The Real Movement

I took so long to write this post because I had to completely rethink my roadmap.

Somewhere I dropped a thread, I think. I have to address an important issue before I move forward. In particular, I want to point out a queer anomaly between the two charts below to see if everyone else can see what I see in the stylized chart I created applying Marx’s argument on our poor, historically doomed 19th century hand-loom weavers to Roosevelt’s poor, historically doomed depression-era dirt farmers.

First, here is the dirt farmers’ chart:

And here is the chart I created employing the actual historical data from the Great Depression:

Can you see my problem?

If you are sharp, you will notice, that my original chart for Roosevelt’s poor, historically doomed depression-era dirt farmers doesn’t predict any change in the mass of socially necessary labor time created by Roosevelt’s intervention in 1933 through the Agriculture Adjustment Program and dollar devaluation against gold. Yet the actual historical data show there was actually a huge change in the mass of socially necessary labor time following Roosevelt’s intervention.

There was not just a huge change in the United States, according to most students of the Great Depression, every country that altered the gold standard in the 1930s saw a similar result:

According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, The UK and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. … The connection between leaving the gold standard as a strong predictor of that country’s severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries. This partly explains why the experience and length of the depression differed between regions and states across the world. (Wikipedia)

Again, here is the dirt farmers’ chart based on stylized model, which show no alteration in the trajectory of socially necessary labor time:

And here is the chart based on the actual historical data, where, in reality, we get a sharp alteration in the mass of socially necessary labor time in 1933 that basically brings the contraction phase of the Great Depression to an end and begins a recovery of sorts — although this recovery is decidedly tentative and halting.

As can be seen in the above chart, “real” GDP, as measured in exchange value (gold), immediately stops contracting in 1933. By 1937, it is approaching where it was in 1932, when another downturn occurs in 1938. It seems that, by increasing the mass of superfluous labor time, Roosevelt’s devaluation and public spending not only stopped the economic contraction in place, but actually boosted the production of exchange value.

Recall again the argument Marx makes in the Grundrisse that capital “posits the superfluous in growing measure as a condition … for the necessary.”

And in “Time, Labor and Social Domination”, Postone takes this to mean that “With advanced industrial capitalist production, the productive potential developed becomes so enormous that a new historical category of “extra” time … emerges … in the form of “superfluous” labor time.”

This extra time emerges because capital cannot dispense with the unnecessary labor time, since labor time is social wealth for capital even when it is superfluous to the production of material wealth. On the other hand, as can be seen from the actual historical data, this growing mass of superfluous labor time is not just necessary for capital in its own right, it is now also the condition (Marx says the “life or death” condition) for the further expansion of socially necessary labor time.

To understand how this works, think of all of those workers who need subsistence wages while they are building aircraft carriers to threaten the planet.

Good jobs at good wages!

As I will show, this is, by far, the most staggering implication to be drawn from the chart above.

According to Postone, then, what I naively have been referring to as superfluous labor time is only superfluous from the standpoint of a future communist society. The region of my chart I have labeled superfluous labor time is actually somewhat inaccurately labeled, since superfluous labor time remains necessary for capital despite the fact that it is, at the same time, entirely superfluous to the production of material wealth.

Does this makes sense?

If not, here is how Postone argued his case in his own words from Time, Labor and Social Domination:

My examination of the dialectic of the two dimensions of capitalism’s underlying social forms has shown, however, that a general reduction of socially necessary labor that would be fully commensurate with the productive capacities developed under capitalism cannot occur, according to Marx’s analysis, so long as value is the source of wealth. The difference between the total labor time determined as socially necessary by capital, on the one hand, and the amount of labor that would be necessary, given the development of socially general productive capacities, were material wealth the social form of wealth, on the other, is what Marx calls in the Grundrisse “superfluous” labor time. The category can be understood both quantitatively and qualitatively, as referring both to the duration of labor as well as to the structure of production and the very existence of much labor in capitalist society. As applied to social production in general, it is a new historical category, one generated by the trajectory of capitalist production. (p. 374-75)

In other words, despite the staggering increase in the productive power of social labor, there is a growing mass of unnecessary labor time that capital literally cannot strip off precisely because labor time itself, not material wealth, is the measure of social wealth for capital!

