Zombie Capitalism: Global Crisis and the Relevance of Marx

Faced with the financial crisis that began in 2007 some economic commentators began to talk of 'zombie banks" financial Institutions that were in en 'undead' state incapab� of fulfilling any positive funcVon but representing a threat to everything else.

n ::J: ::c

RIS HARMAN ,,'

pic Hi tory of the Wand

However 21st century capitalism as a whoM! is a zombie system dead to achieving human goals and responding to human feelings but capatMe o f sudden spurts of adivity that cause chaos all around. Chris Harman shows how Mant's understanding of capitalism is essential fOf any explanation of how this world emerged and developed over the last century and e half. He shows that the rools of the crisis today lie not in financial speculation but much deeper in a crisis of profitability which 30 years of the neoliberel offensive have failed to reverse.

L 293

The future of the system will not be a return to steady growth but repeated instability and upheaval, together with a rising ecological crisis. Finally he looks the force in society capable of ending the rule of capital -the global working dass_

'Apowc·'oI, )IT)reher: and ae ble en- �ue f l".3pltaJlsm 11)!Tl O'le Jf the wOll:l'5 pre-eminent Marxl.:;1 e )OOT.TlISts ThIS book needs to be tCcnnng a threat to everything else." What they do not recognise is thai 21 St (;cn. tury capitalism as a whole IS a zombie system. �ecmlngl) dead when It comes ro achienng human goals and responding to

worker it produee\ privation. It produces paiaces-bul for the worker, hovels. It produces beauty-but for [he worker, defor· mity ... The worker unly feci... himself outside his work, and in hiS work feels outside himself. He feels .n home when he is not working; when he IS working he does nor feel at home.

human feelings, but cap.lble of suddcn spurt!> of activit), that In his early wmings Marx called wh,lt was happening ··alien­

cause chaos all around.

ation",

raking op a philosophical term developed by the

philosopher Hegel. Marx's contemporary Feuerbach had used the A world turned against ourselvcs

term to describe religion. I t was, he argued. a hu man creanon rhat people bad alloned -to dominate their li"e!>. Mar., now !.aw capi­

There has onlr been one serious tradmon of analysis to attempt to provide an ;u,:ellum of the system in these term!>. It is thai which originated III the Writing!> of Karl .Marx and hi!. I{)ng-timt· col­

tahsm In the same way. It was human labour Ih,1I produced new wealth. But under capitalism that wealth wa� turned infO a mon­ ster dominating them, demanding to be fed by ever more labour.

league I-redt:rick Engels. Marx came to adulthood 111 the early 18405, JUSt as industrial capit:llislll began to IllJke its first, limited, impact on southern Germany where he wa� hOrT!. Engels was sent by hiS father to help manage J factor) in Mnnchestcr, where the new system was al­ rc.ld)' flourishing. The}' shared With almost the whole of their generation of German inrellecrual roulh a desire to overthrow the oppressive PrussIJn feudal system of class rule presided over b)' a monan.:h wlrh despotic powers. But ther soon began to grasp that the mdustrial c.lpltalism that was supplementing feudalism con­ tai ned oppressive features of its own. Abo\'e all it was characterised by an Inhuman subordination of the Illass of people to the work they did. What Marx was beginning to discover ahout the fUllc.:liolling of [his then-new system led hllll to undcrr,lke a crilll.:al reading of ItS most t:mllleor proponents, political ccono­ miSts like Adam Smith and David Ricardo. HIS conclusion was that, although the system \'asrly incre.. sed the amount of wealth humans could produce, It aho denied the maJorit), of them [he

•

The object that labour produces, ITS product, stands opposed to it as smnethmg alien, as a powt·r independent of the producer. The more the worker exerts himself in hi� wurk, the more pow­ erful the alien, objecflve world becomes which he brings into bemg over against himself, the poorer he and his inner world become, and the less the}' belong to him ... The worker places his life in the object: but now It no longer belongs to him, but to the obJecl . .. lQ As Marx pur It In hi!. notebook!> for C..a/Jltaf In the early 1860s: The rule of the caplfallst over the worker IS the rule of the object over tbe human. of dead lahour over living. of the prodUCT over the producer, since In fact the commodities which become the means of domination over thc worker are ... the products o f the production process ... It is the alienation process of his own social lahour."

benefits of this wealth: The mOfe the worker produces, the less he bas to comurne. The more values he creates, the more valueless, the more unworthy

lahour, and it [Urns the other section into a machine ... Ii produce... Intelligence-bur for the worker, stupidity ... It is true thai

he was dead. He also set out. through a quarter of a century of grinding intellectual labour, to Ir)" to understand how the s}'stem had come iIllo hcm!!; and how it created forces opposed to itself . His works were nOt JUSt works of economics, but a ··cnrique of political economy", of the system which other schools of econom­

labour produccs wonderful things for the rich-but for rhe

ics [Oak for granted. I-lis starting poim was th::u cJpitalism is a

he hecomcs ... IThe system] replaces labour by machll1es. but it throws one !.ection of workers back to a barbarou... type of

12

Bur Marx did not simply record this state of affairs. Others had done so before him, and man)" were ru continue w do so long after

ImrodUCllun

Inuodu.."'lion

13

historical product. 3rr1Vll1g where h e found It as 3 result of a d\­ namic which drove It ever onwarJs In a prcx:cs't of rndlc..s chan e wuh �constant revolurionising of production. uninterrupted di�­ turbann' (If all social conditions, everlasnng ullcenainry and agltation".'l The economic studies of the mature Marx aimed to

g

gra�p the nature of this dynamic. and with it the trends 10 the de\>'el­ opment of the system. They are the IfldispensJhle starting pOIm for

anyone who wants to try to grasp where the world is g01l1g today. J·h� method was to analyse the system at different le,·els of abo stractlon. In the first volume of CapItal h e set out to delineate the most general underlying features of capitalist production. The second volume" deals with the way in which eapltal, commodities

and money circulate within the system, and the thIrd volume" 111tegrate� the procesio of production and circulation to provide more

concrete accounts of things like profit rateS. the cn�is, the {;tcdit system and rent. Marx's origmal intention had been to produce t'�lnher volumes. dealing among other thll1gs with the �tate, for­

eign trade and world markets. He was unable to complete these, although some of hi!> work towards them is contalTled in various notehooks by him.1< wpltal w as rhen. an unfinished work In some respects. But II was an unfinished work that accomplished Ihe goal of unveillllg (he baSIC processes of the sy!>tem, Intcgratlllg Into 11\ account the very things ignored by rhe static equilibrium anal)M� of the neoclassical mainstream: technical advance. accu­ mulation. recurrent crises and the grO\\ th of poverty alongside the growth of wealth. ,

Using Marx today For these reasons, any account of the world system raday has to begm with basic concepts developed by Marx. I try to uutline these

In the fir�t three chapters of this book. Some re:lders from a Marxist background migb t regard rhe account as redund.ulI. But the concepts have often been misunderstood wlthlll the Marxist

has been an aJmost schoi.btl( Jpproach In which competing inter­ pretations pore over texts hy M.trx and Hegel. It is often as if Marxist theory had been ambushed by Its opponents and retreated inro a theoretical bunker of irs own, lUSt as detached as the)' are from the real world. For IhlS reason I have felt It necessary [0 ex­ pound the basic concepts 10 a way which IS ( 1 hupe) cas)' [0 follow. showing how mey describe the interaction of the underlying forces that determine the direction of capitalist de\-elnpmelll. I ba\'c left detailed discussion o f other lllterpret3tions

to

footnotes. I have.

