Midnight Notes on crisis, energy and capital in the 1970s.
The divergence of prices from values shows how there is a possibility of an energy price rise versus other prices without abandoning a work-exploitation analysis of capitalism. For by investment in the High sector to escape assembly-line insubordination, women’s refusal of housework and urban insurrections, the High sector attracts higher commodity prices. But why did the profits crisis actually require an “energy” crisis” and not simply the traditional tools of the capitalist cycle? Why was the profit-fall-unemployment-wage-rate-reduction-pro fit-rise sequence (i.e., the “old time religion” of capital), which retains the general physiognomy of the system, not adequate anymore?
The answers to these questions has many parts but one thing is clear: the source of the crisis is in the breakdown of the Keynesian factory-home circuit that was the basis of the post-WWII political economy. Capital, like an amoeba, contracts in areas of acidity and expands in more nutritious and bland waters. In the profits crisis decade the areas of acidity concentrated in two spots: (a) the assembly line production in “middle level” manufacturing and extraction industries, (b) in the “home” where reproduction work is centered.1 Capital experienced the crisis of profits both as a local and global irritant as well as a decline in its self worth and “castration” by the big-bad State (the tax timidity syndrome).
A typical “common sense” response to the questions of this section is that the taxation- timidity syndrome has brought on a chronic PRODUCTIVITY CRISIS of which the energy crisis is one instance. From the winged words of corporation executives, from the pulpits of economic Poloniuses, the same evil is identified and decried: the collapse of productivity. But are the sermons total myths? YES, myths indeed, in the narrow sense of “productivity”.
If by “productivity” we mean (as econometricians do) “real” output per working hour, then capital had no productivity problem. On the contrary, the post-WWII period has seen a productivity boon, at least compared with the 1914-1947 period which saw two wars and the Depression. Moreover, though both periods showed comparable increases in output per hour, the previous one showed a greater increase in the real wage and a reduction in the work week. If the performance of the first period had been repeated in the second, the work week would now be 27.8 and the average real wage would be substantially higher. (See graph #7)
Further, in the energy crisis period (1973-present), though output per work hour was rising slower than in the past, real wages lagged even behind this pace. But capital is not interested in output per se, it is interested in its share. The relation between changes in real profit and changes in productivity shows the statistical anomaly of the 1965-1973 period. (See graph #8). In the post- WWII period up to 1965, year-to-year changes in profits tended on the average to be twice as much as changes in productivity: but in 1965 they began to equalize. Only after 1973 did the ratio return to its historical portion. This shows that the 1965-1973 period cut down the attractive power of profits and further disintegrated the profits-wages ratio. Somewhere there was a leak. Everywhere there was the search for the thief of profit. Youth, women, blacks, the “collapse of the work ethic”, were the likely suspects. Consider the sage words of Ford’s Malcolm Denise in December of 1969:
Nowadays employees are (1) less concerned about losing a job or staying with an employer; (2) less willing to put up with dirty and uncomfortable working conditions: (3) less likely to accept the unvarying pace and functions on moving assembly lines; (4) less willing to conform to rules or be amenable to higher authority. Furthermore, the traditional U.S. work ethic — the concept that hard work is a virtue and a duty — has undergone considerable erosion .... There is also, again especially among the younger employees, a growing reluctance to accept shop discipline. This is not just a shop phenomenon rather it is a manifestation in our shops of a trend we see all about us among today’s youth.2
The wind was full of such lamentations! “LSD will eat up the line!” “The feminists will wreck the family!” The blacks want everything!” ... ad nauseum.
When output per hour collapsed in mining and began to slow down in auto, steel and rubber, the volume on the capitalist dial was turned up a few notches. But the source of complaint was not output per hour but profit per work hour. The share of profits in productivity increases was in peril. . . Hence the need for a total change in the structure of prices and work. For this was not another statistic, but the basis of the relation between working class and capital. As our introduction pointed out, a satisfactory matching of productivity to profit has been the essence of capitalist strategy since the end of the nineteenth century. Any serious disturbance of this strategy puts into question a century of that capitalist wisdom embodied in the “Marginal Theory of Value and Distribution”.
Capitalism is a system of margins, accelerations, of changes, differentials; not flows, but flows of flows. Thus, the appearances, though obvious and bemoaned, did not tell the tale. Capital is abstract, and its snapping is at first abstract as well, for the problem is not speed but lack of impulse. The 1965-1973 profits crisis stopped not the flow, but the flow of flows. To understand the strategy of accumulation that was put in jeopardy by the class struggle of that period we must do some investigation of capital’s mind, not so much psychoanalysis as theoretical eavesdropping.