For this reason, in the chart below you will notice that the area I formerly labeled “superfluous labor time” is now provisionally re-labeled “capitalistically necessary labor time”.

Capitalistically necessary labor time refers to labor time which necessarily arises solely from the requirements of the capitalist mode of production. It is labor time that does not create value and should not be confused with socially necessary labor time which is defined by Marx as that labor time, “required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time.”

Moreover, according to Marx, superfluous labor time is not just necessary for capital, the premise of the mode of production is of an ever growing expenditure of superfluous labor time as the indispensable precondition for the expenditure necessary labor time.

To be honest, I should have figured this out on my own since Marx says as much in the Grundrisse:

Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth. Hence it diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition – question of life or death – for the necessary. On the one side, then, it calls to life all the powers of science and of nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labour time employed on it. On the other side, it wants to use labour time as the measuring rod for the giant social forces thereby created, and to confine them within the limits required to maintain the already created value as value. Forces of production and social relations – two different sides of the development of the social individual – appear to capital as mere means, and are merely means for it to produce on its limited foundation.

Fortunately, Postone made sure we never forgot shit like this.

Finally, in contrast to Marx’s definition of socially necessary labor time, capitalistically necessary labor time is entirely superfluous and its expenditure creates no value. Thus, it follows that the exchange value of capitalistically necessary labor time in the market is always zero.

Just a lot of empty labor time, just like Postone said.

Which creates an obvious difficulty:

• how are we to distinguish commodities that contain socially necessary labor time from commodities that contain only capitalistically necessary labor time?
• what happens to prices when some commodities have a price that is partially composed of socially necessary labor time and partially composed of capitalistically necessary labor time.
• how would we distinguish which part the price of a commodity is which?

Postone left a lot of stuff for grad students to figure out, but let’s not hold our breath. We’re at least as smart as they are, so let’s continue.

In response to my last post, I received this question from a reader on my askFM:

Was the breakdown of production based on exchange value essentially a state mandated phenomena? Had FDR not made the decision to devalue the dollar, would this collapse have been delayed to a further date?

No, the Great Depression itself was the end of production based on exchange value, or, in common language, production based on money. But, as Marx explains in chapter four of Capital:

“As a matter of history, capital, as opposed to landed property, invariably takes the form at first of money; it appears as moneyed wealth, as the capital of the merchant and of the usurer. But we have no need to refer to the origin of capital in order to discover that the first form of appearance of capital is money. We can see it daily under our very eyes. All new capital, to commence with, comes on the stage, that is, on the market, whether of commodities, labour, or money, even in our days, in the shape of money that by a definite process has to be transformed into capital.”

So, (and this is the second implication of the chart, as I will explain), the breakdown of production based on exchange value amounts to “the end of history” wherein capital makes its first appearance as money. Capital is now emancipated from money, so to speak, existing apart from it and independent of it. Money once again has become money in its full sense: it has solidified into a lifeless hoard of gold, while capital ceaselessly circulates and self-expands, never resting, never able to assume the form of money again.

FDR’s actions were forced on him by the mode of production itself. The state could either assume the mantle of capitalist or capital itself would collapse.

*****

Back to our chart now, because Postone had some very interesting things to say about it that I briefly touched on in my answer above, although he passed from this earth before I constructed it:

As you will see, the chart provides two different measures of United States gross domestic product (GDP) for the years 1929 to 1939: one based on exchange value (the gold area) and one based on currency (defined by the green line).

But these are not just two different measures of GDP: as we know from my previous work with our poor, historically doomed hand-loom weavers and our poor, historically doomed dirt farmers, they are also two different measures of labor time. The yellow area represent socially necessary labor time, while the green line defines the actual aggregate labor time expended by society. To put this another way, the green line defines the labor time “paid” in dollars, while the yellow area is labor time that would have been paid if a commodity money were employed in transactions.