howc,·er, feh ir nece�sary to deal with the most common oblection!> 10 Marx's account frpm mainstream ect)nonlLst� in Chaprer Two. since anyone wbo studies ("conoml(s ,tt school or university will have their views Inflicted on them. Readers who have heen lucky enough to escape that fate arc welcome to skip thiS ch3pter. \Vhere t� Incompleteness of Mar,,'s own account doe� matter is in coming to terms With changes 111 capltalism Since hiS dearh. Things he only referl> to in passing in CaIn/ai-the growth of mo­ nopolies. the intervention by states m c;lpit'l1i�t production and markets, the provisum of welfare services, war as an economic weapOn-ha\c become ma�sively Important. Marxists in the first decades of the 20th centu,)' were forced by circumstances to debate some o f thest' mJtter", and there was a new burst of cre­ ative thinking in the 1960s and early 1970s. I attempt to draw from such discussions the concepts needed

[(l

"go beyond CaP/tar

and 6.11 in gaps in Marx's own account of the system (Chapters �()ur and Five). The rest of the book then mes to come to terms with the development of capil-aiism over the last HO }cars, from the great slump of the inter-war years (0 the Crisis causing turmoil across the world as I wrlle. The account must be not simply one of economic processes, bur at every stage of how the interaction of capitals and states on a world scale gIVes n"t! to w:trs and civil wars, hunger and environmental disaster, as well as booms and slumps. Nuclear weapons and greenhouse gases are as much a product of alienated labour as car facwries and coal mines.

camp as well as outside ir. They have been seen as compenng with the neoclassical to provide an equilibrium 3ccmmt uf price (orma­ tion and then faulted for failing to do so. l -

A note on the book

One re:lCtion has bet:n to drop key clements 1Il Marx's own analysis. keepmg it only as an accoullt of exploitation and of the anarch) of competition. Another, apparently opposed. reaction

The instability of the capitalist economy has had ItS Impact on the writing of this book. I set about writing the first draft when what I call "the great delusum�-rhe belief rhat the capitalism had

14

LnlrnJUCtiol'l

imroJu,uon

15

found a new way of expanding without crises-was at J[S height in late 2006. I viewed another economic l"rJ.sl� a" l1levitable, III much the S;lI11e way that someone Ilvmg 111 a city built on a seis­ mic fault line knows It is at somt: point going to suffet an earthquake. Bur I did not pretend to be able to predict when this would h3ppen. or how destruc[]vC it would be. My aim, r:Hher. was to update my E:'(/llallImg the C riSIS of 25 years ago, taking IIHO account changes in the .system S1l1ce. but repeating [he basic conclu!.ion that its blind rush forward would have devastating repercussions for peopk's hves through the rest of this century, creating immense social and polmcal crises With potentially revo­ lutionary Implications. But one of these blind rushes had Its effect I, S I was finishing a lSO.OOO-word draft. The credit crunch of August 2007 turned into the great crash of Scptt:mber-October 2008, leading one apol­ ogist for the system. Wll1em BUlTer, ru wnre of '""the end of capitalism as we knt"w It"'. Many detads about the system which I trc;lrcd as part of the prescnr were alwan unevenly distnhuted her-ween dasse... Ne\erthele!o�. for walll oj anything bener. I have had (0 use such figures.

A hriet f"\plananon of some of rhe terms I usc. Generall), "\'(.'e.. r" and "East" Me u!.cd in rhe wa)' rhey were In the Cold \'(ar dc!.:ades of the last cenrury, with "the Wen- including Japan. "Third World" and "Global South" refer to the poorer part.!> of

UNDERSTANDING THE SYSTEM: •

rhe world which were relari\'ely unindusmaJised for mO!.1 of rbe 20th century. as do the phrases

"developing"

or Mundcrde\'eJoped

countries" used wuh some of the statistics. The "Cummunt�t counrrics" are those wldl srstems slIllilar 10 that of the U�SR before 1991. "Productive c,lplral"' IS that employed in in dustry agricul ture, 3� oppo\cd to that

III

or

finance and commerce. finally,

capitalists are a�sllmed to be Ina Ie, �Hlce 99.99 percent of them werc unti[ only a couple of decades ago, while the workers they ex­ ploit have always been of both genders. I provide a glossary in an attl'mpr to make rhe mau:'nal more 'lcct"ssible bOth to rhose fortu­ nate enough not to have studied mainstream economics and [() those who are nl)[ yet familiar with ,\Iarxisr wrITings.

18

Irumdu.:"on

MARX AND BEYOND •

CHAPTER ON!::.

Marx's concepts

A worl d of commoditi es The most obviou!> feature of the economic system III wluch we live is (hat it is centred around the bUYing ;lnd s ellin g of goods of all

sorts. We h :vc

to

pay for food, shelter, dothing, em'rgy to light

and hear our homes, tran..port to move tand what is happen 109 to thl' \\orld we have to hegin b)' understanding the working!> of cOnlllloditr prudlKnol1_ {\-iJr\: was not the fir!>t ro try to understand such workings. He wa� preceded b) the cI.lssical pollncal econonllSts-earir support­ er� 01 capItalism who tried [0 understand ItS baSK dynamics as ir struggled

fO

hreak through, in a Furope 'Iill domin:lfed by

landowning classes. Two were of �pccial lmportance: Adam Smith, who wrote IIl lhe 1770;. at the time when the I1rst modem factor}'. a !.pinning mill, was openmg at Cromtord 111 Derbyshire; and David RIcardo, who defemh:d the tnterests of the carl}' mdustriltl-

151\ again�t the big landowners 40 years later in the afterming some goods to fall in pnce compared to others. Marx provided one from hiS own time:

The inuoduction of power-looms into England probably re­

J vcr)' child knows that any nation [hat stopped worki ng, nut for a year, but let us say, lUSt for a few \\/eeks, would perish And

duced by one-half the labour req uired to weave a given quantiry

.

of yarn into doth. The hand-loom weavers, as a matter of fact,

every child knows, too, that tbl' amOUTltS of products corre­

continued to require the same time as hefore; hut for all that.

sponding to the differing amounts of need� demand d ifferi ng

the pro �uct of one hour of their labour represented after the

and quanmam'ely determined amounts of society's aggregate lahour . . . And the form in which thiS proportion al distributIOn

change only half an hour's M.)CiaJ labour and consequently fell

of labour asserts Itself in a state of society in which the IIlter­

to

connection of social labour expre�sc� itself as the privatc exchange of the individual products of labour, is precisely the exchangc \'alue of these products.'1 All the diftcrent kinds of pri­ vate labour, which are carried on independently of each other . . . are contlllually being reduced to the q uantltatlve pro­ portions in which society requires them.'-' Neoclassical ecunomlsts tried [0 devclQp a norion of value our o f peoplc s subjective judgements, with some even trying to incorpo­ '

rate Ltbour as "dislltiliry" . M a r x, b y contrast, saw value as .

