Robert Kurz: The Road to Devaluation Shock and the Collapse of Capitalism (Final)

September 2, 2012 Leave a comment

5. The recovery of capitalism is no longer possible

Kurz’s overall analysis of the crisis that emerged full blown in 2008 consists of four fundamental bullet points:

First, in the course of capitalist development Marx’s theory states there is a rising composition of constant capital to variable capital; this rising composition of capital compels an increasing dependence of productive capital on interest yielding capital, i.e., on debt.

Second, this rising composition of capital is also a declining ratio of variable capital to constant capital that compels the total capital to find new outlets. This dependence can, at first, be satisfied through outward expansion into new markets, but ultimately can only be met by the growth of an unproductive service (or tertiary) sector.

Third, based on the above two developments, there is an increasingly paradoxical (self-contradictory) dependence of productive capital on profits derived from debt of the non-productive sector that consists entirely of a dependence of productive capital on fictitious claims to its own future profits.

Fourth, this third paradoxical, self contradictory, dependence can only be resolved ultimately through the dependence of this entire increasingly fragile structure of accumulation on the consumption and debt of the fascist state.

In the first instance, the increasing dependence of the total social capital on the state is made necessary by the fact that the state becomes essential to the expansion of the total social capital into new markets through the means of imperialist wars and predations. But, this dependence really only comes into its own when the state becomes the consumer and debtor of last resort. In the final analysis the growth of a non-productive sector must be dependent on the growth of the fascist state as consumer of last resort. And this latter, if it is to maintain existing commodity production relations, must be dependent on expansion of the public debt. This is true because only the state can decide what serves as money within its territory and what means are used to pay its debts. It can, therefore, pay its debts with “money” it creates out of nothing, simultaneously “satisfying” this debt and evaporating its value.

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Robert Kurz: The Road to Devaluation Shock and the Collapse of Capitalism (4)

August 27, 2012 Leave a comment


4. The Necessary Parasitism of Fascist State

In a recent interview, Saint Paul Krugman gave us this gem of bourgeois economic theory:

SPIEGEL: More stimulus also means more debt. Many European nations, as well as the US, are already drowning in debt.

Krugman: I’m not saying that I don’t ever care about debt, but not now. If you slash spending, you just depress the economy further. And, given the low interest rates and what we now know about long-run effects of high unemployment, you almost certainly actually even make your fiscal position worse. Give me a strong-enough economic recovery that the Fed is starting to want to raise interest rates to head off inflation — then I become a deficit hawk.

Saint Paul tells us in a depression such as the one we are now experiencing it is impossible to pursue the sort of austerity currently being visited upon the EU without rushing headlong into calamity. Better, he says, we should expand the debt of the already bloated public sector still further and worry about the consequences later. It never occurred to the interviewer from Spiegel to ask Saint Paul why the growth of capitalist economies is now chained to the debt of the public sector.

Robert Kurz had a few ideas on that subject.

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Capital, Absolute Over-Accumulation and the Fascist State (Part five)

March 27, 2011 Leave a comment

I want to summarize a bit at this point, because I received a comment from one person that my writing style made his head hurt. If, I have made this unnecessarily difficult to understand I apologize for that. In part, this arises from the fact that I am grappling with this material as I write these posts. Writing is the way I best absorb what I am reading.


First, in relation to absolute over-accumulation:

Over-accumulation is sometimes popularly referred to as over-production (although this latter term sometimes means different things to different people). According to Marx, over-accumulation of Capital produces a fall in the rate of profit and the crowding out of a portion of the active capital — some portion of the total social capital has to lie idle. In other words, the entire system experiences a severe crisis. General over-production leads to a mass of commodities that cannot be sold and which only reduce the value of the remaining portion. Prices fall, businesses go bankrupt, millions are unemployed, and factories are shuttered. The portion of the total social capital which is forced to lie idle can not function as capital — it cannot be used to exploit labor power to create surplus value, or can only exploit it on condition it accepts a lower rate of profit or even a loss. Which actual capitals are forced to lie idle is decided by competition over how to share losses among the total social capital. Each capital tries to minimize its own loss and pass the burden of losses on to the rest of the class.

Says Marx:

A portion of the old capital has to lie unused under all circumstances; it has to give up its characteristic quality as capital, so far as acting as such and producing value is concerned. The competitive struggle would decide what part of it would be particularly affected. So long as things go well, competition effects an operating fraternity of the capitalist class, as we have seen in the case of the equalisation of the general rate of profit, so that each shares in the common loot in proportion to the size of his respective investment. But as soon as it no longer is a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it off upon another. The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, i.e., to what extent he must share in it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers. The antagonism between each individual capitalist’s interests and those of the capitalist class as a whole, then comes to the surface, just as previously the identity of these interests operated in practice through competition.

Under conditions of absolute over-accumulation, however, the problem is not simply that one or another capital must lie idle — i.e., no longer function as capital — the total social capital can no longer function as capital. Even the very biggest capitals can no longer realize profits from the production of surplus value. Conditions are such that the production of surplus value no longer leads to the increase in the mass of social capital and the mass of employed labor power, but to the absolute fall in both the mass of social capital and employed labor power. Capital as a mode of production, i.e., as an economic system, has suffered an absolute breakdown from which it cannot recover.