“Marginal Theory”, the economics we get in every introductory course, significantly appears on the scene at the very time of the explosion and slaughter of the Paris Commune. It claims that in order for individual firms to maximize profits and for the accumulation process to flow throughout capitalist society, wages and profits must be correlated with the ever increasing productivity of social labor. In other words, productivity increases achieved by new technological leaps, more “efficient” organization of work in factories, mines and farms, more “scientific” planning of family, school and health, had to be shared with the working class. Capital could not appropriate it all. A classic application of this strategy is the early Ford wage policy that combined relatively capital- intensive, mass production techniques with bonuses for punctuality and a “clean family life”. Without such schemes, the worker turnover rate which was approaching 300% per year would have interminably broken the continuity of the line (the very basis of its productivity). Nobody is born an auto worker, they must be made, and their production in the home must be planned. Ford understood the other side of Marginal Theory: not only must wages be used to “induce” workers to accept the discipline of the assembly line, but with higher wages the working class can become a dynamic consumer and push the system to higher levels of production (hence profitability, since a concentration of fixed capital such as River Rouge requires continuous utilization to pay off). Once wages are as dynamic as social productivity the working class becomes a production agent integrated into the capitalist system through the consumer-goods market. Reproduction becomes a “dynamic force of production” instead of merely guaranteeing the subsistance of labor power.
Marginalist Theory has been criticized by Marxists as a subjective mathematization of vulgar economics ideologically motivated to slay Marx. Bukharin calls this theory, “the ideology of the bourgeoisie who has already been eliminated from the process of production.”3 In reality, it is the strategy of introducing the working class into the process of consumption. Marxists did not see that the legitimizing purposes of marginalist’s theory were tangential, and that its primary purpose was to provide a new strategy to capital, in front of a radically different class struggle. By the 1870’s and the Paris Commune’s volcano of desires, it became clear that the working class could not be taken as a separate, almost-natural species, with fixed needs that might or might not be satisfied depending on population growth. As Marx’s 1867 Value, Price and Profit, suggests, in this period the struggle for the normal working day was slowly yielding, in the most advanced sectors, to the struggle for wage increases.
The class forces were entering into a new constellation. To see this, let us get back to basics. The working day resolves itself into two magnitudes;
V / S
V represents the amount of social labor time necessary to reproduce the working class in its capitalist function, S is the surplus labor capital appropriates in the working day. This unpaid labor, the secret of capital, appears in many forms, not only in the factory but in the kitchen, the ghetto street and the laboratory. Mathematically, the class struggle resolves itself for capital into the relation between V, S and V+S. The object is the accumulation of surplus, S, and there are only two ways of increasing it: absolutely and relatively. Absolute surplus value is appropriated by lengthening the working day, V+S, without changing V. This was the type of surplus value developed in Newton’s time. But capital’s ability to generate absolute surplus value was undermined by the working class struggles for a “normal” work day, i.e., the “ten hour” and “eight hour day” campaigns. Capital’s response was relative surplus value which is appropriated by reducing V relative to S while leaving V+S constant or even decreasing it. Relative surplus value is the type of production that is at the basis of thermodynamic’s investigation of work/energy.
It can only be produced by constant revolutions in the forces and relations of production, requiring the application of science, memory and skill at every linkage. Marx saw the turn to relative surplus value as the necessary tendency of capital:
The increase of the productive forces of labor and the greatest possible negation of necessary labor is the necessary tendency of capital . . . The transformation of the means of labor into machinery is the realization of this tendency... In machinery, objectified labor itself appears not only in the form of product or of the product employed as a means of labor, but in the form of the force of production itself. . . The transformation of the production process from the simple labor process into a scientific process, which subjugates the forces of nature and compels them to work in the service of human needs, appears as a quality of fixed capital. Thus all powers of labor are transposed into the powers of capital.4
The Marginal Theory reflects capitalist strategy in the era of relative surplus value. “Productivity” becomes a central political category, “efficiency” the battle slogan in the regulation of the class relation as the shillobeth of “unproductive” was hurled at the feudal landowners by the early bourgeoisie. Thus Jevons, the “father of Marginal theory”, saw it as a statistical thermodynamics accounting for the transformation of energies (in the form of desires, pleasures and utilities) into work. For him the capitalist system is a gigantic social steam engine that turns the millions of separate energetic impulses of the working class into accumulated capitalist power. It took a relatively short time for this theory to enter into the curriculum of the capitalist manager. Its pedagogical function is immediately evident even in its abstract form (despite the eternal complaint of the “shirt sleeve” business economists against their theoretical colleagues) for it accustoms capital to a fludity in productive arrangements, the expectation of constant change in productive relations (aimed at destroying nodules of working class organization) and an appreciation of its own abstractness. At the same time, the theory taught a complementary lesson: the working class could no longer be merely resisted, repressed and killed when it struggled; it had to be allowed a dynamic function in the system of productive relations and the market . . . the struggle could and had to be used.
