

Kurz’s argument is not quite yet that discourse, but must be considered the moment when such a discourse became necessary for the further advance of social emancipation. Our job is to elaborate this discourse, showing that it rests on the very premises of existing society – a mass of unemployed labor and a mass of superfluous capital, the premise of wealth that rests on, and cannot be conceived apart from, universal want and privation — that makes possible the unfettered self-development of each individual within society.

When we say that social emancipation is the solution to capitalist crisis, we only mean free disposable individual time away from labor is the solution to the horrors of capitalist austerity, unemployment, poverty and want.

Social emancipation is incompatible with every form of property

September 11, 2012 1 comment

In the first section of his essay, Kurz examined the limitations of 20th Century Marxism that, he argued, was incapable of theoretically superseding capitalism except by means of a proposed future event, the proletarian political revolution, which, would solve all of capitalism’s ills and manage society in some undisclosed fashion. To address this theoretical failure, in section two of his essay, Kurz returns to the basic schema of Marx, the link between the forces and relations of production. Kurz proposes the technologies associated with the digital revolution renders living, value producing, labor increasingly superfluous to production. Kurz concludes the significance of the new technology is not to be found in its production, but in its utilization by society. This technology cannot be employed to mobilize the massive labor armies of the Fordist era.

I argue, following Kurz, the impact of the digital revolution on the ‘economy’ appears to us in its phenomenal or perceptible form as a growing potential for social collapse and regression to a primitive state of simple survival. This survivalist fear is simply the result of the conditioning of our consciousness by commodity production itself — since we have been conditioned by bourgeois society to take its relations as the “natural” form of society, we experience capitalism’s potential for collapse as the potential for the collapse of civilization itself, when it is actually otherwise. In fact, as Kurz seems to argue, the potential inherent in this technology for the collapse of commodity production must actually be the premise of our conceptions of social emancipation; because this technology makes possible a decentralized organization of society without the necessary fulcrum of the state and commodity fetishism generally.

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VIII. The collapse of capitalism, Minsky and the Great Financial Crisis

August 31, 2010 2 comments

The idea that Marx’s prediction of a complete breakdown of capitalism could be triggered by something as innocuous as a recession may seem far-fetched. After all, recessions are as ubiquitous to post-war capitalism as inflation, bubbles, and military interventions by Washington. Indeed, most recessions in the post-war period were deliberately triggered by Washington to slow growth by cutting off the availability of credit — the mother’s milk of superfluous economic expansion.

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VII. Superfluous labor and the collapse of capitalism

August 28, 2010 2 comments

If we now return to the definition of depression offered by the wiki, we can see how inadequate it is:

In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by economists as part of a normal business cycle.

Considered a rare and extreme form of recession, a depression is characterized by its length, and by abnormally large increases in unemployment, falls in the availability of credit— quite often due to some kind of banking/financial crisis, shrinking output and investment, numerous bankruptcies— including sovereign debt defaults, significantly reduced amounts of trade and commerce— especially international, as well as highly volatile relative currency value fluctuations— most often due to devaluations. Price deflation, financial crises and bank failures are also common elements of a depression.

The definition is not only inadequate; it contains assumptions about both depressions and recessions that are misleading and altogether an obstacle to understanding the current economic disturbance we call the Great Recession.

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VI. Prices and superfluous labor

August 24, 2010 Leave a comment

A depression erupts when further investment by businesses becomes unprofitable; this lack of profitability results solely from the fact that labor is so productive that consumption is the overriding limiting barrier to further investment. Once this “insuperable” limit was encountered, money was withdrawn from circulation by the owners of gold who could find no profitable use for it. In response to this, government devalued the national currency against gold and then altogether debased it.

The debasement of the national currency severed the connection between gold and the national currency; and, therefore, between value and price; and between socially necessary labor time and labor time actually expended. On the one hand, there is gold: the expression of the value contained in the output produced. On the other hand, there are dollars: the denomination in the prices of that same output of the labor time actually expended.