somethmg objective. as II1dicatmg the proportion of total social labour "cmbodied"l1 in i t . But what that value IS only comes to

une-half it s former value.'·

Thousands more examples coul d be given today. For we arc living in a period in which technical advance is much faster in some in­ dustries (especially those invo lving microprocessors) than others,

and so the prices of th lng� like DVDs, televisions and computers produced by indusrries using the most tec hnologically advanced equipment are tending to fall while those in other industnes using older techmques remain fixed or tend to fISC. Thjs is someth ing of central importance as we shal l see later when we discuss [he dy­ namics of 2 1Sf century capitalism. Once co mmodiry pr oduction is g ene ralised across a society, one particula r good come" to be used to represem the value of all

light as a resuir of the continual. blmd, IIlteraC(1on of commodities

others-money (Marx calls It "the uni\'ersal equivalent"). In

on the market." The system as a whole forces us IIldivldual com­

Marx's day it was usually In the form of gold (or sometimes

ponents to worry .I bour how thc mdividual labour thc)' employ

silver), and a certam quantity of gold (sa)' an ounce), produced by

relates tQ labour elsewhere." He calls mis process the operatiun of

a

"the I3w of vallle·'. Values, however, are not unchanging. All the tim e there is the

certa in amOUD( of aver.lge lahour time, could act as a measure

of the value for all the othcr goods that were bought and sold. As cap ita lis m developed as a system, blinks and then govern ments

introducti on of new techniques or new meth ods somewhere in the

found that they could use paper nores to stand in for gold in many

system. Thi� results In a change in the amount of sociall y necessary la hou r needed to produce certain commodities-and that changes

so long as people believed others would accept those notes

thelT exchange \'a lue. The use values of objects remain fixed until

transactions and eventually to dispcnse with reliance on it at ail, (known technically .15 "fiat money" ) for goods. Credi t fro m

natural processes of wear, tear and decay damage them. But the

banks cou ld also function in the same wa)" so long as people con­

excha ngc value of things-the value that matters for the system as

tinued to trust the banks.

26

Ulldcrstandmjo; [he �yslcm: ,\lJrx ,lilt! Ikytlnd

Marx's CoIlC�p�

27

•

The development of commodit\' production h.ld one Important

tionals, then the (Jut of a world populanon of over six billion. a mere

effect. It s\'stel113ticaiir distorted people·s underSt.l ndlng of rea lity

20,000 people exercise decIsive comrol ovcr tht: creation of wealth;

through what Marx called the �fe(ishi!om of commodltics�:

in faer. the figure will be considerably lower than that because most o f the directors Will sit on the bo;lrds of more than Olle hrm.

relation of the producers to the sum tot;ll of their OWI1

Production, of course. is not carried out slmpl)' by the multination�

lahour I" presented to them as a social relation. eXlstmg not be­ rween themselves. bur berwecn rhe products of their labour. . . A

als. Alongside them are a mass of fl:nionally based medium-sized firms that have not achieved multinational status, and alongside

definite social relation between men assumes, in their eves, the

them exist an even la.rger number of small firms. some little more

fantastic furm of a relation bet\\'een things. In order to find an

than family operations employinEt perhaps a couple of people. Bur,

.Inalog)" we must hJ.ve rccnur� to rhe mlst·enveloped regions

even raking all these into consideration, onl) a small percentage of

of the religious world. In that world the productions of the

the world's populatlDn conrrol the means of production responsible

human brain appear a" independent bemgs endowed with hfe.

for producing the major portion of Its wealth.

The

•..

,

and entering into relation both With one another and the human race. So it is

111

men's hands.l -

rhe

world of commodities with the produc rs of

Those who dn not own and control such mean.. of production have no chuice 1£ they afe til make a livehhood. beyond the mmi­ mum prO\'tded by welfare programmes, other than to trr to sell their ahility to work to those that do. They get paid

.1

wage, while

People spe() that people talk of ... . whereas in wealth and employers "pro\'iding people with work thc worker reality it is labour rhat adds (0 the value of capnal and who provides labour to the employ�r.

class of purchasers, that is the capitalist class. wuhou( ren(Junc­ mg his existence. He belongs nm to thiS or that bourgeois, but TO

(he hourgeoi� clas:..-·

•

The differencc between the value of the worker's labour power and the value created b)' the labour done was the source of tht. surplus value. Once the employer bad gm this surplus v;llue, it could be kept (hrecdr as profit. it could be used [() pay off intere... ! on any mone� horrowed to build the facton or as rent 10 the . ,

owner of the land Oil which the factory stood. But however sur­

i terest and rem, Irs source plus value was divided up into profits, n remamed the excess work done hy the workers-the C'(piOltJlioll by those who owned thc means of productloll of those who did nul. Once the owner Iud got rhe profit. he could use II to build ne\\ means of production. increaSing still further hiS capaCity 10 blackmail workcrs into labOUring for him on his terms if the)' were (0 get a bvelihood. It was thiS process which made the employer a capitalist. It ,llso gave a spccial meaning to (he word "capital-. The word is used by mainstream economists and in everyday hIe simpl)' to mean long� term investment as opposed to immediate comumptlon, Bur it has a deeper SIgnificance once the means of production

Absolute and relative surplus value

.Ift"

Ill lhe con­

Irol of one group of society. compellll1g others who want a Ilvehhood (0 work for them. It is now a product of pa�t ];lbour which is able to expand through the exploitation of current labour.

h IS. a!> Marx put It, not a thing, but a relation: Value·creatmg and v:l[ue-enhancing power belongs Ilor 10 the worker but to the capitallst. .. All the development of rhe pro. ductn'e forct's of labour is development of the productive forces

s could r;lise Marx disnngulshed berween twO way!> 111 wl1ll.:h firm �Tude method the ratio of surplm value to wages. One W;IS by the solute surplus of lengthening the working day. He called this �,Ib widespread in \':\ Iue ". This method 01 forcing lip profiT:!> wa!> very in Capital pro­ the early days of industrial capltali"m. and Marx in Capital that \'Ides many examples of it. But l\.1arx a.1�(J nuted terproduc­ prolonging the working day over much could be coun tIve for the capltalist: A point must inevitabl) be reached. where extension of the working da.r and II1tenSlty ot the labour mutually exclude one another, in such a way that lengthenmg of the working day be­ comes compatible only \\ith a lower degree of intensity.l' to successive ar­ "ao II was that. after putting up ma!>!>Ive opposition working day for children, Ilmpts ro provide a legal IUll it to the pressure-and lIIajor capItalist imere...ts gave way to working class ed once hours �t)metimes found that production actually mcrcas method of pro­ wt're shorter. For mu ch of the 20th cemury the past. In (he IUllging the working day seemed to belong 10 the �tance had �dvanced mdus trial countries. at least, workers' re�i and holidays IIIrced capItalists to concede a shoner working week become the with pay. The 72-hour week of Victorian rimes had �H hour week .1nd then the 44-hour week. increasing the But there was another range of methods for rker, which Imount of surplus value to be obtained from each wo JJ

Marx called

relal in! surplus va IUt' �. Ir rel ied on r ed uci ng rhe pro­ portion of tbe wOrk tim e that we nt into co\'eril1A the coSt of replenish l ll A worker's capaci ty to wurk, that is. theIr labour power. This rook three forms, Thl' first was to inrrnduc{' new machineI')' InlO the workplal"e, !>o h . to mcrease p roductivH ), and reduc e rh{' amount o( lime If took for the wo rkers to produce goods whose ,>ale would cover their wages. In eff ect. ill\tead at, Sa). (our hours worl.. cO\eflng the COSt ot their labou r power, two hours would do SO-WIth two ho urs extra goi ng rn pr oduce surplus \'alue. r.1a u saw thi .. as the method of incr easmg explOlt. I.

