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.
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.
Here is an interesting chart from Zero Hedge: In data going back to 1980, employment for younger workers aged 20-24 has never increased — that is, it has never increased until this year:
I know what you are thinking: the data provided by Washington is a fraud. I am going to show why, even if we take that chart on its face value as genuine, Washington is completely fucked. I am going to subject the entire category “employment” to an analysis using Marx’s labor theory of value. By “employment”. of course, I mean wage slavery; which means, although it is commonly treated as a good, it is actually an evil. But, I intend to treat this “employment” on its own terms, as it is commonly held a some sort of social good.
Let’s begin with this morning’s non-farm payroll report — 114,000 net hires in the economy and an unemployment rate of 7.8%. Both of these numbers are, of course, cooked beyond all credibility, but this is not the point. It doesn’t get us any closer to the actual situation to state (as the GOP will, no doubt) that Washington cooks the unemployment numbers. Dems cook the books when they control Washington, the GOP cooks them when they are in control.
Washington has always cooked the numbers — now the numbers are burnt beyond all recognition.
(First a note about this morning’s serving of cooked data: According Mish Shedlock, the minimum net new hires needed just to keep the unemployment rate flat is 125,000 per month. Last month there were 114,000 net new hires, however the unemployment rate declined from 8.1% to 7.8%. So, before you Obama voters celebrate, you should be aware than the economy did not even provide enough new hires to offset people coming into the labor force looking for jobs.)
Compulsory employment growth and inflation
It is the labor force participation rate that is most revealing in the numbers. The labor force participation rate (the blue line in the chart provided by Calculated Risk below) peaked in 2000-2001 and has been on a slow decline since that recession. From a high of just over 67%, that rate has now fallen to about 64% in this report. This reverses a trend of increasing participation in the labor force — folks actively seeking work — that goes back at least to 1962, according to the data available to me. Since 1962, in other words, as a general rule each year has seen more people trying to get a job than the year before. This trend higher reverses in the 2001 recession, and as a general rule, each year fewer people are participating in the labor force.
Why is this reversal in labor force participation important to analysis? Well, let’s look at this statement by President Truman in 1950 speaking of the military buildup that commenced with the start of the Cold War:
“In terms of manpower, our present defense targets will require an increase of nearly one million men and women in the armed forces within a few months, and probably not less than four million more in defense production by the end of the year. This means that an additional 8 percent of our labor force, and possibly much more, will be required by direct defense needs by the end of the year.
These manpower needs will call both for increasing our labor force by reducing unemployment and drawing in women and older workers, and for lengthening hours of work in essential industries. These manpower requirements can be met. There will be manpower shortages, but they can be solved.”
Following World War II, Washington set it as a priority that the labor force should steadily increase each year, in order to siphon off a portion of this growth for its military expansion. This goal was secretly given legal form as National Security Council Report 68. The goal of “full employment” was made the primary labor policy of Washington in 1946 and renewed in 1978.
“Full employment” in this case should be understood as full employment of labor power resources. In other words, it was the policy of the United States to seek full employment of its labor power resources for its strategic national ends. This “full employment” policy was sold to Americans as Washington’s commitment to providing a job to everyone who needed a job.
Which is fine and dandy, except at the same time, Washington was deliberately debasing the currency, driving up prices, and forcing more folks (particularly women) into the labor force to compensate for falling consumption, and moreover, forcing people to work well past their retirement. So what at first appears to be a benign policy, even an commendable agreement between Washington and its citizens that it would do everything in its power to create jobs, turns out to be a policy of forcing every person under its domination to look for work.
Children barely off the breast were abandoned to daycare warehouses, so mothers could find work just to pay for daycare; even substitute formulas for the breast were devised, so children could grow up attached to a rubber substitute for their mothers; essential functions within the home like child-rearing were thus commodified. And this, in turn, led to its own set of social ills, as women were assaulted by their bosses, discriminated against in their careers and under-paid — as the nation was convulsed with real or imagined terror of child abuse in day care centers. A generation of children were now referred to as “latch-key kids”, and teenage pregnancies proliferated. The elderly went back into the work force and became greeters at Wal-Mart, as people delayed or altogether gave up on the idea of retirement, unable to amass sufficient savings to stop working. Taking care of the elderly itself became a commodity sold as nursing home care.
Still, labor force participation increased despite these horrors.