This theory, e.g., showed capital how unions could be used instead of being outlawed and crushed whenever they appeared. For it maintains that unions cannot increase wages beyond the productivity of labor in the long run, because wages are ultimately controlled by supply and demand in labor market. At worst, unions are innocuous; at best, though they may hurt individual capitalists, unions, by bargaining over wage and working conditions, can spur changes in the organization of work and stimulate productivity.
Consider Bohm-Bawerk, the Austrian Finance minister and discoverer of the “error in the Marxian system” (i.e., the deviation of prices from values). In 1914 he wrote:
If the entrepreneur finds his hands tied by the price of labor, but not in regard to the physical equipment of his factory, and he desires to adopt the presently cheapest combination of factors of production he will prefer a combination different from the one used before, one that will enable him to make savings in the now more costly factor of labor, just as, for example, an increase in the cost of land may cause the transition from extensive to intensive methods of cultivation.5
In other words, if unions force wages up, this will force the capitalist to reorganize production by making it, e.g., less extensive and more intensive in time, (for space becomes time when we go from land to work). Unions can force a transition from absolute to relative surplus value and become a factor in the development of capital, provided they are attuned to the system: don’t agitate too much, don’t desire too much and most important “get down with us”. Although the variety of tactics capital uses to attune the working class are barely mentioned in the textbooks and treatises, the “entrepreneur” should figure it out himself: sometimes head bashing, sometimes prime ministerships. What was crucial was the strategy that was taught to generation upon generation of capitalists: one doesn’t fight the class struggle any more with the tactics of Scrooge.
Such a century old strategy is not abandoned easily. Even the so-called “Keynesian revolution” did not question the importance of linking wage and profit increases with productivity increases. Keynes saw that it was crucial for “collective capital”, the State, to intervene and guarantee this correlation, should the individual capitalists refuse. Yet throughout the 60s and 70s Marginal Theory was systematically attacked in debates on capital’s theory. “What”, say the marginalist economists, “can’t wages and profits grow and twine together like tendrils from the graves of dead lovers?”
Just as statistical surveys were proclaiming the long run success in linking real wages with productivity, there was increasing disquiet in the councils of the wise, By the early 70s it was obvious that profits and wages were again antagonistic, as in the days of absolute surplus value. Profits were not gathering a normal share of productivity increases and, even more ominously, the institutions of bargaining essential for the equilibrium (the unions and social-democratic parties) were subverted or bypassed by the struggle. Welfare struggles, ghetto revolts, wildcats, factory occupations and a “breakdown” in discipline from the army to the university (reflecting a “disorder” in family and sexual relationships) all moved outside the orbit of union-management corridors and club house crap tables. Though the absolute content of these struggles took seemingly opposite poles:
THE END OF WORK -- PAY FOR ALL THE WORK WE DO
MAKE LOVE NOT WAR — LOVE IS WORK
FREEDOM NOW — NO MORE FREE WORK
Capital was more concerned with their “non-negotiability”, their “unreasonableness”. Capitalism lives on the future and the immediate quality of these demands spelled: NO FUTURE, WE WANT IT NOW! What might have appeared as slight statistical shifts had the nature of auguries from the tangled guts of date charts and computer printouts. Productivity was no more guaranteed by the new class forces, who sniffed the astronomical level of accumulation achieved, and were demanding it all and now.
As in the epistemology of pragmatism, irritation leads to thought, and these demands rubbed capital’s managers raw. Lucky for capital, the needed thought had already risen to consciousness. Piero Sraffa had developed a system that suggested a strategy radically different from the Marginalist. Like all genuine capitalist responses to working class struggles, Sraffa’s took up the class’ demands, but with a twist of its intent. Just as early capital took the Diggers’ anti-landowner slogan: “those who don’t work should not eat’’ and turned it against them, the new capitalist strategy takes the working class’ refusal of work, and relativizes it to itself.
