Today, as the global economy flounders from crisis to crisis, Marx’s analysis of capitalism is the essential basis for a correct understanding of what is going on. Moseley’s book reaffirms key elements of this analysis. The previous obsession with the transformation problem has resulted in the undermining of these key aspects of Marx’s critique, actually making an understanding of twenty first century capitalism harder. Moseley’s book, though long winded and somewhat repetitive, serves a very useful purpose in exposing this undermining and its implications. For this reason alone it is worth reading.
Background to this Book
This is a substantial book which the author admits has been 20 years in the making.1 It deals primarily with Moseley’s own “Macro-Monetary” interpretation of Marx’s economic writings and takes up and rebuts criticisms of this interpretation. However, the book also looks critically at the major interpretations of Marx’s economic work, by Marxist academic economists, which have emerged in the last 100 years, giving a brief description of them and critically examining their failings. Many people may not realise this, but for the greater part of the twentieth century the accepted view among academic Marxist economists, which was generally known as the Standard Interpretation (SI), was that Marx made a fundamental mistake in his economic analysis which needed to be corrected. The key issue behind this is the so-called “transformation” problem, namely the transformation of values into prices of production. The SI and its offshoots claim that Marx failed to do this correctly and his work needs to be corrected. A number of corrections have been proposed and a further number of variations of these corrections themselves put forward in ever greater complexity. Moseley shows how these criticisms and corrections are founded on a misinterpretation of Marx’s work; and that the corrections each violate some other key aspect of Marx’s work. Moseley argues that Marx did not make a mistake and there is no transformation problem whatsoever.
It is interesting to note that the criticisms of Marx made by academic economists, had most currency during the period following the Second World War when capitalism appeared to be marching from strength to strength. A notable exception was Paul Mattick who argued, throughout the boom of the 50s and 60s, that the post war boom was based on the devaluation of capital which had been brought about by the war, and predicted the return of the crisis.2 Moseley’s book is dedicated to Mattick whom he recognises as a major influence on his work. With the return of the crisis in the 70s the SI began to be first challenged in academic papers and later in books. The crisis of 2007/8 has added momentum to this process and Moseley’s book is the latest refutation of the SI. The relationship of capitalism’s health to interpretations of Marx’s critique is not accidental. It is an illustration of the link between the infrastructure of capitalist society, its economy, and the superstructural ideology.
Though these disputes may seem somewhat arcane, the conclusions about the SI affect basic concepts of Marxism which are essential for understanding capitalism. In particular, the SI and its variants undermine the centrality of the labour theory of value. The refutation of the labour theory of value is, of course, something bourgeois economists have been trying to do since the 1870s.3 Marx’s aggregate equalities, namely that, at the level of the global capitalist economy, total value equals total price and total surplus value equals total profit, which he derives in Capital Volume 3 Chapter 10 are also undermined, since as Moseley shows, according to the SI they cannot both be true simultaneously. These remain essential tools for understanding twenty first century capitalism with its inflation of the money supply, falling rates of profit and speculation. Understanding tendencies and developments in contemporary capitalism are, in turn, essential for framing principles and tactics in the class struggle.
The Transformation Problem
The labour theory of value holds that labour is the source of value in capitalism. The products of capitalist production, commodities, take their value from the labour they contain, which can be measured in terms of labour time. The source of profit in capitalism is the unpaid labour which capitalists extract from the working class, the surplus labour, which appears in the form of surplus value. This can also be valued in terms of labour time. Marx makes a provisional and simplifying assumption in Volume 1 of Capital, that commodities exchange at their values. This holds for the aggregate of the whole global economy, but Marx was aware that this is not true for individual commodities, which exchange at their prices of production.4
In Capital Volume 3 Marx examines how products of individual industries get their prices and concludes values are transformed into prices by multiplying the capital laid out in the individual industries by an average rate of profit determined across the economy as a whole. This produces an equalisation of the rate of profit throughout the sectors of the economy. Prices were therefore generally not equal to values but dependent on the capital laid out and the average rate of profit. Therfore individual industries do not generally get as profit the surplus value they produce. There is consequently a distribution of the total surplus value produced between the various industries and sectors of the economy. The amount each industry receives depends on the capital they lay out multiplied by the average rate of profit for the total economy. Marx drew up some tables in Capital Volume 3 Chapter 9 which show the division of surplus value between industries with different capitals and different ratios of constant to variable capital. The initial inputs appear in terms of values. Marx argued, however, that for the economy as a total unit (and today this must be the global economy), the sum of all the values must equal the sum of all the prices and the sum of the surplus values must equal the sum of all the profits. Marx’s analysis is a dynamic one starting with the economy as a whole from which an average rate of profit is calculated and then moving to the individual sectors where the capital they lay out is multiplied by an average rate of profit determined from the economy as a whole. This is an analysis with sequential evaluation which considers capitalism as a single system with direct connection between values based on labour time and market prices.
