The Real Movement

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Tag: productivity of labor

October 16, 2015

Can the state prevent the collapse of capitalism by printing currency?

Tom Cutterham seems to believe to the answer to that question is, Yes. Cutterham’s review of Paul Mason’s book, Postcapitalism — Forget Wikipedia — is a common enough response by some activists to any mention of communism:

“Again and again, those who predicted imminent collapse were proved wrong. There were always new ways for the system to adapt to its inherent contradictions and crises, always new markets to pry open and new forms of labour to exploit.”

Capitalism, this argument goes, is apparently capable of almost infinite adaptation. The response usually does not deny that capitalism is prone to crises, nor that these crises may trigger some political event like a social revolution. However short of a social revolution, (triggered usually by an alteration of consciousness secondary to a crisis), there is nothing inherent in capitalism driving it toward its self-annihilation.

The current iteration of this argument, which among Marxists seems to date back to Tugan-Baranowsky, is now defended by the value-form school and almost all Marxists today. This school includes very influential Marxist writers like Michael Heinrich in Germany, John Milios in Greece and David Harvey in the United States.

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October 10, 2015

The hidden conflict within the fascist state for control of economic policy (5)

I have been going through this process in order to clarify for myself the logic of the current discussion of so-called negative interest rates — an oxymoron if ever there was one. This is part five of the series; part one, part two,  part three and part four can be found here. I hope it also will have some use to readers.

Part Five: The dollar and the increasing possibility of 21st Century Currency Warfare

Can monetary policy be rescued from oblivion? Probably not. There are just too many difficulties with the idea of negative interest rates on currency.

As I explained in part four of this series, Haldane proposes that the way around the zero lower bound on monetary policy may be to impose a negative interest rate on the holders of state issued currency. If a way could be found to force the holders of currency to pay interest on the currency in their bank accounts, wallets, pockets — and even in their mattresses — the distinction between credit money and currency could be forcibly imposed on society by the state despite a zero interest rate environment.

Once stripped of its deceptive wrapping as mere monetary policy, what Haldane is proposing is the outright expropriation of your savings account, your checking account and even the currency in your wallet and cookie jar. This goes well beyond monetary policy and begins to encroach on the limits of national economic policy itself. Under the most charitable interpretation, his proposal is well into the sphere of fiscal, even currency, policy despite the attempt to conceal it behind protective coloration as a negative interest rate on currency.

For the moment, however, let’s ignore this potential objection to his proposal. Instead, let’s treat it as a proposal for a measure similar to what FDR did in 1933: pure and simple devaluation of the currency.

What are the difficulties to be considered?

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October 9, 2015

The hidden conflict within the fascist state for control of economic policy (4)

I have been going through this process in order to clarify for myself the logic of the current discussion of so-called negative interest rates — an oxymoron if ever there was one. This is part four of the series; part one, part two and part three can be found here. I hope it also will have some use to readers.

Part Four: The desperate search for an exit from failed monetary policy

“I think we got the Recovery Act right. The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.” Larry Summers, Washington Post, November 8, 2009

“We didn’t think it would take that long.” Ben Bernanke, USA Today, October 5, 2015

The disappointment with the weak impact of counterfeiting the currency was admitted by Bernanke in a recent interview. This was not supposed to happen according to the dominant monetary theory, and Ben Bernanke in particular, where the prices of commodities are a function of the supply of currency in circulation. According to Bernanke’s “quantity theory of money”, the government had this technology, the printing press, which it could use to manage the US national capital. In fact, following the financial crisis, the policy rate went to zero without providing any real stimulus at all.

The chief economist of the Bank of England, Andrew Haldane, gave a speech in September on the problems faced by monetary policy. Although Haldane never mentions Larry Summers, his speech addresses the same concerns Summers raised in his own November 2013 “secular stagnation” speech. The problem is that monetary policy, on which the United States has relied since 1979, has run into a dead end, the zero lower bound. Had Washington not stepped in and provided a multi-year, multi-trillion dollar fiscal stimulus, capitalism likely would have collapsed. No one will admit it, but this is in fact what has happened after the 2008-2009 financial crisis.

