Internationalist Perspective 'As We See it'

thanks mike.

Mike

You beat me to the punch! I was about to post the link when I discovered you already had.

The document in question, "The World as We See it: Reference Points" represents long months of discussion, arguments, rewrites and edits, and we hope people will respond (positive or negative) to it here or by contacting us at [email protected]

Cheers

Fischer

Can i endorse this paragraph as a definition of what has been called the 'Thin Red Line', a project with a soft spot in my heart and occasionally espoused by myself on these forums

Just as the proletariat of today is more fragmented and diverse than it has ever been, so too are the prorevolutionary organizations. They come from various theoretical backgrounds: Marxism, anarchism, the theory of communization, etc. IP recognizes this diversity and works to network between groups. No individual or group possesses the whole truth. Political organization allows the confrontation of ideas, networking, debates and discussion from which may arise new clarification on capitalism and its possible overthrow. Ephemeral organizations and long-term structured organizations, occasional meetings and regular debates, all these expressions can be valuable for the development of a clearer awareness of the challenges today. We do not seek their merging into one large organization, but we encourage communication and collaboration between them, and re-groupment when it makes sense.

Again the article expresses my own wish for the future of my own Party

Theory must be where the struggle is. Therefore, the political organization must aim to participate actively in the struggles of the collective worker. ‘Participate’ rather than ‘intervene’: instead of making one-sided interventions, we seek to participate in the conversation of resistance, in which theory inspires and develops action, and is, in its turn, inspired and developed by action.

[my emphasis]

We could also benefit by some more input into the far fewer attempts at running 'non-denominational' discussion groups, conferences and seminars in addition to agitational workplace and 'community' networks.

I know you were a little critical of the lack of involvement of SPGBers in the MDF and i acknowledge that the SPGB may well be called to account.

But then i can also show that the SPGB does respond in a comradely fashion with such as the Oxford Communist Corresponding Society. Or currently with the Wakefield Socialist History Group. Others that have been given comradely reviews is Critisticuffs.

When we have our own problems of lack of members turning up to our own branch meetings with more and more inquorate then the lack of visitors to non-SPGB groups is understandable.

I know the Edinburgh branch has persisted with a discussion group for many years that is open and welcomes the participation of others. It meets at ACE so it couldn't be any more amenable to anarchists and other activists. There exists a Brighton discussion group with regular non-members in attendance and two new discussion groups, Folkestone and Liverpool, trying to get off the ground. I'm sure they would welcome political exchanges with others who hold similar but not identical points of view.

I guess one snag is these are seen as SPGB-sponsored affairs rather than what they could and perhaps should be ...umbrellas for the Thin Red Line along the lines of perhaps the Workers Forum of the 40s and present MDF

In regards to involvement in the wider context of workers struggles then i have to confess for the SPGB it is wishful thinking and only an aspiration for the future. Occupy rose and fell too quickly for the SPGB's sometimes glacial process of decision-making to permit it to make any noticeable input but most Party-members were keen to participate and offered critical support...But you personally knowing some of our elderly members wouldn't have expected them to exchange a soft bed and feather-downy for a sleeping-bag under canvas.

I would add that our blog, Socialism Or Your Money Back has been very vocal in posting support for migrants and highlighting the environmental issues.

This year may be interesting in regard to trade union protests to the Tory new laws. I hope we will be more visible at these offering an analysis that will be one you yourself cannot endorse but also one that will nevertheless be still critical of the unions encouraging and urging them to go further than they do. I would like to see joint meetings or forums to discuss our differing perspectives and ideally to put those in front of union members and union activists rather than talking to the already converted. After all at the end of the day, it will be workers who decide which of us presents the better arguments to carry forward into practice.

Thanks Mike. I still need to finish sections 6-8, but I broadly agree with sections 1,4,5,9 & 10. Apart from the problematic historicist proposition, you mentioned, my main objection to sections 2 & 3 are that it remains too much a simple rehash of orthodox marxist positions, in potentially fatal places. This paragraph (and a bit) captures most of the issues:

Real domination caused a vertiginous development of capitalist society, but it also developed its inherent contradictions. Capital, wealth, can take no other form than that of the commodity, exchangeable for other commodities. That means it must have a use-value (for somebody with money to buy it) and an exchange value, the content of which is abstract labor time, value. It cannot exist without either: if it has no use-value, it can’t be sold, and if its production requires no labor time, none can be stolen, so there can be no surplus value or profit. Use value and value, the two sides of the commodity, must therefore develop hand in hand. But under real domination, they become increasingly unhinged. Use-values grow exponentially through technification, a process in which living labor is subtracted, replaced by technology. But the growth of value requires that living labor-power is added. Capitalist society runs more and more on past labor (hardware and software). The pool of living labor, from which surplus value can be extracted, tendentially shrinks, despite the increasingly efficient fishing techniques. Tendentially, this leads to a relative decline of the production of new value while the exponential growth of use-values (of the capacity to produce them) clashes with the narrow basis on which the conditions of consumption in capitalism rest, and impedes the realization of value.
.
Real domination brought capitalism’s crisis tendency to the fore. It is a crisis of profit, a crisis of overproduction, a financial crisis, but its roots are in the commodity in the breakdown of its unity.[...]Still, capitalism cannot get rid of its crisis-tendencies. It can only overcome them through a massive devalorization of existing capital. It needs violent phases of destruction, either through depression or war, to restore conditions for new growth.

The very last point, which is one being pushed by the likes of Alan Freeman and Andrew Kliman for the last years ("the decline of the rate of profit can only be solved by socialism or world war 3") is really a consequence of the first.

The first point - "Capital, wealth, can take no other form than that of the commodity, exchangeable for other commodities" - is fatally wrong. Capital can, does and must, take the form of money capital during it's valorization-in-process cycle. In fact the money phase is the only phase that cannot be dispensed with in any of the variant cycles (industrial: M-C...P...C'-M'; merchant: M-C...M': financial: M...M'). If capital can take the monetary form, then it is no longer clear that wars actually result in the destruction of capital that Freeman/Kliman take as a given. Certain capitalists certainly make a hell of a lot of money out of war. Just because armaments and war materiel are destroyed in their consumption does not make them materially different from any other commodity. The fact that infrastructure and people are destroyed in the process does not demonstrate per se, that war inevitably results in the destruction of capital overall - unless you take the position (opposed to Marx) that capital cannot exist in the monetary form. And as for depressions - well pretty much everybody accepts that depression-deflation cycles increase the buying/command power of saved investment capital at the expense of debtors - if anything existing capital is increased rather than destroyed in that case.

The section "Capitalist society runs more and more on past labor (hardware and software). The pool of living labor, from which surplus value can be extracted, tendentially shrinks" section is just basically the same old OCC/FROP orthodoxy that I reject entirely - see thread here entitled "The OCC", for my reasoning.

The third thing I take issue with is the idea that the roots of capitalist crisis are in the breakdown of the commodity's unity and that this is a new development of the era of "real domination". (Again, in passing, the idea of global, "geological time", eras is historicist). First of all, in the para the assumed breakdown of that unity and it's link to crisis hedges its bets by first leaning on the OCC/FROP and then flip-flops onto underconsumptionism (aka "crisis of realization") due to expansion in productive capacity clashing with "the narrow basis on which the conditions of consumption [...] rest", i.e. the buying power of the w/c. Frankly this is a sop to Piketty and socialdemocrats pointing to the falling real income share. If the "narrow basis" is the problem, why won't "widening" it again, by using political power to rise the real income share of workers again, be the solution? I think both arguments are wrong, but to be unable to choose between the orthodox FROP zusammenbruch theory and the socialdemocratic underconsumption theory, is a greater wrong than the sum of the parts.

But... my main issue with the splitting asunder of the commodity's unity is that this is not a new thing, in the sense that the passage from the relative form of value to the general form of value - i.e. the emergence of the value-form itself - is predicated precisely on the rupture between the exchange value of the general equivalent - money - and its use value. And since the dual nature of the commodity is predicated on the existence of the general form, to allow for the transformation of concrete labours into abstract labour - then the rupture between use value and exchange value is always-already part of the value-form from the very outset. And if you consider it, the special characteristic of capital - its limitless self-accumulation - would be impossible if the money form was still tied to a concrete use-value basis (think how many workers would have to be engaged in the physical production of money's concrete use-value base, for e.g.).

OK, read through sections 6, 7, 8 in detail. Really like section 8 - I actually think it's the strongest section overall.

As an anarchist unsurprisingly I have no disagreements with the political conclusions of section 6 - the only minor quibble would be the definition of the state is a little bit structural-functionalist (and historicist), so slightly circular, but it's a minor quibble.

Section 7 I do have serious problems with, but the details are pretty involved (exogenous vs endogenous money, invalidity of "fictitious" as a category of capital, etc, etc) so I will hold off on a detailed breakdown of that section to a separate post.

In passing, as an unconnected issue, that I couldn't understand what the following was actually supposed to mean.

Money has grown at an increasingly faster pace than “the real economy”, that is, than the value of the commodities that are actually produced and sold. Therefore, it must devalue. But that only happens when production and consumption are stimulated despite the lack of profitability. The result is high inflation, endangering the value of money as such and thus of the entire hoard.

[i.e. I don't understand how the sentence in bold follows the sentences before it and joins them to the one after it]

So. leaving aside a detailed discussion of section 6, I wanted to come back to another issue I had with sections 2 & 3 (What is Capitalism & The Historic Trajectory of Capitalism). It's initially a problem with the question of the transition from pre-capitalism to capitalism, but links to other stuff.

In the most basic terms, capitalism is a result of a unique convergence between
1) an abundant source of “free” labor,
2) an accumulation of capital in its money form and
3) the appearance of a state apparatus capable of regulating a new productive/distributive regime.

"1" is the problem here, from a transition point of view. In short 1 is not a precursor/prerequisite to capitalism but a consequence of it. Materially, for a significant section of the dominated, producer class to eat and exist while not engaged in agriculture presupposes a revolution in agricultural productivity.

Even more than that - and here I am plugging the Marxist guitar into the amp of heterodoxy and turning the heresy dial up to 11 - this point of origin, in order to produce the radical decrease in agriculture of the ratio of living labour to land required, means that the specific capitalist relations of production not only appear first in agriculture rather than manufacturing (as the "Political Marxist" tendency of Brenner et al have pointed out), but appear in the form of real domination ab initio, rather than passing through a prior stage of "formal subsumption".

That is, we need to take a leaf from the NML book that rejects the "logical-historical" reading of the stages of the value form (i.e. no historical "golden age" of simple commodity production, where commodities exchanged at their values and use-value and exchange value cohabited in harmonious unity) and apply it to the formal and real subsumption categories. Once capitalist relations of production have been established in one area (in agriculture initially) they can then colonise other areas of production (mining, manufature) by the formal/real sequence outlined by Marx in Capital, in relation to manufacturing. However, at the point of origin, there is no pre-existing external power to impose formal domination. An imminent origin requires the historical inversion of the conventional logical order in that the strategy of relative accumulation - the "economising" of scarce labour inputs in agriculture - is the only one that can effect the necessary revolution in agricultural labour productivity on which all further development is dependent. Historically in pre-capitalist societies, such as the otherwise technologically far more advanced China, the temporary accumulation of surplus labour acted as a disincentive to investment in labour-saving technologies given availability of cheap labour as an alternative.

tl;dr it is not an abundant source of free labour that produces capitalism, but capitalism that produces an abundant source of free labour.

(This doesn't help the whole era of formal domination vs era of real domination epochal thing, naturally.)

Should also be noted that factor 2) "the accumulation of capital in its money form" is in direct contradiction to the axiom in section 3 that capital can only be accumulated in the form of commodities. That is an internal contradiction between sections 2 & 3 independent of any views of my own.

Ocelot says:

And as for depressions - well pretty much everybody accepts that depression-deflation cycles increase the buying/command power of saved investment capital at the expense of debtors - if anything existing capital is increased rather than destroyed in that case.

Any data to back that up-- that existing capital is increased, rather than destroyed-- in either its fixed, circulating, or money forms?

Spoiler alert: data for the US shows just the opposite for the period of the Great Depression.

Spikymike

Only just started to have a look at Brenner after a long delay so that might help me consider that aspect later.

I'd probably skip Brenner and go straight to Ellen Meiksins Wood - something short and readable, like The Origin of Capitalism, to get an overview of the general idea, and then get back to the whole detail of the original Brenner debate (he's a more boring writer, imo) if you then think that it warrants your further attention.

S. Artesian

Ocelot says:

And as for depressions - well pretty much everybody accepts that depression-deflation cycles increase the buying/command power of saved investment capital at the expense of debtors - if anything existing capital is increased rather than destroyed in that case.

Any data to back that up-- that existing capital is increased, rather than destroyed-- in either its fixed, circulating, or money forms?

Spoiler alert: data for the US shows just the opposite for the period of the Great Depression.

Cool - which data? (i.e. links please).

I'd be interested to see data showing that the buying power of saved investment capital decreased and the real indebtedness of debtors lessened rather than intensified during the Great Depression.

Asked you first. Provide some data to back up your assertion, that "existing capital is increased."

Arguing that "buying power" is increased when asset bases are reduced, when capital is contracting, or that debtors are more deeply indebted is precisely not a refutation that capital must devalue, demolish, liquidate the existing capital values embodied in the means of production. You are mis-taking the processes of concentration, centralization, which operate in both expansion and contraction, with accumulation itself. You are arguing the capital has expanded during the period of its relative and absolute contraction. Do you have some numbers to back that up?

Is "value expanding value" during a depression? Simple enough to find data to support, or refute, that claim.

I'm asking for the data that shows capital is increased during the Great Depression-- that any of the measures by which we measure capital expansion-- revenues, profits, profitability, fixed assets, output, investment, cash and cash-type assets on hand increase for capital as a whole, as a system.

US BEA and bea.gov has the tables on investment, asset growth, GDP, etc. back to 1929 and beyond that... so click away.

SpikeyMike-- don't skip Brenner--- his work, compiled in The Brenner Debate, and elsewhere is well worth the effort.

ocelot

Ellen Meiksins Wood - something short and readable, like The Origin of Capitalism,

recommended?

Shit. Just saw Ellen Meiksins Wood just died. Bollocks. One of my favourite Marxists.

petey

ocelot

Ellen Meiksins Wood - something short and readable, like The Origin of Capitalism,

recommended?

Definitely

Where did you see that confirmed (I know it's on the Wikipedia page)?

ocelot

Section 7 I do have serious problems with, but the details are pretty involved (exogenous vs endogenous money, invalidity of "fictitious" as a category of capital, etc, etc) so I will hold off on a detailed breakdown of that section to a separate post.

I agree. For instance, what are these passages from section 7 (p. 19) trying to say?

The "hoard" referred to in this paragraph is defined in the previous one as "accumulated wealth", presumably the totality of accumulated capital.