Marx’s analysis is fairly straightforward and easy to understand. However, the proponents of the SI5 hold that, since the inputs to production are products of other industries, Marx should therefore have transformed the inputs from values to prices of production. They then set about correcting Marx’s ‘mistake’. This resulted in evaluating inputs and outputs simultaneously via a series of simultaneous equations, or by mathematical iteration, or by analysing the production cycle in terms of the physical quantities of the commodities input to production and those produced as output. The rate of profit was also determined simultaneously.
Moseley examines the SI and the various permutations of it in detail. He points out these corrections amount to a static equilibrium theory of capitalism and moreover make the labour theory of value (LTV) redundant because the results of all the clever mathematics reach the same answer whatever the initial inputs. Further they result in two separate systems of evaluation: a value system, which is hypothetical, and a price system, which determines prices of production. These two systems are without connection. There is thus a price rate of profit and a value rate of profit which need not be the same. If this is the case then the key conclusion of the LTV that surplus labour is the source, and only source of profit, is undermined. The sum of the surplus values does not necessarily equal the sum of the profits and some other source of profit must exist. Similarly the sum of the values of globally produced commodities does not necessarily equal their prices. All this, one would have thought, represented metaphorically driving a coach and horses through Marx’s analysis, but it has been considered merely as extending and improving his theory.
As capitalism’s crisis continued further rejections of the SI have been developed. The so-called Temporal Single System Interpretation (TSSI), developed by A Kliman and T McGlone and explained in Kliman’s book Reclaiming Marx’s Capital (2007), presents a refutation of the premises and conclusions of the SI. In particular it argues there is no logical flaw in Marx’s theory, as the SI claims, instead it is a logically consistent system. Moseley is largely in agreement with the TSSI but criticises it for arguing that prices of production are short term prices applying to a single cycle only. Prices of production, he insists, do not change with each cycle of production as the TSSI claims. Moseley argues prices of production are rather than long term centre of gravity prices responding to prices of inputs to production. If prices of the inputs change during the production process prices of the outputs must reflect this.6 Moseley argues that, although the TSSI satisfies Marx’s aggregate equalities in a single period of production, it will not do so in the long run.
Macro-Monetary Interpretation
Moseley has developed his “Macro-Monetary” interpretation by arguing that Marx’s analysis starts on the macro level analysing capitalism as a single economy, that is analysing the economy as a whole in terms of values. It then proceeds to analysing individual industries, or branches of production. This is at the micro level, and the analysis is a monetary one resulting in prices. He calls these analyses different levels of abstraction. The first, the analysis of capitalism as a whole, can be done in terms of values. This is the level of abstraction which underlies Capital Volumes 1 and 2. For this it is assumed that commodities are exchanged at their values. For the whole economy, the sum of all the values will equal the sum of the prices and the sum of the surplus values will equal the sum of the profits. Thus for the total capital the rate of profit will be the sum of the surplus values divided by the sum of the values of all the capitals.
However, in Volume 3 the level of abstraction is a single industry. Here we find values converted into prices of production via the average rate of profit worked out for the economy as a whole and surplus value determined for the economy as a whole distributed between industries as described above. For an individual industry its original capital is increased, or in Marxist terms valorised, in the following cycle:
M-C …. P …. C’ - (M + ΔM)
A sum of money capital M is transformed into capital, C, representing means of production and labour power. This capital enters the production process P, and is transformed into capital C’, representing commodities produced. The sale of commodities C’ results in recovery of the original money capital M plus an increase ΔM. ΔM, of course, represents the unpaid labour of workers. This circuit starts and ends with money. It starts in the sphere of circulation, moves to the sphere of production, then returns to the sphere of circulation.
Because the original purchase of the means of production and labour power takes place in the sphere of circulation, the exchange of money capital for means of production and labour power is an exchange at prices of production. Hence the inputs to the valorisation cycle are prices of production to start with and their transformation from values to prices of production has already taken place. It follows therefore that the entire argument about the need to transform inputs from values to prices of production is based on a misunderstanding.