Surplus value. accumulation and the rare of profit

llndtr�("nJIJlI' fht S)'§t..m: \Inn. and lk)vnd

power of the workers (their wages) and the profit of the company,

bur also the ..:oSt of the wool and the wear and tear to the power

looms. If the power loom can keep going for ten years, then in each year onc tenth of its COSt h;IS to be covered by the annual sales of the cloth-th is IS what acullIntant!> refer to rhe deprecia­ . other way. the labour tion cOSts of capital. Or, to put it m

IIlcorporared in the value of the cloth includes nm only the new 37

socially ne(;es�ary labour expended by the workcr�. but also the

"dead labour" used to produce the wool and one tenth of rhe power loom. For these rea of production as well as on wages. This is rhe "rare of profit", which Marx depicted

as "'(c+v]. It I:' affected not only by the (3[10 of surpl us value to wagt'S. bur also by the ratio of expenditure on instruments and material� of production (constant capnal) [() w;lges (v'lriable c::tpital). Marx called this l ast (3t10

(dv]

the "organic composition of capital" .

Thi� varies from industry to mdustr) and over time. DLfferent pro­ d uction processes can usc the same amount of labour but different amounts o( pJanr and eq uipment; rhe COSt of equipment in a fac­

I'rimiti\'e accumulation Today we take the bUYlIlg and sel l ing of labour power for granted. It seems as �na[Ural" as the rlSlIlg and settlllg of the sun. Yet nowhere was 1[ moP'(' than a minor teafure of any socier) until a few hundred years ago. So in Europe III the late .\1iddle Ages. or III Africa and Asi a at the fIIne of European colOnisation in the 18th

and 19th c",nrurics most people had at least some dIreCT access to the means of getting a livelihood-e\'cn if they had to hand over a slice of wh3t they pn)duced to a pa raSi tic 1.1 ndlord. Peasants could ,

grow food on their own land and craft�1llen 11l3ke goods

III

their

own little workshops.

What changed this, aecorcl lllg ro M.1rx. was a pnm eval act of robbery-the use of force to remove mas:.e!) of people from any control ovcr the means of productton. ThiS was often earned

through by the stare al the hehest of some of the IllOSt privileged groups in society. 111 England and Wales. for example, the nse of capitalism was accompanied by "endOSllres�-the forcible dri\"ing of peasants from common klnd ther had cultivated for centuries. laws against "vagra nc),,' rhen compelled rhe dispossessed peas­ ants [0 seek work at \\ hatcver wage thcy could get. In Scotland the

"clearances'" had the same effect, as the lairds drO\e rhe crofters (small farmers] from [he land so as to replace them first by sheep

and then by deer. As Britain's rulers carved our an empire for rhcm­ selves throughout the rest of the world. the)' took meas ures ro bring about the same separation of the mass of people from con­

trol over the means of gaming a livelihood. In India, for example rhey granted complete ownership of the land ro the already highly privileged zamindar class. In East and South Africa rhe y usually .

(orced each household to pay a fi xed sum of money. a poll tax. whicb it could only raise b)' �ending some of Its members ro seek rmp loymelll with European r,tnchers or businessmen.

that to employ thl' same number ({) smelt iron ore 1Il[(J steel. This

Marx called [his process of crearing the conditions for the growth of capitalist production "the primitive accumula tion o f

has Important Implications for the d yna mic of capitali�m. It is

cap ital . Marx tells hl)w:

tory em p loying 1 .000 people to sew clOTh into clothes is bs than

"

Understanding Ihe "r>IC'Il1; Man; and

BclUIld

"

39

The dis(.;owry of gold and siiver In A merica . the extirpa tio n, en­ sla\'emenr and enwmbmenr In mines of the 3bort�inal population, the beglnnlllg ot rh e (.;onquest and louring of the Ea..r Indies, the turning of Africa into a warren for the COlTlmer­ tlal hunting of bla�k sk im signa hsed the rosv ' d,lwn of rhe er.l of �.lplr.llist producuon... ,

CHAPTER T\t'O

Marx and his critics

nUt h) i rself

this could nor lead [Q caplfaltS! prndu�[lon. Theft' h.ld, a trer all, been pillage of ODe sort or anorh('r throughout the history of dass society, going back to na hv • /oman times Wlthuut It leading to the ra pid accumulauon thar characterises capitalism. The forcible separation of masse s of people from any control over t le means of prod union-and so fro m an y posLarx and h,� Cnucs

H

Nor can ;'margmal output" as ddlned br the neoclas�jcal .!>chool pro,ide an amwer. This i� mea�lIrcd. they argue, by the value of the I.:aplI.lI used up in produl.:mg it: hut when ther define (h� \ .llue of that capital they do so in term!> of the marginal OUtput. They enJ up saym&, m effecr, that "the rnargm.t1 value of capi tal equal., the marginal value of capital�. or " profit equals profic". ,)tarements 01 thiS son cannot explam an}rlung. All they do is to state that if something exists. It exists. Orthodox economics 10 fact dOt's no more than state that I.:cr. tain thmgs are bought and certain thmgs are sold at present, wuhout e>.plaming why these thmgs .lre produced and not others, why somt people are rich and somc poor, and why some goods pile up unsold while people wh() desperately nt'ed them go wuh­ out, or why sometimcs there are booms and at other time� slump.!>. These pomts were made against margillal economics more than 80 year� ago hy the Austrian Marxist Rudolf Hil ferdmg and the Ru�slan revolutionary Nicolai Ilukharin. They have been put �lCroSS more recendy in a rigorously logi(:al form by dissident aca­ demIC economists known as the "Cambridge School". Bur the capacity o( dissident economists to pmnt Out the ahsurdities In neocla��ical theory has nor weakened ItS hold on academic eco. nomics" It hilS slIllply led HI ever more obtuse mathematical models being used to proviJe an appearance of sC:lentific ngour. As Juan Rohmson pointed our half a ccntur) ago: Quanurative uriliry has long since evaporated but I[ is still COlll1110n to set up a model in whICh quamities of "capital" appear, withour any indicatiOn of what it is supposed to be a quantiry of. .lust as the problem of giving an operational mean­ ing to uriliry used to be avoided by putfmg it mto a diagram, so the problem of giving ,I mcarung to the quantity of "capnal" IS evaded by purring It into algebra.' RecogmHon of the difficulties with their own theory has, on occa­ SIOns, forced those who otherwise accept the neoclJ.s�ical system to try ro reinforce it with elements frOI11 the labour theory of value. So Marshall suggested there might occasionalty be merit in using a labour theory of value: " the real value of money is better meaioured for some purposes in labour rather than In commoditit,s", al­ though he hastened to add. "ThiS difficulty will nm ,,£(cel our work in the presenr \'olumc. . . "" John Maynard Keynes also half Und place through the redIstribution of surplus

value within rhe capitalist class. This does nor in an}' degree alter the fact thar the surplus value came from the exploitation of wurkers 1I1 the firSI place, and that

e\'ery change In the SOCially necess;try labour lime needed to pro­ duce a commodity has an l'Uel:1 on liS pnce. It is rhe flow of

already produced surplus value from one capitaiisl to another through time that equali!>e!> the TMe of profir" -which is also why there can be bIg differences between Ihl' r�:Hes of prOfil III difterent parts of thc system when there are Impediments