Capitalism has, especially in the last 60 years, increasingly sought refuge in money creation, either to stimulate production and consumption, or to stimulate the growth of the hoard, propping up its “value” despite a declining rate of value creation in the real economy. In other words, a massive creation of fictitious capital, not resulting from new value but created out of thin air, has been mixed into the pot. Money has grown at an increasingly faster pace than “the real economy”, that is, than the value of the commodities that are actually produced and sold. Therefore, it must devalue. But that only happens when production and consumption are stimulated despite the lack of profitability. The result is high inflation, endangering the value of money as such and thus of the entire hoard.

This appears to be saying no more than if you create more purchasing power (money as claims on wealth) than the economy requires the result will be a rise in the general price level ("inflation"). But is the excess of money really capital, even "fictitious" capital? Marx did use the term but not in a sense different from what it generally meant in the 1860s (or the 1890s when Engels edited his draft of Volume III of Capital for publication), i.e as the conversion of a regular stream of income into a notional capital sum which can itself be bought and sold, or "capitalisation", nowadays "securitisation". But this is separate from and not the same as creating more purchasing power in the form of money

And who is doing this creation of money "out of thin air"? Is it the government? The central bank? Commercial banks?

Is there really "a declining rate of value creation in the real economy"? If so, what's the evidence for it?

The first part of the following paragraph appears to be a description of Quantitative Easing (and why it doesn/t/hasn't caused inflation). But is it this that is really keeping capitalism going? And has the money created by QE really gone towards "the fortunes of the super-rich (I thought it was held by financial institutions rather than rich individuals)?

A second approach has been more efficient: by forking over newly-created money directly to capital (meanwhile demanding austerity from the rest of society), the hoard has been successfully defended. Most of that new money never enters into circulation except within the hoard itself. It therefore causes no inflation (again, except in the hoard). While propping up the demand for financial assets, the money is sterilized in the coffers of central and private banks in the fortunes of the super-rich. There, it does no good (only a small fraction of it re-enters the productive sphere) but also no harm. Precisely by not re-entering the circulation of commodities, the hoard hides the fictitious nature of the money that is created without a corresponding creation of value. The program of the capitalist left would accomplish the opposite and reveal the fiction. And it is on this fiction that capitalism rests. The belief that money is value and that value is real wealth. If that belief falters, capitalism breaks down.

Is capitalism really kept going by "fictitious capital", whether created by ordinary inflation or by quantitative easing? Would it collapse without these? This would seem to be a financial, not to say, monetarist theory of the collapse of capitalism, similar to the so-called "financial meltdown" of capitalism expected by many currency cranks. It's not too clear what's the role of the "capitalist left" (Labour Party, Trotskyists and other reformists) in precipitating this. Would it be through the raging inflation the implementation of their programme would cause?

ocelot

Shit. Just saw Ellen Meiksins Wood just died. Bollocks. One of my favourite Marxists.

Damn! That's depressing. Her books were so readable yet theoretically penetrating. She'll be sorely missed.

I’m happy to see some serious discussion of our Reference Text on Libcom. I want to emphasize that this text is not a finished product but a work in progress. Therefore constructive critique, such as pointing out passages that are underdeveloped or lacking in clarity, or formulations that lack precision (Spike Mike mentioned one, and he has a point) are very welcome. I further want to emphasize that this is a summary of our positions. As such, it is concise and the argumentation is not as fully developed as in articles in IP that are about one of the specific points. I will refer to some of these articles in my reply, I hope you’ll read them. They may clear up some confusion. A lot has been written already, too much to answer in one post. So I’ll try to do this in several posts.
I welcome AJ’s support for IP’s approach to debate. We would like to be informed of the forums SPGB organizes, especially in Edinburgh. There would be a lot to discuss. There is a big difference between us on how we see the state and its institutions. AJ writes:

“This year may be interesting in regard to trade union protests to the Tory new laws. I hope we will be more visible at these offering an analysis that will be one you yourself cannot endorse but also one that will nevertheless be still critical of the unions encouraging and urging them to go further than they do.”

In other words, assume the task of cheerleaders, for the workers but also for the institutions that tie them to capitalism. From our text it should be clear that we reject this, but AJ does not comment on this glaring difference nor on the analysis on which it’s based. So that’s something to discuss.
On to Ocelot.

Ocelot writes:

The first point - "Capital, wealth, can take no other form than that of the commodity, exchangeable for other commodities" - is fatally wrong. Capital can, does and must, take the form of money capital during it's valorization-in-process cycle.

The last sentence is correct of course but the critique is based on the assumption that money is not a commodity. But it is. Indeed, it is impossible to understand money and its function if one does not understand that it is. That doesn’t mean it is the same as other commodities. Together with labor power but for different reasons, it is the one commodity that is special, different from all others. It represents all others and at the same time stands opposed to them. It is the universal commodity, that circulates and thereby embodies the value of all others, and at the same time it is a particular commodity, with its own demand, competing with other commodities and which can exceed the demand for all other commodities.

It is the alpha and omega of the capitalist accumulation process. M must become M’.

But money does not create value. The only commodity that does, is labor power. Other commodities transfer value but only the consumption of labor power can make it grow, and only money (and a few others) can hold it. All other commodities are perishable money, Marx wrote, while money is the imperishable commodity. But, as he implied, it only seems imperishable. Not only because its value can only increase as much as the creation of value by labor power (and its realization) increases. Also because, as a commodity, money must possess both constitutive elements of the commodity: it must ‘embody’ value as well as have a use-value. Its value, assuming we agree on the framework of Marx’s value-theory, comes from the value of the commodities transferred into it and grows accordingly. Its growth depends on the growth of surplus value extraction. Its use-value is its capacity to circulate value and to hoard it, to maintain it as value in a latent, not immediately valorizing state. But the growth of that hoard is limited by its capacity to valorize over a longer term, and thus by its use-value in that regard.
In other words: the commodity money can be overproduced, just like any other.

Ocelot seems to think that value is stable, regardless what form it takes, whether it be money or armements or anything else. But value isn’t permanent, it must constantly transform. M must become C. C must become C’. C’ must become M’. M’ must become C”. And so on. At every point, the transformation is an obligation. If it doesn’t succeed, devalorization is the result. M offers the illusion of escaping from that obligation, of being capable to maintain existing value as value, regardless what happens in the real economy. That’s why problems in the transformation M – C (lack of profitable investment opportunity) leads to a ballooning growth of M. That’s why we see the “safe haven effect”, the flight of money capital to where M seems the safest, leading to a small recovery in the US in the past years, while most of the rest of the world kept sinking deeper.

Because value must constantly transform, the form it takes is very important, contrary to what Ocelot seems to think, because it is the specific form, and thus its use-value, which makes the transformation possible. As Ocelot writes, “Certain capitalists certainly make a hell of a lot of money out of war.” But as Marx wrote “short of a miracle, only those things can be transformed into capital which are utilisable in the labour process (i.e. the means of production), and in addition such articles which are suitable for the maintenance of the worker (i.e. the means of subsistence)”. In other words, military production, and all other commodities that are unproductively consumed, are a net loss for capital as a whole. The loss is mitigated by the realisation of the surplus value created in their production but their very use-value implies that they cannot be constitutive elements of new capital, of new value. They are an endpoint rather than a moment in the cycle. They are a burden on the profit-rate of capital as a whole, as even bourgeois economist recognize. Similarly, the use-value of the commodity money has to be understood in this framework, the constant need for transformation of value in order to continue its accumulation. The use value of money is to bridge C- C’-C” (in order to achieve M-M’-M”). It does so by stepping constantly into the place of other commodities but also by building up a hoard that remains connected to M-C over a longer period, through the credit system, to value creation. Any creation of money that exceeds this use-value, is overproduced and must devalorize. This is what Ocelot does not see when he makes the incredible claim that capital is actually doing well in times of depression and war- no devalorization to be seen on his planet.

That leads us to Ocelot’s critique of IP on crisis-theory, to which I will reply in my next post.

Artesian wrote:

arguing that "buying power" is increased when asset bases are reduced, when capital is contracting, or that debtors are more deeply indebted is precisely not a refutation that capital must devalue, demolish, liquidate the existing capital values embodied in the means of production.

Yes, the increased buying power is because the price of assets are greatly reduced. Firms go bust and sell off what they have at fire-sell prices. The remaining firms who have survived benefit from this- they gain market share but also can buy up what's left for a song. This is what sets the stage for the coming expansion within the contraction itself.

Ocelot wrote:

...in order to produce the radical decrease in agriculture of the ratio of living labour to land required, means that the specific capitalist relations of production not only appear first in agriculture rather than manufacturing (as the "Political Marxist" tendency of Brenner et al have pointed out), but appear in the form of real domination ab initio, rather than passing through a prior stage of "formal subsumption".

This may be true for England, but many countries have transitioned to capitalism with agriculture remaining very backward. A very interesting example is Japan, but its far from the only one; This is why its hard to take Political Marxism seriously- although it's a neat little theory, its hopelessly anglo-centric and therefore ahistorical when applied to capitalism as a world system.

kingzog

This may be true for England, but many countries have transitioned to capitalism with agriculture remaining very backward. A very interesting example is Japan, but its far from the only one; This is why its hard to take Political Marxism seriously- although it's a neat little theory, its hopelessly anglo-centric and therefore ahistorical when applied to capitalism as a world system.

Political Marxism's response to this is that capitalism elsewhere developed as a (competitive) response to British economic (as well as military and colonial) expansion, often with the direct involvement of the state in industrialization because there was no time for a "spontaneous" development. But it still holds that the "prime mover" was agricultural capitalism in the British countryside.

S. Artesian

Asked you first. Provide some data to back up your assertion, that "existing capital is increased."

Arguing that "buying power" is increased when asset bases are reduced, when capital is contracting, or that debtors are more deeply indebted is precisely not a refutation that capital must devalue, demolish, liquidate the existing capital values embodied in the means of production. You are mis-taking the processes of concentration, centralization, which operate in both expansion and contraction, with accumulation itself. You are arguing the capital has expanded during the period of its relative and absolute contraction. Do you have some numbers to back that up?

On reflection you are right to call me out on that. My position would require the possibility of a frictionless transfer of accumulated capital from all other forms into secure financial instruments, which is clearly impossible (even if the state was not so stupid to respond by actually reducing the available pool of treasuries, as the US initially did in the depression). There's no way the appreciation in real value of the nominal amount of capital that made it to safety, for lack of a better term, could counter-balance the losses in stocks, bonds, and devalued capital goods in ruined businesses and sectors.

I still think the proposition that the physical destruction of war necessary leads to destruction of capital overall, does rely on the assumption that only capital in the form of material capital goods is "real" to be self-evident. I'd need to see some actual figures before assuming that the Vietnam War resulted in a net destruction of US capital, for e.g.

But focussing more clearly on matters of mass of capital (as opposed to concentration, centralisation and command power of capital) now makes me see that I have a bigger problem understanding how the reduction in the mass of capital whether by military or economic destruction, reduces the technical or value composition of capital, once reconstruction begins in the post-crisis phase.

If re-investment of retained capital (however reduced) is reinvested at the same level of technology (or at least not a lower one) then the technical ratio of the mass of constant (fixed and circulating) production capital to labour power, will be the same as before. And without substantial technological change from pre-crisis times, then the value compostion, will be the same. So if the profit rate is linked to the overall OCC, and the OCC is a ratio, not a mass, I don't see how the reduction in overall capital mass leads to reduced OCC in new-build restoration production.

Clearly I'm missing something important in the argument

Sander

The last sentence is correct of course but the critique is based on the assumption that money is not a commodity. But it is.

Which is where we disagree. Because I say that the only way to assert this is to do such violence to definition of a commodity as to destroy it's usefulness as a category.

Sander

That doesn’t mean it is the same as other commodities. Together with labor power but for different reasons, it is the one commodity that is special, different from all others.

And there is a point at which those differences make it a different thing altogether. My mobile phone does not walk like a duck, quack like a duck or swim like a duck. But that's not because it is a special duck, different from all the others, it's because it's not a duck, it's a mobile phone.

Sander

It represents all others and at the same time stands opposed to them. It is the universal commodity, that circulates and thereby embodies the value of all others,

And in order to assume the role of universal representative of the value of all other commodities, making their incommensurable concrete use-values, commensurable in value terms, it has to become abstracted from its own original concrete and incommensurable use-value (gold, silver, rice koku, etc)

Sander

and at the same time it is a particular commodity, with its own demand, competing with other commodities and which can exceed the demand for all other commodities.

It is a unique thing alright, but it does not compete with other particular commodities as a particular commodity. It loses the form of a particular commodity once it becomes the general form of value.

Sander

Also because, as a commodity, money must possess both constitutive elements of the commodity: it must ‘embody’ value as well as have a use-value. Its value, assuming we agree on the framework of Marx’s value-theory, comes from the value of the commodities transferred into it and grows accordingly. Its growth depends on the growth of surplus value extraction. Its use-value is its capacity to circulate value and to hoard it, to maintain it as value in a latent, not immediately valorizing state.

The value of a commodity is the socially necessary labour time necessary to produce it (and each additional unit of it). Not the case for money. Strike one on the exchange value of a commodity.

The utility of money is certainly to capacity to circulate value and to hoard it. But utility and use-value are not the same thing. The use-value of a commodity is tied to the particular concrete qualities it has, it's physical extension, which are incommensurable to other different use-values. The utility of money is to make these incommensurable use-values commensurable in exchange. That is a utility, not a use-value. In German Marx mostly uses Gebrauchswert, but on occasion, Gebrauchsgestalt. The value form does not have a concrete Gestalt. Strike two.

Sander

In other words: the commodity money can be overproduced, just like any other.

When a commodity is overproduced the value crystallised in it by the socially necessary labour expended in its production is not realised. But the value of money is not determined by the abstract labour necessary to produce it. Zimbabwe style overproduction of money does not result in unrealised abstract labour, but the dilution of the value of money by oversupply. Again, the value of commodities is not determined by demand and supply the way that money is (ignoring the issue of variable monetary velocity for a moment).

Sander

Ocelot seems to think that value is stable, regardless what form it takes

Nope

Sander

The use value of money is to bridge C- C’-C” (in order to achieve M-M’-M”).

Again this is systemic utility rather than use-value.

Ocelot: And without substantial technological change from pre-crisis times, then the value compostion, will be the same. So if the profit rate is linked to the overall OCC, and the OCC is a ratio, not a mass, I don't see how the reduction in overall capital mass leads to reduced OCC in new-build restoration production.

Of course, that "substantial technology change" is exactly what prefigures the "crisis" and the upheaval, and the long-term structural changes in capitalism. Marx says almost exactly somewhere in his Economic Manuscripts 1857-1864 (maybe the Grundrisse?)