However, if the inputs are prices of production they are not generally equal to their values as Moseley admits. The link between value and price of production can only be made by assuming that these actual quantities of money capital used to purchase means of production and means of subsistence do, in the long term average, approximate to values. Marx makes this assumption and so these sums represent a starting point, a point of departure, for the analysis. Using these values, which are the same as those used in Capital Volume 1, the analysis is able to show how a sum of money capital M can be increased to M + ΔM.
Moseley is at pains to prove that his analysis corresponds to that of Marx. He supports this with many textual quotations from Marx’s published works and the more recently available drafts and notebooks accessible in the MEGA.7 He also deals with sections of Marx’s work quoted by the SI proponents and attempts to show they are taken out of context or that their ambiguity needs to be seen in the context of Marx’s work as a whole. Whether this book will lay the transformation problem to rest or not is, however, doubtful. So much of Marx’s work now available was not edited by him but has been published posthumously. Major texts were compiled by Engels, and now with the MEGA available it is possible to see what Engels left out and what he reordered. In addition the notebooks, which are dated, show how Marx’s analysis developed. Ambiguities, of course, remain and academic Marxists will continue to use them to support their various views.
A more significant question is how precisely Moseley’s analysis helps in understanding the trajectory of twenty first century capitalism.
Relevance to Twenty First Century Capitalism
Moseley’s book clearly affirms the key aspects of Marx’s analysis which continue to underlie contemporary capitalism. The most important is the centrality of the labour theory of value to any true understanding of the present. Labour is the source of value and unpaid labour is the source of surplus value which in turn is the source, and only source, of capitalist profit. As a consequence it follows that the aggregate sum of the surplus value produced globally must equal the sum of the profits which the capitalist class appropriate. There is similarly only one rate of profit or, in other words, the value rate of profit is equal to the price rate of profit. Also, since there is only a single system of values and prices the sum of the values must equal the sum of the prices of production.
Marx’s analysis is based on money being commodity money, (i.e. gold/silver etc. which have intrinsic value in their own right). Does today’s money, known as fiat money, invalidate all this? Moseley thinks it does not. Marx, in the chapter on money in the Grundisse8 lists three main functions of money. It must serve firstly as a measure of value, secondly as a medium of circulation and thirdly as an abstract representative of wealth. Today’s fiat money is a measure of abstract labour, i.e. value, and is accepted as both a medium of circulation and a representation of wealth. It therefore serves the same function as commodity money previously did. It can be related to labour time by what is known as the Monetary Equivalent of Labour Time (MELT). In a system of commodity money MELT would be determined by dividing the new value produced by labour in currency units (gold) by the labour time required to produce it. Moseley maintains that in a fiat currency system MELT is still related to gold and should be calculated by dividing the amount of paper money in circulation by the quantity of gold required to replace it if prices were gold prices.
The use of fiat money, however, gives states and banks controlling national currencies powers they could not have with commodity money which had to be backed by gold. Banks can inflate the money supply by issuing credit which is not redeemable by gold, while central banks can issue bonds and manipulate their interest rates. This is not a new phenomenon. In the case of the British economy, a standard work explains that: "In 1844 an Act of parliament limited the quantity of currency which the Bank of England could issue to the value of its stock of gold but the Act also allowed the Bank to issue £14 million of notes unbacked by gold, (the so-called ‘fiduciary issue’). After this initial breach, the fiduciary element was consistently increased until the break from gold was completed in 1939 with the transfer of the Bank’s gold holding to the Exchange Equalisation Account, for use only in international payments." (Guide to the British Economy, Peter Donaldson). What Donaldson omits to mention is that the 1939 devaluation was the tail-end of a round of competitive devaluations by all major states in the world economic crisis preceding the Second World War. The worldwide break from gold had started with the British domestic economy in 1931 followed by the US abandoning the gold standard in 1933. By 1939 the break was ‘completed’ when the whole sterling bloc came off the gold standard.