This chart was produced by my hand, but it is actually an attempt to visualize Postone’s argument from his groundbreaking reconstruction of Marx’s theory, Time, Labor and Social Domination. In that book, Postone explains Marx’s theory leads to a rather interesting result that I tried to capture from the actual historical data:

With advanced industrial capitalist production, the productive potential developed becomes so enormous that a new historical category of “extra” time for the many emerges, allowing for a drastic reduction in both aspects of socially necessary labor time, and a transformation of the structure of labor and the relation of work to other aspects of social life. But this extra time emerges only as potential: as structured by the dialectic of transformation and reconstitution, it exists in the form of “superfluous” labor time. The term reflects the contradiction: as determined by the old relations of production it remains labor time; as judged in terms of the potential of the new forces of production it is, in its old determination, superfluous.”

To call this labor superfluous is to seriously misapprehend its role in the capitalist mode of production; it is only superfluous from the standpoint of communist society.

If the chart from the previous post seems a bit bizarre to you, let me explain some of its implications.

In post V, I stated:

So have you ever wondered what happens to all the labor time that our hand-loom weavers spend producing their product that was not socially necessary?

Me neither.

To be honest, no one cares, actually; which is why almost no one produce anything by hand these days.

But, according to Postone, superfluous labor is still out there.

Masses of it — really, a whole lot more than you can imagine.

And not just in the U.S. Defense Department.

Scads, actually. Just a huge amount. The sheer amount would fry your brain trying to conceptualize.

All that labor time is still being expended by our poor latter-day hand-loom weavers without so much as a single second of real compensation by the market. It is just so much wasted labor time that creates no value and that consequently has no exchange value. And I think it accounts for what Postone calls the hollowing out of working society.

So we should try to quantify it, since a thing that can’t be measured probably doesn’t exist — even when a genius like Postone says it does.

At the risk of sounding like the complete asshole that I am, what I produced in the last chart is a tool for accurately measuring the mass of superfluous labor time in our so-called economy, using nothing more than the assumptions of Marx’s labor theory of value.

I present it again below in all of its simplicity:

The first and most important implication of the above chart is that it suggests that, by employing the assumptions of Marx’s labor theory of value rigorously, we can objectively identify and quantify a growing mass of superfluous labor time within the so-called United States economy. This mass of superfluous labor time is very similar to the sort of labor time we might expect if Postone’s hypothesis is correct.

In the first place, superfluous labor time is unnecessary labor time that has been expended without creating value, and which, therefore, is not expressed as exchange value in the market. This unnecessary labor time, however, has the peculiarity that, although it has no exchange value, since 1933 it retains a currency price.

Which is to say, the exchange value of the commodity and the price of a commodity no longer coincide, but increasingly diverge. As we will see, eventually, this divergence will become so extreme that as the exchange value of the commodity falls, the currency price of the commodity will increase.

The chart below singles out the portion of the chart labeled superfluous labor time. It shows that this sort of labor time begins to emerge at the nadir of the Great Depression, following Roosevelt’s devaluation of the US dollar against the gold standard and the initiation of the Agricultural Adjustment Act in 1933.

I refer to this effect as an inflation of dollar-denominated GDP:

In fact, inflation and superfluous labor time are simply two different terms for one and the same process. The first term, inflation, falsely identifies as a purely monetary phenomenon, what the second more accurately (but still not quite correctly) identifies as a growing mass of unnecessary labor time.

If you recall from the passage I quoted from Keynes, the inflation is deliberate in that, as we learned in post VI, it consists solely of “increasing expenditure upon [commodities] more rapidly than their supply comes upon the market” to prevent the collapse of prices. Roosevelt was basically doing this when he created a shit-ton of counterfeit dollars and used them to “purchase” the unsaleable crops of our poor, historically doomed dirt farmers, and a lot of other stuff — like unemployed labor power for the Work Progress Administration.