Compulsory employment growth and debt: the hidden relationship
Hand in hand with this goes the ever increasing accumulation of consumer debt that working folk used to compensate for stagnant wages, despite the fact that each family was working more hours than their parents had. And all of these ills, which list could be extended almost indefinitely, appeared to have no cause other than the individuals themselves. If someone ended up working in a Wal-Mart at 70, it was because they had not saved enough; if a woman abandoned her child to day care, it was because she or her husband had not spent enough time in college; if teenagers were now getting pregnant at 13, it was because the morals of society were collapsing.
No one looked at Washington and said, “You fuckers are responsible for this!” And, if by chance, someone did say this, it was only in the form: “You democrat fuckers have tied up the economy with your regulations”; or, “You Republican fuckers have crippled Washington to the point that government can’t provide enough stimulus to create full employment.”
No matter what the policy advocated — tax cuts or spending increases — there was always someone to assure us it would create jobs and pay for itself with “increased economic growth”. Through most of the period from at least 1980 until now the growth of employment has always been proportional to the increase in debt. From 1980 until at least 2006, the savings rate of American declined until it went negative entirely in 2004-2005. It is particularly interesting that the saving rate actually touched near zero just as the labor force participation rate reached its peak.
The problem with the latest employment figures, however, is not to be found in the effects of a rising participation rate on working families, either in the form of social ills or the accumulation of debt. It is that, no matter these ills and no matter the accumulation of debt, total hours of labor must increase — the fate of capitalism depends on this growth.
But, it is not increasing.
Why compulsory growth of employment is necessary for Washington
Capitalism is a mode of production where the employment of labor power must constantly increase, no matter what the consequences. This mean, the duration of labor must constantly rise, a duration that is a function of the number of workers times their hours of work. Washington and the political parties always directs our attention to the unemployment rate, which figures are usually cooked, but, what really matters for Washington, is not the unemployment rate, but the duration of the social working day. At least this seems to be what is relevant, from the standpoint of Marx’s theory.
According to the date I have access to, social labor day has fallen only four times in the last 36 years: briefly in 1991 and again in 2001, and in a sustained way from 2007 to 2009. In other words, since this depression began in 2001, the total hours of work has fallen 3 years between 2001 and 2009. The response to this fall the first time, was the Bush tax cuts, Paul Krugman calling for a housing bubble to replace the NASDAQ bubble Bernanke’s speech on deflation, and Alan Greenspan being asked to retire from the Fed.
The second and third times the total social labor day shrank, coincided with the collapse of the financial system and Fed monetary policy.
This argues that this measure of economic activity is more significant than the hype over non-farm payroll numbers would have you believe. Such an argument might be said to be based entirely on coincidence, were it not itself based on the arguments of Postone and Kurz. They suggested the social labor day must constantly expand if existing relations of production are to be maintained.
What is more, each writer comes to this conclusion from different premises, i.e., different and contradictory notions of value. Postone’s argument suggests that the total labor time of society must expand despite the contraction of socially necessary labor time in the forms of value and surplus value; while Kurz suggests the increasingly fictional quality of credit, of fictional claims to future profits, requires the constant expansion of total labor time of society. In either case, Postone in 1993, and Kurz in 1995, using different notions of value, argue the total labor time of society must increase. And when, in fact, this total labor time actually did not increase, first a depression was triggered, then a financial collapse.
But, I hear you: ‘I am still not convinced by the evidence — it could, after all, be a really good scientific wild-assed guess on the part of those writers.’
Good point! Evidence suggests each writer, Postone and Kurx, was familiar with the writings of the other — so this could be just another instance of group-think. Instead of just going from Postone and Kurz to the empirical data, we need to go from Postone and Kurz back to Marx’s argument to establish a logical chain of reasoning, and figure out if, in fact, these guys were just making a wild guess.
In Marx’s argument, capitalism is not just a system of commodity production; it is a system of surplus commodity production, of the production of surplus in the form of commodities, of the production of surplus values. As a system of commodity production that aims always at the production of surplus value, capitalism relentlessly aims toward self-expansion beyond its given limits — as Marx put it, it employs existing value to create surplus value. Both Postone and Kurz employ this argument to uncover the absolute necessity of capitalism, at a certain stage in its development, to produce a sector consisting entirely of superfluous labor. In fact, Marx himself hints at just this result in volume 3, when he writes:
“If, as shown, a falling rate of profit is bound up with an increase in the mass of profit, a larger portion of the annual product of labour is appropriated by the capitalist under the category of capital (as a replacement for consumed capital) and a relatively smaller portion under the category of profit. Hence the fantastic idea of priest Chalmers, that the less of the annual product is expended by capitalists as capital, the greater the profits they pocket. In which case the state church comes to their assistance, to care for the consumption of the greater part of the surplus-product, rather than having it used as capital.”