But it's not "right" because Marx said it's right. That the OCC changes, and changes disproportionately so that the inanimate portion grows faster than the surplus value it extracts and so produces a situation where the rate of profit tends to decline as capital accumulates is evident from the study of any number of industries-- semiconductor fabrication, flat panel glass display, petroleum, automobile production, maritime shipping (EEE container ships, anyone? or Dry bulk freighters)-- and erupts in bouts of overproduction (semiconductors, petroleum, container ships, dry bulk carriers, iron ore, steel, anyone?).

The point of capital is accumulating the means of production as values; the point of accumulating the means of production as values is to employ that expanded "fixed base" to reduce the necessary labor time and transform the fixed assets into an growing mass of commodities.

The law of the tendency of the rate of profit to decline as capital accumulates leads to overproduction. The response to general overproduction is quite clearly the destruction of commodities, the devaluation of assets, the liquidation of capital values by finance, or fire or flood.

Moreover, the response of the bourgeoisie tends, and always tends to become the attempt to drive the cost of labor-power below its value; that is to say to drive the wage below the value required for labor to reproduce itself.

Destroying the accumulated capital doesn't take place without destroying the variable capital-- marching off to war, and to wage-levels below "the normal" etc. etc.

Yes, but that doesn't really answer my question of how the reduction in the mass of accumulated capital leads to a lowering of the OCC in new (or resumed) firms in the reconstruction phase though.

I think the general thinking is probably a "common sense" assumption that if total accumulated capital is reduced more than working population, then when growth resumes the aggregate ratio of constant to variable capital must be also. But then, looking at the picture at the individual constituent level, it's hard to see that is possible without at least some firms individually being recomposed with a lower constant/variable ratio, and that kind of technological regression doesn't seem to happen (if anything it's the other way around, reconstruction takes place at a the highest level of productivity available, rather than the rates of older, aging fixed capital, pre-crisis - which actually makes the problem worse from a naive OCC perspective). I think there's a fallacy of composition in the "common sense" picture which doesn't stand up to detailed scrutiny.

But anyway, my personal obsession with the problems of the OCC is a bit of a derail here. I really need to assemble my criticisms of this concept into a single text for circulation for proper feedback/criticism.

Before I get on the detailed response to section 7 of the IP doc, I just wanted to pick up on one other thing in Sander's response above.

As Ocelot writes, “Certain capitalists certainly make a hell of a lot of money out of war.” But as Marx wrote “short of a miracle, only those things can be transformed into capital which are utilisable in the labour process (i.e. the means of production), and in addition such articles which are suitable for the maintenance of the worker (i.e. the means of subsistence)”. In other words, military production, and all other commodities that are unproductively consumed, are a net loss for capital as a whole. The loss is mitigated by the realisation of the surplus value created in their production but their very use-value implies that they cannot be constitutive elements of new capital, of new value. They are an endpoint rather than a moment in the cycle. They are a burden on the profit-rate of capital as a whole, as even bourgeois economist recognize.

The problem here is "all other commodities that are unproductively consumed". My initial challenge was

"Just because armaments and war materiel are destroyed in their consumption does not make them materially different from any other commodity."

"materially" is probably unfortunate given that I really mean in relation to social production. If I go into a US supermarket I can buy an iPad or an M16. What is it about the M16 that makes it any less of an ordinary consumer product than an iPad? Why does it represent a break in the cycle of capital's valorisation in a way that the iPad doesn't? All consumer commodities - whether consumed by individuals or departments of state - have the characteristic of not re-entering the production cycle as fixed capital. So what? All end-user commodities have to go through the process of delivering it's use in consumption and then end up as waste (so it must be replaced) otherwise there would be no cycle at all.

I just don't see how it is possible to draw a line between consumer commodities, whether mobile phones or guns, that delimits "means of subsistence" from "unproductively consumed commodities" that is actually a materialist rather than moral definition (however covert).

Yes, but that doesn't really answer my question of how the reduction in the mass of accumulated capital leads to a lowering of the OCC in new (or resumed) firms in the reconstruction phase though.

Well, let's look at recent experience: the US auto makers, post 2007. 27 production plants were closed, employment levels cut by 1/3; wage tiers introduced so that those hired after 2008 made 50% less than those hired previous to that year; and work rules changed so that overtime no longer accrued after 8 hours in a day, but after 40 hours in a week.

Profitability restored.

What's the difference between that-- and torching 27 factories; sending 1/3 of your work force off to die; freezing wages, etc? Degree? Quantity? Duration?

If I go into a US supermarket I can buy an iPad or an M16. What is it about the M16 that makes it any less of an ordinary consumer product than an iPad?

Yeah, I find the notion of waste production, or unproductive consumption a bit problematic. In fairness though, some would claim that if you, a worker, buys an M-16 for recreational use, then its consumption, and its production, are both "productive," as it becomes part of the means for reproducing you, the worker, as the worker. If the military buys the M-16s-- then it's not contributing to either the reproduction of the workers or of capital in that it is not "value engendering value."

I think the issue is really complicated. Clearly military spending advances capital on its course of reproduction. Major advances in US factory production were first developed in armaments production in the arsenal workshops. That the government has taken over this role from private entities ("public" military as opposed to private military) doesn't seem to change the essential relationship. Tax money used for military spending does not represent a deduction, really, from capital, but IMO, a "clawback" from wages.

kingzog

Ocelot wrote:

...in order to produce the radical decrease in agriculture of the ratio of living labour to land required, means that the specific capitalist relations of production not only appear first in agriculture rather than manufacturing (as the "Political Marxist" tendency of Brenner et al have pointed out), but appear in the form of real domination ab initio, rather than passing through a prior stage of "formal subsumption".

This may be true for England, but many countries have transitioned to capitalism with agriculture remaining very backward. A very interesting example is Japan, but its far from the only one; This is why its hard to take Political Marxism seriously- although it's a neat little theory, its hopelessly anglo-centric and therefore ahistorical when applied to capitalism as a world system.

Agree with what Jura already wrote on this. I was referencing PM in the narrow question of agriculture rather than manufacturing or commerce being the necessary point of origin for capitalist social relations. As for the other aspects of the PM theory of the transition, I partly agree with it, but I also think it is only part of the story - and that the other part was precisely England's relation to external colonies in Ireland and North America. In other words, acquring large colonial possessions in the Americas is not sufficient to explain the transition (otherwise Portugal and Spain would have been the first European powers to make the transition), but neither do the unique pattern of property and social relations that became established in English agriculture, post-Black Death explain the transition there, without the wider international context of colonialism.

This recent interview in Viewpoint with the authors of a new book pushing back against the supposed Eurocentrism of PM and Wallerstein's World Systems approach, looks interesting in this context - but I think the most likely explanation lies in combining the insights of PM on the contigent and rare local pre-transition relations of production, and the "anti-Eurocentric" emphasis on the need for an international context.

(Sorry for derail)

"materially" is probably unfortunate given that I really mean in relation to social production. If I go into a US supermarket I can buy an iPad or an M16. What is it about the M16 that makes it any less of an ordinary consumer product than an iPad? Why does it represent a break in the cycle of capital's valorisation in a way that the iPad doesn't? All consumer commodities - whether consumed by individuals or departments of state - have the characteristic of not re-entering the production cycle as fixed capital. So what? All end-user commodities have to go through the process of delivering it's use in consumption and then end up as waste (so it must be replaced) otherwise there would be no cycle at all.

I just don't see how it is possible to draw a line between consumer commodities, whether mobile phones or guns, that delimits "means of subsistence" from "unproductively consumed commodities" that is actually a materialist rather than moral definition (however covert).

Yeah, agree. That's a weird argument to make. Indeed, the argument should really be reversed. Use-values that are completely "destroyed" (used up) in consumption can actually accelerate the valorization process. There is a reason for the existence of planned obsolesence as it accelerates exchanges; the consumer has to re-buy the commodity much sooner than normal. Indeed, theoretically speaking, it does not matter if the use-value in the end is actually consumed. All that matters is that commodities are sold so that the surplus-value in them is realized. From a pure value point of view, the cycle of accumulation would continue uninterrupted.

S. Artesian

Yes, but that doesn't really answer my question of how the reduction in the mass of accumulated capital leads to a lowering of the OCC in new (or resumed) firms in the reconstruction phase though.

Well, let's look at recent experience: the US auto makers, post 2007. 27 production plants were closed, employment levels cut by 1/3; wage tiers introduced so that those hired after 2008 made 50% less than those hired previous to that year; and work rules changed so that overtime no longer accrued after 8 hours in a day, but after 40 hours in a week.

Profitability restored.

What's the difference between that-- and torching 27 factories; sending 1/3 of your work force off to die; freezing wages, etc? Degree? Quantity? Duration?

I don't disagree that war can restore profitability through analogous measures to how US auto makers did in your example. The conventional view of the success of the German Wirtschaftswunder after the flattening of its industrial heartlands during WW2 (i.e. reconstructing industry with the latest most efficient technology available) follows roughly along the same lines.

My problem is this doesn't fit with the conventional picture of the tendential rise in the OCC causing a tendential fall in the rate of profit, leading to a period of crisis, It's the second part of the story, that the devalorisation of capital allows for the restoration of the profit rate, that I have a problem with.

Let's take a look at the measures Big Auto took - slashing wages and closing plants (shedding workers and fixed capital). The first measure is strategy of absolute surplus value (in volume 1 terms*) and does not affect the ratio of labour to constant cap per unit product - so unchanged OCC. However, if we make the not unreasonable assumption that there was a bias towards closing more unproductive plants and keeping open the more up to date, more efficient ones, that would increase unit productivity in the remaining (reduced) operation - which would (value composition of constant cap inputs unchanged) actually increase the OCC of the sector.

So what? Well, if the restoration of the profit rate has nothing to do with lowering the OCC (and seemingly linked to actually increasing it, at least at the level of individual corpos or sectors), then the rise of OCC can't be the source of the crisis in the first place. Really, in that case, you're talking about a periodic crisis of overaccumulation - which is not the same thing.

Bear in mind, I'm responding to my (possibly erroneous) reading of this section of the IP position doc

Capitalist society runs more and more on past labor (hardware and software). The pool of living labor, from which surplus value can be extracted, tendentially shrinks, despite the increasingly efficient fishing techniques. Tendentially, this leads to a relative decline of the production of new value [...]Still, capitalism cannot get rid of its crisis-tendencies. It can only overcome them through a massive devalorization of existing capital. It needs violent phases of destruction, either through depression or war, to restore conditions for new growth.

[I suspect "fishing" is a typo]

Which I interpret to being roughly equivalent to the position of Kliman, Freeman, et al, that the rising OCC, as outlined in (Engels' remixed) Volume 3, is the source of secular fall in the profit rate that can only be resolved by either terrible destruction of world war 3 (or socialist revolution). (And they make the further point that the great depression was only ended by the war, so it's not depression or war, but either war or depression and then war)

The problem with restating the crisis theory as a recurrent crisis of overaccumulation, from the orthodox anti-Bernsteinian point of view, is that other than requiring painful periods of devalorisation, it doesn't provide any final limit to, or historical crisis of, the capitalist mode of production as a whole.

----
* this is arguable depending on your interpretation of the strict form of words used in volume 1 (i.e. formally just lengthening the working day, as opposed to wage cuts), but I tend to go with the general idea of relative surplus value being the specifically capitalist strategy that "revolutionises out and out the technical processes of labour, and the composition of society" via technological change - and the consequent increase in the technical composition of capital - i.e. less labour per unit produced.

So what? Well, if the restoration of the profit rate has nothing to do with lowering the OCC (and seemingly linked to actually increasing it, at least at the level of individual corpos or sectors), then the rise of OCC can't be the source of the crisis in the first place. Really, in that case, you're talking about a periodic crisis of overaccumulation - which is not the same thing.

Indeed, the steps taken in response to the tendency of the rate of profit to fall do not necessarily lower the organic composition of capital. What those steps do accomplish is boost the rate of extraction of surplus value, while devaluing and liquidating portions of accumulated capital (look back at the bankruptcy, liquidation, and consolidation of US railroads in the late 1970s through the 1990s). Route miles (trackage) was dramatically reduced; switching yards eliminated; employment shrunk, creating a reduced asset base which allowed for the restoration of profit (with thanks to the US govt's 3R, 4R, and Stagger's rail recovery legislation, and the growth of containerized traffic), and applications of more modern "command and control" technologies.

The OCC of railroad capital expanded far beyond what it was before, in value terms, and by the mid 1990s, the annual capital expenditures for a single Class 1 railroad were greater than those annual expenditures in the 1980s for all Class 1 railroads.

That said, your assertion that:

Well, if the restoration of the profit rate has nothing to do with lowering the OCC (and seemingly linked to actually increasing it, at least at the level of individual corpos or sectors), then the rise of OCC can't be the source of the crisis in the first place.

is not correct. It doesn't follow that if the restoration of the rate of profit does not require the lowering of the OCC, that the increase in the OCC can't be the source of the problem. Of course it can, in that the rate of profit can be restored by increasing the rate of extraction of surplus value to offset the decline in the rate of profit triggered by the increased OCC.

And yes, we are precisely talking about the cause for the "periodic crises of overaccumulation"-- as those periodic crises are both the product and producer of the tendency of the rate of profit to fall-- the change in the relation of the technical and living components of capitalist production. It's in volume 3 where Marx talks about the "overproduction of capital" and points out that the overproduction of capital is the overproduction of the means of production as capital, where the accumulated means can no longer achieve the intensified exploitation of labor power.

Does this mean there is no hard and fast historical limit to capitalist accumulation? I think it does. In fact to argue that the OCC or the TFROP does set some permanent, impermeable boundary, gets us to that ideological point where some argue that "the bourgeoisie can no longer develop the means of production." Of course, they, the bourgeoisie "can."

The famous countervailing tendencies are operative, and capital can restore itself unless and until it's overthrown. That it turns the world into an abattoir until that overthrow is accomplished is the price everybody else pays.

To cut things back to front a bit:
S. Artesian

Does this mean there is no hard and fast historical limit to capitalist accumulation? I think it does. In fact to argue that the OCC or the TFROP does set some permanent, impermeable boundary, gets us to that ideological point where some argue that "the bourgeoisie can no longer develop the means of production." Of course, they, the bourgeoisie "can."

The famous countervailing tendencies are operative, and capital can restore itself unless and until it's overthrown. That it turns the world into an abattoir until that overthrow is accomplished is the price everybody else pays.

Yes. And this is a similar understanding (if I'm not mistaken) to the ideas in section 5 in the IP doc - "But it is not Inevitable" - which I broadly agree with.

I guess my concern is that the statement in Section 2 that "[Capitalism] needs violent phases of destruction, either through depression or war, to restore conditions for new growth." comes across as a more apocalyptic statement that once the rising OCC has reduced the profit rate to crisis level, then ONLY war or depression can restore the profit rate. Which, to my ear, still has a resonance of entering the old "epoch of wars, revolutions, and the proletariat’s struggle for power". As opposed to the restructuring methods - painful enough as they were to the people who ended up out of a job - that you describe in the restoration of the profitability of the US railroad sector in the 70s - 90s.