Sraffa’s strategy begins with capital’s perception of the crisis as an inability to link, in a balanced way, wage and profit growth with productivity changes. Sraffa argues that wages and profits must be considered antagonistic magnitudes. In Marginal Theory, on the contrary, the wage is a payment for the use of a certain “factor of production” labor, to its owner, the worker; while profits are payments for the use of invested capital (in the form of machines, raw materials or money) to its owner, the capitalist, i.e., wages and profits are theoretically independent of each other. The Marginal theory begins with the individual firm and each factor, labor and capital, contributes to the firms production and is presumably rewarded accordingly: “a fair day’s work tor a fair day’s pay” and “a good tool is worth its hire".
Sraffa, instead, considers the capitalist machine as a whole, with its total inputs and outputs, its food and its shit. He has the total output cut in two: wages and profits. The wage is part of the total value appropriated by the whole working class. His image is that the capitalist machine (a complex intermeshing of material and work flows, transfers, creations and interruptions) stops at every period and drops out a total product, then capitalists and workers struggle over how much each gets. No more “to each his own", now it is lex talonis, dog packs and the wolf packs warring over the carrion. But there is a limit as to how little workers can get. They must receive enough of the total product to subsist and reproduce their race. The wage, then, must be divided into two parts:
We have up to this point regarded wages as constituting of the necessary subsistence of the workers and thus entering the system on the same footing as the fuel for the engines or the feed for the cattle. We must now take into account the other aspect of wages since, besides the ever-present element of subsistence, they may include a share of the surplus product. In view of the double character of the wage it would be appropriate when we come to consider the division of the surplus between capitalists and workers, to separate the two component parts of the wage and regard only the “surplus” part as a variable.6
The ‘subsistence” part of the wage is reminiscent of the classical notion of the wage (e.g., Ricardo’s natural price of labor . . . that price which is necessary to enable the laborers, one with the other, to subsist and to perpetuate their race, without either increase or diminuation. ”)7 By its nature, the subsistence wage is not proportional to the amount of work done, though it is fixed by the constraints of the particular productive system and the presumably fixed (quasi-biological) needs of the “race of workers”. The necessity of a subsistence wage reflects a problematic truth individual capitalists try to elude, but capital as a whole cannot: in order to work, you must remain alive even though you are not working. This is the final “externality” of capitalist production. It is the pollution of non-work eternally produced by work that somebody must “clean up”.
Classical economic theoiy led to “the iron law of wages”, but discovered that iron can melt under intense heat. Thus, Marginal Theory conceeded that the wage can be a variable as long as its variability is ruled by the productivity of labor. For Sraffa, on the contrary, the variable part of the wage arises from the existence of a total surplus, produced by the production apparatus as a whole, beyond mere subsistence. Sraffa argues that the “race of workers” struggles with capital to appropriate part of this surplus independent of its productivity. This “surplus wage” is a sort of “political wage”, for it is not determinable within the system of technical relations of production. With Sraffa, Bohm-Bawerk’s confidence that the wage will in the long run be determined by the “free” market of labor is exploded. Sraffa’s framework describes a world where the working class has effectively broken the tie with productivity and the relationship between wages and profits is strictly antagonistic. With Sraffa, capital conceptualizes a situation where the quantity of the total machine’s production is no longer proportional to the amount of work squeezed out of the working class: the wage becomes independent of work. It spells the end of the Marginalist’s attempt to justify profit as a “fair reward” for capital’s contribution to the production process. Nothing is due to capital, everything must be fought for. We reach here that situation of great class tension anticipated by Marx in the last century:
Real weath manifests itself, rather — and large industry reveals this — in the monstrous disproportion between the labor time applied, and its product, as well as in the qualitative imbalance between labor, reduced to a pure abstraction, and the power of the production process it superintends. Labor no longer appears so much to be included within the production process; rather, the human being come to relate more as a watchman and regulator to the production process itself.8
When the productivity of labor increases beyond certain limits, Marx argues, any attempt to use “labor time” as the measure of wealth fails and “exchange value ceases to be the measure of use value”. Capital finds itself in its deepest contradiction:
On the one side, then, it calls to life all the powers of science and nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labor time employed in it. On the other side, it wants to use labor time as the measuring rod for the giant social forces thereby created, and to confine them within the limits required to maintain the already created value as value.9
When working class struggle pushes capital to a point where necessary work time approaches zero, Sraffa’s system can be profitably applied.