Second, in relation to absolute over-accumulation and the Fascist State:

The Fascist State arises out of conditions of absolute over-accumulation as a political response to the Great Depression of the 1930s. So far as I can tell, the emergence of the Fascist State in the 1930s was not itself a given in the process I am describing. Rather, it is a political development resulting from the unwillingness or inability of society to reduce hours of labor in response to the Great Depression. Because it legally determines what serves as money, the Fascist State can “purchase” the surplus value produced by the total social capital that would otherwise be unsellable and pay for this consumption with entirely worthless ex nihilo pecuniam. The Great Depression could be managed by the use of the state’s power to create money. It also became generally obvious to the ruling elites of the leading industrialized countries that the increase in the mass of surplus value produced by the total social capital could be utilized by the Fascist State to increase its military power — and this opportunity the industrialized countries immediately exploited first by preparing for total war in the run up to World War II.

For the United States, which as a result of World War II was the last nation standing with its productive capacity completely intact and in fact greatly increased, the ability to absorb an unlimited amount of unsellable surplus output produced not just domestically but throughout the World Market resulted in the accelerated expansion of its unprecedented political, military, and economic power in relation to all other nations. It also resulted in the fact that the accelerating concentration and centralization of capital, which must accompany absolute over-accumulation, proceeds under conditions which gives a competitive advantage to American capital, and forces the capitals of other nations to absorb the losses. The flow of completely worthless American ex nihilo pecuniam into the World Market, generated by massive trade deficits and massive public spending deficits, are, in reality, not an “unsustainable burden” on the U.S. economy, as economists like to pretend, but amounts to the continuous extraction of surplus value from entire nations — who are converted into additional sources of surplus value through this process — and from the World Market generally. The American Empire is, therefore, the realization of the Fascist State — its perfection — as was only dreamed of by failed attempts like Hitler’s Germany and Mussolini’s Italy.


The result of the first process is a catastrophic breakdown of exchange, and a has implications for both production and consumption. Taxes aside, the Fascist State pays out its obligations not by the equal exchange of values, but by offering worthless ex nihilo pecuniam in exchange for the goods it consumes. It is true that taxes are already unequal exchange, but this form of unequal exchange was necessarily limited by the obvious impact of increased taxes on society. Taxes imposed on society result directly in the loss of individual consumption power — a loss which is both obvious and which have on occasion been the spur of rebellions throughout history. Moreover, absent tribute, the State was limited to imposing the burden of its parasitic existence on those territories over which it actually was sovereign.

With ex nihilo pecuniam, there are no such limits: the burden of Fascist State expenditures have no direct impact on society. Rather, society experiences this burden indirectly in constant and pervasive rising prices as the purchasing power of money depreciates — a burden the unscrupulous economist is only too willing to ascribe to a host of other causes — supply or demand shocks, rising labor costs, etc. (Offering an endless list of such “causes” for events so as to obscure THE cause is standard operating procedure for these paid apologists of the Fascist State.) As Keynes observed, within certain limits continuous pervasive inflation of prices, while just as effective as taxation in reducing the consumption power of the mass of society and increasing Fascist State expenditures, also traps the members of society in a false choice pitting the purchasing power of their wages against the possibility of being unemployed altogether:

Thus it is fortunate that the workers, though unconsciously, are instinctively more reasonable economists than the classical school, inasmuch as they resist reductions of money-wages, which are seldom or never of an all-round character, even though the existing real equivalent of these wages exceeds the marginal disutility of the existing employment; whereas they do not resist reductions of real wages, which are associated with increases in aggregate employment and leave relative money-wages unchanged, unless the reduction proceeds so far as to threaten a reduction of the real wage below the marginal disutility of the existing volume of employment. Every trade union will put up some resistance to a cut in money-wages, however small. But since no trade union would dream of striking on every occasion of a rise in the cost of living, they do not raise the obstacle to any increase in aggregate employment which is attributed to them by the classical school.

A kind of perverse “communism” emerged within the World Market as a whole in which the contribution to the common wealth of society is indeed detached from consumption but in a rather bizarre manner: Nations, like China, who produce very large quantities of commodities for export, receive nothing in return for this labor — their exports are essentially provided gratis to the Fascist State.

The result of the second process is the World Historical defeat of the Proletarian Revolution — the challenge by the proletarian class majority of society to capitalist class rule and the almost constant contention between the two classes over which would control the state power. The absolute over-accumulation of capital, since it leads directly to the breakdown of the process of production and exchange, presented the proletarian majority of society with the opportunity to raise itself to political rulers of society. But, this required the reduction in hours of labor for the mass of society and a successful effort to bring the total process of production under conscious management.

Mind you, these required steps were not optional for the working class majority of society. Under conditions of absolute over-accumulation, the profit motive no longer serves as the impetus of productive activity; it no longer performs the function of setting the social capital in motion for the simple reason that, with the breakdown of exchange, the realization of the produced surplus value has broken down as well. The social capital could only be placed in motion under premises that are altogether incompatible with the capitalist mode of production. In Marx’s theoretical model, I believe, the failure to assume control of the production process and reduce hours of labor during the Great Depression was a catastrophic World Historical event from which the Proletariat as a class cannot recover.

The very emergence of the Fascist State in the form of an American Empire presupposes the concentration and centralization of capital into a global capital under the control of the American Fascist State, on the one hand, and, on the other hand, the division of the great mass of proletarians along every possible line and, in first place, their division into numerous inconsequential national working classes — split up into nation states. I think the consciousness of the class as a class, which cannot be anything but a political consciousness, is necessarily confined to the nation state and the contest over power within the nation state. But, it is just this nation state which is converted into a hollow shell with the emergence of the American Empire. Although formally a sovereign power and answerable to no other authority than its own self, the nation state is, in fact, stripped of all sovereignty by the growing influence of the World Market on its internal economic life. Even if, as Marxists continue to insist, the project of the proletariat remains the capture of state power, it is self-evident that exercising this state power as a class is now impossible. There is no way any single national proletariat, or group of national proletariats, can bring the social process of production under their control as the entire social process of production has completely escaped national control. The era of Proletarian Revolutions is over.