[he /luw of \'alue through the system (for imtam.:e, when firms have ver), large to

amoullls of II1vestmem tied down immovably in (ert,lin sorts of fixed capiral or when states prevenr investment moving our of what they see as priorit) industrlesl. Marx's ,olurion to the problem posed in Snllth and RIcardo was

atracked within twO year, of It appeanng m Volume Three of

("Apital by the maq�inali"t BOhm-Bawerk. The ".ll11e arguments he used have been emplnred repeatedly en'ry �tnce. They h,1Ve often thrown �I::trxi"ts OntO the defensive. with mam accepting the core of the criticism and rerrearing from the attempt to understand the dynamic.. of caplrai.sm uSing J\larx's cOl1cept\. This happened. for Instance. soon after the rC"i"ai of Interest

J1l

• fter the Marxism •

(" ·ems of 1968. Figure.. on the left such as Ian �h�edman and Geoff H<x1gson rook up arguments essenrially the !oame .IS tho"e used ilga insr ,\13r, by Bohm-Bawerk (although they dId not accept th(' marginalisr theor� of value) and his successor� like Samuelson. ' Marxiq scholarship, alread}' on the defenSive for pollllca[ reasons 1Il�ide universlt)' economiCS faculries. otten retreated into scholas­ TIC dehares Over te"ts or into obtuse mathematical calculation.. as remore from the real world as rhose of thelt mainstream colle'lguc�. The resulr overall was, as Ben Fine has put it, "an IIlcreasingly and exclu�ivc1y acadcmicised Marxism "'· and "llmired engagement WIth the world of capital as oppu!>cd to that of Cap/fal".·� The criricism of Marx's approach centres around the contenTion that simply looklllg at the mov(.'"ment of value between (.'":1 plfals �lftc r production h.lS takcn place cannot explain nn:1l prices, "lIlce it does not explaIn the pnccs of the lIlput� into production (the means of production and labour power). For the Inputs themselves are �omrnoditic\ With prices di fferent to their values. So Marx's

clusion wat. ar­ only in min or dct.uls- .I..: A somewhat similar con ikh among other!> ri\led at hy Miguel An�el Garcia and Anwar Sha mathematical In the late 1 970� using models that were much less ikh �howed that .1nd easier to follow than \'on Ikmkiewicz·s. Sha profit would not tOtal price could equal total value, hut tOral d to prove that always equal wtal surplus valuf'. Garcia claime �Il by allowing a both equalities could hold. Blit he could only do tion cycle to the change in the rare of exploitation from one produc ents of value bc­ next. since the shift In prices caused by the mo\em of wage goods rween sectors caused changes in the relative priccs and capital goods.:< heen able com­ Since then, however. a numher of �lar,isTs have fuml.lmema l pletely to rescue Marx\, position by challenging the Sh3 ikh and many assumption made by \'on Bortkil!wic7. ')wce£y. ' hoJ of sinmltane­ e others-th reliance on simultaneity.· The met to production ous equations .Issumcs that lhe prices of the mpllts y do not. The out­ have to equal the prices of the outplils. Bur the production. Or, putS are produced after the inputs have g(lIle into a process A will to put It another way. the value of the inputs for s B---cven if in differ from that of the same tnputtecl used to 1ll,lke a ntical machine not be the same as the value u'>ed to make an ide .

no change in the amount of capnal investruenr from one cycle of

next week.l' the mpuTs into But, argue the ernic.. of Ma rx. this still le:l\es them ro labour production as price�, not as values. and to reduce d to produce i \'olves an infilllte regress . The investment nee values n ue!;, but that is rhe inputs needs to be broken down into bhour \lal stment needed not possibl e withOUI breakmg down In turn Ihe Inve

production to the next (what is called "slIuple reproducrion "J. His

10

method. it i� clainll'd, explains prices in terms of prices. not in term� of labour values.ll The Ricardian, von BorrkicwiC7. artempted III

J 907 ro sol�'e rhe

prohlem of deducing prices from labour \·alues mathematicalil. using 'illlll1lrancous eql1ation�. He used a model in which thcre IS

equations supposedly showed that any arrcmpt to proVIde a gen­ erally applicable way of transforming labour value5 nltO prices led t�onc of the "cqualltles" taken for granted by �Iarx not working. EIther total fJrice dId lIot equal total value, or total pro/it did 1101

eqllal total surfJlliS lfalltl!. Every attempt to dcdnce prices from values for most nf the 20th century rtlIl into the samc problem. The respon�'-' uf t-.l.trxi,ts was either to ab,mdnn the cenrral feature of the labour theory of value or to condude, as for instance Paul Sweezy did in 1942, that "the Marxian method of tr.msformation is logically unsati�factory" hut that the "patterns of development'· of value and price "will differ lIndnst;lnJing Ihe' �VSle'm; \\.In. ;lIld 8.:)",ul

produce n, ad IIlfimturn. the problem like There is a simple response 10 those who pose produce the inputs this: Why? Why do the investments needed ro value when they have to be broken down in terms of theIr labour

themselves were produced?" duction IS the The starting point for looking at any cycle of pro it. The exercise of money price of the input.. needed to undertake rnin amount of labour in the production process then adds a I:er modity. the price new \lalue, which forms the basi� of the new com of surplus value of which i n turn is for11led IMough the movement . Vcrage her than l from capitalists who would otherwise get a hig . rate of profit to those who would get a lower one

There i� no Iln'd to go hack i n history ro dec ompose into labour values the prices of thlllgs which \\erc pa id fur at the heglOlling of the protlu�tlon round, in order til under\t .llld the lIT1pa�t llf creat1O� new value and surplus value on the dy namics of the S) �tem. It I� no more ne>.:CSSMY than It is i n physical dynamics to dccompo"e the momentum of an oble'ct thar !>trikes an other inr o all the iorce� [h.lt have prenously acted on if to create that momentum. gOing tlghr back (0 tht' foundation of the uruVI:t 5e with the big bang; or than 11 is necessary in biology to kn ow tht: whole histon of the evolutlon of an orgarusm, going right ba ck [0 the first fo mation of organ;1.: life forms, 111 order [Q see wh at rhe eff(.ocr of a gcneuc change will be i n rhe pr{'sent. As Guglielmo Carchedi has pointed our, " If thi� critique were sound, It would mean rhe bankruptcy nOt on ly 01 t>.larx·s transfor. mation procedure bur also of SOCi.l l \ci ence III all ih versions" IIlc JUdlllg those thai cnncise fo.la t:lc