Eventually, Roosevelt would use the same method to rearm America and guide it to world domination, but that is the next post. For this post, it is probably enough that we realize that superfluous labor time can be identified and quantified. We can now move on to show, objectively, based on the actual empirical data, how this labor time develops over time and how it leads to what Postone calls “the hollowing out of working society.”

The obvious question at this point is how this highly stylized presentation holds up once we try to apply it to a real world instance — say the actual historical data drawn from the Great Depression?

I’m glad you asked, because I just happened to have some of that data here, which includes the actual historical data of the Great Depression years 1929 to 1939.

The chart for that data looks something like this:

When I apply the same template to identify the regions of socially necessary labor time and superfluous labor time that I applied to our poor, historically doomed dirt farmers and to Marx’s poor, historically doomed hand-loom weavers, I come up with this chart:

Now, I want to be clear that I have done nothing here with regards to US GDP in the 1930s that I haven’t already done with the stylized information for our 1930s dirt farmers:

Which is to say, first, I took the stylized information I developed based on Marx’s text in chapter 1 of Capital and applied it to the actual historical data drawn from US GDP during the 1930s. I could do this because, no matter that in the first case we are talking about 19th century hand-loom weavers and in the second case we are talking about an innumerable variety of types of 20th century labor, in both cases we are talking about the same thing: abstract homongenous labor.

Again, abstract homongenous labor being what it is, namely “one and the same sort of labour, human labour in the abstract”, we can smoothly substitute the previously developed charts showing the expenditure of the actual and socially necessary labor times of our poor, historically doomed hand-loom weavers in the 1860s or that of our poor, historically doomed dirt farmers in the 1930s, with the innumerable labors of the entire US economy in the 1930s without much fear of committing a theoretical faux pas.

Got that?

Okay, let’s proceed.

Second, as in the case of our poor, historically doomed dirt farmers, I have carefully shown that bizarre dogleg in 1933-34 where Roosevelt devalues the dollar from 20.67 dollars to one troy ounce of gold to 35 dollars to one troy ounce of gold. The dogleg is nothing more than an alteration in the standard of prices — the gold standard — following Executive Order 6102. When Roosevelt devalues the dollar against gold. After that devaluation, you will remember, he was then free to print up a boat load of dollars and use those dollars to buy the unsold crops of the dirt farmers under the AAA.

Third, I then label the two regions of the chart “socially necessary labor time” and “superfluous labor time”.

You can also see that once Roosevelt devalues the dollar, a portion of labor time that is superfluous to the production of value has now acquired a “price”. The term price here is in quotes, because it is entirely fictitious.

How do I know the price is fictitious?

You already know how I know it is true.

Our dirt farmers, remember?

Prior to the AAA, a portion of their crops could not be sold. The market price of this portion, based on exchange value calculation, was zero. After Roosevelt devalued the dollars and prints up the currency, he was able to “purchase” the crops with his crapload of phony paper dollars. That crapload of phony paper dollars had no value of its own.

Basically, Roosevelt used valueless currency to buy valueless crops — a fair trade by labor theory standards.

This would suggest that the labor time that was expended on production of the unsold crops was superfluous, had no exchange value and, therefore, no price in the market.

It also suggests that, through devaluation, Roosevelt altered currency prices to include at least a portion of superfluous labor time.

In the remaining posts I am going to discuss the implications of that chart I created above, see what happens when I extend it down to the present and discuss how it confirms Postone’s argument on the hollowing out of working society.

I will then fold all of this into a single paper and leave it on my public drive for comments and criticism.

Our next step begins with a brief comparison.

In our discussion of the hand-loom weavers, we noted that although they were only paid for their socially necessary labor time in the market, Marx argued they continued to labor the same amount of time as before. We created a chart that demonstrated what these two durations of labor time actually looked like:

I then extrapolated Marx’s argument ten periods to produce this chart:

In my last post, I substituted mid-1930s, depression-era dirt farmers for Marx’s mid-19th century hand-loom weavers and converted the above raw labor time information into exchange values to arrive at this chart:

Now, let me say a word about this chart, because it is not as simple and straightforward as it appears.