The communist movement of society begins on these premises.

Capital, Absolute Over-Accumulation and the Fascist State (Part four)

March 25, 2011 Leave a comment

In its fully developed form, the Fascist State is an American empire imposed by the United States on all other national states, in which each of these national states are no more than its local (national) subsidiary. The emergence of this Fascist State became the condition for the further development of the World Market bound up with Capital.

Over-accumulation of capital results from the fact that capital is founded on scarcity and can only exist on this premise. This fact leads us to the export of surplus capital into what Marx referred to as the outlying field of production within the world market, where it can be employed at a higher rate of profit. But, absolute over-accumulation in the complete meaning of this term, presupposes absolute over-accumulation not only in one or a few nations, but in all nations together. Thus, it also leads to the universal — and not merely national — competition between capitals, aimed  at concentration of the total global social capital and the elements of capital into fewer hands, and the global centralization of this social capital, along with the emergence of a global finance capital — the problem presented by the conversion of the mass of surplus value into a mass of profits within the World Market as a whole.

The question how the concentration and centralization of national capitals is to proceed is settled in the manner of such disputes between nations — i.e., by armed conflict in which one national state emerges victorious — a condition most notably expressed in the eruption of predatory total war between nation states during the Great Depression whose bloody power had been swollen by the sheer mass of social labor time that could be converted into unproductive military expenditures on a truly horrific scale. World War II was the systematic destruction not merely of armies on the battlefield, but of the industrial capacity of the belligerents and the civilian populations who could place that capacity in motion. From this point forward, when I speak of absolute over-accumulation I shall be referring to absolute over-accumulation within the World Market as a whole; and, when I speak of the Fascist State, I will be speaking of the American empire.


In the preceding section, I have suggested that under conditions of absolute  over-accumulation of capital, it becomes necessary for society to reduce total hours of labor, and thus bring its productive activity under its conscious control. If this is not done, or is done insufficiently, the Fascist State emerges as a symptom of the unwillingness or inability of society to realize the general reduction of total labor time. I have further argued that this unwillingness or inability to reduce total hours of labor leads to an expansion of total social labor time in relation to socially necessary labor time, i.e., to an increase in superfluous labor time. This expansion of total social labor time in proportion to necessary labor time leads to a general rise in prices of commodities even as the value of the commodities fall. Side by side with this general rise in prices, we see also the forcible withdrawal of gold standard money from circulation as money and its replacement by American ex nihilo pecuniam, along with the constant increase in the supply of this fictitious money.

It is not the increase in the supply of this fictitious money that leads to inflation, i.e., to a general rise in the prices of commodities, to the depreciation of the purchasing power of the money generally, but the increase in the proportion of total labor time to socially necessary labor time that leads to both the increase in the supply of money and the general increase in prices. If taxes are assumed to be zero, the growth of the Fascist State, of superfluous labor in the form of a grotesquely bloated and constantly expanding state, consists precisely in the issuance of ex nihilo pecuniam to pay for its expenditures. Its growth and the growth of the money supply are identical.

At the same time, the growth of the Fascist State is also the unproductive consumption of the superfluous portion of the surplus value produced by the total social capital, of the mass of surplus value that cannot be employed productively by the social capital as additional capital for the purpose of self-expansion. The expansion of the Fascist State is, therefore, also the expansion of fictitious profits, or profits “realized” on surplus value that no longer exists and has been consumed unproductively by the Fascist State.

But, socially necessary labor time is only that portion of the working day during which the mass of workers produce the value of their wages. The duration of labor time beyond this is surplus value, which, under condition of absolute over-accumulation, cannot be sold at a profit — actually realized according to the law of value — and, which, therefore, must be unproductively consumed (destroyed) entirely by the Fascist State. It is logically impossible to assume, as do the various statist ideologues, that an increase in Fascist State expenditures can lead to an increase in the wages of the working class, or an improvement in their conditions. The opposite is actually the case: the increase in Fascist State expenditures presupposes the increase in the mass of surplus value, in the mass of labor time expended by society beyond that labor time required for the production of the commodities consumed by the working class. This expansion only results in the further impoverishment of the great mass of society.

Thus the constant increase in Fascist State outlays, even for social services, result only in the deterioration of the mass of society; in their increasing impoverishment; in the actual decline in “real” wages; and in the general rise in both prices and unemployment. Yet, moderation of prices and unemployment during periods of expansion bring no more than the slightest moderation of this immiseration — the stagnation rather than outright decline of wages, and stagnant, desultory, job growth rather than outright increases in unemployment.

The absolute over-accumulation of Capital presupposes that all the contradictions of capitalist society comes to its surface in a rather spectacular fashion and on a global scale. A rampant speculative binge of remarkable proportions is unleashed as even the very largest capitals find it impossible to realize the surplus value extracted from the mass of employed labor power and thus are forced into speculative financial pyramid schemes. Competition between capitals explode, but no increase in the concentration and centralization of capital suffices to reduce the costs of production sufficiently to enable realization of the gains of this concentration and centralization — indeed, the problem of realization only becomes more difficult and profound as the concentration and centralization of capital proceeds at an accelerated rate. Wages are too high, but also too low — thus even as the reduction in the value of labor power accelerates by export into the least developed regions of the World Market where wages can be paid amounting to a fraction of the most developed regions, and by accelerated application of machinery, science and technology to still further reduce the expenditure of labor power and increase its surplus producing capacity, the successful reduction of the value of labor power only creates the necessity for its further reduction.

