The Real Movement

If I don’t get pushback on this post, I will be very surprised for the simple reason that I am about to make a number of what may be considered highly controversial arguments. However, each particular argument will be grounded in statements I have already made in the course of this series. Thus, as controversial as this arguments sound, they should follow logically from the statements I have already made.

Below I again present the last chart from the previous post that tracks combined federal, state and local government spending relative to aggregate United States gross domestic output from 1860 to 2020, according to http://www.usgovernmentspending.com.

It is important to understand that, as I stated in the previous post, I am assuming that all of this federal, state and local spending consists of unproductive consumption, which is to say the state produces no commodities of its own; it is a parasite on society at large. According to Marx and Engels, the economic actor in question must come into money by selling a commodity. State expenditures, however necessary some might consider them, fall under the same category of transfers as quit-rent-corn and tithe-corn the peasant produced for the feudal lord and the parson. As Engels clarified, “To become a commodity a product must be transferred to another, whom it will serve as a use value, by means of an exchange.” Clearly, taxes and other like state revenue do not fall in this category.

Based on all of this, I have concluded that state revenue and expenditures should not be treated the same way as other elements of United States gross domestic product.

Let me take this one step further and suggest that all federal, state and local government spending is superfluous and involves the expenditure of superfluous labor time — as now shown in the chart above.

This means, we now have a real theoretical problem with the historical data. The data we have been relying on assumes that state expenditures should be added to aggregate output of the national economy. However, we know that, in Marx’s labor theory of value, superfluous labor “does not count as labour, and therefore creates no value.”

Which means, and as Chart 3 above shows, federal, state and local government expenditures do not add to the value of United States gross domestic product, but actually subtracts from United States gross domestic product. This is because, not only does the state not add any new value to circulation, it unproductively consumes some definite portion of the existing value already in circulation.

But here is where it gets a bit tricky, because, as we saw in an earlier post, beginning in 1933, Roosevelt’s fascist AAA program basically started paying 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.

It is only natural to ask if this bizarre change in behavior on Washington’s part had any effect on how United States GDP is calculated according to Marx’s labor theory of value. Not surprising, we find out that it indeed does have an affect on how federal state and local expenditures are calculated, as is shown in the chart below.

I was looking at historical data on United States GDP and it occurred to me that all of the data before 1933 is suspect, perhaps before 1971 as well. The problem is the way they account for state expenditures in those numbers. Marx’s labor theory of value would count those expenditures as destruction of value, but the Bureau of Economic Analysis, which compiles the figures for United States gross domestic product, counts government expenditures as additional value.

This essentially mean that labor theory differs from bourgeois simpletons in that before 1933 state expenditures count as a drag on the output of the national economy, since these expenditures add nothing to national output and only unproductively consume real capital. Before the breakdown of production based on exchange value this destruction simply would not appear as anything other than a loss of potential GDP in the same way that any unproductive labor time would not be counted in a market exchange. It would, for all intents and purposes, fall under the heading of superfluous labor time, as a portion of labor time that created no value.

But what about after 1933 — after FDR issued Executive Order 6102?

I’m glad you asked, because then it starts to get a bit complicated.

After the breakdown of production based on exchange value, federal, state and local government expenditures are immediately captured as a portion of superfluous labor time that, while still superfluous and creating no value, nevertheless has a price denominated in debased valueless state-issued currency. In other words, this labor time would appear as a component part of GDP under the same heading as the excess unmarketable crops of our poor,. historically doomed dirt farmers that also had no market price prior to the AAA, but acquired a price denominated in the same debased fiat under FDR’s AAA program.

Despite the fact that labor time expended by public employees and vendors in the state sector create no value, this expenditure would appear to have a price denominated in currency and be counted as an aliquot part of gross domestic product of the United States, just as the excess output of the dirt farmers.

So, we get this really bizarre inversion in our chart where, for instance, World War One, located toward the middle of the chart, appears as a rather sharp decrease in U.S. gross domestic product because of the volume of military expenditures, while World War Two appears on our chart as an even sharper increase in gross domestic product, because of the much greater volume of military expenditures just two decades later.

In both case, the expenditures have no value and unproductively consume existing value, but in the second case, the grisly business of war appears for the first time in human history as a ‘productive’ activity, productive of profit to the extent an ever growing mass of excess capital and an ever growing surplus population of wage workers can be set in motion by state expenditures.