What can determine the wage in such a situation if not productivity? Sraffa turns to the old discussion of the Corn Laws, i.e., to the manipulation of the wage by control of the relative prices of commodities. He argues that prices are fixed by the wage rate; at the same time, given commodity production, the wage rate can also be determined by exchange relations between commodities. As long as capital has the power to relate prices it has the power to control how much of the (surplus) “political” wage the working class will appropriate. But not just any commodity will do.
Sraffa distinguishes between two types of commodities: basic versus non-basic. Basic commodities enter into the production of all commodities, while non-basic ones do not.
These (non-basic) products have no part in the determination of the system. Their role is purely passive. If an invention were to reduce by half the quantity of each of the means of production which are required to produce a unit of a “luxury” production of a basic commodity which does enter the means of production, all prices would be affected and the rate of profits changed.10
In other words, if one wanted to influence the wage (and hence the profit) rate, it would make no sense to change the price of Pennsylvanean coo-coo clocks or even of stereos and TVs, i.e., the “consumer durables” that have proven so crucial to the development of the system in the past. A Sraffa-type strategy must employ energy commodities (e.g., oil and electricity) since they enter directly or indirectly into the whole spectrum of production from fertilizers to computers. “Energy” commodities are basic commodities. Thus, any attempt to affect the wage-profit relation in a period when Marginalist Theory is inoperative must involve price changes of basic commodities.
This excursion into Sraffa’s theory explains why the profits crisis of the 1965-1972 required an energy crisis. Only with price changes of the energy commodities can the average real wage be reduced and investment moved from lower organically composed industries to the High industries. Such price changes dispose of both global and local irritants affecting the profit rate, since they reduce the general wage (whether paid on the job or through welfare checks, pensions, unemployment checks) and, at the same time, reduce the share of value that goes to the Average and Low industries. Energy plays a central role both in the wage commodity “bundle” (heating, food, etc.) and in the production of “capital" goods. To change its relative price is inevitably to affect the average rate of profit, instead of cyclically returning to a predetermined profit rate. The profits crisis heralded not another fluctuation around a given “long run” average rate of profit, but a fall in the average that could not be dealt with on the basis of the Keynesian wage-inflation cycle that coordinates real wages and productivity via the “money illusion”. No “State Bank induced” inflation or “monopoly capital” pass-along of wage increases would deal with the surprising totality and novelty of working class struggle. The essential mechanism to reshape the system had to be an energy price transformation that would effect the profits crisis both globally, in the realm of social reproduction, and locally, in the closedown of insubordinate factories.
- 1 What of race? We agree with the wages-for-housework analysis: the essence of the racial (as well as sexual) division is to be found in the hierarchy of wages and it was indeed that hierarchy that the black movement attacked most directly in the welfare women’s movement, in the formation of black factory unions & caucus, in the youth gangs and “parties" of the ghetto streets. The explosion of black women, men and youth attacked the Keynsian model of accumulation at its heart since the thrust was from the largely unwaged sector. Cf. Maria Rosa Dalla Costa and Selma James, POWER OF WOMEN AND THE SUBVERSION OF THE COMMUNITY (Bristol, Eng, Falling Wall Press, 1972) for the seminal work on this matter.
- 2 Quoted in B.J. Widick “Work in Auto Plants: Then and Now", in AUTO WORK AND ITS DISCONTENTS, (Baltimore; John Hopkins U. Press, 1976), p. 10.
- 3 Bukharin, THE ECONOMIC TH EORY OF THE LEISURE CLASS, (N.Y., AMS Press, 1970), p. 31.
- 4 K. Marx, GRUNDRISSE, (N.Y., Vintage Books, 1973), p. 700.
- 5 Bohm-Bawerk, “Control or Economic Law” in SHORTER CLASSICS OF E. VON BOHM-BAWERK, (South Holland, Ill.; Libertarian Press, 1962) p. 192-193.
- 6 P. Sraffa, PRODUCTION OF COMMODITIES BY MEANS OF COMMODOTIES, (Cambridge, Eng.: Cambridge University Press, 1960), p. 9.
- 7 D. Ricardo, PRINCIPLES OF POLITICAL ECONOMY & TAXATION, (N.Y. MacMillan Co., 1914), p, 80
- 8 K. Marx, GRUNDRISSE, p. 705
- 9 ibid., p. 706
- 10 R. Sraffa, PRODUCTION OF COMMODITIES, p. 7-8.