First, it should be noted that there are two lines, not one. This is because we are dealing with money (gold) and currency (dollars). Keep in mind that money is the actual commodity, while currency is the token typically used in transactions that represents money symbolically. Currency is NOT money; it is pegged to money and this peg can be changed or adjusted.

Second, as I said in post V, when I convert raw labor time into exchange values, labor time that is not socially necessary is stripped off:

To be clear, this was not just labor time that created no value. Empirically, in Marx’s labor theory of value this labor time didn’t exist at all! It was stripped off by commodity exchange. Only labor time that creates value remains in Marx’s theory and socially necessary labor time remains as a residual because it alone is expressed as exchange value

This is important to understand because it means that, for us, the only labor time that counts appears in the region below the exchange value line. This is socially necessary labor time, labor time that produce value and is, therefore, expressed in the market as exchange value. All labor time taking place above this region is superfluous to the creation of exchange value and is no longer expressed anywhere in our calculations. This unnecessary or superfluous labor time literally no longer exists as far as labor theory of value is concerned:

In reality, however, it continues to exist and Marx acknowledges that it exists when he says:

The hand-loom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour’s social labour, and consequently fell to one-half its former value. (My emphasis)

In other words, the hand-loom weaver still needed the same time as before to do what they need to produce their commodity, but their labor itself created less value. There was no change in the actual amount of labor time they needed as individuals to create their product. But a portion of their labor time now became superfluous to the creation of value. Which is to say, it now fell above that exchange value line in the above chart — in the region I have labeled “superfluous labor time”.

Everything Marx said about the hand-loom weavers I am applying to the dirt farmers as I stated in post VII.

… abstract homongenous labor being what it is, namely “one and the same sort of labour, human labour in the abstract”, we can smoothly substitute the previously developed chart showing the expenditure of the actual and socially necessary labor times of our poor, historically doomed hand-loom weavers in the 1860s for that of our poor, historically doomed dirt farmers in the 1930s, without much fear of committing a theoretical faux pas …

Now, let’s see what happens when we add Roosevelt’s devaluation of the dollar in 1933 and the start of the Agricultural Adjustment Act the same year:

Based on the above chart, I can only come to the conclusion that, beginning in 1933, Roosevelt’s fascist AAA program basically paid our poor, historically doomed dirt farmers for labor time that produced no value at all, i.e., superfluous labor time, as a means of exiting the Great Depression.

At the same time, beginning in 1933, the prices of commodities no longer expressed the socially necessary labor time required to produce them. Beginning with 1933, we must make a distinction between the prices of commodties and the value.  As I will show next, the historical data appears to be suggest that this is what is happening for the entire economy.

The implications of the data directly support Postone assertion that working society is being hollowed out.

So, now I want to graphically demonstrate the argument I made in the last post.

In my last post I said,

…if Roosevelt wanted to pay our poor, historically doomed dirt farmers for their socially unnecessary labor time, he could print up a bunch of paper dollars and use these dollars to buy the excess crop that the farmers couldn’t sell in the market.

To be honest, the dirt farmers would just see an envelope full of dollars. They could not tell, just by looking, whether the dollars were “real” or “counterfeit”. In fact, as far as they knew, government couldn’t counterfeit dollars, because the right to issue dollars belonged to government by law. So, they were happy to accept the dollars as genuine cash in return for their unsold crops and use the cash to bank their mortgages to the banks.

Roosevelt had saved them!