The ferocity with which Capital attacks the value of wages increases in proportion as each successful assault on the value of wages necessarily creates a demand for the next wave of assaults. Governments are converted directly into an instrument for the creation of fictitious profit and speculative financial schemes. The Fascist State is an agent for increasing the rate of surplus value, for an increase in the mass of surplus value produced, and, therefore, for an increase in its own mass as consumer of the entirety of the surplus value produced and the creator of fictitious profits on an even greater scale. The magnitude of the insatiable lust for profit increases, and, simultaneously with this increase in magnitude, the effort by the state to satisfy this lust by reducing the tax rate on capital (which continues to exist only as a formality, a fig leaf to provide political cover for Washington’s absolute corruption); promoting increased export of capital; ripping up regulations or altogether ignoring them; deliberately exposing the mass of society to environmental disasters and the ever expanding despoiling of nature; the routine introduction of dangerous materials into the food chain; the promotion of dangerous products etc., all for the purpose of gaining an insignificant increase in the rate of surplus value.

The Fascist State is the world historical political defeat of the Proletariat in its struggle for power against the Bourgeoisie. It is the actual political-economy of this defeat in the form of a globally dominant parasitic mass that grows in proportion as the political defeat of the Proletariat becomes the very premise and condition of the Proletariat’s own political activity — to the extent, therefore, that its complete and final subjugation to Capital is the premise not merely of its productive activity, but of its political activity as well; that political activity itself offers only to increase its impoverishment — its absolute degradation and absolute immiseration — and the constant expansion of its own capacity for self-governance in the form of an alien power confronting it and ruthlessly dominating it. The very political power of the proletarian majority of society looms as a merciless tyrannical social power over it that is absolutely indifferent to it.

On what other basis can the emergence of the Fascist State in a society founded on universal suffrage be premised other than those under which the actual proletarian majority of society express their own divisions in the form of this Fascist State? And, under what conditions should we expect these divisions to be most pronounced other than universal competition within the proletarian majority of society; under which each member of this class is thrown into absolute competition with the rest of the class, where every member of the class is set in absolute competition against every other member, and, therefore, under such condition as the class more or less assumes the form of a mass of petty commodity sellers under the most extreme competition, i.e., under conditions of an absolute and growing excess population of laborers? Marx argues that over-accumulation of capital consists precisely of this absolute excess population of laborers along with an absolute excess of capital.

It follows that the question is not whether the working class is split into adherents of greater Fascist State deficit spending, or a reduction of Fascist State deficit spending — that they oppose each other as Democrat versus Republican, progressive versus Tea Party, liberal versus conservative, public employee versus private employee, black versus white, male versus female, undocumented versus citizen, employed versus unemployed, etc. All such distinctions between and among the various factions within the Proletariat are of no significance whatsoever — are merely incidental to the outcome of the process I have described. It is not a question of the political prejudices or particular circumstances of the various members of the working class, but of politics itself: that Fascist State, no matter its specific composition and periodic reshuffling, is indifferent to this class, hostile to its interests, and exists only to further degrade and impoverish it.

The Fascist State signifies that politics is dead! That the class struggle has been settled decisively in favor of the Bourgeoisie and against the Proletariat — a class struggle that ended with the world historical defeat of the Proletariat. That the struggle against present day society must henceforth go ahead on a different basis.

Capital, Absolute Over-Accumulation and the Fascist State (Part three)

March 22, 2011 Leave a comment

The constant expansion of the Fascist State presupposes the constant expansion of capital which can no longer function as capital, which can no longer employ labor power for purposes of the self-expansion of capital; which, in other words, seeks its self-expansion, not by augmenting the productive capacity of society but by exploiting the wholesale destruction of this productive capacity through fictitious profits.

Of superfluous labor, Moishe Postone writes:

It should be clear that “superfluous” is not an unhistorical category of judgment developed from a position purportedly outside of society. It is, rather, an immanent critical category that is rooted in the growing contradiction between the potential of the developed forces of production and their existent social form. From this point of view, one can distinguish labor time necessary for capitalism from that which would be necessary for society were it not for capitalism. As my discussion of Marx’s analysis has indicated, this distinction refers not only to the quantity of socially necessary labor but also to the nature of social necessity itself. That is, it points not only toward a possible large reduction in total labor time but also toward the possible overcoming of the abstract forms of social compulsion constituted by the value form of social mediation. Understood in these terms, “superfluous” is the historically generated, immediate opposite of “necessary,” a category of contradiction that expresses the growing historical possibility of distinguishing society from its capitalist form, and, hence, of separating out their previous necessary connection. The basic contradiction of capitalism, in its unfolding, allows for the judgment of the older form and the imagination of a newer one. My analysis of the dialectic of transformation and reconstitution has shown that, according to Marx, historical necessity cannot, in and of itself, give rise to freedom. The nature of capitalist development, however, is such that it can and does give rise to its immediate opposite—historical nonnecessity—which, in turn, allows for the determinate historical negation of capitalism. This possibility can only be realized, according to Marx, if people appropriate what had been constituted historically as capital.

Although Capital is founded on scarcity, it nevertheless has a tendency toward the absolute development of the productive forces — toward, in other words, realization of abundance. But, the development of the productive forces occurs wholly within the limits of scarcity — a limit against which Capital constantly strains yet is continually thrown back by its own inherent contradictions. The productive forces develop to a staggering extent — as can be seen in American agriculture where the labor of 0.6% of the population suffices to feed the remaining 99.4%, yet, hunger persists, and grows; prices continually inflate; and the war on the consumption power of society extends even to routinized crop destruction by using it for fuel.