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V. Debasement and prices

August 22, 2010 Leave a comment

There is a syndrome known to afflict people who have undergone surgery to relieve terrible bouts of seizures called split brain. The wiki explains how this affliction expresses itself:

Split-brain is a lay term to describe the result when the corpus callosum connecting the two hemispheres of the brain is severed to some degree. The surgical operation to produce this condition is called corpus callosotomy and is usually used as a last resort to treat intractable epilepsy. Initially, partial callosotomies are performed; if this operation does not succeed, a complete callosotomy is performed to mitigate the risk of accidental physical injury by reducing the severity and violence of epileptic seizures. Prior to callosotomies, epilepsy is treated through pharmaceutical means.

A patient with a split brain, when shown an image in his or her left visual field (the left half of what both eyes take in, see optic tract), will be unable to vocally name what he or she has seen. This is because the speech-control center is in the left side of the brain in most people, and the image from the left visual field is sent only to the right side of the brain (those with the speech control center in the right side will experience similar symptoms when an image is presented in the right visual field). Since communication between the two sides of the brain is inhibited, the patient cannot name what the right side of the brain is seeing. The person can, however, pick up and show recognition of an object (one within the left overall visual field) with their left hand, since that hand is controlled by the right side of the brain.

The same effect occurs for visual pairs and reasoning. For example, a patient with split brain is shown a picture of a chicken and a snowy field in separate visual fields and asked to choose from a list of words the best association with the pictures. The patient would choose a chicken foot to associate with the chicken and a shovel to associate with the snow; however, when asked to reason why the patient chose the shovel, the response would relate to the chicken.

The split brain syndrome is an altogether apt analogy for what happened when the dollar was debased from gold.

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“Staring into the awful face of God…”

October 25, 2008 Leave a comment

Thank you Jehu for taking the time and thought to outline the answer to my question.

Yet, Francis Phalen’s reply to Rudy in the graveyard remains, “Don’t count on it.  Guys like him don’t let go of a good thing.”

Since the paradigm you describe is so counter to the present day paradigm that keeps all the people Francis is talking about in the only position from which to pull the levers of power, how do they begin to see your message as a Golden Path?  My guess is we all “stare into the awful face of God” together before anything like this is even considered.

Do you see this way of life being demanded from the bottom up?  I mean, all those who tuned into the latest episode of Survivor last night, will they see the wisdom or even necessity of this radical thought?  How does this changeover begin?

This is an excellent question – one which reveals not simply the conceptual requirements of a post-economic society, but also the key to understanding the very core of our own times as we stand on the event horizon between the epoch of scarcity and that of abundance.

It is precisely this radical view of our future which has been the driving force of American politics for the last thirty years. That we have not recognized it as such is, above all, symptomatic of the profound grip fascism has on the political and economic discourse.

(NOTE: I would say here, I apologize for returning to the idea that the Party of Washington is the party of fascism. I use it, however, not as a pejorative, but as an accurate description of its ideology. We have come to associate fascism as a rightist ideology, but in fact, if historians are to be believed, it began with the defection of its leaders from the left-wing parties of Italy. The Wiki features an interesting outline of the central economic tenets of fascism, among which is the idea of a “Third Way,” the uncanny resemblance to which you will immediately find in ideology of the Clinton Democrats, right down to the self-given label.)

Americans have been fighting for the reduction in working time for the last forty years!

Why this movement has never been recognized is simple: Americans’ attention has been focused on the chief form a too long work week takes, not on the problem itself.

As we stated earlier, government has expanded to monstrous proportions feeding on the superfluous working hours of society, and driving us to this present crisis. The chief symptom of the expansion of working time has been the expansion of government, and of taxes. Thus, we read this piece in a Massachusetts newspaper:

For years, Massachusetts was known derisively as “Taxachusetts.” But voters could help shed that label in November by completely eliminating the state’s income tax in a single stroke.

If approved, the ballot initiative would wipe out 40 percent of state revenues and give back to each taxpayer an average of $3,600.

The Massachusetts proposal is the most notable of several tax-cutting questions that will appear next month on ballots around the nation.

Others include a North Dakota initiative to cut individual income tax rates in half and trim corporate rates by 15 percent; an Arizona measure to mandate that any initiatives requiring spending or tax increases be approved by majority of all registered voters, not just those casting ballots; and a Maine plan to repeal new taxes on beer, wine and soda.