I have other problems with the idea of investing in new technology to increase the rate of extraction of surplus value (namely the idea of a further increase in the OCC being the cure for the disease brought about by the rise of the OCC, the idea of increasing the rate of surplus extraction as "counter-tendency" when it's nearly always the primary motive of new technological investment, etc), but I'm hesitant to go too far down the rabbit-hole of getting back into the debate of that whole monster thread on the Michael Roberts blog over the Heinrich v Kliman debate on this (which the "counter-tendency" issue reminded me of). So maybe park that one for another day.

I really want to look more closely at the relation between value, money and "the hoard" proposed in section 7. The problem is finding a way that isn't about arguing about the validity of theories in the abstract, but looking what potential mistakes of political practice might result from problematic understandings of value, money and wealth. Which is a bit difficult given the low level of anti-capitalist movement activity, in general, and the impossibility of predicting future activity.

To prevent this, capitalism has, especially in the last 60 years, increasingly sought refuge in money creation, either to stimulate production and consumption, or to stimulate the growth of the hoard, propping up its “value” despite a declining rate of value creation in the real economy. In other words, a massive creation of fictitious capital, not resulting from new value but created out of thin air, has been mixed into the pot. Money has grown at an increasingly faster pace than “the real economy”, that is, than the value of the commodities that are actually produced and sold. Therefore, it must devalue.

This is problematic on multiple levels. (ignoring the previous problem discussed - i.e. that the declining rate of value creating in the "real" economy is inexorable) The idea that money "represents" real-world value, implies some kind of one-to-one relation, beyond which there is an overproduction of money (and note the distinction between "money" and "the hoard" has collapsed here) as "fictitious" capital. In other words money is a quantity variable, rather than a flow variable, whose effective supply is highly dependent on varying speed of circulation - i.e. the conventional neoclassical quantity theory of money is at work. Secondly the means and agency of money creation is obscured (by use of the passive voice) and the qualifier of that creation being "out of thin air" - a la "Zeitgeist" - leaves the impression that there's no difference between Mugabe's regime forging it's own currency by using the mint's printing press to physically print more Zim dollars, than Quantitative Easing or the "horizontal" creation of money through credit creation in private banks and financial institutions.

This is not just economic illiteracy in terms of basic understanding of money (a non-trivial matter in any understanding of capital) but it ignores, above all, the role of demand in the burgeoning creation of new triple-AAA rated (incorrectly) financial instruments prior to the 2008 crash. It was the role of real value, being accrued by Chinese banks, and above all the Chinese state (through it's "sterilization" operations) being fed back into the market for US "risk-free" dollar denominated financial instruments, that created the impetus for the financial innovations of synthetic CDOs and all the other panoply of now justly-infamous pieces of financial hoodoo. But this was not "thin air" - it was really accumulated value seeking storage instruments.

And this, ultimately, is another one of my problems of the Kliman-style retreat to the OCC as crisis-explainer. I don't believe that such a high level of abstraction, that abstracts away from the actual historical and contemporary growth and development of the world market, can on-balance better explain current crises rather than obscure them. In that sense, for all her analysis later turned out to be fatally flawed, at least Luxemburg attempted to situate the crises of her era in the development of the global capitalist system of her time. To me it seems a regression to retreat from that big picture to a horizon where we treat the development of the world system as if it could be modelled on an internal contradiction of the US economy, abstracted from the rest of the global market. But anyway...

IP: To prevent this, capitalism has, especially in the last 60 years, increasingly sought refuge in money creation, either to stimulate production and consumption, or to stimulate the growth of the hoard, propping up its “value” despite a declining rate of value creation in the real economy. In other words, a massive creation of fictitious capital, not resulting from new value but created out of thin air, has been mixed into the pot. Money has grown at an increasingly faster pace than “the real economy”, that is, than the value of the commodities that are actually produced and sold. Therefore, it must devalue.

Ocelot:This is problematic on multiple levels.

Indeed it is. "Fictitious capital" explanations are about as lame as you can get, particularly when intended as an explanation for the whole course of capitalist development in the last 60, or 70 years.

Everything is wrong in the fictitious capital argument:

1) it is not a substitute for real value creation, but accompanies periods of real value creation
2) it's "not created out of thin air"-- unless you think capitalism is always a Ponzi scheme all the time-- and even then somebody somewhere provided some "seed money"-- real capital
3)the origin of credit instruments is not as a substitute for production but in the different realization times of different capitals, "smoothing" these interruptions and differences so that production can be maintained while awaiting the completion of the different circulation times
4) the credit instruments distribute profit and are essential in the creation of the general rate of profit
5)the linear argument that states because money has grown faster than the value of commodities and therefore money must devalue is contradicted by the actual, including the recent history of capitalism.
6) the claim that "money must be devalued "is essentially a "monetarist" argument and ignores the importance of the velocity of the circulation of money; ignores the fact that money supplies continue to grow and exceed "total values" without producing a condition of permanent inflation; that what gets devalued in a contraction are the commodities, not money. Look for example at 2008/2009 (after the collapse of Lehman Bros.) when the Fed had to create open-ended currency swap lines to supply dollars to central banks around the world as private banks hoarded dollars refusing, for example to issue letters of credit to finance world trade.
7) add your own here_____.

Other than that, I have no problem with theories of fictitious capital.

Capital has survived and prospered, even with reduced rates of profit, because it has intensified the exploitation of labor power; transferred wealth up the social ladder; and physically enforced that exploitation and transfer.

S. Artesian

Everything is wrong in the fictitious capital argument:

Agree with what you write about this. Awaiting IP's defence of their essentially financial/monetarist theory of contemporary capitalism and its problems.

Thank you for your patience. I had a few other priorities on my plate. In the coming days I have free time and hope to adress most of the comments, including your claim that we defend a monetarist position. Other in IP have said they would comment as well.

Maybe to try and put the issue in a more concrete context - in the anti-austerity movement in Spain in the last years, a number of groups (M15, "Indignados", etc) raised the slogan "no es una crisis, es un estafa" - "it's not a crisis, it's a con".

The problem I see with the "fictitious capital" argument presented in section 7 is in one of the issues SA pointed out:

"2) it's "not created out of thin air"-- unless you think capitalism is always a Ponzi scheme all the time-- and even then somebody somewhere provided some "seed money"-- real capital"

If we're going to make an argument that the crisis is not a scam, but a crisis ...of capital's function (viewed normatively from our perspective) then the position that it's all "made-y, uppy", printing money "out of thin air" subjecting us all to the valorisation of "fictitious capital", is a bad place to start, because it does sound indistinguishable from saying the whole affair is actually a scam and capitalism is just a Ponzi scheme. Or, worse still, the "bad capitalism" of global financiers, the Goldman Sachs "vampire squid", etc is the Ponzi scheme, which must be replaced by "real" jobs for "real" people, employing "real" capital (now with new added environmental friendliness!) to meet "real" needs in a "real" democracy.

Sander

Thank you for your patience. I had a few other priorities on my plate. In the coming days I have free time and hope to adress most of the comments, including your claim that we defend a monetarist position. Other in IP have said they would comment as well.

Just to make this clear, I would hope IP does not waste any time refuting the issue of a "monetarist position." It's immaterial, and irrelevant.

What IP should do, IMO, is apply its meta-analysis, its "macro" evaluation of capitalism, to the "micro"-- to an industry, or sector, like maritime shipping, containerization, semiconductors, steel, aluminum, or my personal favorite petroleum (upstream, extraction) in one or some or all countries, and show how, and when as chronology and sequence are most important, all the elements of the "macro" are made manifest in the industry, and how the "motion" of capital in that industry recapitulates and confirms what IP claims in its theoretical analysis of capitalism as a whole.

Sorry for the delay and thank you all for your comments. In this post I want to reply to the criticisms that Ocelot and others made on the points in the Reference Text of IP on the roots of capitalism’s crisis.

As a reminder, IP’s view on this, in a tight nutshell, is that capitalism is in a systemic crisis because it has created a world in which it no longer fits. Because value becomes increasingly dysfunctional as vehicle for the creation of real wealth, and the creation of real wealth becomes increasingly dysfunctional as vehicle for value’s accumulation. This is the result of capitalism’s historic evolution. We use Marx’s concept of real domination to analyze this. It means the gradual penetration of the value-form into all the pores of society. Everything, tendentially, becomes a commodity.

The commodity has a dual nature: it is value and it is a use-value (it is useful for someone who has the money to buy it). It needs to be both but real domination sends the production of value, on the one hand, and of use-values, on the other, on increasingly diverging growing curves. The cycle of transformations value has to go through to continue its accumulation and to reproduce society becomes compromised at several points: C – C’ because of the resulting tendential fall of the rate of profit, C ‘- M’ because of the resulting saturation of productive demand but also M’ – C”, because, given the two other bottlenecks, M has the incentive to stay M, resulting in overaccumulation of money-capital and financial crisis.
The real world is much more complex than that but that is the ground layer to which the criticisms were directed.

Ocelot objected to the formulation, borrowed from Marx, that all social wealth in capitalism takes the form of commodities. Fatally wrong, according to him, because it also takes the form of money-capital. To my reply that money is a commodity too, he countered that it isn’t, because his mobile phone is not a duck (they’re probably both commodities though ;-)).

I get it, they’re very different, and that’s true, Marx too scoffed repeatedly at economists like Say who thought money is a commodity like any other. He emphasized it’s quite different from all other commodities since it’s the only one that is exchangeable into all others. “In order to secure the exchangeability of the commodity, exchangeability itself is set up in opposition to it as an independent commodity (it was a means, becomes an end)” (Grundrisse, p.201) Hence he called it “the general commodity” but he also pointed out the inner contradiction in money in that “…money is not only a general commodity, but it is also a particular, and […] as a particular, it comes under the laws of supply and demand…” (Gr. p.200) As a particular commodity, it can be withdrawn from circulation and overaccumulate.

Commodities, Marx stated, “are only commodities because they have a dual nature, because they are at the same time objects of utility and bearers of value.” (Cap1, p.138) It is only because it is also a commodity that money can be exchanged with other commodities . It must be a bearer of value and be useful for someone willing to exchange it with its equivalent

Ocelot objects:

“The value of a commodity is the socially necessary labour time necessary to produce it (and each additional unit of it). Not the case for money. Strike one on the exchange value of a commodity.”

That is indeed a clear difference between money and other commodities. The commodity exists doubly, as value (money) and as a specific product. When a commodity is sold, it splits - its exch value is free to go anywhere, to become any other commodity, while its use value is withdrawn from circulation and consumed, productively or unproductively. Not so money: as the general commodity, it is not withdrawn and consumed, but remains circulating, constantly stepping into place of other commodities. But it can do so only because it is also a bearer of value, the equivalent of the commodity for which it is exchanged. It embodies abstract labor, even though little or none was needed for its material production. Indeed, it may have no material form at all. Its material form is irrelevant “because it is not in this material that the commodity exchanged for money is supposed to be realized, but rather in the material of another commodity.” (Gr., p.211) The split transfers the abstract labor (value) of the commodity into money. That way, the totality of money comes to represent the totality of the value of all other commodities. “But if by this it is meant that money exchanges only real wealth which already exists, then this is false, since labour as well is exchanged for it and bought with it, i.e, productive activity itself, potential wealth.” (Gr., p.216)

That money is value is a real fact, as well as mere belief, like value itself. An objective abstraction. Its value does not come from its production costs and its utility is not based on its material qualities. “The utility of gold and silver rests on this, that they replace labour”, Marx approvingly quotes his contemporary economist Lauderdale . What it transfers is pure exchange value and in that sense, it is “the commodity in its pure form, indifferent to its natural particularity” (Gr., p.213) In order to circulate the value of commodities, it must be a commodity itself. Circulation is only possible because “ideally”, commodities are already transformed into money, and money ideally into other commodities. Because of the basic unity between them. The circulation process is a totality of exchanges of commodities, based on their value, not of exchanges of commodities with a non-commodity.“At no point does it [money] cease to be a commodity, as long as it remains within the role of medium of circulation”. (Gr., p.215)
What when it stays no longer within that role, when it’s wanted for itself, withdrawn from circulation, in other words, when it behaves as a particular commodity?
Ocelot writes:

“it [money] does not compete with other particular commodities as a particular commodity. It loses the form of a particular commodity once it becomes the general form of value.”

That is a quite astonishing claim in a world in which financial markets overshadow all others. According to Marx: “Just as exchange value, in the form of money, takes its place as the general commodity alongside all particular commodities, so does exchange value as money therefore at the same time take its place as a particular commodity (since it has a particular existence) alongside all other commodities.[…] money comes into contradiction with itself [..] by virtue of being itself a particular commodity (even if only a symbol) and of being subject, therefore, to particular conditions of exchange in its exchange with other commodities, conditions which contradict its general unconditional exchangeability.” (Gr., p.150)

What makes money a particular commodity with its own demand, competing with other commodities for the largest possible share of the total demand? What is its “particular existence”? What utility does it have when it turns its back to circulation? Not its material substance (“even if only a symbol”). It is wanted for itself because of its capacity to store value. Because even while not circulating value, it remains a potential means of payment, it keeps its “general unconditional exchangeability”.

Aside from the fact that hoarding is what capitalism is all about, the capacity of money to withdraw from circulation is absolutely essential to capitalism’s functioning. Capital has to be able to leave circulation without losing its value, to re-enter it when and where productive opportunities arise. It needs credit, financing over the long term. As Marx explains in Cap2, without hoard formation, the capitalist mode of production could not develop on a large scale. (p.418)

How does the hoard maintain the value that is realized in it, as value? Value isn’t stable. No matter how much exchange value was transferred into it, as a commodity, money remains bound by its utility, in casu its “general unconditional exchangeability” into equivalent commodities. Originally, this utility was based on money’s existence as a particular commodity like any other, with a value based on its production cost and a specific use-value (as precious metal). The quantity of abstract labor needed to produce a certain quantity of gold or silver, was what made money able to measure the value of other commodities, and what allowed it to be withdrawn from circulation without losing its value. That is clearly no longer the case. More than ever, money is being withdrawn from circulation, coveted for its own properties, but these have little or nothing to do with the qualities of its material substratum (if there is any) or the quantum of labor needed to produce it. It is hoarded because it appears “the imperishable commodity” (Gr., p 145). But no matter how much value has flown into it, it can only stay “imperishable” and maintain its general exchangeability in so far as its functional utility remains intact. That is its capacity to represent existing value (in circulation) and to represent future value (in the hoard). This utility is quantitatively defined so money can be overproduced. When that occurs in circulation inflation is the result, when in the hoard, it leads to financial bubbles.