In any case, consider the alternative. To demonstrate what that might look like, let’s assume our poor, historically doomed dirt farmers suffered the full effects of the Great Depression without any state aid whatsoever, even as the development of the forces of social production reduced the value created by the expenditure of one hour of their labor time by — let’s say — 10% annually between 1929 and 1939. The results in terms of the market prices the dirt farmers realized for their crops in money (gold) and in currency (dollar) might look something like this:

The above chart show the declining exchange value of one hours produce denominated in both money (gold), the yellow line, and currency (dollars), the green line, each year from 1929 to 1939. Like our poor, historically doomed hand-loom weavers, our poor, historically doomed dirt farmers are slowly being ground under by the progress of social production. From our poor, historically doomed dirt farmers perspective, Roosevelt’s evil deal wasn’t so evil after all.

So when the Agriculture Adjustment Act came into effect in 1933 as Roosevelt planned, the farmers were more than happy to do what he asked. The state, printed up a crapload  of new currency and bought up all of the unsold crops of the dirt farmers while convincing them to leave a portion of their fields idle in the following years in order to relieve the overproduction of farm goods. At the same time, Roosevelt devalued the dollar by 70% against gold to establish a new lower price standard.

Now the chart for market prices probably looked something like this instead:

This second chart is almost exactly the same as the first chart with the exception that we get that bizarre dogleg in 1933-34 where Roosevelt devalues the dollar from 20.67 dollars to one troy ounce of gold to 35 dollars to one troy ounce of gold. The dogleg is nothing more than an alteration in the standard of prices — the gold standard — following Executive Order 6102. When Roosevelt devalues the dollar against gold, he is then free to print up a boat load of dollars and use these dollars to buy the unsold crops of the dirt farmers.

Remember, this should not be a surprise to anyone, since Marx already explained how this little scam works in Capital, chapter 3:

If the paper money exceed its proper limit, which is the amount in gold coins of the like denomination that can actually be current, it would, apart from the danger of falling into general disrepute, represent only that quantity of gold, which, in accordance with the laws of the circulation of commodities, is required, and is alone capable of being represented by paper. If the quantity of paper money issued be double what it ought to be, then, as a matter of fact, £1 would be the money-name not of 1/4 of an ounce, but of 1/8 of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as a standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2.

The corollary of this general law is that if Roosevelt wanted to create a lot of currency quickly to buy the unsold crops of the dirt farmers (and a lot of other stuff), all he had to do was to devalue the dollar against the standard of prices, i.e., gold, which he did in 1933, in Executive Order 6102.

I hope I haven’t lost anyone so far, because this brings us to the really difficult part now; the part that Marxists seem conceptually incapable of understanding.

Take a deep breath and sit down.

You may need your favorite recreational medication when I am done.

As I said in the last post, according to Marx, in an exchange, the money commodity will stubbornly express the labor value of another commodity as the price or exchange value of that commodity — and no more nor less. This is the limitation of commodity money in a commodity production and exchange system.

But Marx’s law includes an exception that was so big you could drive the family car through it. Roosevelt’s brilliant Wall Street advisers knew exactly how to easily circumvent Marx’s silly limitation and this is step three:

Don’t use money to pay the dirt farmers; use currency instead.

Yes, Marx’s limitation had a serious loophole. In most transactions, people didn’t actually use money; they used currency — a state issued substitute for money. And by 1933, no one was using money at all. They were hoarding every bit of gold they could get their hands on — mostly because that’s what people did during depressions.

Still, even in 1933 a lot of people confused currency with money, but Marx explained the difference between the two in chapter 3 of Capital:

Paper money is a token representing gold or money. The relation between it and the values of commodities is this, that the latter are ideally expressed in the same quantities of gold that are symbolically represented by the paper. Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value.

Currency, said Marx, isn’t money. It is a token or symbol of money, used to replace money in circulation as a convenience. It represents money only to the extent the state regulates its relation with an actual money like gold. Prior to 1933, the exchange ratio of, for instance, dollars to gold was 20.67 dollars to one troy ounce of gold. Washington regulated its issuance of dollars to maintain this peg.

This peg of dollars to gold was called the gold standard.