For forty years now, since well before the so-called Reagan Revolution, Americans have been waging a determined, if blind and unconscious, battle to push back against the ever lengthening work week, beginning, perhaps, with the Jarvis amendment against soaring property taxes in California in 1978. (There may have been earlier examples of this, but we are – we confess – mostly ignorant, and ignorant of them.)

The standard interpretation of the Jarvis campaign is that Republicans don’t like poor and minority people – which probably is true, since it spawned a whole generation of activists who targeted welfare queens and immigrants as the sole cause of all economic difficulties experienced in white suburbs.

However, contemporaneous explanations which relied on the racist ideology shared by the movement’s participants are entirely beside the point, since, as we know, the movement reflected not the economic pain caused by the coloreds but by the collapse of Bretton Woods, and the impact National Security Council Memorandum 68 had on deindustrializing the country.

And, we also know, black people and immigrants have always been blamed, in every period of American history, for every social disorder which has descended upon us, since the outbreak of witch hunts in Salem.

Blaming the coloreds is what Americans do.

Accepting this racism as the explanation for the actual political response of Americans to very real impact of economic events in their lives is what ignorant assholes on the left do.

A tax, of whatever form, and, by whatever level of government, is nothing more than the indirect extension of the working day. When government takes 20 percent of your paycheck you are forced to offset it by working longer hours, if you are to maintain your previous standard of living despite this loss.  How you accomplish this – by working longer hours directly, or adding new members of your household to the work force – is, of course, up to you – the politician doesn’t care one iota.

Likewise, the accumulation of government debt, in the form of bonds and notes, has this same effect. So, we read this in the above mentioned article on the Massachusetts income tax elimination proposition:

The state’s “Taxachusetts” label dates back to the 1980s, when Massachusetts had some of the highest tax burdens in the country.

Then-Gov. Michael Dukakis won the 1988 Democratic Party’s presidential nomination on the success of the so-called “Massachusetts Miracle,” but after his loss, the economy tanked.

Dukakis floated bonds to pay off the deficit, forcing lawmakers to hike the income tax rate from 5 percent to 5.95 percent in 1989, then to 6.25 percent in 1990. It later fell back to 5.95 percent.

The relentless incremental upward creep of taxes, and of public debt – which latter frees the incumbent politician from the political embarrassment of a sudden and massive rise in taxes while building into future budgets ever greater tax increases if they are to finally be repaid – exerts relentless downward pressure on the living standards of working families, leaving them vulnerable to the loss of their homes, living paycheck to paycheck, even forcing them into their own private debtors’ prison of credit cards, kited checks, and revolving accounts – making it impossible for them not to just achieve their modest dreams, educate their children, and retire with some level of comfort, but compelling them to sacrifice each current day in vain hope of someday simply breaking even, or, at the very least, not so broken as to end their days eating dog food.

And, it is right in this midst of this nightmare, this violent vision of our senior years, as we struggle to keep our families together, educated, housed, and fed, Washington comes to us and requests to borrow $700 billion from the Chinese government to bail out its retainers on Wall Street, who have all this time profited handsomely from the swollen public debt – gorging themselves on it to the point of insensibility and euphoria – and from our descent into the status of impoverished wage slaves standing the merest paycheck or illness from financial disaster.

Is it any wonder that, in response to this insult, working families of every political persuasion, without exception, flooded Congress with the singular demand to vote the request down? And, that the promise to reduce taxes is a necessary part of every political candidates platform?

So, in answer to your question: How does this changeover begin?

My answer is this: it has always been there. The first steps American working families took to express their separate interests were the establishment of organizations to demand shorter working time in this country in the 1800s.

As Robert Whaples observed:

[W]ith the continued rise of merchant capitalists, the transition from the artisanal shop to the early factory, and an intensified work pace had become widespread by about 1825. These changes produced the first extensive, aggressive movement among workers for shorter hours, as the ten-hour movement blossomed in New York City, Philadelphia and Boston. Rallying around the ten-hour banner, workers formed the first city-central labor union in the U.S., the first labor newspaper, and the first workingmen’s political party — all in Philadelphia — in the late 1820s.