The hoard’s value is maintained and grows because it remains connected, over the long run, to the valorization process. But if valorization runs into obstacles in the phase C – C’ (TFRP) and in the phase C’ – M’ (lack of productive demand), the entire commodity-world has to devaluate, including the accumulated hoard.

But that does not happen immediately . Capital flees production to seek shelter in the hoard. The rising demand for money for its value-storing capacity, pushes its price upward. On the one hand, this seems to confirm the wisdom of refraining from M-C and the possibility of accomplishing M –M’, money breeding more money, without the mediation of production. This process, in Marx’s view, is the perfect illustration of the fetishism that lies at the heart of the value system. (“Thus we get the fetish form of capital and the conception of fetish capital. In M –M’ we have the most vacuous form of capital, the perversion and objectification of production relations in their highest degree. It is the capacity of money, or of a commodity, to expand its own value independent of reproduction which is a mystification of capital in its most flagrant form.” (Cap3, p.392) On the other, it depresses the demand for other commodities further and thus discourages production, new value creation, even more.

As more capital flees productive investment, more and more exchange value flows into the hoard. But at the same time, the need for it as a use value, its connection to the valorization process, decreases. Financial capital overaccumulates. Its increasing mass becomes a crushing burden on the economy as a whole. It has to devalorize. It has become impossible “to maintain the value that is already realized as value”. (Marx)

It is the devalorization of the hoard that brings all the crisis tendencies together and makes it general because it affects all aspects of capitalist society’s reproduction. The crisis is even existential: with the collapse of the hoard, society loses its rudder and its purpose. Therefore, preventing this collapse becomes the state’s main objective. It’s the main purpose of the orgy of money creation unleashed after the crisis of 2008. Not the stimulation of production and employment, to which only a fraction of that new money went. What Quantitative Easing did was buying financial instruments to boost their prices. It is in fact an income redistribution program for the benefit of owners of capital. A greater share of the totality of money (of the value it represents) is sent into their pockets, at the expense of everyone else.

From the above it’s clear that I disagree with Ocelot when he writes:

“The utility of money is certainly to capacity to circulate value and to hoard it. But utility and use-value are not the same thing. The use-value of a commodity is tied to the particular concrete qualities it has, it's physical extension, which are incommensurable to other different use-values. The utility of money is to make these incommensurable use-values commensurable in exchange. That is a utility, not a use-value. In German Marx mostly uses Gebrauchswert, but on occasion, Gebrauchsgestalt. The value form does not have a concrete Gestalt. Strike two.”

Why does a commodity need to have a use-value? Because without it, it can’t be sold, its value can’t be realized and transferred into other commodities. That is the only reason. It does not have to be ‘objectively’ useful, it does not have to be material, it does not have to have sensuous qualities, a “physical extension”, as long as it is of use for someone willing to exchange it for its equivalent, regardless of what he wants to do with it, regardless whether his need is natural or functional, created by capitalism’s specific conditions. In today’s digitalized world, there are lots of commodities that are immaterial. When I spent my money on software, on a lottery ticket or on a financial instrument instead of on iron and linnen, in each case I buy a commodity (which doesn’t mean that in each case an exchange of equivalents takes place, of course).
That doesn’t mean that the substance of the use value has no consequences. That is what Khawaga seems to think, when he writes:

“ All that matters is that commodities are sold so that the surplus-value in them is realized. From a pure value point of view, the cycle of accumulation would continue uninterrupted.”

Would it, regardless of the use-values of the commodities, as long as they are sold? That would take care of C-M. But what about the next phases in the cycle, M- C and C – C’? They can only occur if the specific use values that together constitute the concrete means to carry value further in the cycle (means of production, including labor power) were already produced when C –M occurred. The less C – M is the realization of the value conjoint with these use values, the less value can re-enter the phase of production and create new value. The demand for these use-values saturates, because of the giant productivity unleashed by the same shift to past labor/social knowledge-based production (real domination) which causes the general rate of profit to fall (tendentially). To borrow an example of Marx, if the diverging growth curves of use values and value cause the value of 1 knife to be spread over 100 knives, this does not imply that the demand for knives grows accordingly. The demand is not determined by the value-content of the commodity but by its actual use-value for potential buyers. So there is an intrinsic finality of demand for each commodity due to its use value, and likewise for the combination of commodities that are the means of production. It doesn’t mean that the whole surplus product must be productively consumed, but that the growth of unproductive consumption is bound by the growth of productive consumption, which makes the former possible. Therefore the former’s growth cannot compensate for the exhaustion of demand for the latter. So when we quoted Marx as saying capitalism’s evolution brought it into conflict with "the narrow basis on which the conditions of consumption rest", we did not allude to “the buying power of the w/c”, as Ocelot assumes, but to the limits to the demand for commodities that are productively consumed.
Ocelot accuses us of “flip-flopping” between the TFRP and the market-contradiction, to “hedge our bets”, Alb thinks our view is monetarist, Artesian thinks we’re hallucinating when we speak of fictitious capital. I hope to have at least shown that money is a commodity and why that is important, and that there is a coherence in our analysis, that we look at the accumulation cycle as a whole, how the different choke points are generated by the obstacles created by capitalism’s trajectory to its base, the value-form, how these chole-points are interconnected.There’s no flipflopping, there’s no monetarism that makes monetary imbalance the root-cause of crisis. Marx wrote his only outline for a comprehensive crisis-theory in a section of “Grundrisse”, known as the “Fragment on Machines” in which neither the LTFRP nor the market contradiction is treated as an independent factor but both, and other crisis manifestations, are linked at a deeper level, in the value-form itself. We expand on that.

For the sake of briefness, this text has cut corners and has left several aspects of crisis-analysis un- or underdeveloped. For a more detailled analysis, read “A crisis of value”
http://internationalist-perspective.org/IP/ip-discussions/crisis_of_value.html
and http://internationalist-perspective.org/IP/ip-archive/ip_58-59_IPCL2E.html
“ A Debate on Crisis Theory” in http://internationalist-perspective.org/IP/ip-archive/IP_60.pdf
examines the debate over the tendential fall of the rate of profit between Heinrich and Kliman et al, as well as Heinrich’s critique of Marx “Fragment on machines”, mentioned above. In the same PDF there is an article, “ Why Wealth Redistribution Cannot Solve Capitalism's Crisis”, a subject that also was touched upon in this discussion.

So... Sander can you apply your analysis to the production of commodities like say, semiconductors, or container ships, or petroleum, and show us, using the actual data accruing to the production of these values, how the aspects of your theory are confirmed in the material world?

PS-- I didn't say you were hallucinating in your "analysis" of fictitious capital, I said you were wrong.

Sander, thanks for your considered and detailed reply. Maybe it's just me, but engaging debates on revolutionary theory seem to be less common on these forums than a few years back, so it's good to have something substantial to chew on.

That said, your response was fairly lengthy (it took me three visits to read it all), so I'm going to respond in parts to sections of it, rather than try and include everything in one monster post.

Firstly as our debate on value form might appear obscure or theological, I want to start with this:

It is the devalorization of the hoard that brings all the crisis tendencies together and makes it general because it affects all aspects of capitalist society’s reproduction. The crisis is even existential: with the collapse of the hoard, society loses its rudder and its purpose. Therefore, preventing this collapse becomes the state’s main objective. It’s the main purpose of the orgy of money creation unleashed after the crisis of 2008. Not the stimulation of production and employment, to which only a fraction of that new money went. What Quantitative Easing did was buying financial instruments to boost their prices. It is in fact an income redistribution program for the benefit of owners of capital. A greater share of the totality of money (of the value it represents) is sent into their pockets, at the expense of everyone else.

The bit I bolded above is imo at 180 degrees with the real dynamic. Quantitative Easing certainly drives up the prices of US Treasury bonds (using the US example), but this has the effect of lowering the return on Treasuries and T-bills. In other words, the intent of QE is to starve financial capital held in this "risk-free" form in an attempt to force them out into the bond and equity markets. In other words the purpose of QE, as regards the flow of investment capital, is to squeeze it out of "safe haven" unproductive assets and into bonds and equities - now we can argue whether that is to stimulate productive investment or to prop up equity values in the face of declining profit expectations, but that's another matter which doesn't change the fact that your statement above is the opposite of the real process. Also, to describe QE as an "orgy of money creation" is again repeating the "printing press" metaphor of right-wing neoliberal economists whose monetarism is unable to explain why the tripling of US base money supply achieved by QE in the two years after the 2008 crisis, failed to produce any runaway inflation or "overproduction" (in your language) effects. Which brings us back to the other motive behind QE, the spectre of a debt deflation spiral. But given that the real, as opposed to nominal, value of liquid capital hoared in "risk-free" unproductive stores of value like Treasuries, guaranteed deposits, etc, initially increases rather than decreases, the defence of that fraction of capital is not the state's primary concern. However, here we're at an impasse over the ambiguity of the IP doc concept of the "hoard". Whether that includes merely the liquid capital withdrawn from productive investment, or the totality of social capital, spread over financial capital assets, all existing means of production and "land" assets, etc. If the latter then your account of QE as safeguarding the hoard by boosting prices of haven assets doesn't make sense, if the former then the effect of QE on squeezing returns on haven assets to zero or, increasingly, negative interest rates, also goes against your account.

I'll return to the debate over value form and the nature of money in a future post. But I wanted to start by grounding the debate in examples where the seemingly abstract theoretical debates assume lead to serious differences in interpreting real-world developments. I note you assume by "monetarism" the charge of holding "monetary imbalance [to be] the root-cause of crisis". I can't speak for alb, but for myself I meant it more in the technically less correct, but relatively current sense of subscribing to the quantity theory of money (e.g. whereby "money represents the totality of value"). I note also, with interest, that you seem to quote the Grundrisse exclusively in your arguments on the commodity nature of money. And in fact go on to assert:

Marx wrote his only outline for a comprehensive crisis-theory in a section of “Grundrisse”, known as the “Fragment on Machines” in which neither the LTFRP nor the market contradiction is treated as an independent factor but both, and other crisis manifestations, are linked at a deeper level, in the value-form itself.

Which is interesting in that you seem to follow the autonomists in taking a "Grundrisse-primacy" position (certainly as far as value theory goes, if your appeals to scriptural authority are anything to go by) and valorise the fragment on machines. Yet whereas the post-autonomists use the fragment to justify their declaration that the law of value is dead (thus dispensing with value theory altogether) you seem to elevate it to the pinnacle of Marx's crisis theory.

I'm not sure I've seen that combination before, it may be unique, it certainly seems original. So I will read the linked text with interest. From my own point of view, I accept that Marx's views evolved through his life and work, and generally take his later writings to be superior to his earlier ones in the matter of value theory, as well as everything else. I also don't accept the post-autonomist use of the fragment on machines to declare the law of value defunct, and personally give those paragraphs the same status as the infamous ones in the 1857 Preface - i.e. at best unrigourous prose with little analytic value, at worst just plain wrong.

Finally, I should say that your response to Khawaga's comment seemed to me profoundly wrong. But I'll give him a chance to respond on his own account first.

(to be continued...)

Perhaps Sander can supply some clarification. This appears in the recent IP position paper:

Thus, his early deterministic and stage-ist theories led him to congratulate Lincoln on his re-election even while the first industrialized war was still in the course of murdering over half a million proletarians

Is IP suggesting the the Confederate troops were proletarians?

Even on the Union side, with so little of the economy, and so little of the population urbanized, and involved in industrial production, it's a stretch to call the majority of those troops "proletarians."

Friend of mine claims that IP considers the US Civil War an intra-capitalist dispute where the revolutionary stance would have been that of defeatism, working for defeat on both sides.

Is that an accurate rendering of the IP position?

ocelot

However, here we're at an impasse over the ambiguity of the IP doc concept of the "hoard". Whether that includes merely the liquid capital withdrawn from productive investment, or the totality of social capital, spread over financial capital assets, all existing means of production and "land" assets, etc.

Yes I too was wondering what the "hoard" is (strange choice of word anyway), especially in the light of this:
Sander

The crisis is even existential: with the collapse of the hoard, society loses its rudder and its purpose. Therefore, preventing this collapse becomes the state’s main objective.

If it just includes "liquid capital withdrawn from productive investment" then Ocelot is right to say that protecting the position of this section of the capitalist class is not the the state's main objective. And if it means "the totality of social capital" the "value" of this is not something the state has the power to maintain. In any event, it still seems to be a theory that capitalism is being prevented from collapse by the financial/monetary intervention of the state.

Artesian wrote:

Is IP suggesting the the Confederate troops were proletarians?
Even on the Union side, with so little of the economy, and so little of the population urbanized, and involved in industrial production, it's a stretch to call the majority of those troops "proletarians."
Friend of mine claims that IP considers the US Civil War an intra-capitalist dispute where the revolutionary stance would have been that of defeatism, working for defeat on both sides.
Is that an accurate rendering of the IP position?

Marx expected the victory of the North to speed up the development of capitalism, and therefore also of the working class, and thus be beneficial to the latter. We don’t disagree with that. The question is whether that was worth the price of more than 600 000 lives and all the other misery the war caused. “Half a million proletarians” may be an exageration, as there were many small farmers etc. among them, but that hardly changes the point. The war was horror and the fate of the downtrodden didn’t improve much after it. Marx was still too much captivated by his schematic, deterministic view of history to realize this.

More on other comments soon.

The war was horror and the fate of the downtrodden didn’t improve much after it.

In order to avoid derailing this thread, I would suggest, if Sander agrees, that a new thread around this issue should be initiated.

My first comment would be : Sander didn't answer the questions. I didn't ask why Marx held his view; or even if Marx held a view. I asked if IP considered the Confederate troops proletarians. I asked if IP holds to "turn the guns around. Defeat of the North by the South is a 'lesser evil' than pursuing the war on behalf of the North."

The question for Marxists is precisely not what Sander claims it was: "The question is whether that was worth the price of more than 600 000 lives and all the other misery the war caused."

Baloney. The issue is what determined the war; what made it an historical necessity (if it was); and therefore what compelled the parties to act as they did. History does not assign a price to lives. That's a bourgeois affectation. History is not a cost-benefit scheme or an accounting exercise.

The war didn't improve the "fate" of the downtrodden "much"? Once again baloney. Fate's got nothing to do with it. The war abolished slavery. Was this revolution completed? No. But without the war, there would have been no period of Congressional (Radical) Reconstruction, 1868-1872, which in fact did greatly improve the material lives, if not the fate, of the downtrodden.

That the bourgeoisie turned away from Radical Reconstruction and agreed to the restoration of Redemptionist governments in the South does not mean the war or Reconstruction was a waste-- unless of course you think that the migration of blacks to the cities after the turn of the century, the civil rights movement, the militant struggles of black industrial workers would have occurred without the Civil War, without the 13th, 14th, 15th amendments.