Capital’s problem is not how to abolish hunger and want, but how to dispose of massive quantities of output without abolishing hunger and want. The productive forces have grown to such scale that truly insignificant quantities of labor can produce astounding quantities of output. The question posed to political-economy — to “economic policy makers” — is how to maintain profitability by destroying this abundance. Capital’s tendency to absolutely develop the productive forces comes down to a tendency toward absolute expansion of the Fascist State.

The law of the tendency toward a falling rate of profit not only presupposes export of capital, it presupposes export is absolutely insufficient. It presupposes the export of capital only intensifies the absolute over-accumulation of capital. Thus, alongside the export of capital, the Fascist State grows and must grow at an accelerated rate. Or, put in terms that might be understood by the Modern Monetary Theorist:

Reagan proved that deficits don’t matter.” —Dick Cheney

What matters isn’t the completely fictional accumulation of public debts but that ever increasing quantities of excess capital is destroyed. The expansion of the Fascist State and the destruction of capital is, for this reason, only two sides of the same process. It is the annihilation of value in the perverse form that socially necessary labor time shrinks, even as labor time grows absolutely. This requires not simply the destruction of new surplus value but also the devaluation of the existing variable and constant capital.

The perversity of the requirement: All of this destruction of value and surplus value must be profitable for Capital. Thus Capital in its necessary form must be replaced by Capital in its purely superfluous form. This, of course, is impossible: Capital is value, and value is socially necessary labor time alone. Hence, superfluous Capital is not Capital at all, but merely accumulated superfluous labor time operating as if it is necessary labor time. The logic of the Fascist State is, for this reason, I think, identical with the logic of Capital itself, but with a profoundly different aim. If, for whatever reason, society is unable or unwilling to reduce its hours of labor, the Fascist State is the necessary result. It is the necessity for a reduction of hours of labor expressed in the perverse form of an increasingly intolerable Fascist State.

Thus, the Fascist State is only a symptom of the absolute nature of the contradictions at the heart of capitalist relations of production under conditions of absolute over-accumulation, and as a consequence of a general failure on the part of society to liberate itself from labor — a consequence of society’s failure to reduce the social hours of labor, and thus bring its activity under its conscious control. It is the accumulation of entirely unnecessary labor, superfluous labor, performed by society, in the form of a grotesquely overgrown, and constantly expanding, State power.

That the diminishing application of living labor to production results, and must result, in the extension of hours of superfluous labor in the form of the Fascist State explains why the rise of this state occurs simultaneously with the withdrawal of gold money from circulation as legal money in the United States in 1933, and the subsequent end of the dollar peg to a specific quantity of gold in 1971. The claim by economists like Ben Bernanke and Christina Romer that the Great Depression was caused by the restriction on the supply of money imposed by the gold standard is a crock, an admission that Capital, if it is to continue to dominate society under conditions of absolute over-accumulation, requires the decoupling of money from the commodity serving as measure of value and standard of price — that prices must no longer be constrained to express only the socially necessary labor time embodied in commodities generally, and, specifically, in labor power, the capitalist commodity par excellence, the commodity without which capital cannot become capital, cannot expand its value.

The subsequent explosion of the price of gold, and prices generally, gave evidence of the extent to which the magnitude of the existing quantity of capital in circulation denominated in the legally established gold standard dollar had diverged from its actual value — the extent to which the magnitude of this capital denominated in pre-1971 dollars had already diverged from its actual magnitude denominated in so many billions of ounces of gold. The replacement of money by ex nihilo pecuniam — by money created out of thin air — did not itself lead to inflation, to the depreciation of the purchasing power of money, but only expressed the growing divergence between the shrinking socially necessary labor time of society  and the ever expanding total labor time of society. This divergence presupposes the growing divergence between the value of commodities and their prices: even as the value of commodities shrink, the prices of these same commodities increase. The sum of prices must constantly increase in proportion as the sum of values fall. It is not the increase in the supply of money that leads to the increase in prices of commodities, but the increase in the total hours of social labor in proportion to the socially necessary labor time of society that requires both the increase in the supply of money and the increasing prices of commodities.

The stupidity of liberals and progressives, and the mass of Marxists theorists following them, is that they imagine the Fascist State by directly employing the labor power of society can overcome the inherent tendency toward the formation of a surplus population of workers. What they always overlook in their fascination with this fascist idea is that value is socially necessary labor time — the duration of labor time during which the worker reproduces the value of her own wages. The Fascist State, however, is composed of the surplus of labor time over this quantity of hours. It follows from this that even if the mass of unemployed is provided jobs by Fascist State spending, the new sum of wages including the increase in wages by this additional employment is, and must be, offset by the further contraction in the value of individual wages; that the new sum of wages amount to no more, or even less, than the value of the sum of wages before the unemployed are given public jobs. The average daily wage decreases in value as the mass of employed workers increase. The impoverishment of the individual worker is thereby accelerated; but in this case it is not owing to improvements in the productivity of labor, but owing to the sharing of the meager quantity of means of consumption — to which the workers are limited by Capital itself — among a larger number of hungry mouths.

A vicious circle is thus created: Capital creates surplus value by limiting the consumption of the worker. This surplus value, however, must then be unproductively consumed in its entirety by the Fascist State to maintain the conditions under which it was created, i.e., to maintain the limited consumption of the worker. The new value, having been consumed by the Fascist State, is replaced in circulation by ex nihilo pecuniam having no value whatsoever; and, which only devalues the existing employed variable and constant capital — or, what is the same thing, inflates the prices of the commodities composing both variable and constant capital. Finally, the purely monetary devaluation of the variable and constant capital increases the pressure on Capital to increase the rate of surplus value in order to maintain and increase the mass of surplus value, i.e., to further increase the productivity of labor by reducing still further the consumption of the mass of society.