Our failure has been not to realize that, since NSC-68, this became an immediately political demand – a demand aimed not at employers, who never let down their own fight against the idea of shorter working time, but against government which filled this superfluous working time with its own demands on the wallets and budgets of ordinary Americans, and, thus, on their time away from work.

This has been the single unconscionable failure of those who can imagine a life without work, and a society no longer organized by the requirements of scarcity.

Frankly, there has been no political force to put these two separate threads of the same movement together – tax reduction and shorter working time – and, it is unlikely that any will emerge in the near future – at least until such time as the Democratic Party’s candidate and likely next president, Barack Obama, crashes to earth in this ongoing crisis.

What isolated supporters of shorter working time there are, are wholly under the thrall of more taxes for programs they believe are necessary to the public space – mostly silly pie-in-sky projects to rebuild the infrastructure, improve schools, health care insurance, or to promote environmentally friendly methods of producing energy – none of which requires a dime more in public spending than is available today, and all of which could be done with the merest fraction of current public expenditures.

The leaders of the anti-tax movement, such as Carla Howell in Massachusetts, are hopelessly under the thrall of libertarian delusions that a reduction in the size of government can be realized while ignoring the fate of millions of working families who would be tossed into the streets, as they are summarily shoved off government payrolls and into unemployment – provoking the most astonishing cascade of mortgage and personal debt defaults, and a mass floating population of unemployed families easily eclipsing that of the Great Depression.

Nevertheless, the present crisis will do precisely both of these things: shorten the work week and reduce the size of government.

Unfortunately, it will probably do them both in the worst possible way as has already begun: through the bankruptcy and default of one after another national, state, and local government, and the accelerating layoffs of millions of working families, bankruptcy of the biggest industrial and commercial giants, and an impending tsunami of personal debt defaults. Perhaps in the middle of all this a bulb will pop on above someone’s head.

Until then, as you point out, we will all be “Staring into the awful face of God…”.

What is your vision of the shorter work week?

October 23, 2008 Leave a comment

We received the following emailed question from a friend, and since it is relevant to what we have discussed on these pages, we reprint it in full, along with our response.

I feel the need to ask this question.  I have no doubt of the need to shorten the work week.  For reasons I cannot place into words other than to say you have made a convincing argument understood by my reptilian understanding of economics.

My question is this: What is your vision of the shorter work week.  That is to say, if a person earns 100 dollars a day and thus 500 dollars a week, does that mean he will now earn 400 dollars a week?  How does this square with his need to pay for what he needs to live, food, shelter, clothing, etc. if the “price” for such things does not shrink in direct ratio to this steep drop in earnings?  If the price for such things does not change as well, does this not make it impossible to match in income the “costs” of living?

This is the piece of the puzzle that brings my understanding to a grinding halt.

If I am to go forth in the world making the argument that the need to shorten the work week is obvious, how do I answer this first logical question that I am at once confronted with?

Am I making my question clear?

Yes, you are perfectly clear, and perfectly correct that it difficult for people to understand. Part of the difficulty for me lies in translating the way I think about this into images people who are not at least also partly delusional can understand.

But let me try:

To begin, consider a factory which employs 100 persons, and which produces 42 inch, wide screen, high-definition, picture-in-picture, plasma televisions  and sells them with the expectation of a reasonable profit.

Of these 100 employees, 5 to ten actually work directly or indirectly producing the televisions sold by the company.

The other 90 to 95 employees spend the entire day doing each others hair and nails, giving back massages, advertising the company product to each other, running the company store, selling each other valuable real estate in the company cafeteria, running loan shark operations and football pools, or passing regulations declaring who among the employees can marry whom, how much of what drug each can use, how often in the course of the day their children must recite the Pledge of Allegiance or pray, and which neighboring factory to invade next.

As you might imagine, paying 95 employees, out of a 100 person work force, to simply hang around looking busy, when, in fact, they are doing nothing at all, adds quite a bit of cost to the price of those plasma televisions.