Marx is clearly suggesting the unproductive consumption of the total social product becomes increasingly necessary when he closes with the wry comment:
“The preacher confounds cause with effect.”
Still later, Marx decries the result of this process:
“In the first place, too large a portion of the produced population is not really capable of working, and is through force of circumstances made dependent on exploiting the labour of others, or on labour which can pass under this name only under a miserable mode of production.”
Which is to say, a growing mass of workers makes its living by subsisting on the surplus value of the productively employed population. So, for me at least, there is a clear line beginning with Marx, through the argument of Postone and Kurz, that is expressed graphically below in the empirical data on the social labor day:
This decline is far more significant than the manipulated data foisted on the population of voters this morning. It suggests there is a real material dysfunction in fascist state economic policy that cannot be altered with a set of misleading stats. Beyond the convenient and willful ignoring of the shrinking labor participation rate, and the mass of unemployed no longer counted, the data suggests a situation that cannot be repaired by confidence tricks designed to keep the two parties in power.
Almost a fifth of the population is now permanently locked out of the labor force — the highest on record — according to Zero Hedge calculations:
If hours of labor do not expand at a sufficient rate to sustain existing relations of production, the entire Ponzi scheme must collapse. This process has probably already begun, which explains the insanely desperate actions of the Federal Reserve over the past month.
Why is Washington so implacably hostile to a reduction of hours of work as the solution to unemployment? And, why has it abandoned the 99ers to their fate?
The answer to these questions is simple: Washington depends on the unpaid hours of labor wrung from the working population as much as capital itself. Washington is not a neutral party when it comes to hours of labor; it is, without exception, the largest single consumer of surplus labor time in society. The entirety of its revenues amount to the unpaid labor of society either directly, in the form of taxes, or indirectly, in the resources it controls through debt or money printing.
This fact is never admitted by progressives, nor even by vulgar proponents of Marx’s theory. The argument made by the Marxists against the current State amounts not to a recognition that the machinery of state shares with capital the total pot of surplus labor time, and, as a result, must be interested in the longest possible duration of unpaid labor, but only that this machinery is under the control of capital and should instead be controlled by the working class. The progressive critique of the State amounts to a demand that this unpaid labor time be devoted to the “improvement of society”; the typical vulgar proponent of Marx differs from this only in that he proposes this be under the direction of a working class party. Neither raises the demand for the abolition of all unnecessary labor, and with it, the state in its entirety.
When the Great Depression erupted Washington suddenly had access to billions of hours of unpaid social labor which it, along with the other great powers, immediately set about throwing into preparation for World War II. Government, already the largest single consumer of unpaid labor time in society, expanded monstrously – consuming perhaps as much as 40 percent of national output. But, in the aftermath of that horrible conflict, we really see its voracious hunger, and insatiable lust for surplus as the Truman administration conceived of and implemented a policy of a permanent war footing: The Cold War.
In his annual message to the Congress, delivered January 12, 1951, Truman opened with these words announcing the birth of the national security state:
We face enormously greater economic problems, as I transmit this fifth annual Economic Report, than at any time since the end of World War II. Although our economic strength is now greater than ever before, very large new burdens of long duration are now being imposed upon it.
The United States is pledged and determined, along with other free peoples, to cheek [sic] aggression and to advance freedom. Arrayed against the free world are large and menacing forces. The great manpower under the control of Soviet communism is being driven with fanatic zeal to build up military and industrial strength. We invite disaster if we underestimate the forces working against us.
The economic strength of the free peoples of the world is, however, superior to that of their enemies. If the free nations mobilize and direct their strength properly, they can support whatever military effort may be necessary to avert a general war or to win such a war if it comes. The resources are on our side. The only question is whether they will be used with speed and determination. The answer will depend upon unity of purpose and of action–unity among the free nations, unity here in the United States.
Unity is imperative on the economic front. On this front, under the American system, everybody is involved–every businessman, worker and farmer; every banker and scientist and housewife; every man and woman. We can win our way through to ultimate triumph if we all pull together. Decisive action, essential to our safety, should not be halted by controversy now.