As for Sander's rationalization of IP's "exaggeration" of the death of 500,000 proletarians: Since when do Marxists, presenting an analysis of capitalism engage in "exaggeration"? Exaggeration? What's next, claiming "artistic license" in mis-characterizing class struggle? IP does not engage in exaggeration-- but in direct distortion to support a position that has no real basis in fact. That's called ideology.

See why this should be split-off?

By coincidence this article on the Reconstruction and its importance for today was published on the Common Dreams website

http://www.commondreams.org/views/2016/01/30/fables-reconstruction-why-clintons-comments-about-southern-history-matter

Artesian,
I’m appalled that you think the dead of 600 000 people (regardless whether they were proletarians or not) and all the other misery the war inflicted should not be a factor in judging whether to support such wars or not. It reminded me of Che Guevara writing in his diary that the millions of deaths in an atomic war would be well worth it to advance the cause of communism. I’m not saying you would make the same judgement but you argue in much the same vein as he did when you write

“History does not assign a price to lives. That's a bourgeois affectation. History is not a cost-benefit scheme or an accounting exercise.”

Right. History has no feelings, it does not suffer, it has no sense, it has no purpose. But we humans do.

Sander

Artesian,
I’m appalled that you think the dead of 600 000 people (regardless whether they were proletarians or not) and all the other misery the war inflicted should not be a factor in judging whether to support such wars or not. It reminded me of Che Guevara writing in his diary that the millions of deaths in an atomic war would be well worth it to advance the cause of communism. I’m not saying you would make the same judgement but you argue in much the same vein as he did when you write

“History does not assign a price to lives. That's a bourgeois affectation. History is not a cost-benefit scheme or an accounting exercise.”

Right. History has no feelings, it does not suffer, it has no sense, it has no purpose. But we humans do.

Sander,

I'm appalled that your tally of the cost-benefit of the US Civil War does not include the lives of the millions of Africans enslaved, those more than thousands who perished in the Atlantic passage, and those millions who were, quite literally, worked to death.

Those bodies, somehow, don't show up in your ledger, do they? Of course not, they were slaves. By definition, they don't count.

The absurdity of your "position"-- your numbers-driven pacifism-- is that, besides begging the questions, it leads to asking, "Well, if only 200,000 died, would that make it worthwhile?"

As if once the struggle is joined, you would have known what the death toll would have been.

I'm asking you to answer some simple questions, which the careful reader will note, you continue to avoid answering:

1. Is it IP's position that Marx, and the IMWA, were wrong in endorsing the North's military, political, and economic struggle against the slaveholders' rebellion?

2. Is it IP's position that "revolutionary defeatism"-- which means that revolutionaries in the North welcome the defeat of the Union troops by the troops of the slaveholders' rebellion as preferable to the victory of Union troops-- was the "correct" position?

3. What justification can there be for claiming that the US Civil War sacrificed the lives of over "500,000 proletarians on both sides" when the composition of the slaveholders' army was not proletarian at all, and the proletarian component in the Union Army was a distinct minority?

4. Does the IP regard the victory of the North in the Civil War, the formal, legal, and substantive elements of the abolition of slavery-- i.e. military occupation of the South, Congressional Reconstruction, the 13th, 14th, 15th amendments as "tragedies," and not just tragedies, but a defeat for the prospects of revolution?

Perhaps the US should have, after all, been more like Brazil? And let slavery continue, say until the 1880s, then those 500,000 of almost proletarians, including the almost proletarian slave owners, wouldn't have had to sacrifice so much? And the million or so slaves, those actually performing the labor, those who would have died in the 30 or so years.....?????

Do at least try to answer the questions. After that, you can be as appalled as you like.

A comment by Sander, in the midst of a discussion of the value-form, that the US civil war was a capitalist war, and one of the first wars in which warfare itself became industrialized, foreshadowing in that respect the inter-imperialist wars of the future, is being turned into a dispute over whether one would have supported some form of revolutionary defeatism -- a manufactured dispute reeking of archaism. What is indisputable if we want to be sidetracked here is that the aftermath of the civil war within ten years was the institutionalization of the Jim Crow system in the South, including the reduction of the mass of the black population (the freedmen) to a new form of enforced labor as sharecroppers or penal workers, held in thrall by the power of the state and the Klan to enforce its racial codes; an outcome supported by both the winners and the losers in that conflict. That said, however, it's the actual trajectory of capitalism today that's at issue in this thread, so let's not be diverted.

A comment by Sander, in the midst of a discussion of the value-form, that the US civil war was a capitalist war, and one of the first wars in which warfare itself became industrialized,

Get your facts straight, Mac, if you're going to participate. Just to bring you up to speed and correct your distortion of the record, it was not a comment by Sander that triggered the discussion of the Civil War. It was the statement in your position paper "As We See It" on the Civil War that prompted my questions in this thread, a thread devoted, according to its title devoted to Internationalist Perspective: 'As We See It. Can't think of a better place to raise the question, can you?

Plus, I suggested that the admins might want to split the thread so we could pursue both issues. They have, so far, not seen the need for that. OK, then this is the place to pursue these matters.

You don't like it? Too bad. Ask the admins to split the thread, and then there will be two places where you can avoid the issues you raise in your own position paper.

Moreover, a friend of mine-- you know him, Loren Goldner-- stated that IP hold's a "defeatist" position on the US Civil War so I asked for clarification on that.

All will note that you, like Sander, ignore the questions directly dealing with the assertions in your position paper, and your attempted rationalizations thereof ("war is horrible." "war is terrible." "war cost 500,000 proletarians their lives." "I'm appalled at your sang froid" blahblahblah).

So let me reproduce the questions and then you may, one more time, and with feeling, avoid answering them, claiming that questioning your own assertions-- like the Confederate troops being "proletarians" for one-- is a diversion from.......what? Value-form? Do us a favor....

1. Is it IP's position that Marx, and the IMWA, were wrong in endorsing the North's military, political, and economic struggle against the slaveholders' rebellion?

2. Is it IP's position that "revolutionary defeatism"-- which means that revolutionaries in the North welcome the defeat of the Union troops by the troops of the slaveholders' rebellion as preferable to the victory of Union troops-- was the "correct" position?

3. What justification can there be for claiming that the US Civil War sacrificed the lives of over "500,000 proletarians on both sides" when the composition of the slaveholders' army was not proletarian at all, and the proletarian component in the Union Army was a distinct minority?

4. Does the IP regard the victory of the North in the Civil War, the formal, legal, and substantive elements of the abolition of slavery-- i.e. military occupation of the South, Congressional Reconstruction, the 13th, 14th, 15th amendments as "tragedies," and not just tragedies, but a defeat for the prospects of revolution?

No one disputes that Congressional Reconstruction was eviscerated; that a campaign of terror organized by the former Confederates and slaveholders (those "proletarians" who survived the tragic Civil War-- the tragedy being that they in fact survived) was the motor on the Redemptionist trolley; that the Northern bourgeoisie, and the Northern petty-bourgeoisie, turned away from Reconstruction when Reconstruction, to succeed, required racial equality throughout the land.

However that doesn't mean the Civil War was not necessary, and did not carry within it the impulse to emancipation-- as in fact subsequent revolutions and civil wars have embodied a similar impulse only to wither, ebb, and re-form the conditions of exploitation and oppression.

So answer the questions and in the subsequent discussion see if you can link your answers to your analysis of the value form. If you cannot, then you don't really get what Marx was driving at, and why he undertook the critique of capital.

All the talk in the world about value form don't mean a thing if the only place your so-called Marxism gets you is a place of abstention in a war against slavery.

This started as a thread on a substantive topic, from which I thought I'd learn something.

As we see Internationalist Perspective:

Theory: value form

Practice: value form

A young black proletarian says (to Internationalist Perspective):

"Hey professors, look out the window! What do you think of all those kids disrupting traffic because another white cop has killed another unarmed black teenager?"

Internationalist Perspective's response:

"value form"

Then some of us who aren't abstentionists from the class war that shapes our lives say:

"Hey Internationalist Perspective, why don't you answer the kid's question?"

Internationalist Perspective response:

"Let's not be diverted from value form"

We again respond:

"Why are you getting so surly?"

Internationalist Perspective response:

"Because of your disgust for value form"

See how that can be frustrating?

petey

This started as a thread on a substantive topic, from which I thought I'd learn something.

Actually, in the real terms of Marx's critique of capital, the practical struggle embodied in the US Civil war, of the actual material conditions of class, and the prospects for the emancipation of labor is 1000 times more substantive, than IP's (mis)exposition on fictitious capital, value form, etc.

Be that as it may, I asked the admins to split the thread.

US Cvil War sub-thread split here Was the Union war against the Confederacy a progressive war or imperialist bloodbath?

(Don't need to be an admin to "split" a thread)

That's not "splitting" a thread. Splitting is when the posts, in their original formal are constituted as a separate thread. But so much for hair-, I mean thread, splitting.

Well, now all IP has to do is to continue avoiding applying concretely its "meta-theory" to the actual developments, cycles, motions of capital accumulation, demonstrating how the categories of its theory are made manifest in any specific industry.

Well, needs must. I do intend to come back on some of the other points in Sander's response to me earlier (specifically money and value-form related). I'm also interested in commenting on the US Civil War thing, which is another reason why I created the other thread. But in both cases, I'm a little time-embarrassed at the moment with work, so will have to get back to both in a bit...

If this was 1861, or even 1871, I would have put on the blue and seen the American civil war much as Marx did, though with the knowledge of more than a century and a half, it's hard not to see the outcome of that war not having been baked into the cake, which, of course changes the way in which the war today is understood: as the march of a capitalist juggernaut on its way to global domination, and with respect to the black population first as cannon fodder in the late stages of the war, then as an exploited caste condemned to sharecropping and the rein of the Klan, then to labor in the factories of the North (and segregation and racism in its cities), and now to incarceration in its prison complexes and to mass unemployment, and Flint Michigan or west Baltimore as its exemplars. Was it all inevitable, a necessary series of stages? Inasmuch as I don't believe in the laws of history and their inevitability -- so dear to traditional Marxism, no. But it's 2016, and now the task is what are the historical conditions today for the abolition of capitalist social relations? Which brings us to the centrality of the value-form, and the prospects for the development of a revolutionary consciousness that can both grasp the value-form as historically specific, and provide a basis for its abolition.

At the risk, then, of responding here to Ocelot's post of January 29 on IP's purported "Grundrisse primacy", references to Marx's "Fragment on Machines" in that text seems crucial to an understanding of the actual trajectory of capital. Despite its interpretation by Toni Negri as a basis for putting an end to the proletariat, creating a "multitude," and seeing immaterial (or cognitive) labor as upending the very bases of the classic wage relation, it actually subjects the whole of a worker's existence (24/7) to the imperatives of capitalist accumulation. And for that ever-growing part of the population whose existence has become, to use a now well known expression, "precarious," other modes of control, ideological and physical, are being developed by capital, including its left (identity politics and nationalism). However, Negri and other post-workerists constitute just one way to read the "Fragment on Machines." IP's Reference Text points to other ways, ways that illuminate the actual trajectory of capitalism today, ways that take us beyond the Hobson's choice between Luxemburg's crisis theory and Henryk Grossmann's. Perhaps we should move on to that.

If this was 1861, or even 1871, I would have put on the blue and seen the American civil war much as Marx did, though with the knowledge of more than a century and a half, it's hard not to see the outcome of that war not having been baked into the cake, which, of course changes the way in which the war today is understood: as the march of a capitalist juggernaut on its way to global domination, and with respect to the black population first as cannon fodder in the late stages of the war, then as an exploited caste condemned to sharecropping and the rein of the Klan, then to labor in the factories of the North (and segregation and racism in its cities), and now to incarceration in its prison complexes and to mass unemployment, and Flint Michigan or west Baltimore as its exemplars. Was it all inevitable, a necessary series of stages? Inasmuch as I don't believe in the laws of history and their inevitability -- so dear to traditional Marxism, no. But it's 2016, and now the task is what are the historical conditions today for the abolition of capitalist social relations? Which brings us to the centrality of the value-form, and the prospects for the development of a revolutionary consciousness that can both grasp the value-form as historically specific, and provide a basis for its abolition.

Belongs in the other thread, Jack, I mean Mac. Trying to divert us?

But since you brought it up here: So what are the answers to the questions? And in particular, how can IP in a position paper claim that the US Civil War claimed the lives of half a million proletarians? Do the troops deployed by the slaveholders' rebellion count as proletarians to IP?

I didn't say the Civil War was inevitable. I did say it was necessary, not as a a "stage of history, but for the advance of US capitalism. The abolition of slavery was essential to that necessity.

That you can claim the grasping the value-form as historically specific is the basis for revolutionary consciousness, while at the same time and in the same place produce distortions of the actual class forces engaged in historically specific struggles, kind of undercuts your assertion that grasping the value form is quite that important.

What you have created is a philosophy of the abstract that has only minimal contact, tangential at best, with the world of the concrete.

Sartesian, could one, for example, discuss how less than fifty years ago the FIAT Mirafiori plant in Torino employed tens of thousands of workers in a state of the art plant to produce fewer cars than a few hundred workers produce today? Or how a steel mill in Pittsburgh fifty years ago employed thousands to produce a fraction of the of the steel that a modern plant, whether in India, Germany or even the US produces now? Neither the statistics nor the case studies are hard to come by (industrial sociologists have provided them), but it's Marx's Fragment on Machines, and his whole analysis of the value-form and its trajectory that makes it possible to see the socio-political consequences, and the theoretical and political challenge that those changes produced.

mac intosh

Sartesian, could one, for example, discuss how less than fifty years ago the FIAT Mirafiori plant in Torino employed tens of thousands of workers in a state of the art plant to produce fewer cars than a few hundred workers produce today? Or how a steel mill in Pittsburgh fifty years ago employed thousands to produce a fraction of the of the steel that a modern plant, whether in India, Germany or even the US produces now? Neither the statistics nor the case studies are hard to come by (industrial sociologists have provided them), but it's Marx's Fragment on Machines, and his whole analysis of the value-form and its trajectory that makes it possible to see the socio-political consequences, and the theoretical and political challenge that those changes produced.

You can discuss anything you want, anytime. I just asked a question about an assertion IP made in its position paper and it seems the partisans of IP will go to great lengths to avoid providing a direct answer.

You claim you don't want to be diverted from discussing the value form, so Ocelot separates my questions into another thread, but then you continue the so-called diversion right here. Bizarre, no?

Here's a news flash: Many of us have been following this massive animation of fixed assets by a continually reduced labor component for years. Many of us have even analyzed and developed the statistics on this direction of capital, and examined its social consequences for some time.

You call it value-form, like that's some new untapped stream in Marx's critique. It's not. Those of us who dismissed "decadence theory" as inadequate, inaccurate, and atrophied have been on this for some time now. Those of us who, at or around the same time, demonstrated how "fictitious capital" was a non-explanation are clear on just what makes up the real content of the value form.

That's just my opinion, you understand.

That's all fine Spikeymike, but the very least he could do is answer the questions based on IP's own assertions.