More recently we have seen central banks directly injecting fictitious money into the banking system by bailouts and quantitative easing. This has created massive inflation. Since the modified gold standard ended in 1971 the inflation of currencies has been staggering. The gold price has risen from $35 per ounce to an average of around $1400 today. This is devaluation of the dollar by a factor of 40 or 39000%. Past devaluations such as that carried out by Roosevelt in 1933, when the dollar was devalued from $20.67 to $35 per ounce of gold, which amounted to a 70% devaluation, pale into insignificance. For the UK inflation since 1971 has been 1470%.9 The amount of money relative to the size of the economy has been increased by a factor of about 16. This, however, is significantly less than the increase in the gold price. One of the reasons for this is the distribution of this new credit money and the way the official statistics on inflation are calculated. In the UK according to analysis of “Positive Money,” an organisation which campaigns for reform of the banking system, while the UK central bank (BoE) has created £190bn of additional money since 1971, private banks have created £2.02 trillion. The bulk of the new money created by private banking system, £1.28tn or 63% of it, has gone into housing. The second largest amount £460bn or 23% has gone into finance.10 This has produced massive inflation in UK house prices. In addition there has been a massive increase in debt, both of which are not registered in official inflation statistics. All this exists on a global scale also. Global debt, as we pointed out in Revolutionary Perspectives 1211 , now amounts to approximately $250 trillion, well in excess of the debt existing before the crisis of 2007/8. This debt attracts interest which can only result in the financial sector appropriating an ever larger share of the available global surplus value. All this, of course, has resulted in the enormous increases in inequality which bourgeois economists, such as Piketty12 , have exposed and lamented. The use of non-convertible fiat currencies has given the controllers of capitalism the ability to carry out manoeuvres with the monetary system which postpone capitalism’s problems. These problems are being attenuated by spreading them globally and allowing the central countries to appropriate an ever greater share of the global surplus value through their financial sectors. But have these measures been able to fundamentally invalidate Marx’s critique of capitalism? We think not.
One of the issues which Marx is at pains to emphasise at the start of Capital Volume 1 is the fetishism of capitalist production. Nothing is as it appears and this starts with the nature of the commodity itself. Profit appears to come from both constant capital and labour both of which bourgeois economists insist are simply factors in production. The source of surplus value and so capitalist profit is disguised. The distribution of surplus value between industries, commerce, interest and rent, hide where this surplus comes from. Each sector claims it produces the profit it appropriates. Again monopoly capital drains surplus value from rivals to itself making it appear that monopoly itself is a source of profit which it is not. All this makes the system opaque and hence difficult to understand. However, as Marx noted
"… all science would be superfluous if the outward appearance and the essence of things directly coincided."13
Marxism is, of course, the critique which unveils the essence of capitalism which lies behind its appearance.
Today, as the global economy flounders from crisis to crisis, Marx’s analysis of capitalism is the essential basis for a correct understanding of what is going on. Moseley’s book reaffirms key elements of this analysis. The previous obsession with the transformation problem has resulted in the undermining of these key aspects of Marx’s critique, actually making an understanding of twenty first century capitalism harder. Moseley’s book, though long winded and somewhat repetitive, serves a very useful purpose in exposing this undermining and its implications. For this reason alone it is worth reading.
CP
- 1Money and Totality by Fred Moseley published by Haymarket Books in 2015
- 2See Marx and Keynes Paul Mattick (Merlin 1970)
- 3The theory of marginal utility as opposed to the labour theory of value was proposed by W.S.Jevons in 1871 and taken up by others including A Marshall Principles of Economy in 1890. P Mattick wrote, “Marginal utility is the construction of a value concept which justifies the prevailing class and income differentiations. The existing inequalities based on the exploitation of labour are explained as the undefeatable natural law of diminishing utility.”
- 4This issue was central to Marx’s criticism of Ricardo.
- 5Most important of the theorists of the SI are L Bortkiewicz Value Price in the Marxian System, P Sweezy The Theory of Capitalist Development, P Sraffa Production of Commodities by Means of Commodities, I Steedman Marx after Sraffa.
- 6A Kliman argues Moseley’s criticism amounts to simultaneous valuation of inputs and outputs.
- 7MEGA is Marx Engels Gesamtausgabe – a project to publish all the writings of both Marx and Engels on the internet.
