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.
!Quelle Surprise! Like Greece and Spain before it, the UK finds austerity can only result in more austerity:
U.K. Tories to Press Ahead With $16 Billion of Welfare Cuts
The Conservative Party will press ahead with plans to cut 10 billion pounds ($16 billion) from the welfare budget and reduce spending by most other departments as it extends Britain’s austerity program into a seventh year.
The cuts to the benefits budget will go ahead as long as they meet safeguards sought by Work and Pensions Secretary Iain Duncan Smith, who has clashed with Chancellor of the Exchequer George Osborne on the issue since the party came to office in 2010. Duncan Smith and Osborne published a letter today saying the differences had been resolved.
“We are both satisfied that this is possible and we will work together to find savings of this scale,” the ministers said, according to excerpts released by Osborne’s office.
Osborne will address activists at the Conservatives’ annual conference in Birmingham, central England, later today, seeking to assure voters that his party will spread the pain of austerity across society. He’ll accuse the opposition Labour Party of focusing too much of that effort on the rich.
“There’s unfairness if people listening to this show are about to go out to work and they look across the street at their next door neighbour with blinds pulled down, living off a life on benefits,” Osborne said in an interview with BBC Radio 5 today. “Is it fair that a young person straight from school who has never worked can find themselves getting housing benefit to live in a flat when people who are working, perhaps listening to this program, are still living with their parents” because they can’t afford to move out, he asked.
Osborne is seeking to extend spending reductions across government departments as a 2010 effort to rid Britain of its budget deficit by 2015 is pushed back a further two years. Britain spends more than 200 billion pounds a year on welfare, accounting for 30 percent of total government spending. The Treasury said in March that welfare cuts of 10 billion pounds are needed by the fiscal year that runs through March 2017 on top of the 18 billion pounds of savings already announced.
See this is the problem with austerity — the more you cut, the more you must cut. Folks, if the fascist state is subsidizing capitalism by accumulating debt, cutting fascist state deficits only weakens capitalism.Since the fascist state is propping up profits through its accumulation of debt, if this debt accumulation is reduced, it sets off a vicious cycle which can only end in each round of cuts making necessary the next round of cuts.
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 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?
1. Fiscal policy, or how to create one job on Main Street by borrowing five jobs from Wall Street
In 2011, a congressman made the argument that Obama’s stimulus program had produced jobs at the cost of $278,000 per job. Although the charge was nothing new, it made its rounds on the conservative GOP talking points circuit, and even ended up in the congressional record. This number, of course, was so outrageous by any measure of efficiency that it had to be analyzed by what we might call “clear thinking persons with no agenda”, i.e., the news media.
One “news source” in particular known for its ability to vet these things is PolitiFact.com, and it went after the congressman’s charge. PolitiFact established that the congressman, a Republican, was deliberately distorting facts against Obama’s stimulus program.
At $666 billion, the bill was estimated by the White house to have “saved or created” between 2.4 to 3.6 million jobs. What the congressman did, was employ the low end of the number of jobs “created or saved” and apply it to the total of the bill.
The Obama administration responded that this was unfair, since the money went to more than just creating jobs, it also invested in infrastructure, energy, education etc. Which is an odd response, since obviously the administration included those “investments” in its estimate of jobs “created or saved”. The Associated Press made the further argument that,
“Any cost-per-job figure pays not just for the worker, but for the material, supplies and that workers’ output — a portion of a road paved, patients treated in a health clinic, goods shipped from a factory floor, railroad tracks laid,”
So what AP is stating is that a job created by economic stimulus must account not just for the labor power directly expended, but also the constant capital used up in the course of this expenditure. But then AP performs an almost unnoticed sleight of hand and counts everything twice. So we count the money spent to build a road in terms of wages and materials, then we count the road as a finished product; we count the wages and material employed to build a clinic, and then we count the clinic as an operating concern.
Once we remove the misleading double counting from our calculation in the argument in the AP version of this story, how this differed from what the congressman said, is unclear. Indeed his criticism was later refined by one conservative media outlet this way:
“He says he never said that $278,000 per job went to salaries, but ‘rather that each job has cost taxpayers $278,000.'”
Five dollars of debt to produce one dollar of wages
So what the worker actually receives of the $278,000 spent to create her job is one thing, and the cost of creating that job is another. Assuming the worker received an average hourly wage of around $19, she would have an annual wage of $38,760, minus taxes. But to receive this $38,760 minus taxes in wages, the taxpayer must pony up $278,000 minus the taxes paid by the worker.
Which is to say, it roughly takes about 7 dollars of spending to create 1 dollar worth of wages using fiscal stimulus. Moreover, this fiscal stimulus must be newly created money, through debt, and, therefore, created out of nothing. If we take the administrations preferred figure of $185,000 per job, this still amounts to 5 dollars of new debt to produce 1 dollar of wages.