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October 8, 2015

The hidden conflict within the fascist state for control of economic policy (3)

Part Three: The Zero Lower Bound and the Collapse of Neoliberal Monetary Policy

I have been going through this process in order to clarify for myself the logic of the current discussion of so-called negative interest rates — an oxymoron if ever there was one. This is part three of the series; part one and part two can be found here. I hope it also will have some use to readers.

To recap my argument so far:

Keynes in his 1930 essay, Economic Possibilities for Our Children, diagnosed the cause of the Great Depression as the improvement in the productivity of labor. Although at first admitting this improved productivity must sooner or later require reduction of hours of labor, in his 1933 essay, The Means to Prosperity, he ultimately proposed to fix it by a two-fold strategy: First, the state should maintain abundant credit at very low interest rates to facilitate private investment; second, the state had to lift total spending on commodities through deficit spending.

By the 1970s, however, this strategy — basically a strategy to avoid reducing hours of labor — ran into the twin economic maladies of stagnation and borderline hyperinflation — sometimes called stagflation in the popular press — leading to the political movement to get rid of state management of the economy entirely. In turn, this effort to get rid of state management is more popularly referred to by the name, neoliberalism, on the Left.

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October 4, 2015

The hidden conflict within the fascist state for control of economic policy (2)

Part Two: The collapse of the Keynesian policy consensus

As I stated in my previous post, the conflict over control of state economic policy can be traced to the Great Depression. Keynes set the state economic policy framework for this conflict by tracing the cause of the Great Depression to the improvement in labor productivity. According to Keynes in 1930, the depression was caused by capital reducing the need for labor faster than it could find new uses for labor. Of course, capital only has one use for labor: the production of surplus value, production of profit. Keynes was essentially confirming Marx’s prediction that the diminishing need for labor would lead to the collapse of commodity production.

Paul_VolckerAccording to Marx’s labor theory the price of a commodity is only the expression of the “socially necessary labor time” required for production of commodities. This implied that as the labor required for production of commodities fell, so would their prices. When the Great Depression hit, the problem pointed out by Keynes, that the reduction of labor was outrunning the pace at which capital could find new uses for labor, was expressed in deflation, i.e., generally falling prices.

Marx’s argument that the prices of commodities were tied to their labor value carried deadly implications for capitalism. Since prices paid for commodities was the only way the capitalists could recover their investment. Falling prices implies growing pressure on profit. If the capitalists could not sell their commodities at prices to cover their investment plus profit, capitalist production for profit would come to a standstill.

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October 2, 2015

The hidden conflict within the fascist state for control of economic policy

This article, Devaluations didn’t work, points to what I think is the real reason the Federal Reserve is desperate to raise its policy rate some time this year. It is becoming increasingly obvious monetary policy hasn’t delivered and the bankers are in danger of losing their control of economic policy.

According to the Economist: “Devaluations today haven’t had the positive impacts the end of Gold Standard did in the 1930s”. In the aftermath of the financial crisis of 2008-2009, bourgeois simpletons are deeply divided over how to replace the extraordinary measures taken to prevent collapse of capitalism with a set of policy tools that can be used to manage the crisis long-term. At the heart of this struggle is the question,

“Why aren’t currency devaluation policies creating inflation?”

To answer this question will require a little bit of economic history.

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June 11, 2015

To confront Washington, China should cut hours of labor now

From FT Economics today, China is dangerously flirting with deflation:“PBoC admits defeat in war on deflation.”

“China’s central bank this week faced reality and revised down its inflation estimate to half the level targeted by Beijing, implying it is failing — as global peers have before — to combat the threat of deflation.

That is not only bad news for a country struggling to stimulate growth, it also threatens a ripple effect around the world: cheap made-in-China goods contained price rises around the world when that was a force for good.”