Truman, in his report, explains the implications of a conflict with the Soviet Union of a very long duration:
These manpower needs will call both for increasing our labor force by reducing unemployment and drawing in women and older workers, and for lengthening hours of work in essential industries. These manpower requirements can be met. There will be manpower shortages, but they can be solved.
For those readers whose critical facilities have been dulled by countless hours of exposure to American Idol, what we have here are the words of a craven hustler — a two-bit con artist trying to sell you something you don’t need. Washington is in the business of selling security and its sales methodology is the practice of sowing fear of chaos, terror, and the unspeakable strange unknown. This sales strategy required the creation of an adversary to the “American system”, as well as its domestic avatar buried deep within the populace, to create a pervasive sense of vulnerability and distress among the population. It doesn’t matter that this adversary is Soviet communism or “Islamofascism”, nor that its domestic avatar appear in the form of a devout Muslim citizen or communist trade union activist; what matters is that the threat be, at the same time, pervasive and discrete, universal and particular, potentially life-threatening and merely strange.
This impeccably crafted direct appeal to the collective lizard brain of society, which paralyzes critical thought as our painfully slow brain tries to calculate the odds that the Sikh gentleman sitting in front of us on the bus might be strapped with explosives — renders critical thinking useless, and, therefore, a mere impediment to the apprehension of our empirical circumstances, reduces each of us to a suggestible sheeple, and set us up for acquiescence to the burden of providing Washington with ever greater hours of unpaid labor.
On the one hand, this “service” provided by Washington is very profitable to capital in its own right, since it requires enormous amounts of otherwise unprofitable output in the form of every imaginable thing from paperclips to the most advanced spy satellites, and launchers to put them in orbit. On the other hand, the demand for these products are the very kinds of superfluous expenditures that become increasingly necessary for the continuation of this social form of production.
Once the identity of interest between capital and the State in the longest possible extension of hours of labor is established, it is possible to understand not only Washington’s hostility to work time reduction as the means to end unemployment, but also its imposition of the regime of global competition on the American economy, its facilitation of companies moving industrial facilities and service jobs off-shore, and its hypocritical promotion of amnesty for undocumented immigrants: the capitalist state is a state that must operate according the laws of capital because it is founded entirely on the consumption of the surplus labor created by capital.
It also helps us explain the abandonment of the 99ers to their fate, the impending evisceration of the social safety net and the brutality of the austerity regime now being prepared by Washington. Far from merely falling under the control of Wall Street, Washington itself wants and needs this brutal assault on the living standards of Americans because all other methods of increasing the extraction of surplus value have failed.
In my rant yesterday, What help for the 99ers?, I made an argument why folks who support the 99ers should nevertheless oppose extension of unemployment compensation beyond 99 weeks. That argument made what might be considered an obscure connection between the unemployed and the large body of “public servants” who compose the state machinery of repression, totalitarian control and imperial expansion.
Let me add a few remarks to clarify how I see this connection.
To do this, we have to look at Karl Marx — not the infamous icon of Marxism, but the real guy, the writer and, to some extent, anthropologist of capitalist society — Often the two get conflated, so that, for instance, the utterances of any knucklehead running around with a copy of the Communist Manifesto sometimes is mistaken for the actual words written down on paper by the original person.
In Marx’s model of capitalist society, the unemployed worker is not an accidental occurrence and should not be treated apart from the labor force itself. The unemployed worker is a reserve force available to capital for those periods where new profitable opportunities or requirements for additional labor suddenly open up. The idled worker makes it possible for these new areas to be exploited by providing the additional labor capacity necessary to take advantage of them. This reserve also serves a function of depressing wages during times of depressions, when capital rationalizes its operation to resume profitable expansion by pressing wages below their cyclical average.
Thus, unlike economists, who treat unemployment as an aberration, a defect, or failure of the market, Marx believed a relative surplus population of workers was essential to the functioning of the capitalist system of production itself. The constant expansion and contraction of the labor reserve is consistent with his comprehensive model of capital in which, for example, the price of a good had to fluctuate according to the laws of supply and demand, and only reflected the value of the good through the moving average of these fluctuations. Capitalism is a social system of production carried on by millions of individuals acting privately — unless the system itself had flexibility to adjust to billions of differing and even contradictory decisions each day it would soon break apart.