- 8See K Marx Grundrisse p.115
- 9See inflation.iamkate.com
- 10See Positive Money: positivemoney.org
- 11See: leftcom.org
- 12See Piketty, Marx and Capitalism’s Dynamics: leftcom.org
- 13K Marx Capital Volume 3, Chapter 4
Comments
Not a bad review but the
Not a bad review but the author should never rely on anything from the 'Positive Money' lot regarding the banks and money supply as the result as in this case is to confuse issues of commercial Bank lending and debt in relation to, for instance house price inflation, with the matter of money supply in the traditional sense. Noa on the CWO site has already made some valid criticism in this respect which deserves a response. See also the discussion here and the summary pamphlet from the spgb mentioned near the end:
https://libcom.org/forums/theory/fallacies-about-banks-01102012
It’s really two articles. One
It’s really two articles. One on Moseley’s book. The other on capitalism in the 20th century. The part on Moseley is ok, but they imply it’s only valid for the so-called ascendant period of capitalism up to 1914 when capitalism for them supposedly entered into its period of “decadence”. Here they go off the rails by seeming to suggest that capitalism has been kept going, as it were “artificially”, by inflation of the money supply by both the state central bank and by private banks.
But while the state can create more money-tokens commercial banks cannot. Banks can only be regarded as creating new money if you extend the definition of money to include bank loans. But this only confuses things. Banks are, as Marx himself accepted, essentially financial intermediaries shuffling already existing money. Their lending cannot cause inflation. It's not excessive bank lending that causes a boom but that in a boom banks lend more and are less cautious as to who they lend to.
What is really surprising is that a group in the Marxian tradition should reference a rightwing banking reform group like Positive Money which seeks to explain in purely monetary terms why booms end.
Perhaps what the CWO feel they have in common with them is that the CWO too offers a purely monetary explanation for capitalism’s continuation beyond the sell-by date they have fixed for it.
It will be linked to their theory that another world war is needed to devalue capital, by literally destroying what is it embodied in, so that the rate of profit can be restored (the same amount of profit on a smaller amount of capital) capital accumulation can resume. Since, however, it is nearly 75 years since the end of the last world war, they need a theory to explain why there has not been another one and how capitalism has survived -- hence their recourse to a monetary explanation.
There is some more discussion
There is some more discussion of this on the CWO's own site with some additional valid points from Noa but the CWO responses I fear miss the point of the original narrow point of dispute. Of course capitalism as such has continued (and continued to develop) past the different notional dates of capitalism's decline or 'decadence' assumed by both the SPGB and the CWO, past two world wars and many smaller ones. The CWO has offered an analysis of this which doesn't rely on any purely 'monetary' explanation though the role of debt assumes particular relevance in terms of the post 2008 crash. The above opening CWO article is in error both terminologically and factually in term of the role of traditional money and inflation but not necessarily in terms of the global debt burden and it's relationship to the falling rate of profit.
On what grounds do you claim
On what grounds do you claim that the SPGB holds a theory of economic "decadence"? Obviously, as Marxists, we say that by a certain point capitalism had created the material basis for a world socialist society and so was no longer "historically necessary". Presumably you do too. But this is not the same as saying that after 1914 real capital accumulation has not been able to happen (or that to the extent that some takes place this has been, and has had to have been, negated by destruction in war).
What do you mean by "global debt burden"? Who owes who what and who is it a burden on? And what precisely do you think is the relationship between "the global debt burden" and "the falling rate of profit"?
alb wrote: The part on
alb
That's not even our view of decadence, as these two articles demonstrate:
"Many, however, see the period of decadence as a phase in which there is no further possibility for the development of the productive forces. For them capitalism is inevitably destined to die and give birth to socialist society. In reality, under the capitalist system, the development of forms of parasitic appropriation, in accelerating the process of accumulation on an enlarged basis widens the base of its starting point. From this, if on the one hand it leads to the accelerated drive towards over-accumulation, on the other it leads to the excessive growth of the necessity to intensify the exploitation of the proletariat and the need for extra-profit. For this reason, the introduction of ever more advanced technology into production and the expansion of the productive base never cease, but they radically alter the consequences of their impact on the entirety of social relations. On the other hand, ascendance and decadence are the products of the very same contradictions so that it is absurd to think of them as two neatly separated phases and that the second period begins only when the first has ended." (Refining the Concept of Decadence)
"To this end, it is absolutely insufficient to refer to the fact that, in the decadent phase, economic crises and wars, like the attacks on the world of labour-power, occur with a constant and devastating rhythm. Even in the progressive phase, if by this is meant that long historical period in which the capitalist productive form overcame all the forms of economic organisation preceding it and created the conditions for an enormous development of the productive forces, crises and wars arrived punctually, just as the factors of attacks on the conditions of labour-power expressed themselves. An explicit example of this is given by the wars between the great colonial powers at the end of the 18th century and over the whole of the 19th century, up to the outbreak of the First World War. The example could be extended by listing the social attacks and the frequent military attacks on the class revolts and insurrections, which played themselves out in the same period. And when, according to this mode of posing the question, did the transition from the progressive to the decadent phase occur? At the end of the 19th century? After the First World War? After the Second? As if the problem could be the chronological identification of the cusp without examining the economic factors which have produced decadence itself, at least if effects are not confounded with causes." (For a Definition of the Concept of Decadence)
alb
Do you think the data provided by Positive Money on how much credit private banks have created since 1971 is incorrect? Ok, but if so, let us know rather than try to evoke some kind of guilt by association.