China needs a plan B just about now and I think they should revisit the debate between Mao and Deng over China’s path for the most rapid development path.HKG105:CHINA-DENG:SHANDONG,CHINA,13OCT94-FILE PHOTO 03MAR59- Chinese leader Deng Xiaoping (L), is seen confering with the late Chinese Chairman Mao Tse-tung [Mao Zedong] in Shandong province March 3, 1959. B/W ONLY

Maoists will know I am referring to the debate of the 1960 and 1970s over the path for China’s development. The two sides of the debate is pretty simple to describe. The Dengists raised the slogan: “Black cat or white cat; the cat that catches the mouse is a good cat.” Essentially, their pragmatic argument was that it did not matter which measures the state employed, so long as those measures sped the development of the productive forces. This attitude, of course, horrified the Maoists who rightly saw in it the formula for unbalanced growth, rising inequality and,  eventually, full capitalist restoration. This debate shaped China history for most of the latter part of the 20th century and played a significant role in the Great Proletarian Cultural Revolution, which shook China and the world for more than a decade. In the end, Deng and the Dengists won, in large part simply by outliving Mao.

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June 4, 2015

Husson’s and Treillet’s call for labor hours reduction: Important but seriously flawed

I just finished reading this article by Michel Husson & Stephanie Treillet on the significance of labor hours reduction, Liberation Through Vacation. I want to offer some thought on why I think it is, on sfweek29ethe whole, as important as it is disappointing. I make these points, not because I disagree with what I think was the intended thrust of their article, but because certain folks will go after Husson’s and Treillet’s argument. For instance, A. Kliman has already taken David Graeber and others to task for their weak arguments on labor as just another attempt to rebrand social democracy. (See Kliman’s, Post-Work: Zombie Social Democracy with a Human Face?) My point here is to expose weaknesses in their argument because Husson and Treillet’s main thrust is, after SYRIZA’s election, the most important development to emerge from the crisis in 2015.

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March 8, 2014

How superfluous labor time creates inflation

Dollarpurchasingpower

The purchasing power of one dollar, as measured in percentage of an ounce of gold. (1970-2012)

I want to turn to the question of the impact of the growing mass of superfluous labor time has on the exchange value and prices of commodities. Once i am finished, I hope you will understand why inflation is not a mystery — and, consequently, why all inflation within the mode of production can be traced to the growing mass of unproductive labor.

As I explained in the previous post, the emergence of a significant mass of superfluous labor time within the mode of production is the result of the tendency toward overproduction of commodities, of overproduction of capital in the form of commodities.

According to Marx in Volume 3 of Capital, this overproduction necessarily results in the devaluation of capital: At the point where overproduction of capital becomes a general condition of the mode of production, no increase in the mass of capital can add to the mass of profits; indeed, the possibility exists that an increase in the mass of capital actually results in a fall in the mass of profits.

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February 26, 2014

How does superfluous labor time alter the impact of labor hours reduction on profits

In my last post I showed why I think a reduction in hours of labor would affect the “economy” the same way as a crisis brought on by the falling rate of profit does. The reduction of hours of labor has the effect of withdrawing a portion of the surplus labor time of the working class from exploitation and of reducing the time available to capitalists for production of surplus value.

However, so long as the labor time withdrawn from the capitalist does not reduce hours of labor below the duration necessary for the reproduction of the labor power of the working class, the working class should suffer no change in its material standard of living. The reduction only affects capital and has the same impact as a rise in the organic composition of capital. In this case, however, the rise in the organic composition of capital is achieved by a forcible reduction in hours of living labor imposed by the actions of the working class, rather than by an increase in the proportion of constant capital to variable capital resulting from a crisis of overproduction.

I think this is correct and would appreciate any input others might have on this question.

In my last post I deliberately left out the question of the role superfluous labor plays in this problem; however, in reality the efficiency of the employment of capital in the course of the labor day is not 100%. Some portion Photograph_of_President_Truman_with_his_some_of_his_top_advisers,_upon_his_return_to_Washington_from_the_Wake_Island..._-_NARA_-_200236of the labor day is wasted, i.e., does not produce value and, therefore, does not count as productive labor time. The portion of the labor day that might fall under this heading has been calculated by various yardsticks by both bourgeois simpletons and by labor theorists. The estimate employed by Borsch-Supan is that wasted labor time amounts to anywhere from 10% to 30% of the typical labor day. On the other hand, labor theorists, employing different measures from bourgeois economists and even among themselves arrive at between 50% and 66% of the typical working day. My own calculation, based on a comparison of currency prices to commodity money prices, finds this wasted labor time now amounts to more than 90% of the labor day.

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