This has political consequences to which I turn next.

Jobless Recovery, or, The End of Work…

August 10, 2009 2 comments

We thought you might need a primer on how to interpret the unemployment figures released by Washington last week:

PRIMER: Frankly, you can safely ignore the unemployment figures, because they are meaningless, and, in just a few months, Washington will revise them to show how meaningless they were.

End of primer…



While the Bureau of Labor Statistics showed a remarkable easing in the pace of job losses – “only” 247,000 jobs lost in the past month – more reliable sources show the rate at which jobs are being lost has not slowed in the least.

According to Mish Shedlock, Washington has simply stopped counting unemployment, and is engaged in a statistical shell game:

Taking one time auto sector anomalies and manipulation of the participation rate into consideration, today’s job report was much weaker than looks at first glance …

… I consider these job losses to be depression level totals. Admittedly conditions are not as bad as the great depression, but this is certainly no ordinary recession by any economic measure including lending, housing, bank failures, jobs, the stock market, commodity prices, treasury yields etc. …

I have been calling for the rate to hit 9.8% by August. With only one month coming, today’s report shows that is not going to happen. However, much of the “improvement” in the numbers today are as a result of the participation rate falling by .2%. In other words, the BLS stopped counting.

TrimTabs’ estimates of the unemployment rate, based on real-time tax data, show breathtaking job losses continuing in July and predicts massive revisions for official economic statistics over the next few months:

TrimTabs Investment Research estimates that the U.S. economy lost 488,000 jobs in July, considerably more than the consensus estimate of a loss of 305,000 jobs. In addition, TrimTabs expects the Bureau of Labor Statistics to revise its job loss estimates sharply higher for the first half of 2009 based on the latest unemployment insurance survey results.

“While Wall Street is convinced the recession is over, the economy continues to shed jobs at an alarming rate,” said Charles Biderman, CEO of TrimTabs.

TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. Historically, TrimTabs’ employment estimates have been more accurate than those of the BLS.

And unemployment is not the only suspiciously less downbeat official stat: Chris Martenson has pointed out that government GDP figures are not even reliably reflecting corporate reported data:

… [W]e are being asked by the Bureau of Economic Analysis (BEA) to accept a reported -2% drop in PCE [Personal Consumption Expenditures] and a decline in corporate revenue of -15% , a figure more than seven times larger.

Of course, the discrepancy between the two cannot be reconciled. It is impossible. One must accept one or the other.

I will point out that a -15% decline in corporate revenues is also in alignment with sales tax data from the states (down some 10% yr/yr), unemployment (9.5% and climbing) and many other economic measures.  I will recall here that good data is that which aligns with other data.

How is such a misleading GDP report created? (Hint: think sausages)

The answer lies in a disturbing mixture of seasonal and hedonic adjustments, imputations and other statistical wizardry not subject to review or insight. We are asked to simply accept the results without question.  Disturbingly,  the Wall Street/MSM (Main Stream Media) spin-machine runs off with the GDP report as though it were the sacred truth itself…


Perhaps, we should take a step back from the debate over unemployment statistics and try to find out why unemployment is such a pressing problem in the country – the kind of political problem which exposes them to misleading data, statistical manipulation, and even outright fraud.

The obvious answer, that unemployment is a problem because we like to eat! is not as accurate as it seems on the surface. It actually takes very little time to produce the things we consume in the course of a normal day, week, or year.

And, if the truth be known, new employment adds nothing to our material standard of living – if eating were the problem we could easily get by with almost no employment at all.

We work because we must work, not to put food on the table in any material sense.

This contradiction, that our work produces work, lies at the core of the problem unemployment statistics highlight.

And, the root of this contradiction is found along a little known, less discussed, and even less understood fault line running through our economy: The boundary between what we can call the core of our economy and its superfluous periphery.

At the core of our economy are the big organizations – General Motors, Ford, Apple, Exxon-Mobil, Archer Daniels Midland, etc. – which produce the things we use each day.

These include all of our food, clothing, shelter, iPhones, stretch his and her Hummer limousines, and, of course, that 42 inch, wide screen, high definition plasma television with its 200 channel of reruns of old Seinfeld episodes.

It also produces all the things we need to produce the things we use: factories, computers, and so forth.

While it might seem like a lot of stuff, in fact, the production of the things we use everyday, and the production of all the things we need to produce the things we use everyday only comprise a small portion of our economy.

The superfluous periphery of our economy, by contrast, is actually the largest part of our economy, and is composed of economic activity which produces nothing.

It includes, Goldman Sachs, lawyers, economists, aircraft carriers cruising the Persian Gulf, and you – most likely: which is to say, in all likelihood, you go to work each day and engage in work which produces no real good.

It is not that you do nothing of ethical value – you could, for instance be a social worker, protecting at risk kids from life on the streets; but, in this capacity you produce no more economic value than a trader at the proprietary trading desk at J.P. Morgan, or, that worthless swine, Doctor Dre, shilling for some filthy beer company.

Only work that produces a good which eventually ends up on your kitchen table, or otherwise consumed, is work which produces economic value.

All other work – from slaughtering entire villages in Afghanistan, to figuring out how to scam more money for Medicare, under the guise of reforming health care, in Washington, to selling the idea that global warming can be slowed by the Cash for Clunkers program – belongs in the superfluous periphery of the economy.

And this is the heart of the problem we face regarding unemployment: The two parts of our economy work in entirely different ways.