�

TIllS l.."rHique. i n fact, would have to apply to an y SOCi.ll phe­

nomenon inasmuch s" explall1s me measurement, he is taking for granted rhat which he is trying to explain. For B611111-Bawerk this proved thar It IS nOt the amoum of Inbour in goods which derermll1cs their prices, bur rhe way people evaluate them in relation to orher goods (rheir "utiliry" ) and thar this deals a death blow to the labour theory of value. However, rhe problem for the theory evapor.ltes once rhe law of value is seen as something working through time. The develop­ ment of technology ag:lIn l.Ild again lead� 10 jobs emerging thar can only be c..1rried out by, those With particular 5kills. Ar first there IS no ohjet:tive measure of the amount of socially necessar}' labour rime needed w produce them, and thn� in possession of such $kills or the goods produced by rhem can recclve payments which bear no obvious relation to lahour time. In eifect. \'alue flows w chose comrolhng a monopoly of these skills from the rest of tbe system. But this is only a transitory phase, even if sometime:s a long one, as capitalists elsewhere in rhe system will do their utlllO..t to try ro gall1 control of some of the benefits of the new skills for themselves. There arc tWO ways they can do thi!>. The)' can tralll new groups of workers to acquire the skill�. This effectively amounts to lIsing Cloe sort of lahour to crcatc new labour power capahle of doing the �killed work, so that the fillal lahour is in fact composite labour, made up of the hving labour of the immediate worker!> and a form of dead lahour embodied i n their lahour power as skills. The cap­ Italists can gel this extra element

labour power directly by on the job trainlllg for workers (as with apprenticeshi p systems), the) JIl

"

can leave irs provision to the workers themselves (when worker!. pay f(l go through cour!>es to get skills qualific.lIions) or the}' can rely In part on the S[3[e providing It through it� traming courses. But in each case, dead labour i ... embi.JJled in the enhanced IJbUUf power and rhen transferred n i to the products of the labour prQl.:e'>s, J.:> with the dead 1,l bour embodied III means and m;:HeClals of proouctlon. But thl!' snil leaves a question unresolved. Whl) train!> rhe train­ ers? Skilled tr.liners cannOt them..dves gcr their �"ills from un..kliled workers. U their skills arc mon{)pol� sk i lls and they pro­ duce goods that cannot be produced by unskilled worke!!>, howe\'er man)' work together at tbe job, then those whn own those gooJ� WIll be able to charge monopol}' prices that do not reflect 1300m \ 3Iue!>. hUi simply huw much people arc prepared to pay. ThiS will be true of certain skill... .md certain good.. at any par­ ticular pOHlt in time. Rut over time this labour tOO will be reduced to s( mle objective r,ltio of other labour. Capit.lli"ts elsewhere In the s}'stem will actively seek Ollt new techno logies that undermine

?n the other hand, capitalists have to reduce the Il'vel uf wa�es. ied pnsmuns trhe the same techniques create new and qualif n subJected to de­ counter-tendency) which, III their turn, arc soo observe both the qualification ... At an) moment in rune we can !onions and tbus the tendency (the dequalific3t1on of cerralll pu the counter-ten­ de\ aJuation of rhe agent..' labour power) and for \\hich agents dency (rhe creation of new. qualified pO!>ltiom ). with a high v,llue of labour puwcr arl' needed c..es the ,

such skill monopolies by enabling the tasks to be done by much less 1>killed labour. [n rillS way, the reduction of skilled labuur to i a never ending feature of capimlist ac­ unskilled labour O\t'T time s cumulation. If enough unskil led lahour i .. tr,lined up to the level of ..killed labour needed to produce particular commodities, those commOlhtles will cease to be scarce and [helt \'alue will (all to the level that reflects the combination of the labour needt'd to repro­ duce a\crage bOOur power and the extra co!'.t of the (raining. A1> Carchedi puts if: Due

rhe labour proccss, the le\·eI of skills requued of an agent IS lowered. The value tlf his or her labour power is then devalued. We can refer III

the introduction of new tl'Chniques

•

III

(0 thiS process as del'llludtiOlI (of labour power) through de­ qUdltfja1ll0n (of �kills). /f is thIS process which reduces skilled I() unskilled labour and thus (at least as far a.. the \alue of labour power is concerned) alter� the exchange rebIlons be­ tween the commodIties of wbich those different types of labour power :tre an input. It is this real proce...s which justifies the rhe­ oretic;)1 reductiull of skilled to unskilled labour, or the expres!oion of the former as a multiple of the latter. . . The process of devaluation through dequaHficarion is a con­ stant tendenc), in capitalist production, due to the constant need 52

Under5fdndln� Ihe �rS{crn:

M,HJe and Bcyvnd

\brJe and bb emu:"

(.;HAI'TER THIU:.E

The dynamics of the system

•

Illusions and reality The history or-capitalis m in i\ hrx's rime and thaI uf hiS uumedi­ :'Ire successors W:lS punctuated hy economic ,rises that occurred

about once every tcn years-there were 15 In the US in the 1 1 0 years between 1 8 1 0 and 1 920. For a few years firms would invest on a large scale, taking on new workers; building new factories and buying new machines would ere.He a demand for the products of Industries like construction, steel and coal, which 111 [Urn would take on new workers; the new workers would receive wages which in turn enabled them to buy goods. Very fast r;nes of economic growth led firms to do cverrthing they could to lure people from the countryside-and increa�ingly from other, poorer counrries­ into SC'Uing their labour power In the [C)wns. Unemploymenr would fall to around 2 percent. Then something always seemed to go wrong. Giant firms would suddenly go hust, cancelling th� demand for the products of Other industries. where firms wuuld also go hust; right across the economy workers-many only re­ cently drawn inro industry-would be sacked; their loss of bUying power then ensured [hat the crisis ricocheted from industry ro in­ dustry; panic wuuld sweep through the capitalist class. while unemployment shot up virtually over night 10 1 0 pcn.:em or lugher, where it would stay for momhs or even years until a new period of rapid growth wok off. The mainstream economics of the time denied that such �crises of overproduction" were endemic tel the sy�[em. basing thelf ar­ guments on a popu lariset and vulganser of Adam Smith'� ideas, Jean-Baptisre Say. His "law" argued that supply and dem;.lnd must always coincide. "ince every time someone sold something Umln,tandmg th., Snlrm: \13r1( and lkvunu