In times of unusually vigorous expansion, and even for war, the great mass of this population of unemployed would be “called up” (both metaphorically and actually in the case of the military draft) to fill needed positions in industry or on the battlefield. Thus, the “liquidity” of the reserve source of labor power is not simply a matter of business concern, but also a matter of state. So, for example, it is not a surprise to see a statement by White House in the debate over the DREAM Act explaining why the act would be useful for its ongoing military operations:
Secretary of Defense Gates has written to DREAM Act sponsors citing the rich precedent of non-citizens serving in the U.S. military and stating that “the DREAM Act represents an opportunity to expand [the recruiting] pool, to the advantage of military recruiting and readiness.
The size of the reserve labor force is not determined by the means available to expand the scale of productive activity, but to expand activity that creates profit and for purposes of State. But, this purely cyclical movement in unemployment is not of the least concern to us, because it merely masks a longer term trend identified by Marx: the conversion of this reserve labor force from a relative oversupply of labor into an absolute oversupply of labor.
Over time the improvement in the productive capacity of labor — by augmentation with new types of machinery, new methods of organizing work, application of new scientific knowledge, and technology — is increased to such an extent that the relative proportion of workers who can be employed productively shrinks and a permanently unemployable reserve of labor emerges. (Today, this unemployable reserve consists not only of the 99ers, but also a massive hidden population of young people who have never entered the labor force and who, in addition, compose the largest part of the swollen prison population.) This permanently unemployable reserve — a growing stratum of the labor force rendered entirely superfluous by the advance of industry — loses its opportunity to engage in productive labor and is reduced to serving only as a market for the output of the productively employed labor force.
Along with the emergence of a permanently displaced population of workers we find the emergence of the fascist state — a peculiar type of state organism combining both a permanent war footing with an extensive social safety network of state provided services. Although this state is typically identified with German Nazism and Italian Fascism it is not limited to them, but emerges in all the industrialized nations during the Great Depression, and is the essential feature of Franklin Roosevelt’s New Deal. The social basis of these fascistic entities is the general clamor among all classes in capitalist society for state action to preserve the conditions of existence of the society; namely, the purchase and sale of labor power. It is for this reason the fascist state appears on the scene as the embodiment of the national interest and asserts the populist idea of a national rebirth through a pan-class coalition.
The charge of this state, as imposed by general social demand on it, is to employ the unemployable, and hence, to provide the demand for the output of industry. From this point, political-economy becomes concerned with the problem of consumption of the massive and ever growing output of industry. The fact that the emergence of an absolute oversupply of labor implies the possibility of a drastic reduction in hours of labor for all in society, and, therefore, the awareness of the possibility that society might be entirely freed from labor and the system of domination inherent in the division of labor is, from this point, not only ignored, but actively suppressed. Thus, we see, from the end of World War II, that discussion of the idea improving productivity would lead to the abolition of labor disappears from economic textbooks — to be replaced by the phrase, “the lump of labor fallacy”.
The erasure from economic textbooks of the idea that a reduction and ultimate abolition of labor was the probable outcome of improving productivity foreshadowed last night’s news that the House of Representatives had abandoned the 99ers to their fate. As we showed in the case of the Obama administration, Washington is not merely unaware that unemployment can be wiped out by drastically reducing hours of work, it is hostile to the idea.
Why is Washington ignoring the 99ers, and why is it hostile to the great question of work time reduction? We will answer this in the next post.
I am having a “marxist moment” today. The Obama tax deal, in addition to its other flaws, has completely excluded mention of those who first lost their jobs in 2008 and early 2009, when the worst of the layoffs hit the economy. Millions have already exhausted their benefits, and perhaps 4 million more will join them in the next few months.
So what is to be done for them?
Think about a situation where an unemployment check is fifty, seventy or even ninety percent of the income in your household. And, now, that income is approaching imminent termination. You have probably run through your savings, stopped paying credit card debt and the mortgage; you may even be parking the car away from home to avoid repossession. The crisis was not your fault. You never made sub-prime loans, nor was your own home purchase financed by the deliberate fraud of a liar’s loan. You weren’t the one who bundled those loans and sold them to Iceland and pension funds. You probably never missed a payment on your mortgage, auto or credit card loans until that day the company announced it was shutting down your entire division and began handing out severance checks.