Well, that conclusion was a bit of an anticlimax, wouldn’t you say?

I mean, if all I have to say after this increasingly tedious series is that the chart everyone and her mother thinks is an accurate representation of the state of the United States national economy over the last ninety years is in fact an accurate representation of the state of the United States national economy over the last ninety years — more accurate even than my own fave representation of the state of the United States national capital over the last ninety years based on physical units of gold — then what was the god-damned point of this series?

Well, yeah — sorta — a more accurate representation of what?

“What?” was the god-damned point of this series.

Let me explain.

This first chart is a pretty accurate representation of the gross domestic product of the United States national economy — note the term, national economy — over the last ninety years or so.

And this second chart, I believe, is a pretty accurate representation of the gross domestic product of the United States national capital — again, note the term, national capital — over the last ninety years or so.

A lot of writers, even, embarrassingly, a lot of Marxist writers, confuse a national economy with a national capital, but a national economy can and will be populated with many more players than just capitals.

In the Communist Manifesto, for instance, Marx and Engels mention quite an assortment of players who were around in their day: feudal lords, vassals, guild-masters, journeymen, apprentices, serfs, small manufacturers, shopkeepers, artisans, peasants, tradespeople, landlords, pawnbrokers, and the lumpenproletariat — all of whom exist side by side with capitalists.

One of those players, an increasingly massive one during the twentieth century, has been the nation state. The state too is decidedly not a capital, nor even a commodity producer. For lack of a better term, it can even be thought of (at least provisionally) as an anti-producer, in the sense that it not only does it produce no commodities to sell in the market, it unproductively consumes the commodities others in society have themselves produced.

Also, I opt for the term anti-producer instead of the term consumer for the obvious reason that the latter term tells us nothing. Every member of society who is a producer is also a consumer. This means, for instance, every capital is a consumer, a productive consumer. Production itself, as Marx explained, is also an act of consumption. The state differs from these consumers in that it alone in society consumes while producing nothing.

(NOTE: There may, of course, be exceptions to this rule, but, for the purposes of this post, I assume it holds as the general case.)

But the composition of what we call the economy has changed a lot since the days of the Communist Manifesto. On the one hand, how many feudal lords, vassals, guild-masters, journeymen, apprentices, serfs, small manufacturers, shopkeepers, artisans, peasants, tradespeople, landlords, pawnbrokers, and lumpenproletarians do you exchange commodities with on a typical day? Personally, I haven’t had lunch with a feudal lord or one of his vassals in like … forever, and the closest thing to a lumpen I know is the guy who may or may not sling drugs on the corner down the street — depending on how well I know you.

The state, on the other hand — what Marx called that “appalling parasitic body, which enmeshes the body of French society like a net and chokes all its pores.” — might have been more than a bit player in the economy in Marx’s day, but not much more. In the United States, which enjoyed the freest, most favorable, conditions at that time, in terms of not inheriting a bloated parasitic feudal machine, the federal, state and local governments combined likely accounted for less than five percent of gross domestic output.

As this third chart shows, that same state now accounts for about thirty-five percent of gross domestic output during peacetime — perhaps three times the size of the state relative to the entire economy during the height of a full-blown civil war being fought for its very existence across the entire breadth of its own territory!

I added the usual markers to orient you on the timeline, which, on this chart, goes further back in history than any chart produced for this series so far — 1860, just prior to the outbreak of the Civil War. I did this, to provide some long-term perspective on the actual size of the United States state machinery relative to the rest of the so-called national economy.

Let’s look at this timeline, but concentrate only on peacetime expenditures, okay?

• 1860: Prior to the Civil War, the state absorbed less than five percent of GDP.
• 1866-1917: After the Civil War, the state increased in size significantly to about seven percent GDP.
• 1920-1929: After World War One, but prior to the Great Depression, state share of GDP again rose, this time to about twelve percent of GDP.
• 1930-1941: With the onset of the Great Depression, GDP fell dramatically, of course, but, surprisingly, despite this fall, the state share of GDP nearly doubled to almost twenty percent.
• 1947-2020: Again, skipping World War Two, we find that, in the post-war period, the state’s claim on a share of US GDP has gradually and steadily crept up from twenty-three percent in 1947 to forty-four percent in 2020 — averaging about about thirty-two percent over the entire period.