Let us take the core economy – which we can call the “agriculture-industrial complex”: It hums with energy; people who work in this sector of the economy take their shower after they come home from work, because the work is dirty, monotonous, and … well – its industrial.

People work in industry for years, so they can save money to send their kids to college, so their kids don’t have to work in the factory.

It’s the American dream.

The point of the core economy is to produce as much stuff – Hummers, iPhones, and 42 inch, high definition, wide screen plasma televisions – with as little effort as possible.

And, for the most part, the agriculture-industrial core of the economy has been very successful in that regard: in the not too distant past about 60 percent all people worked in this part of the economy.

Today, industrial work makes up a relatively insignificant part of the labor force; and, agriculture, which once occupied the work of 98 percent of the population, now occupies the work of less than one percent of the labor force.

All of this is obvious to you, but we touch on it for this reason: The industrial core of our economy is shrinking, and has been shrinking since before the Great Depression.

Since the big D, all the growth in employment has occurred outside the industrial core of the economy.

This is probably no shock to you as well, and it is simply a continuation of the same shrinking labor force which occurred in agriculture as people moved off farms and into industry.

In much the same way as agriculture was converted from small family farms into massive industrial production facilities, producing a massive increase in the productive capacity of our society (so much so, that we don’t even really keep track of agricultural employment in the monthly statistics) – the same process has been taking place in industry in general since the Great Depression.

The industrial core of the economy has become so massively productive that it probably takes as little as 10-15 million people to supply all the goods produced in the society – everything from iPhones to Trident submarines to the physical network connecting you to this web page.

That’s the material needs of 300 million people satisfied by the efforts of about five percent of the population.

In theory, the core agriculture-industrial complex of the economy provides a staggering example of the ease with which we can produce everything we need to live on with the most minimal effort.

In practice, however the case is precisely the opposite: The more productive the core of the economy becomes, the more work looms as the most pressing issue of society – a matter of life and death, an insistent angry throbbing to which even the most maladroit, rhythm-less, clumsy politician must dance.

The beat in this Totentanz is laid down by the peculiarity of the capitalist mode: On the one hand, capital revolutionizes work, magnifying its productive powers beyond anything previously witnessed in human history; but this vastly expanded power to produce carries the most bizarre historical irony: Work achieves greatly enhanced productive power only to become its own end – and we become the mere means to its further development.

To put this in less metaphysical terms: A progressively longer social work day becomes the essential condition for the exploitation the productive capacity of work – to realize our enhanced ability to produce 42 inch, high definition, wide screen plasma televisions, we must work harder and longer.

This may not seem like a contradiction to you, but it is: the entire point of increased productivity is to produce more goods with less effort, yet we are now faced with a situation where the ability to produce more goods with less work itself requires an increasingly longer social work day.

To understand how this happens, it is important to understand how differently the two major sectors of our economy work.


We have already touched on how incredibly productive the core economy is, and how this is leading to shrinking employment in the core economy; but, we should add that this core is not simply the source of all the goods we use, it is also the ultimate source of all the profits in the economy, all the government receipts, and all the wages paid in the economy.

To put it another way: The output of the core economy is being “leveraged up” to pay for the wages and profits of the non-core economy, including government expenditures.

This is how the leverage works: In the core economy the wages paid to the labor force and profits of the companies require so many hours of work – in our own economy, this is about six to eight hours per week. However, the official work week – the point at which your employer is required to begin paying you for overtime – is 40 hours.

The difference between eight hours require by our economy to put food on the table and the 40 hours mandated as the official work week – 32 hours – is the basis for wages, profits and government expenditures in the non-core superfluous economy.

In other words, unless workers in industry were worked longer than is necessary, superfluous work in our economy could not exist.

And, conversely, all work performed beyond this same eight hours, by all employees in the labor force, is waste on a grand scale: If superfluous work was removed from the economy, no one would have to work more than one day a week.

What caused this difference to emerge – between the time we have to work, and the time we actually do work – is the drive on part of the companies in the core economy to maximize their profits by maximizing the length of the work day in the core economy, no matter how productive the labor force becomes.

This drive to maximize the length of the work day in industry ultimately backfired in a big way: causing the Great Depression. As the productivity of the labor force increased in the early decades of the 20th Century, more and more goods were thrown on the market, until it produced a permanent generalized glut of goods, which brought economic activity to a near standstill.

Economists call this problem insufficient aggregate demand, but you can call that explanation the unadulterated bullshit of professional obscurantists.

The crisis had been predicted, and should have been no surprise to anyone – and the solution was not only obvious, it was actually introduced into the Senate in 1934 – The Black-Connery bill to reduce the work week to 30 hours.

It was defeated, of course, but we are not the least bit concerned with this – we are only concerned with the result: Once Black-Connery was defeated, and Washington ignored the voices who said the Depression required shorter hours of work, it became necessary for Washington to find some other way to reduce the massive unemployment which created an urgent threat to social stability.

200px-IrvingfisherThe economist Irving Fisher put the problem succinctly:

Those who imagine that Roosevelt’s avowed reflation is not the cause of our recovery but that we had “reached the bottom anyway” are very much mistaken. At any rate, they have given no evidence, so far as I have seen, that we had reached the bottom. And if they are right, my analysis must be woefully wrong. According to all the evidence, under that analysis, debt and deflation, which had wrought havoc up to March 4, 1933, were then stronger than ever and, if let alone, would have wreaked greater wreckage than ever, after March 4. Had no “artificial respiration” been applied, we would soon have seen general bankruptcies of the mortgage guarantee companies, savings banks, life insurance companies, railways, municipalities, and states. By that time the Federal Government would probably have become unable to pay its bills without resort to the printing press, which would itself have been a very belated and unfortunate case of artificial respiration. If even then our rulers should still have insisted on “leaving recovery to nature” and should still have refused to inflate in any way, should vainly have tried to balance the budget and discharge more government employees, to raise taxes, to float, or try to float, more loans, they would soon have ceased to be our rulers. For we would have insolvency of our national government itself, and probably some form of political revolution without waiting for the next legal election. The mid-west farmers had already begun to defy the law.