Between the GOP and the Democrats, then, there is agreement that it takes somewhere between $5 and $7 of debt to create $1 of wages. For some reason, despite the general validity of the congressman’s claim, Politifact.com decided it was not true on a technicality:
“Contrary to Dewhurst’s statement, the cited cost-per-job figure was not aired by the Obama administration. At bottom, his statement leaves the misimpression that the money went solely for jobs rather than a range of projects and programs, including tax breaks. We rate his claim False.”
There is, of course, another way of looking at this from the point of view of Wall Street banksters. From their point of view, it only takes 1 dollar of wages to create 5 dollars of new debt. Since the banksters are only interested in the accumulation of debt, which sits on his book as an asset, this is a fine ratio.
If the fascist state wants to create one job, it has to borrow the equivalent of five jobs to create this one job. The accumulation of the public debt outruns the income of the members of society who must eventually pay off the debt with their income. For every dollar they get in increased income, their debt obligation increases by five dollars. They must work to pay off this debt, requiring a further extension of wage slavery beyond what is required just to satisfy their needs.
Since after the housing market meltdown citizens can no longer be relied upon to accumulate this debt on their own (they have all become subprime borrowers) the state now takes on this obligation on their behalf, and raises the funds to service it by slashing their retirement and health benefits, reducing their access to public services like education, and inflating the prices of commodities by depreciating the currency.
This is how the scam works, folks!
You vote for Obama and the Democrats, and they mortgage your life and labor to banksters. They call this mortgaging of your life “progressive fiscal policy”, and sell it to you as a benefit.
However, since the congressman hails from the GOP, an avowed political opponent of the democrat president, he failed to add this additional fact: The argument does not change if, instead of democrat spending, we substitute GOP tax cuts, except that tax cuts are even more inefficient at “creating jobs” than fiscal spending. With GOP tax cuts, as the research suggest, the actual relation between the debt accumulated and the jobs created is aimless and dispersed and rather a bit more difficult to assess. Rather than aiming at some specific form of wage slavery as the democrats do, GOP tax cuts aim solely at subsidizing all wage slavery.
Tax cuts only have some definite targeted effect to the extent they increase the deficit and the flows of state expenditures into the coffers of banksters. While both spending and tax cuts result in a massive expansion of the public debt, in general, the less targeted the accumulation of the public debt, the more it directly favors only the banksters, who, in any case, underwrite this debt. The question is only one of degree, not result.
With democrat spending, the accumulation of debt takes a specific form — a road, a school, or an industry. It is targeted, and, therefore, can be more precisely applied, no matter that is still wasteful. What’s more, as Democrats and Republicans alike already know, the produced product can now be renamed the Obama Bridge-Tunnel Highway to Nowhere, or the Obama Elementary School, or the Obama Green Energy Research Park, or, as is always inevitable, no matter which party incurs the debt, the USS Obama.
If the outrageous cost of creating unnecessary jobs by fiscal policy is staggering, just wait until I next explain what knowledgeable insiders are saying about the cost of the Federal Reserve’s monetary policy.
A quick note to slap down the standard progressive interpretation of the impact of the Bush tax cuts on the economy. Sorry folks, there is no real empirical support for your position.
Progressives who praise the Clinton era job creation performance versus Bush era job creation performance, and link this to Clinton tax increases versus Bush tax cuts, overlook two things that lead to the wrong conclusion: First, the Clinton job performance came during a time of a general economic expansion, Bush’s performance came during a general contraction. This fact is lost in the data because the data employs dollars as measure of economic activity and so masks the depression that began in 2001. If you discount the dollar denominated economic data using the price of gold, the contraction clearly shows up beginning in late 2000.
The second thing overlooked with this comparison is that Clinton era job creation (not “Clinton job creation” or “Bush job creation” — the two men created nothing) was exactly the wrong policy. The Clinton era succeeded in creating jobs, true. But it was creating jobs into the face of rising imports from China and other low wage nations and a general glut of capital on the world market. The depression did not appear suddenly because of the Bush tax cuts, but resulted in a too long social work day leading into the Bush era. To put this another way, the Bush era’s poor legacy creating jobs was a legacy of the Clinton era’s success at creating too much superfluous work.
The Bush tax cuts came in response to this, which was already evident as he began his term, and was his justification for the tax cuts. Progressives don’t want us to remember why Bush demanded the tax cuts, but some of us do not have such a short memory. This is not a whitewash of the Bush tax cuts; clearly they failed entirely to stop the depression from emerging and gaining steam — but they did not create the depression. Nor, were they responsible for poor job creation during the Bush and Obama years. It was already baked into the cake by overaccumulation of capital.
For those who are interested, as proof of my argument, I include the chart above showing GDP as measured by gold between 1929-2009. In the chart you can see clearly the three depressions that occurred over those years: 1929-1934, 1970-1981, and 2001-present.
The problem is not, and has never been, Republican anti-tax policies versus Democrat social spending policies — both are a sideshow to chronic overaccumulation of capital. Tax policy cannot fix this.
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.
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.
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.
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.