There has been a steady upward creep in the share of GDP absorbed by the state even when we abstract from the massive military conflicts fought over the 160 year period since the Civil War. Indeed, each war appears only to accelerate the steady growth in the share of aggregate GDP being absorbed by the state.

Now why might this be significant?

Come on, you know the answer; or, at least, you can guess what I am going to say in the next part.

If we zoom out from the last chart I showed you in the previous post and look at the entire period from 1929 to 2020, including the projected impact of the emergency measures taken to slow the spread of the CoViD-19 pandemic in the United States, the resulting chart looks something like this:

The chart above is actually a mashup of two different charts. Both show the annual gross domestic product (GDP) of the United States national capital from 1929 to 2020. The first is denominated in commodity money (yellow) and the second is denominated in valueless US currency (green). I threw in a few markers just to help folks figure out what is happening at several points along the time line in the world of bourgeois economics.

Let’s break the two charts out and examine them separately.

In the above chart, the Gross Domestic Product of the United States national capital is denominated in commodity money. (Again, I threw in a few markers just to help folks figure out what happened where in the world of bourgeois economics on the timeline.) We can see that, when expressed in commodity money, GDP has gone through several characteristic phases of extreme capitalistic expansion and contraction during the period from 1929 to 2020 and is still firmly in the grip of its most recent contraction that began in 2001.

What should be surprising about this chart to you is that there is absolutely nothing surprising about this chart.

Since the nineteenth century, we have become accustomed to thinking about the normal cycle of boom and bust characteristic of the capitalist mode of production. Here we have reproduced three such cycles beginning with 1929 and continuing until the present. They differ only in the scale and duration of each bust cycle — the first lasting about four years, the second lasting about ten years and the third lasting, so far, about twenty years. Similarly, the boom cycles, between busts, vary in duration, with the longer of the two lasting from 1934 to 1971 — thirty-seven years — and the shorter lasting from 1981 to 2001 — just twenty years.

Again, there is nothing remarkable about this chart. It is exactly what any scholar of Marx would expect to see, apart, perhaps, from the scale or duration of the cycles, at any point along the timeline of the capitalist mode of production.

It is in fact the lack of anything remarkable about that chart, where GDP is denominated in physical units of gold, against what we know about the normal behavior of the capitalist mode of production that should alert us to the basic incongruity of this second chart, denominated in U.S. dollars, with everything we know about the behavior of the capitalist mode of production.

The chart shows none of the characteristic phases of extreme capitalistic expansion and contraction during the period from 1929 to 2020; there are no cycles of boom and bust, no characteristic explosions when, as Engels put it, “The mode of production is in rebellion against the mode of exchange” — not even evidence of anything as banal as what Schumpeter called, creative destruction — literally nothing. It is as though some Doctor of Economics put capital into a medically-induced coma to prevent its ever-worsening seizures from killing it!

It is exceedingly strange that a mode of production long recognized by Marxist and non-Marxist alike as being characterized by anarchy and catastrophic explosions should have gone for ninety years without a single event like that which occurred with such regularity before the 1930s. In place of those massive economic upheavals, we have mild recessions induced by the central bank and fiscal authorities, the worst of which produced a temporary modest fall in year-on-year GDP in 2009-2010 only after bringing the global financial system to the brink of total collapse.

So, which of these charts is the accurate of the two?

Before you answer, let me remind you that the second chart includes not just the region I labeled socially necessary labor time, but also the region of labor time that I have provisionally labeled capitalistically necessary labor time. This label implies that, for capital, this labor time is as necessary for the mode of production as the region labeled socially necessary labor time. Moreover, according to Marx, capitalistically necessary labor, although superfluous to the production of material wealth, becomes, in growing measure, the condition for the expenditure of socially necessary labor. For capital, it is necessary labor time, labor time that is vital to this peculiar form of social wealth.

The conclusion we are led to inevitably is that, from the standpoint of the normal operation of the mode of production, the second chart has to be the accurate chart — and this despite the fact that we know it to include a massive quantity of absolutely superfluous labor time, labor time that produces no value, labor time that is not required for the production of material wealth. So long as capital is the form of wealth in society, this labor time cannot be abolished.