55

someone cI�e mmt have bought It: sup ply, It \\1.1S da Imed, created its own demand. SoJ ohn Stuart Mil l argued: F.l!.:h per,on's means for paying for the production of other people comists III those Icommodl[ie�1 th.lt he hml sclf po:.. :.e'ises. All sellers are inevItably hy the meanin� nf the word bU\'er... . . . A genera l mer-supply . . .of a l l commodirie, aho ve the dem.lnd Is... (an1 unpos'ilbility... People must spend theIr. . . sanngs . . . pwducri\cly; that IS, in employmg labour.' The founders of tbe neoclassical school h.ld to accept that in prac. tice the economy experienced ,I -tr.lde q'de" or -busi[]e �� cycle" of hooms and rece�sions, in which for some reason supply and demand did nut .Ilway� balam.:e as their theory claimed. Their re­ aCTion was to blame these things on external f3ctor "1 to mamtain theIr s.lles by cUt

r� m order to try to determined by value while rhey sack worke ling at reduced prices rrotect their profits on [he: good� theY ;lfe �cl tments for fear the y "nd at that same time cancel their own inves n goes rhrough the Wil l no t be profitable. A w;n'e of contraCTio cec; below values. e:conomy and with It a general reduction (If pri s go hankrupt. The contraction does not last forever. Some firm on the cheap and �lIowing other firms to buy plant and equipment pared to aCl:ept. FvenruaUy, to cut the wages which workers are pre higher than average " point is reached where ther can expect to get estment and a new rrofits it they em bar k.o n a nt!\\ round of inv h to take advantage wave of expansion t;Ikl"S off as capitalists ru� d, firms to un­ uf the better busines� conditlom•. Comretition le;l ranly exceeds the dertake a level of investment which rernpn tS ,Ind raw material!>. rXlsting outP of new machim'ry, componen ed by �underpro­ rhe "ovetproduction" of the downturn is replac ore were helow va lues duction" in the upturn, and i list as prices hef ve values in the boom. But thl" only U1 the slump. now they rise :1ho pass IIlto production, I,t!:lts until all the new plant and machinery ng the value of indi­ Increasing output af the same time as reduci rofitable and giving \'Idual goods, making some invesnnenr unp ri� in time to yet another downturn. i that tht! cycle IS not a result of mistaken de­ The central point s ernments. hut of the .. Isions by ind ividual capItal ists or their gov takes place: through \e:ry way value expresses Itself in prices. This prices arit producrion.1l It begIn!> as money labour power 3� lIl!>lruments and materials of pruductiol1 and Ihe Dyn:lm,o of rhO' 'i)5I('m

61

commodities. whJ(;h In turn art' combined in Ihe production process to produce orher mmmodities. The,c are sold ru gCI more money, which is then used to huy more mean� of produl.> tlon and labour power. In rhis way one cycle of production follows anOther endlessly, so that "every elemenr'" III It Happears a� a point of departure, transit and ferurn -. �o capiral rakes the form of money, of commodities, of mean, of production and labour power, then of commodille� again and finally of money. For the system to operate. al1 rhese forms ha'·e to eXist sllnllltan�ously. If production is to keep going Without a Stop, (here has 10 be a supply of money to buy commodities, a �upply of commodities to be bought as productive c.lpilal .1nd a supply of 1.1 bour power. The cycle ()f capitalist production, then, is m.lde up of three Intnconnected circuirs-of moncy, of productive capital and of commodities. Each circuit fulfils :1 fUllction for capital 3C· cumulation-and does so to �Ol11e extent accord Ill):; to a drnamic of its own. In thc early stages o( capitalism, when the units of production �vere small. the productive capitalist could operate (Q some degree 1I1dcpendenrl). He had the possibilLty of fin;mcing the buying of plant and machll1ery and paying hiS worker� frolll his own pocket. He also had the possibility of selling his output directly to th()�e who l:onsul11t'd iL Hut as the Individual enterprises grew bigger, (he capitalist often found hIS own resources were Oot enough to pa)' in advance for all the plant, machillery aod materials he needed. lie had tu horrow fmm others. Hl· came to rely on credit, and on speCial insmutions, banks, ready to lend to peopJe lD rerurn for interest on these loans. At [he same time, as the scale of the market grew, he could onl)' �ell hiS goods by relying upoo specialists in the wholesale and retail trades, who would not be able [0 pa)' him for all those goods until they had, in rum, sold them to the nnal consumers. The produc· five capnallst borrowed on the one hand and lent on the other. Credit became an indispensable part of capita list production. And the grealer Ihe eXH:�nr of capitalist production withm a particular economy, the longer and more complex hecame the chall1s of credIt, of borrowing and lending. The pr(lductive capitalIst couJd also become a large scale lender. His fixed capital-his factory building and machinery-was only renewed every few years. But production provided a more or less const:lnt flow of profits. He could lend tht'5e profits to others m the 61

Under-landing Ihe S)'51�1lI: Mn", .:and Berond

Intenm before renewing his own fixed capItal-and would do so 111 return for the payment of interest. Once capitalism is fully developed as the dominant way of pro­ dUCing in a pMticular economy. the lending of past profits by those producti\'c capitalists who do not wish ro immediately reinvest be­ I:omes the chief source of the funds for those capitalists who do Wish to lOvest but lack sufficient pa�t ptofits 10 do so. The financial ystem emerges as a network of IIlStifutiOm. rhat mediate berween Jifferenr product",e caplfail"ts (and the stare. IIlsofar as discrep­ . cies [hat exi...t between its Immediate tax lIlcume and its m Immediate expenditure: lead 11 to also horrow ,1nd lend ). Those who run the financial in!iututions .I n' Ollt to make penfits lust as much as the productive capifahsl� an:. Thl') have funds of their own \thei r banking capItals] which pay for the expense of ...een their operari(lbs and bridge any gap that 1llIgh! opcn up be n their lendins and borrowing lor. at least, ;"JTe meant to bridge the �.lp-a- ll roo often in thc history of the system rhey have lIot), and fhey expect to earn a profit on them. just as the productive capi­ t,llists do on thelf capitals. There IS 3 difference. however. The limmeial capitalists' profits do nOl come directly from produ{.'tion. hut from a share the}" get of the producnve capitalists· profits 111 return for lending ro them-that ;�. interest payment... The rate of interest has often been confused 111 mamstream eco­ numic writillgs with the rate of profit. But 111 fact the level and direction of mO\ement 01 the rwo are qUire different. The ran: of rrofit, as we have seen. is dcternlilled hy the ratio of surplus value the rate of m� to IOvestment in the production process. By contmst, trfest depends solely upon the supply and demand for loanable lunds. [f there IS more money av.ulable for lending 111 an economy, i an IIlcreased Ihen the fare of IIlterest will tcnd to fall; if rhere s Jl'mand for borrowingit will tend HI rise. SlIlee the profits of productive capitalists are the major source nl the funds for lending, a high rate of profit will encourage a I.)wer rate of Interest. On the other hand. if profits arc low. more productive capitalist� will themselves want to horrow and this will nett a pressure ior interest rates to rise. How these cuntradictory nds on other lues-sures on IlUcreSt rates work themselves our depe !.Ietors, particula rly borrowing and lcndin� by the state and the movement of funds in and out of a national economy. But these lither factors cannot do away with the pressures of real production "11 the financial sector. 1 � DynJrnu;s of the �)"Slem

63

Other .:omphcations arist' out of this �t,lte of affalr�. The lend­ ing that nn,lnl;iai lD!!orirutions make I!> nm necess.lril) re�trined to rhe ,IIIlOUI1l they .lCtually han: at their disposal a!!o a rt!sult ot their uwn 11l\'f'�tmem and borrowing. The financial institution.. can assume that what rhe) ha\"l: borrowed will nUl h,1\'c to be paid b,u.;k Immt!diarcly. Therefore mey can extend their lending beyond their immediare mean!>, trusting that eoough of it Will be paid bat:k for them to meet their own debt.'> as they becomt:" due. TIll'; mlkes sense MJ long as the produt:tlve sector of rhe s)�tcm is expanding Its ourpur; int!reascd lendlllg tooa) can be p;ud balk out

for rhis reason IS regarded by the finallcial lTlst1rutLun� as an �in­ vesonem" of "capital " . Yet It in no way (;unrributes [0 the process