At the risk of personalizing this discussion, I know people like this — one is a neighbor, another is a friend and former co-worker at a debt mill run by a large financial company. The debt manufacturer has a seat on the Federal Reserve Bank, and when its debt creating operation ran into the difficulty, it ran to Uncle Sam to bail it out — just another welfare queen in an Armani suit.
I DVR’d the CEO of Motorola talking on PBS Newshour yesterday, because I couldn’t believe what I had heard — I had to record it, so I could look at it today and confirm that, yes, he is that much a self-absorbed bastard. The CEO had just exited a gathering with President Obama of corporate bosses discussing what it would take for the nation’s largest companies to start hiring again. He opined that the administration was moving in the right direction and that President Obama had made a good deal with the Republicans in congress for across the board extension of President Bush’s 2001 tax cuts, which are heavily weighted toward the income of the top one percent of the population. The CEO praised the agreement for its effect in ending much of the uncertainty surrounding the administration’s tax policy.
Now, he said, we had to get serious about the deficit and deal with entitlements.
This morning I am trying really hard to avoid playing the class war card. Playing the class war card in these circumstances doesn’t require any creativity or thoughtful response. It is the political equivalent of yanking back your hand from a hot stove. Yes, corporate CEOs are ruthless narcissistic bastards, who have stripped the nation of its productive assets, moved them offshore, and left us with a hollowed out economy devoted to imperial adventures. And, the situation of the 99ers is pitiable. In conversation with my friend and with my neighbor, I have survivor’s guilt — and this, when I just might be the next dead hostage.
Yes, President Obama is a shameless whore who sold out his sacred pact with his supporters at the first opportunity!
Yes, the 99ers are at the point of extreme financial duress and tilting dangerously on the edge of physical existence!
Yes, our corporate masters are little more than Caligula’s court!
Yet, for all of this the move by the Congressional Black Caucus to introduce an amendment to President Obama’s and the GOP’s tax cut deal by extending unemployment benefits beyond 99 weeks must be opposed. That, this deal is an ugly filthy thing from the progressive perspective is obvious. But, no amount of sweetner will make horse urine taste like champagne. No more than will allowing gays to serve openly change the fact that they are now allowed to be openly gay while carrying out the military policy of an empire.
But, my opposition goes beyond simply “rejecting the good for the perfect” — a child-like refusal to accept compromise: The CBC’s proposal is itself to be condemned because it extends the dependence of the 99ers on state handouts and does not call on both those who are working and those who are unemployed to put an end to this dependence, and the larger dependence on selling themselves into slavery to survive. I think we should be sickened by the recent AFL-CIO internet commercial which portrays the 99ers as helpless, vulnerable victims of economic forces over which they have no control. A depression is not a natural disaster; we are not helpless victims of some financial force of nature beyond our control.
It is a matter of demonstrable fact that the Obama administration knows that all it takes to eliminate unemployment in this society forever is a large reduction in hours of work. His former economic adviser, Larry Summers, former president of Harvard University, and former Treasury Secretary in the Clinton administration, stated this directly:
“I think we got the Recovery Act right,” Larry Summers, the president’s chief economic adviser, said in an interview. “The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”
Preferable for whom? For the state, of course, which now has ample excess resources it can put to work expanding the empire. Resources that, having no possible productive employment opportunity, can be employed for whatever unproductive purpose Washington demands. Beyond simply holding down the wages of those who work, the unemployed are the cannon fodder of empire, the TSA gropers, the bureaucrats ceaselessly promulgating new directives that other bureaucrats enforce. They are the drug enforcement agents, the cultivators of every new would-be “muslim terrorist”, the operators of a vast systematic destruction of young minds in the guise of public education. They are the operator of the largest prison population on the planet — a filthy, vile, unspeakable chamber of horrors that excels only in spreading disease and moral breakdown.
The CBC’s proposal not only does not address these concerns, it reinforces them and promises only to extend them indefinitely. A consistent anti-statist position has to call for the end of all unemployment compensation and its replacement by a large reduction in hours of labor.
The exact opposite of a smart idea to prevent economic collapse: Print money to pay the Wall Street terrorists
Steve Randy Waldman thinks Washington should give you cash. Not just you, of course, he would also give it to your neighbor, your cousin Stella, and Paris Hilton (Lord knows she needs the money). Everyone would get some cash. It would be deposited in their bank accounts, or otherwise handed over in order to address the absence of demand that is now wreaking havoc on the economy.