So just for alb's benefit I
So just for alb's benefit I was referencing this truncated discussion and alb's much older debate with Internationalist Perspective here:
https://libcom.org/forums/theory/world-socialist-movement-decadence-13012019
and alb should be aware that both the CWO and IP have analysis which is different in important respects from that of both the early and current ICC, with my own view being closest but not identical to IP.
In my simple understanding the 'tendency towards the falling rate of profit' is a significant factor in the emergence of global economic crisis, and the devaluation of capital (both constant and variable), including through war facilitated by the state a means of allowing a temporary recovery, but the CWO can defend their own position rather than me.
I didn't think I did
I didn't think I did attribute to the CWO the view that capitalism in its economically decadent period was incapable of continuing to accumulate capital. As I understood the CWO position, it is that such capital accumulation will eventually be checked (by a fall in the rate of profit, as opposed to the ICC view that it will be by a lack of markets) and undone (by the physical destruction in a world war of what the capital had been vested in) so that another period of capital accumulation can begin and which will end in the same way. I always associated the CWO view, from debating with them in the 1970s and 80s that they were saying that capitalism needed a new world war to continue. I can well understand that by the 2000s, and still no world war, the CWO would find the need to "refine" its concept of decadence.
But I note that something of the old view remains in that 2005 document you quote from:
and
So, how despite there having been no world war since 1945 (the 80th anniversary of the start of which was "celebrated" yesterday) has capitalism managed to survive? By financialisation, i.e an explanation from the monetary sphere not production, replies the CWO:
You ask if I am challenging Positive Money's statistics. Unfortunately the link in the Moseley article doesn't take you to the exact source of Positive Money's statistics, but I am prepared to accept that since 1971 the Bank of England has created £190bn of additional money while private banks have made loans totalling £2.02 trillion.. What I would challenge is their claim (which you accept) that since 1971 private banks "created" £2.02 trillion "additional money".
This claim is based on defining bank loans as part of the "money supply" and leads Positive Money (and other currency cranks) to conclude that private banks create the money they lend out of thin air by the stroke of a keyboard, whereas in fact private banks have to have or to find funding for whatever they lend, i.e. already existing money. They don't create any new money that didn't exist before; they just circulate money that already exists.
“Here they (CWO) go off the
“Here they (CWO) go off the rails by seeming to suggest that capitalism has been kept going, as it were “artificially”, by inflation of the money supply by both the state central bank and by private banks.”
Alb confuses the CWO argument with that of the ICC. Over the years we have argued against the view that capitalism has survived by creating credit, debt and cheating on the law of value. (See http://www.leftcom.org/en/articles/2005-11-01/the-economic-role-of-war-in-capitalism-s-decadent-phase
We argue that structural changes in the value relations of capitalism lead to increased organic content of capitalism leading in turn to a reduction of surplus value relative to constant capital which leads to a secular tendency of the rate of profit to fall. Capitalism has historically resolved this problem through crises which corrected the value relations through devaluing constant capital and thereby restoring the rate of profit and allowing a new phase of accumulation to start. So much I think is agreed with the SPGB. We argue further that the increase in the scale of global capitalism by the 20th century rendered the economic crises, which characterised the 19th century, insufficient to restore profit rates to enable a new phase of accumulation. In the 20th century the requisite devaluations have been achieved by global war. The restored profit rate allows a new cycle of accumulation to begin but the secular tendency of the rate of profit to fall reasserts itself leading to a new crisis and if the working class does not overthrow the system, a new global war. The fact that the system has to periodically destroy the wealth it has produced and kill millions of its workers in order to survive is an indication of its historical decadence.