Sartesian, I thought that I had answered your question: in 1861 I would have joined the Union army. I would not have advocated revolutionary defeatism. And in 1789 you might have been a Jacobin, and several years later I might have been with Babeuf. Is that the level upon which we want to discuss history? Robespierre looks different today than he did in 1789, just as Lenin looks different today than he did in October 1917. And, yes the actual outcome of the American civil war, and the subsequent century of a legalized caste system in America, changes the way one looks at the war itself.
So, to get back to what I take to be the point of this thread, the understanding of the value-form, and its consequences for both theory and practice has been enriched by the access we now have to all of Marx's drafts for his critique of political economy, including, but not just the "Grundrisse." We can no longer, for example, read volume III of "Capital," as we did just twenty years ago, because we can now have access to Marx's draft, and not just the text as Engels edited it. And more importantly, the actual trajectory of capital over the past century makes it clear, to take but one example, that the reified consciousness that Lukács insisted can be exploded by the proletariat is a far greater obstacle that he thought back in 1923, quite apart from the changes in proletarian labor itself. In short, we cannot rest with theories about capitalist crisis or class consciousness that ignore both the "new reading of Marx," and the actual structuration of capitalism today. It hasn't all been said already, and that's the point of departure for IP's new Reference Text, one effort to question certain old verities., and to open new debates.

The new Marx reading was discussed extensively on this site a few years back. In any case, playing the value form as some sort of trump card (in the same manner as people.do with dialectics) goes over much against so-called value form analysis, which focuses more on form determination, state derivation and precisely moving away from working class movement centric readings of Capital.

mac intosh

Sartesian, I thought that I had answered your question: in 1861 I would have joined the Union army. I would not have advocated revolutionary defeatism. And in 1789 you might have been a Jacobin, and several years later I might have been with Babeuf. Is that the level upon which we want to discuss history? Robespierre looks different today than he did in 1789, just as Lenin looks different today than he did in October 1917. And, yes the actual outcome of the American civil war, and the subsequent century of a legalized caste system in America, changes the way one looks at the war itself.
So, to get back to what I take to be the point of this thread, the understanding of the value-form, and its consequences for both theory and practice has been enriched by the access we now have to all of Marx's drafts for his critique of political economy, including, but not just the "Grundrisse." We can no longer, for example, read volume III of "Capital," as we did just twenty years ago, because we can now have access to Marx's draft, and not just the text as Engels edited it. And more importantly, the actual trajectory of capital over the past century makes it clear, to take but one example, that the reified consciousness that Lukács insisted can be exploded by the proletariat is a far greater obstacle that he thought back in 1923, quite apart from the changes in proletarian labor itself. In short, we cannot rest with theories about capitalist crisis or class consciousness that ignore both the "new reading of Marx," and the actual structuration of capitalism today. It hasn't all been said already, and that's the point of departure for IP's new Reference Text, one effort to question certain old verities., and to open new debates.

I don't believe I asked you to tell me if you would have entered the Union Army in 1861. I asked what is IP's justification for criticizing Marx for a "determinist mechanistic view of history" based on his support for the North in the US Civil War. To wit, (from my memory), your position paper criticizes Marx for offering congratulations to Lincoln at the very moment that the "first industrialized war" was slaughtering "500,000 proletarians."

So I asked what constitutes 500,000 proletarians? Where did you get that number. Did you, like the bankers at Anglo Irish when stumping for the euro 7 billion bailout, just "pull it out of your arse"? Or do you have some historical, materialist basis?

I asked how can IP make such a statement when the troops of the slaveholders' rebellion were not proletarians by any stretch of one's imagination or internationalist perspective; and the composition of the Union Army was only to some small degree, proletarian?

I am specifically NOT asking you to look back and with hindsight tell me who's side you would pick. I am challenging your interpretation of history; your designation of the US Civil War as Sander described it a "tragedy" a "horror" simply because it was a war.

But please feel free to tell us how IP's view of the US Civil War has changed,now that you've purged the mechanistic, deterministic elements of Marx's analysis from your methodology.

FWIW, I think Marx's congratulations to Lincoln (written during the same period that Marx is writing those Economic Manuscripts that call into question the "mechan-ism" you see in Marx's other writings) were spot on. It was an expression of solidarity in the struggle against the slaveholders' rebellion; it was an expression of congratulations for recognizing the need to abolish slavery; for issuing the Emancipation Proclamation; for pursuing the war with the intent of total, complete victory and overcoming the resistance within the Union military, and elsewhere, to that pursuit of victory.

That doesn't sound all that mechanistic, deterministic to me.

But as for your value-form theory; somehow your recognition of the significance, the materiality, of continued, and expanded value extraction, which after all is what capitalism is all about, does not translate into your explanation for the persistence of capital. Instead we get all the usual descriptions of the usual suspect-- namely fictitious capital.

I don't know how you read volume 3 20 years ago. I think my reading of volume 3 last year was different than my reading of it 3 years ago.

But tell us how IP's reading of volume 3 has changed-- and to do that, you need to show us how it is changed in its practical application; to IP's analysis of say a specific sector of capitalist accumulation then; and that analysis of a specific sector today.

So what's changed? Are the fall in the rate of profit and the increase in the mass of profits no longer expression of a single process? Do prices of production no longer distribute profit among capitals?

Lukacs is precisely not the issue; and never was. Accumulation always has been.

Three days since the last posting by an IP associate. Thank god we got rid of the derail about IP's statements on the US Civil War, so they could plow ahead with the real issue, the value form.

I'm sorry that Lukács seems off-limits here (see post 68), inasmuch as I think that there's a direct connection between accumulation and its crises, and the prospects for the possibility of a development of revolutionary consciousness on the part of the proletariat. Not that Lukács has the answer, far from it, but that he clearly saw the issue. Inasmuch as this thread on accumulation has a long "history," though I only discovered it when it turned to IP's new reference text, I'll try to go back to the origins of the thread, and its whole course.

Lukacs isn't "off-limits." I was expressing a personal evaluation. Funny, I don't remember reading anything about Lukacs in the IP document, but then again my memory might be faulty. Let me check.

PS What happened to Sander?

Nope. Nothing about Lukacs in the IP position paper

So what about it, Mac and/or Sander? Any chance of coming back to answer Ocelot's further questions, or my original ones about fictitious capital?

Yes I will come back to this in a few days. I've been very busy with other things.

I also mean to come back on the money as commodity or mere "exchangeable entity" thing, and the general need to distinguish the different characteristics of land, labour power and money in contradistinction to commodities proper, etc. But workload is unfortunately cutting into my posting time at the moment.

Hello and apologies for the delay.

In this post, I want to adress 4 questions that have been raised in this discussion:

- what do we mean by “hoard”?
- what do we mean by “fictitious capital”?
- what was the purpose of “quantitative easing”?
- why did it not accelerate inflation?

1. The hoard

Capitalism stays alive, not only because of oppression and repression, not only because of the weight of its ideologies, not only because of engrained social practices that reproduce the value-form, but also because of an implicit social contract, based on the perception that value and social wealth are fused, that the growth of either is based on the growth of the other, that the reproduction of capital and the reproduction of human society are the same thing and cannot be separated.

This perception is based on the dual nature of the commodity, as a bearer of value, and a use-value. From the start, that split nature implied the possibility of the two sides of the commodity contradicting each other. But that inner conflict remained mostly latent until technological revolutions in the mode of production sent their growth rates on widely diverging curves. Tendentially, the two sides of the commodity become unhinged. Over time (and modified by other factors), the transformations value has to go through to accumulate, become choke-points:

C - C’: (the productive consumption of commodities resulting in commodities of greater value because surplus value is added) because the diminishing role of living labor in the production process causes a tendential decline of the rate of profit, resulting in insufficiency of profit to continue the cycle;

C’- M’: (the sale of the new commodities, realizing their value, freeing it to transform again) because the continuous rise of productivity comes into conflict with the inherent limits of the demand for commodities that are productively consumed – whose consumption results in the creation of surplus value. This is not solved by rising unproductive consumption.

M’ – C”: (the transformation of the realized value into commodities that are productively consumed)
Because money, faced with those obstacles, has the incentive to stay put , not to re-enter circulation, it over-accumulates.

Massive devalorization is how the conditions for accumulation are restored.

This framework, as well as the reality of the formation of the three choke-points, came under fire on this thread. For the response on the critique on the first (the TFRP) I referred to the text on this in IP #60 and on the second, capitalism’s inherent limits on productive demand, I replied to Ocelot’s and Khagawawa’s critiques in my previous post. But most of the critique was on the third point, M- C, on our view that the over-accumulation of financial capital is a part of the crisis mechanism that is a direct result of the conflict within the commodity, as it has historically developed.

In my previous post, I tried to show that, contrary to Ocelot’s claims, money is a commodity. It has to be a bearer of value and have a utility, to use Marx’s shortest definition of the commodity, in order to accomplish the exchange of equivalents.

Money takes two forms, fulfilling two functions. It circulates other commodities and it is withdrawn form circulation to serve as a reserve-fund, a treasury, a store of value, a hoard. It is different from other commodities in that its value is not based on its production costs and its utility is not based on its material substratum (if there is any). In circulation, it acquires its value from the commodities it represents and its use-value from the use-value of the commodities into which it can be exchanged. In the hoard, it is latent capital, representing surplus value that is not consumed (productively or unproductively). The origin of its value is clear, but what is its use-value, what keeps it a commodity exchangeable with all others? The function of the hoard, from the pov of the accumulation process, is to allow value to go in and out of the production process according to when and where profit beckons, to set in motion value creation over the long run, even when doing nothing in the present. So it needs at least to be perceived as having that utility in order to remain a commodity.

Together circulating money and latent money (the hoard) represent total value: the value of all the existing commodities but also the value that the existing commodities will produce in the future.

Ocelot asks us to clarify what we mean by "hoard".

Whether that includes merely the liquid capital withdrawn from productive investment, or the totality of social capital, spread over financial capital assets, all existing means of production and "land" assets, etc.

The distinction between both is not clear cut. Real estate, for instance, may be a commodity whose value is the value of the abstract labor that was consumed in its production and whose use-value is to be a dwelling of a certain quality. But it may also be a commodity used to store value in. Like art. Likewise reserves of land, oil and other minerals are monetized parts of the hoard. What they have in common is that they are latent capital that retains its utility of universal exchangeability, that can be transformed in any other form of value, in any other commodity. Company shares express the value of the productive forces of that company. But split off as separate commodities, traded not just on the basis of the company’s actual value but on the basis of its future value as well, they too can be, in part, part of the hoard, reserve-fund as well as destination. Financial capital assets can represent both circulating and latent capital. But they may also represent fictitious capital.

2. Fictitious capital

The essence of money is that it represents the value of all other commodities. This includes the value which the existing productive forces (already in possession of capital) will produce in the future. Obviously capitalism couldn’t function without credit, without reserve-funds, without a hoard. The value of that hoard depends on future value because its value – and that of capital in general -- is not based on the value that went into it, but on the value it produces (in the short and the long term). Therefore its growth, and even its ability to maintain itself as value, depends on the growth of the surplus value producing economy. It must keep in sync with the latter, with its expansion potential. But since the value of the future is not a given, illusory value, fictitious capital, inevitably appears. It appears in the form of superfluous productive capacity, in the form of cities without inhabitants like in China today, in the form of technology that will be obsolete long before it has transferred its value into commodities. It appears in financial capital created on the basis of expectations of surplus value which will not materialize.

So money comes to represent something more than existing and potential value. The total of money = circulating value + the value of the hoard + fictitious value.

Of course, fictitious capital tends to lose its value quickly when its fictitious nature is revealed. That is obvious regarding productive capital, when for instance an airport is built that cannot be profitably operated. But the fast pace of technological change forces companies to include “moral depreciation” (the devaluation of their technology before it has transferred its value) into their normal operating costs. In the hoard the distinction between real and fictitious is, again, not clear cut. It’s all money, equal as means of payment transformable into other commodities, including each other. The proof of fictitious capital is in the pudding.

The creation of fictitious capital accelerated in the 1970’s, when insufficient profit, lack of productive demand and strong working class resistance against lowering wage costs confronted capitalism with a systemic crisis. The pedal of money creation was pushed to the floor in order to limit bankruptcies and support effective demand. The resulting ‘pudding’ included a sharp increase of debt, especially government debt, and accelerating inflation. The latter especially was a direct threat because it eroded money’s capacity to measure value and thereby discouraged the long term productive investments on which the value of the hoard depends. If unchecked, hyper-inflation would have led to a collapse of the hoard.

The 1980’s brought a change of course of capitalism, on many levels: political, social, economical, technological…but the creation of fictitious capital continued. However, its focus changed: it was sharply reduced in the general circulation process (bringing inflation under control, getting rid of excess productive capacity) while tax reforms steered a greater share of the purchasing power to the capitalist class. It was a redistribution of wealth in order to sustain the hoard, guaranteeing a sufficient level of demand for its expansion.

The creation of fictitious capital was/is an essential part of the mechanism that kept the US economy the motor of global effective demand. The special role of the dollar as global trade and reserve currency not only permitted, but also necessitated the US to run large permanent deficits in foreign trade ($ 5545 billion in 1982-2006). Dollars accumulated as trade surpluses by foreign countries are circulated back to the US mainly through purchases of US government securities which serve a double purpose: they
cover the government deficit as well as the current account (and trade) deficit. From surplus countries there has been an ever rising demand for US securities, and the money flooding into the US ($800 billion a year) has bid up government bond prices, lowered interest rates and led to a housing boom.

One reason why the flood of fictitious capital was not accelerating inflation was that the largest part of it did not transform into other commodities but went directly into the hoard. The demand for it was accompanied by the growth of “sovereign” debt and by an enormous expansion of financial commodities. As a result, the global amount of profit-seeking financial assets increased three times more than the worldwide gdp, from $ 12 000 billion in 1980 to $ 196 000 billion in 2007, which was four times larger than the world gdp in that year.

Competition between capitals tends to equalize the rate of profit throughout an economy, so that each capital, even those which do not command any surplus labor, obtains a profit proportional to its size. Yet the lack of incentive for M to accomplish M –C, and the high demand for money as a particular commodity pushing up the prices of financial commodities, counter-acted this tendency and created a redistribution of profits from the surplus value producing sectors to the financial sector. In the US, the financial sector’s share of total corporate profits doubled from an average of 18.3% in 1980-1990, to 36.2% in 2001-2006, reaching a peak of 40.8% in 2001-02. In the same period, manufacturing industry’s share of the gdp declined from 19.4% to 11.7%.

The shift in monetary and fiscal policies fostered the illusion that money can breed money, that the cycle of value accumulation can be reduced to M- M’, skipping that pesky production phase. In that regard, capitalism is indeed a Ponzi scheme, in which the ever expanding “value” of the hoard ultimately is a matter of belief -- the belief that its claims on future value will be met.