The gold standard was the law, but don’t be confused. The gold standard was not a hard physical law as in E = mc², nor was it a hard economic law as in the law of the tendency of the rate of profit to fall. The gold standard was a juridical law, as in a rule created and enforced through the state to regulate its own behavior. Like all such rules created by the state (and unlike physical and economic laws), this law could be abolished or replaced by the state at its whim.

Now changing the gold standard had its consequences for sure, but in this case, it was precisely the one Roosevelt needed.

Again, Marx explains:

If the paper money exceed its proper limit, which is the amount in gold coins of the like denomination that can actually be current, it would, apart from the danger of falling into general disrepute, represent only that quantity of gold, which, in accordance with the laws of the circulation of commodities, is required, and is alone capable of being represented by paper. If the quantity of paper money issued be double what it ought to be, then, as a matter of fact, £1 would be the money-name not of 1/4 of an ounce, but of 1/8 of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as a standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2.

In other words, if Roosevelt wanted to pay our poor, historically doomed dirt farmers for their socially unnecessary labor time, he could print up a bunch of paper dollars and use these dollars to buy the excess crop that the farmers couldn’t sell in the market. But then he would have to devalue the dollar against gold — which is what he did in his famous Executive Order 6102, devaluing the dollar by more than 70% from 20.67 to 35 dollars against an ounce of gold.

Roosevelt’s fancy Wall Street advisers knew that changing the gold standard would have no impact whatsoever on the real economy. It would only effect how much currency Roosevelt could pay for the crops the dirt farmers produced.

Unfortunately, this fascist sleight of hand did not matter for our poor, historically doomed dirt farmers. They still were as historically doomed as the poor, historically doomed hand-loom weavers that came before them. But they didn’t know this in 1933 and no one could have convinced them of this fact.

It doesn’t matter that they didn’t believe they were doomed. Today, you can walk from one end of Oklahoma to the other and not find a single dirt farmer. They are extinct as a class; the forces of social production have abolished them.

To get an idea of what it looks like when prices no longer express the socially necessary labor time required to produce commodities will take several steps.

In the first step we have to reproduce some of the work we did with Marx’s example of the hand-loom weavers in chapter 1 of Capital.

This is the easy part.

It is the easy part because abstract homongenous labor being what it is, namely “one and the same sort of labour, human labour in the abstract”, we can smoothly substitute the previously developed chart showing the expenditure of the actual and socially necessary labor times of our poor, historically doomed hand-loom weavers in the 1860s for that of our poor, historically doomed dirt farmers in the 1930s, without much fear of committing a theoretical faux pas, thusly:

What I present in the above chart is merely the same stylized information presented in post IV, now applied to our poor, historically doomed depression era dirt farmers.

In other words, starting from some undefined time in the past, I assume several cycles during which improved machines are introduced into U.S. agriculture, so that each improvement in the forces of social production successively reduces the socially necessary labor time required to produce the farmers’ product by half again.

Again, the red bars (to the rear) show the actual labor time expended by the farmers, while the blue bars (to the front) show the value of the product produced by them. The value of the product is expressed in the prices paid to the farmers in the market when they go to sell their product.

The chart tells the ugly story: the dirt farmers are being forced to work long hours to squeeze an ever diminishing quantity of value from their own labor time. Their working day is being progressively hollowed out by the simple progress of the application of improving science and machines.

Everything is the same as in post VI, except this time we are talking about depression-era dirt farmers instead of mid-19 century hand-loom weavers.

*****

Now comes the hard part.

Our poor, historically doomed dirt farmers were taking a savage beating in the free market because they were being rewarded, not for their actual labor time, but only for the socially necessary labor time they were expending on producing their crops:

In the above chart, I have changed the colors of the bars in period two so I can focus on the details of what Roosevelt wanted to change. In yellow is the amount of exchange value the market paid the farmers for their crops. The yellow bar is equal to the exchange value of the crops. In green is the amount of cash Roosevelt actually wanted to give the farmers. The green bar is more or less equal to the actual labor time expended by the farmers.