The issue which alb points to is that since the collapse of the post war recovery in the 70s there has not been a global war, yet the system has staggered on. How is this to be explained? Clearly the system can only survive by exploiting workers to produce value and surplus value. We can point to a number of ways in which this has been achieved. Firstly we have seen a restructuring of industry and massive increases in productivity in the metropolitan countries together with increases in exploitation via computer control etc. Secondly we have seen a new phase of globalisation accelerated by the collapse of the Russian bloc and the entry of China and India to the world market. It was estimated by 2000 that with the entry of India, China and the former Eastern Bloc countries into the world economy, a doubling of the number of workers available to global capital was brought about. The number of workers rose to approximately 3bn. Workers from the Russian bloc brought very little capital with them and in China and India masses of these workers were proletarianised peasantry bringing no capital with them. This reduced the ratio of capital/labour by 40% according to a study by Professor R Freeman “Labour market imbalances” Harvard University Paper. These developments, which we admit were unexpected, have increased profitability and brought oxygen to the system. However, in the longer term the secular tendency for profit rates to fall has reasserted itself. We argue that capitalism today still needs to devalue constant capital massively to restore profit rates and embark on a new round of accumulation, and the only way this can be achieved is by global war.
Since the 2007/8 crisis there has been a move by the bourgeoisie to transfer profits from productive industry to speculation, itself an indication of the unattractive rate of profit. Central banks have inflated the money supply through quantitative easing and handouts to commercial banks. The only way this could alleviate the situation is for investment to be made in productive industry for exploitation of productive workers. This does not appear to be happening on a scale to make much difference and the money being retained in the banks. Inflation of the money supply and credit creation are at best short term palliative measures which work like Ponzi schemes leading to bubbles which burst. Where profits from the financial sector change from paper profits to real profits they represent deductions from the profits of the productive economy.
We accept that credit created by commercial banks is not money. At one point the text calls it credit money which was the term we intended to use throughout. We accept credit represents debt not value.
I've quoted here the response
I've quoted here the response a comrade wrote to alb above (it doesn't show up because it seems to have been marked as spam):
heraclitus
Fair enough. I can see that
Fair enough. I can see that the CWO position is not the same as ICC's. It was only that the unfortunate reference to the banking reformers of Positive Money and the apparent endorsement of its theory of money (since repudiated) gave the wrong impression. I also see that the CWO still adheres to its view that another "global war" is on the cards and is ultimately needed to save capitalism.
The explanation as to why another world war did not happen seems to be that the fall in the rate of profit was checked not by a devaluation/destruction of constant capital but by a rise in the rate of exploitation. I don't know why this would be so "unexpected", as a rise in the rate of surplus value was specifically mentioned by Marx as another countervailing tendency to the tendency of the rate of profit to fall. Perhaps the operation of capitalism in the 20th century was basically not all that different from in the 19th.
Personally I think the doctrine that there will be/needs to be another global war is wrong. Conflicts of economic interest over sources of raw materials and trade routes, sabre-rattling, arms races, and proxy wars in selected places yes -- that's just capitalism as normal -- but another global war, I don't think so.
A drive to war from the
A drive to war from the competition factors alb recognises as inherent to capitalism have previously lead us into two recogniseable 'world wars' and it was the form of those wars which we tend to envisage defining any new one in the future but 'forms', technology and circumstances change so we should be cautious when looking for the signs of a new one brewing. Capitalist states and their blocks do not go to war in a conscious purpose to devalue capital but that is one result. In today's global capitalism are their any truly 'local' wars, can an accumulation of regional and 'proxy' wars at some point bring the same results - I don't know. It is surely as foolish to assume or predict that another 'world war' is impossible as to assume or predict that it is inevitable.
I agree. I never said that
I agree. I never said that another world war like those of the last century was impossible, merely that it was not inevitable (unless capitalism was ended) and expressed my personal view that it was unlikely.
That reminds me. You never replied to my point about what you thought the relationship was between the "global debt burden" and the "falling rate of profit"; indeed about what was this debt and on who it was a burden.
alb, I think I was just
alb, I think I was just referring to the growth of state and corporate debt (more particularly signalled with the 2008 crash) that is unsustainable in terms of the productive economy subject to both the impact of increased global competition and the longer term tendency towards the falling rate of profit. I think the CWO have got that broadly correct but note the discussion of this is still progressing with Noa on their site and elaborated in other material from the ICT/CWO. IP (Sander) have a slightly different take on it I think but we both got confused about that in a previous libcom discussion!
I'm no better clued up than that I'm afraid so you would have to pursue the argument further with them. Please do as any further clarification for the rest of us is always welcome.