But Artesian is right when he writes that even a Ponzi scheme is not possible without “seed money” – real capital. Even the redistribution of profit from the productive to the financial sector would not deliver it, unless there was something that could be redistributed, unless there was a growth of surplus value extraction. That “seed money” mainly came from:

- a redistribution of incomes from wages to profits (in the US, the average real wage fell from $ 8.99 per hour in 1972 to $ 8.24 dollar in 2006, despite the growth of productivity in that period; in most other countries the decline was greater);
- ‘globalization’, sharply increasing developed capital’s exploitation of cheap labor power as well as expanding its markets;
- the penetration of capital into services and other parts of the economy that were until then not yet surplus value producing.

However, the same technological innovations that made these developments possible, over time also reduce living labor in production and build up productive overcapacity, so the seed money was bound to become scarcer.

And those technological changes, and the restructuring of production with them, did not lead to a return of the growth rates that preceded the crisis of the 1970s, while financial capital kept up its feverish pace, inventing all sort of new financial commodities to meet the demand. In the first place credit derivatives such as credit default swaps (CDSs), whose worldwide estimated amount rose from almost zero in 2000 to $ 58 200 billion by 2007, and collateralized debt obligations (cdos) whose issuance rose from $ 68 billion in 2000, to $ 520.6 billion in 2006.

Asterian writes:

The origin of credit instruments is not as a substitute for production but in the different realization times of different capitals, "smoothing" these interruptions and differences so that production can be maintained while awaiting the completion of the different circulation times.

That is true. But it’s also true that the financial sector has grown far beyond the size and the functions needed to provide loans or insurances to the productive sector. Instead of financing investments in the real economy the financial sector has established its own circuits of capital making financial investments and realizing temporarily huge profits from them.

This was fueled by the growth of fictitious capital, of money that was neither the result of surplus value production nor being productively invested. From 2000 to 2013, the Federal Reserve expanded its balance sheet six fold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at 0.8 percent per year. So much for Artesian’s claim that the growth of fictitious capital (or does he mean financial capital) “accompanies periods of real value creation”.

After 2002 the financial sector’s share of total corporate profits began to decline from its peak of 40.8% to 33.1% in 2007. But the accumulation of finance capital continued unabated up to 2007. The volume of finance capital is not recorded in national accounts but there are clear indications of its growth, such as the enormous expansion of derivatives, from $ 127,560 billion in June 2002 to $ 683,800
billion (47 times the US GDP) in June 2008, corresponding to an increase of 32% per year. The declining profit-rate of the financial sector did not lead to a corrective outflow to the productive sector because of the strong incentive for M to stay M.

3. “Quantitative Easing”

The seed money of the Ponzi scheme was surplus value but its fuel in large part is debt : government debt , corporate debt, consumer debt (in the US, total household debt increased by 97% from 2000 to 2007, reaching $ 13800 billion or 133% of disposable income in 2007) and debt of the financial sector itself, which became even more leveraged than the rest of the economy (from 1990 to 2007,the debt of the US financial sector increased by an average of 11.3% per year, from $2600 billion to 16 000 billion or 116% of the GDP).

The deeper causes of the crisis are in the value-form itself, in the obstacles it created to accomplish C-C’ and C’-M’. But the temporary accomplishment of M – M’ despite these obstacles, made it take the form of a debt crisis that threatened to devalue the hoard.

Within the logic of value, a devaluation of the hoard, and of capital in general, is exactly what is needed. A cheapening of the productive forces, a destruction of claims of past value on the value of the future. And indeed, the crisis wiped trillions off the balance-sheets. But many trillions more were created to prevent the crisis of ‘doing its job’ of devaluing capital so devastatingly that a new floor for value accumulation would be reached.

Already in March 2009, Bloomberg News reported that that the US government and the Federal Reserve had used, lent out or pledged $ 12 800 billion, or 42 100 dollar per household. The measures taken to stem the crisis were not all the same (different focus US/China for instance) but they all were based on a steep increase of fictitious capital.

As a result, despite brutal austerity measures and attacks on the social wage, debt, the claims on future value, has increased at an historically unprecedented tempo, as illustrated in a McKinsey report published last week:

Some findings:

Global debt has increased from $142 trillion in 2007 to $199 trillion in 2014 (286% of the global GDP) –an increase of 57 trillion! The ratio debt/GDP of some key players: Japan 517%, China 282%, US 269%.
The Chinese debt has quadrupled since 2007. Global government debt increased with 25 trillion and is projected to keep rising.

A breakdown, in trillions of $:

2007 2014
---------------------------------------------------------
Corporate debt 26 tr 56 tr
Household debt 19 tr 40 tr
Government debt 22 tr 58 tr
Financial sector debt 20 tr 45 tr

In regard to the US, we argued that the primary goal of the increased deficit spending (projected at 15 to 20 trillion from 2009 to 2019) and of the stepped up money-creation by the Fed (at an average pace of $600 million an hour) through its “Quantitative Easing” program, was to defend the price of dollar assets, to prop up its hoard.The same is true, mutatis mutandis, for similar policies in Japan, the Eurozone and the UK.

Ocelot objected that

the intent of QE is to starve financial capital held in this "risk-free" form in an attempt to force them out into the bond and equity markets. In other words the purpose of QE, as regards the flow of investment capital, is to squeeze it out of "safe haven" unproductive assets.

That may be true, but from what I wrote above it should be clear that the hoard which the Fed seeks to protect is far more than “risk-free” public debt. It contains equity and other financial assets as well, and, judging from the stock market’s rise during QE, it was quite successful in stimulating them. It may be more than a coincidence that, only a year after QE3 was ended (Oct. 2014) the steady rise of the Dow Jones and S&P began to falter. I wouldn’t be surprised if the Fed pretty soon launched a QE4.

Since QE meant a massive addition of money, it was more than a strategy to move a part of the hoard to another in the hope of stimulating productive investment. In regard to the latter, it failed: productive investment, see figures above, remained very low. That shows that equity is something more than a share of the actual profit producing capacity of a company: its growth does not just reflect a growth of its value in M –C –C’- M’ but also the growth of equity as hoarding capital, inflated with fictitious value, of M refusing to become C and seeking M –M’: a growth of claims on future value.

Rolling Stone ‘s financial reporter Matt Taibbi examined where the Fed’s money went to. He wrote (April 28, 2011):

“The Fed began buying up every distressed investment on Wall Street, even those that were in no danger of widespread defaults: commercial real estate loans, credit-card loans, auto loans, student loans, even loans backed by the Small Business Administration. What started off as a targeted effort to stop the bleeding in specific trouble spots became a gigantic feeding frenzy.”

For Taibbi, a Bernie Sanders supporter, this seemed nothing more than unrestrained greed, hogs serving themselves, but it was more than that. It was aimed at keeping the global demand for American capital assets strong by supporting their prices, to assure that the steady global stream of surplus value to the American hoard continued. This made it possible for the US to continue to run up high trade deficits and have a strong currency and low interest rates at the same time. This permitted a modest recovery of the American economy while most others stagnated or sunk deeper.

Which leads me to my last point.

4. Why has QE not caused a rise of inflation?

QE and other stimulus programs did cause a rise of inflation, but not in the US and other highly developed economies. But look at China, India, Russia, Brazil, Mexico, Venezuela and most other countries: inflation is indeed accelerating in a world that carries so much more money and debt in relation to its value production than even 5 years ago. It leads to currency devaluation and a flight of capital in search of a safe haven. And there, the policy of the Fed pays off. As does US capital’s investment in military superiority, despite the burden that it is. And all its other advantages, the scale of its domestic market and of its productive capacity, its historically grown role as custodian of the global currency, its stable and unified political structure contrasting with the disarray of the divided Eurozone, and the fact that American capital remains at the cutting edge of technological innovation, thereby reaping surplus profits through ‘technological rent’ and monopolistic market positions, inspiring confidence in its future value.

With real wages stagnating or falling, cuts in social expenditures, and productive investment remaining low, there is little danger that the economy would overheat. The high demand for hoarded value sucks excess money out of circulation. Furthermore, the low prices of commodities imported from low wage countries and the intensifying price competition between them for the American market, keep inflation low. It is not in the general circulation but in the swelling of the hoard that the growth of fictitious capital becomes visible in the US.

Inflation and deflation are often portrayed as mutually exclusive while in fact they occur at the same time. They do, because while the Ponzi scheme is kept going through the injection of fictitious capital, the obstacles for C –C’- M’ remain and indeed become larger, as automation keeps shedding variable capital, the source of surplus value, and tendentially reducing productive demand. No commodity can keep its value if it cannot transform into another. That M always can, is the belief on which the hoard is built. But for other commodities, it’s clear that they must be sold or loose their value, that they must transform soon, at any price. Hence, deflation. The deeper the crisis becomes, the more visible it will be. Deflation is its inherent tendency.

Both inflation and deflation will continue to rise, but with different manifestations in different places. But everywhere the pressure to squeeze more surplus value out of the working class and to cut the costs of maintaining the ‘superfluous’ will increase.

There will be runaway inflation in the weakest, least competitive parts of the global economy, and negative interest rates in places where the hoard is still inspiring confidence and the safe haven effect applies. The latter are aimed at steering capital to more risky ‘productive’ investment but they also express capital’s resistance against doing just that, its unwillingness to leave the ‘safety’ of the hoard, because of the deflationary pressure.

How long the Ponzi scheme can continue without another major breakdown is hard to say. But it’s even harder to explain how enough ‘seed money’ to keep it going will materialize.

Sander

But since the value of the future is not a given, illusory value, fictitious capital, inevitably appears. It appears in the form of superfluous productive capacity, in the form of cities without inhabitants like in China today, in the form of technology that will be obsolete long before it has transferred its value into commodities. It appears in financial capital created on the basis of expectations of surplus value which will not materialize.

That's the whole point. It's not that there isn't fictitious capital, it's that all capital is fictitious when it cannot reproduce itself quickly and expansively enough.

Right now 7% of the maritime dry-bulk carrier fleet is in lay-up at anchorage, and estimates are that another 7% has to be taken out of service. So are those ships fictitious capital? Are they any different than the bonds that were used to finance their construction? If the ships are not fictitious capital, then the bonds issued to finance them are not fictitious capital-- as the notes represent but a momentary expression of value of the ship-capital, commodity capital, and are not fictitious values in themselves.

So the problem is not with "fictitious capital"-- but in capitalist reproduction and accumulation; in overproduction.

Unfortunately, the term "fictitious capital" is utilized often, too often, by many, too many, to counterpose it to to "productive capital." No such distinction exists except in the extreme circumstance of swindles, con games, Ponzi schemes-- even then, the "opposition" is more or less non-sensical.

If Marx is right and markets do not create value, cannot create value; if exchange is not the origin of value, then the fictitious exchanges do not create value and do not function as capital-- they serve, like all instruments of credit and debt do, to distribute the actual surplus value according to the laws of capitalism and thereby participate in the creation of an average rate of profit.

Sander

But it’s also true that the financial sector has grown far beyond the size and the functions needed to provide loans or insurances to the productive sector. Instead of financing investments in the real economy the financial sector has established its own circuits of capital making financial investments and realizing temporarily huge profits from them.

That's a, pardon the pun, "value judgment" and not a materialist analysis, based again on, first, deftly slipping in the word "financial" to replace "fictitious" thereby conflating the two in all instances and all quantities and second by providing no basis for determination of what constitutes a "reasonable," or "adequate" or "sufficient" level of financial capital which is the only basis for making a market driven, and market valuation determination that there is "too much" financial capital; that financial capital has outgrown in "reasonable," customary role.

You are attempting to use valuation quantities to refute the qualities inherent in valuation itself, which is kind of like, but not exactly the same, as talking about "too big to fail," "better regulation," firewalls, and all that other stuff.

The billions of dollars of debt used to finance shale oil extraction in the US? "Fictitious capital"? If so, "excessive" fictitious capital? Is there a right amount of "fictitious capital"? But of course not as that would imply abolition of the market from the getgo.

QE and other stimulus programs did cause a rise of inflation, but not in the US and other highly developed economies. But look at China, India, Russia, Brazil, Mexico, Venezuela and most other countries: inflation is indeed accelerating in a world that carries so much more money and debt in relation to its value production than even 5 years ago.

No, not at all. US QE didn't cause a rise of inflation in emerging market countries. Certainly not in China, India, Russia, Brazil, and Venezuela. Back in the day of US QE, which ended when? 2 years ago?, QE led to an increase in valuation of the EM currencies in relation to the dollar. Inflation in China for example has little if anything to do with the US QE, and everything to do with the "excitation" of the Chinese economy through the financing of the SOE expansions, the use of special investment vehicles for channeling off-books local government purchases and sales, particularly in the real estate sector.

Brazil's current inflation is part of the economic downturn attributable not to US QE (anybody here remember how Brazil and the EM countries loudly complained about QE for cheapening the US dollar and making their exports more expensive?) but to the overproduction in Brazil and China and Australia and Indonesia in the resource, mineral, and ore sectors.

Now if you want to claim QE is fictitious capital and fictitious capital has not stimulated productive investment, then you can't claim QE has precipitated the inflation and/or overexpansion of the "real economies."

Short version: You're pissing up a rope in counter-posing fictitious capital to capital in explaining any moment of capitalist accumulation by referring to fictitious capital as a cause, an explanation, a determinant.

That's a, pardon the pun, "value judgment" and not a materialist analysis, based again on

This is mostly accurate, as the financial sector is not primarily there to service the 'productive,' as of course capital separated off from labour is not there to support labour. That its detached form was also to act like it, was instead necessary for this form, and consistent with the nature of capital, such that capital itself could not oppose this detachment by itself. That said, at the least there is some vaguely expressed correctness to their value judgment, as a base advocacy of labour, which seems to be getting at something along the lines of the falling rate of profit as it was in capitalism as well, although in terms foreign to the main actors in that.

Unfortunately, the term "fictitious capital" is utilized often, too often, by many, too many, to counterpose it to to "productive capital."

Valid, the term 'fictitious capital' does not necessarily hold any necessarily destabilising power. Generally speaking, while fictitious capital as usually referenced might identify an instability, it does not locate this in any necessary process that would have led to this instability being manifested. While capital appearing apart from the process of exploitation was a regular occurrence, but this was merely appearance, that a form of it do so primarily for the capitalists, presented as merely floating value to be indiscriminately thrown around, might seem bizarre. However, most criticisms seemed to assume that capital detaching itself from productive capital, tacitly identified with labour, and forming an independent realm was somehow a problem within capitalism, when in reality it was the nature of capital. It was then said that the issue with fictitious capital was that it could easily backfire. Obviously, though, any instability or tie to overproduction conceded inherent in fictitious capital is inherent in each transaction of such, and hence if it appears that it is merely a question of particular or chance transactions, rather than theoretical necessity, then this is misleading.