This is basically what has happened to our economy – 5 to ten percent of the labor force make real things, the rest make mischief, and add to the cost of those real things. That all this mischief, and all these costs occur outside the factory, rather than inside, is of no concern to us when it comes to understanding the effect a largely unproductive workforce has on the prices of real goods.

Inside or outside, it makes every thing more expensive that it otherwise would be.

However, there is a deliciously bizarre twist to this for the factory owner, as we will see:

Let us suppose the owner of that factory were to lay off this unproductive 95 percent of the work force: Now we have to ask who would buy all those spanking new plasma televisions?

This, of course, is no concern to him – he only wishes to reduce his costs of production, and still might export the televisions to some other area where the consumer might afford it. His former employees go hungry, but he can salve his conscience by donating his old $1000 suits to the local charity so they might be recycled to some poor slob to wear to his next job interview.

The problem is, however, in our economy this excess workforce is not inside the factory, where it can be quietly laid off. It is outside the factory in the economy, where they can add to the factory owner’s costs indirectly, and, in a way he can’t so easily offset – they haunt him, cause him to twist and turn each night as he fights to find a way to finally subdue them.

Each day he goes to work and lays off another hundred or so, yet, in the morning they appear again – outside the factory gates – as new indirect costs of production: wraiths asking to mow his lawn, give him a pedicure, personally shop for him; as, hedge fund managers, mistresses, county political operatives, DPW crews, a host of tax collectors, or, Navy Seals ready to plant small suitcase nukes in Tehran.

At McDonalds, or DB Bistro Moderne, in the form of a Corniche or a Hyundai – the carrying costs of a superfluous workforce makes itself felt in the generalized upward pressure on prices throughout society. However, relentlessly he trims his workforce, in equal measure, his indirect costs seem to rise.

We could have our factory owner run his operation from another nation, to no avail. Even there, as when he laid off the the first of his employees, rising prices threaten him: fluctuations in currencies soon crush whatever competitive advantage he seeks. He accumulates more, but only at the cost of spreading the disease of inflation throughout the global marketplace.

Of course, one cannot sidestep the problem of a superfluous mass of employed labor except by reducing it. Leaders of industry and government have tried in every manner to offset this cost by various means, and have all failed miserably.

And, there are only two ways to accomplish this: lay off millions in the current labor force – as is being done by companies and governments around the country – and leave them homeless and hungry. Or, reduce their working hours.

Either solution will lead to the rapid fall in prices, but only one will allow people to take advantage of this fall.

So, in answer to the question, “How does all this work?”: If the reduction of the work week is planned, the starting point is to enact this reduction COMBINED with a reduction in taxes equal to the lost wages.

  1. So, for instance, if we were to reduce the work week from 40 hours to 32, a working family paying 20 percent of its wages as taxes, would see their tax rate fall to zero – no payroll tax, no income tax, no state income tax – nothing. We would also want to assure ourselves that other silly taxes: sales, property, excise, etc. were subject to the same income test as well – or eliminated entirely.
  2. This reduction would be combined with offsetting cuts in government budgets, and all government would be required to run balanced budgets – the biggest trick practiced by Washington and government at every level is the issuing of bonds and notes to fund deficits – contributing to inflationary pressure on prices, and larding their rolls with nepotism and cronies.
  3. Public debt service would be eliminated, allowing government to live within their means and continue to deliver necessary services.
  4. Private debt would be eliminated as well, as this is simply a form of compulsory servitude – forcing working families into years of involuntary work to pay for over-priced goods. Without eliminating it, it would not be possible to further reduce the work week without threatening to push families out of their homes and into the street.

Reducing the work week, as is obvious from this incomplete list, is only the beginning. As important is reducing government, which has expanded to monstrous proportions feeding on the superfluous working hours of society, and driving us to this present crisis.

This is where I typically part with most on the left who share the same goal of a world with less work. They have adopted the problematic world view of a necessary role for government – a view, which, in my opinion, leads directly to the present crisis.

If pressed, they will admit government has more often worked for Wall Street than it has for working families. Yet, they find it difficult to conceive we might all be better off without it. The ideological grip of what can only be called an American version of fascism – populism – is too deeply embedded.

Yet, this crisis will do precisely everything I have indicated above – and more – before it is over.