As you can see, Roosevelt wants to pay the farmers twice the equivalent in cash that they would get if they were paid the value of their crops.

As bizarre as this may sound, paying more for a commodity than its value is not as easy as it sounds; in fact, it is damn near impossible. Sure you can walk into a Walmart today and pay $2.00 for a $1.00 bar of candy, but commodities themselves get real scarce when you exchange them for less than their value. And, in a pure commodity money exchange regime, there is no way as a general rule to pay more than the value for one commodity without accepting less than the value of another commodity.

Thus, according to Marx, in an exchange, the money commodity will stubbornly express the labor value of another commodity as the price or exchange value of that commodity — and no more nor less.

This is the limitation of commodity money in a commodity production and exchange system.

But Roosevelt was a brilliant politician from New York with equally brilliant Wall Street advisers; they found a rather devious way around this silly limitation.

In the last post I argued that, eventually, the state would have to find a way to pay working society for labor time that was not socially necessary on pain of its dissolution.

Well, “eventually” turned out to be somewhere around 1933, in the middle of the great Depression.

And, to be fair, the state did not set out to actually pay people for labor that was not socially necessary; it just kind of ended up that way.

What they set out to do was, among other things, save the social equivalent of our poor, doomed hand-loom weavers, poor doomed depression-era farmers.

Prices in 1933 were crashing in a deflationary death-spiral not unlike that faced by our poor doomed hand-loom weavers. The state was finally forced to intervene to take control of capitalist production, beginning with agriculture.

One source put it this way:

Within days of his inauguration in 1933, President Roosevelt called Congress into special session and introduced a record 15 major pieces of legislation. One of the first to be introduced and enacted was the AAA, the Agricultural Adjustment Act. For the first time, Congress declared that [it] was “the policy of Congress” to balance supply and demand for farm commodities so that prices would support a decent purchasing power for farmers. This concept, outlined in the AAA, was known as “parity.” AAA controlled the supply of seven “basic crops” – corn, wheat, cotton, rice, peanuts, tobacco and milk – by offering payments to farmers in return for taking some of their land out of farming, not planting a crop.

As you can see from the above quote, the early Roosevelt fascist programs were based on a flawed idea: the state was “offering payments to farmers in return for taking some of their land out of farming, not planting a crop.”

Owing to the improvements in application of science and on the progress of technology in agriculture the need for human labor in the sector was plummeting. Consequently, the value of agricultural products and their prices plunged. Very quickly farmers found themselves in the same situation as our poor doomed hand-loom weavers: working long hours for very little return. Roosevelt promised he could fix this by, essentially, paying them to not grow stuff — an early example of what is now known as basic income.

It took a genius like Keynes to see the flaw in this dumb idea:

To judge from some utterances of the Chancellor of the Exchequer, he has been attracted to the idea of raising the prices of commodities by restricting their supply. Now, it may well benefit the producers of a particular article to combine to restrict its output. Equally it may benefit a particular country, though at the expense of the rest of the world, to restrict the supply of a commodity which it is in a position to control. It may even, very occasionally, benefit the world as a whole to organise the restriction of output of a particular commodity, the supply of which is seriously out of balance with the supply of other things. But as an all-round remedy restriction is worse than useless. For the community as a whole it reduces demand, by destroying the income of the retrenched producers, just as much as it reduces supply. So far from being a means to diminish unemployment, it is, rather, a method of distributing more evenly what unemployment there is, at the cost of somewhat increasing it

The only thing to be gained by paying farmers not to grow crops, said Keynes, is to make everyone in the farming community poorer!

As an alternative, Keynes proposed a rather startling axiom:

For commodities as a whole there can be no possible means of raising their prices except by increasing expenditure upon them more rapidly than their supply comes upon the market.

In other words, to stop the collapse of prices in the Great Depression, the state had to pay more for commodities despite their diminishing value.

Price would no longer express the socially necessary labor time required to produce a commodity, its value.