To maintain artificially long hours of work in the core economy, Washington had to expand government employment and employment the rest of the superfluous periphery of the economy – which expansion continues today and which has become more urgent as productivity increases.


The problem of unemployment in this recession, therefore, is not simply a problem of creating jobs, it is the creation of a specific type of job: a job which produce nothing, add nothing to your material standard of living; jobs which only serves to engage you in meaningless, monotonous, and thoroughly superfluous activity, to your disadvantage, and to the disadvantage of the global ecology.

That would be bad enough, but it only gets worse:

Since productivity is increasing faster than the population is growing, the core economy continues to shrink, adding pressure on the economy to produce even more jobs. Now, in addition to creating jobs to offset the increase in productivity, we have to create jobs to replace the jobs lost in agriculture and industry.

And, that is not all – not by a long shot: Leveraging the core economy to create jobs in the non-core economy is itself inflationary – raising the cost of producing everything.

So, as you might have noticed, we have been in an unprecedented inflationary spiral for the last seven decades, which not only forces us to pay more for the same goods we purchased for less yesterday, it also drives core manufacturing companies off-shore – to Mexico, China, and other low wage venues – in search of lower costs of production.

So jobs have to be created to replace the ones which are lost to off-shoring and out-sourcing, and, if this proves more profitable for these companies, even more jobs have to be created to offset the booked profits of these companies.

So, it is not too difficult to understand why the Messiah’s stimulus plan predicted that it would cost some $200,000 to produce a job which pays less than $40,000 a year: Each jobs created has to waste an astounding amount of resources from the core economy.

An interesting example of this waste can be found in the Cash for Clunkers program – the stimulus program which gives you up to $4,500 to trade in your old gas guzzler for one of the more efficient new models. One writer had this to say about the program:

Reduce-reuse-recycle, right? Wrong. Let’s run down that three-item hierarchy of how to be kind to the earth: What’s getting reduced, fuel consumption and pollution by the new car relative to the clunker? Not given the staggering amount of pollution produced and resources consumed to manufacture even the smallest, most fuel-efficient vehicle. Exactly how staggering is tough to nail down definitively; what constitutes “making” a car? Where in the process do we start? Do we count only the material and energy used within the factory grounds? Or do we go a step upstream and count the material and energy used to make those materials used at the factory, and the energy spent to transport them thereto?

We can keep taking steps further and further back until we get to the energy required to extract crude oil and mineral ores from the earth, and that’s what we have to do if we’re looking for the real total energy that goes into a new car. We don’t need actual numbers here, just orders of magnitude, and it quickly becomes clear to all but the most strident Prius-preacher that driving an old car half a million miles is really less taxing to the greater environment than making even just a single new one.

What’s getting reused? Not the powertrain of the clunked cars; as has been amply covered here and elsewhere, the scheme requires their engines be not just disabled but utterly destroyed. Why? Even if we grant the shaky assumption that incoming engines are so worn as to be relatively high polluters, all it would take to ensure they’re refurbished before returning to useful service would be removing one spark plug and filling its cylinder with ordinary playground sand. Voila: the engine is quickly and definitely disabled, yet still reusable after disassembly and reconditioning—and without the clouds of toxic smoke created by an engine being permanently spoiled by sodium silicate. (Transmissions and rear axles are not subjected to the same permanent destruction, they’re simply not allowed to be sold. Why? Well, that’s a very good question and I’m glad you asked it.)

So we haven’t reduced and we’re not reusing; what’s getting recycled? Not much, except maybe sundry non-powertrain parts from the clunked cars and giddy bromides from the pirates who built us a house-of-cards economy financed by money pretended into existence, then arranged for that money to be magicked into their pockets at everyone else’s expense.

It is, however, that last point – money magicked into the pockets of finance capital at everyone else’s expense – that reveals the real horror of the Cash for Clunkers program: To repay the loan incurred by the government and you for that “green” new car will require an income stream lasting as long as 5 years.

For most of us, that means you will have to get and keep an unproductive, superfluous job that will provide the income stream necessary to repay the debt you incurred when you purchased your new efficient automobile.

How much energy will you consume in that five years as you commute back and forth to the office – and, how much will you consume in that office as you perform some meaningless task – while trying to earn enough to pay off that loan?

Welcome to the green economy!


So, you can decide to engage in the mass delusion which says unemployment is peaking and recovery is on the horizon.

Or, you can face up to the difficulty of creating superfluous jobs in an economy where real work is rapidly being abolished by improvements in productivity.

Either approach ends at the same destination: Work will be abolished, and you will be forced to figure out what to do with your spare time – Who knows, you might even decide to enjoy yourself instead of sitting at the kitchen table trying to balance a checkbook.

Whatever you decide, you should know this: In the past two recessions, and in this current one, productivity has been increasing even as unemployment has been collapsing – a situation so dire, and so unprecedented in the post-war economy that economists don’t even have a word for it yet.

They have been floating the term jobless recovery, but absent jobs, how is recovery possible? What company is going to make the investment to produce goods which can never be sold because the customer has no job?

We have coined our own term for it: The End of Work.