" f capital accumulation, and the inrerest earned is paraSitic on i the productive !!occror of the econom)". For what is taking place n this reason Marx calls it "fiCtitious capital'" describing i( as ·'me most fetish like form of the relations of capltal-," since Mcapital

appears as a mysteflous and !:idE·creating source of IIlterest"' and "Il becomes the pmperty of money to generate value and yield in­

I�rest, much as it is an attribute of pear trees to bear pears"

uf IIlcreaSi'd ompul and surplus \'aille III rhe not tOO dL'>t;ml future. Such prophecies about increased lending bemg recoverable arc self-fulfilling up to a degree. !!oince the IIlcreased lending to produc·

tive Glpi[ll encourages it in turn to increase its own Ie, d.. (If investment, and to produce mon: profits from whll;h 10 repily the ha nker�. But invariahly a ponlt IS eventually' re.lched when thc drive for financial profit� leads to levels of lendlllg above wh,n can he paid b;,lck out of rhe expansion of real output, prod ucing finan­ ll:11 r.::ri�cs on rhe one hand a n d attempts ro escape cheir impact throUAh fr.lUd on the other. As Marx putS It, "The nedir sysrem ac�elcratL� rhe m,ltt"rial development of thl· producllve forct"!. and rhe world market", bur doe,. this through developing "the incen­ tive to capitah�[ production. enrichmcnt through explOItation of thl' lahour 01 other�. ro the most pure torm of gambling :lOd swin­ dling.. ... finance drives "the process 10E produl"l ionj heyond ItS t:apu.lli ..t lill1l(s" resulnng cessive credlr'"

III

"'O\'crtradc, uve rproduction and ex­

in w.lrs that rehound on production Itself.

J\.l arx·s view of this process foreshaduwed by a century the cur­ rentl) fashionable accoum of Hyman Mm!>ky," according In which finJncial operations invariably move on from a stage of normal profitable buslllces

(he 2 1 s t cenrury later in tlus book. All that needs to be said for the moment IS (har there is 1111 problem accuuntmg for them by starting with Marx. Indeed, Ihe only serious question confronting Marx's crisis theory does nor Ih

DynamiC5 of the S)�lem

III

67

of cri,>c� roda). bur r.lIh....r from the fact that for three ,md 3 half decades. trolll 1 91� to 1 974. a major cap­

of hIstory was enough to cast doubt on [he (.Mar x istJ theor)' of an

Italist country like Britain did nor e�perience a recession in which

Many Marxists who accept rhe tbeory of \'a1ue and the main con­

arise from the

occurrence

economic output fell. while the bl�cst ccononl\', rhe US, only ex­ periencl'd onc ver� brief such recession (that of 1 948-9). The

absence of �uch crises became a malar elemcnt in economic dis­

inevitable decline of ca p italism owing to a falling rare of profit" .;'

tOurs of Marx's accuunt of the cnsis are lUSt ,l'> dlsm lssh'e of it.l' Others hedge round their support for it with 10

M)

many provisos as

ef fecti vely cut It out of any 3CCOunt of the system's long-term

cussion In the decades of rhe 1 9505. 1960s and early J 970s. And

developmem.

iry of the boom-rece��ion cycle roday.

him [0 assert that capitalism IS doomed by the very forces of pro­

w i thoul commg to terms with it, one cannot gra�p rhc intractabil­

However, If crises were an i nevi table feature of ca pitalism for

Yet Marx himself regarded It as absolutely central. It ena bled

duction which It Itself un leashes:

Marx, they were nut 111 themselves the c( mral point in his analr�is

•

of Its long-term dvnamic. Ther were a C)'dical feature of [he

The rate of self-expansion of capitalism, or the rate of profit.

system which It had nUllaged to cupe with sen'ral times by the

being the goal of capita list production. ItS bll ... appe.u,> as a

time Capital was pu blished , however great the ha rdship they had

caused [() the mOlSS of the pop ul arion rhe distres,> 10 those capital­

threat to the�aplt3list productlun process.'

.

ists who went bu�t, or the occasional outburst of popular

This �[estifies to the merel), historica l, tranSitory ch,lraCler of rhe

b rin g Ihe system

to an end As the Russian revolutioll;lry l eon Trotsky pur it nearly

ca pitalist mode of prod uction" and TO rhe way that "at (1 certain smge it conflicts with Irs own further development". It showed

capital ism does live by crises and

that "the real barrier of caplr3lisr production was capl tal ltself" ,l'

diScontent. They

were

l10t in themselves going to

.

40 years a fter ;..tarx'� death,

"

booms. Ilist allpposcd "diminishing rerurns" 111 ,Igri­

The tendency of the rate of profit to fall

culture. WJ M arx provided an explan ation which did not depend on such q uc stion ab l e assumptions, II but upon grasping thar rhe

The tbeory

dynamic of capitalist accumulation contains within it a n Irre­

The first of these processes IS what Ma t� called �the law of the

�olva

tendency of the r�ue of profi t [Q fall� (sometimes called, for short,

ble contradic tion.

Each individual capitalist can increase his own competitive­

by Marxi..ts Sl!lce, "the fal ling rate of profit"-the phrase I will

ness through increasing the productivity of his workers. The way

often use bere),

to do tbis is for each worker to use more and more "means of

Thi� IS one of the mosr difficult pans of J\larx's theory for new­

comers to hiS Idea th:lt rechnological l . dvance does not always n i volve increas­ ing the ratio of means ()f production to worker..-that It can be "caplt:ll saving'· rather than -capital Intensive" . I f scientific knowledge is progressing and being applied as new technulogies. tht:'11 some of these technologies may employ less machlllery and (aw materials per worker than old technologies. At any one rune there wi1l be some new technologies [hat are capnal-saving. This IS true. But It does Dot refute Marx. I-'or there arc likely to be a greater number of '"capital intensive" rather than "capital sflvmg" mnovations. Ar flny gi\'en level of scientific and technical knowledge some innovations may indeed he capital-savlng. Bur when all these have been employed, there will still be other inno­ vations (or at least capitalists will suspeCt there are other Innova tions) to be obtained only by Increasing the (evel of invest­ mem III means of production. The fact that some techn ical progress c:ln take place without any rise in the rario of capital ro labour docs not mean that all the advantages of technical progress c ratio then he will benefit only from those Innovarions that do not-and he will lose out III competition WIth those who CImple an� wer to any such argu­ ment: th:H the first capItalist ro im"est 111 a new tCl.:hnolugy gets a I.:ompl'utin: ad\ antage over hiS fellow Cilp ltallStS which enables hun ro �·l In.1 surplus profir. bur that thl.'> .'>urplu s wil l not last once the new techniques are generalised. \'('hal the capiraJist gets in moner t('rms wh en he sells hiS goods depends upon the average amount of sociall y nece..sary labour ("ontamed in them. If hl' IIlrroduces a new, more productive. tech­ nique, but no other capitalists do so, be IS pro ducing goods wurth the same amown of sociallr necessary labour as before. but with less expenditure on rea l concrete labour power. HIS profits rise:' But once all cap italists have Introduced these tec hniquc�. the value of the goods falls L1mil i t c orrespon ds to the average amount of labour needed to produce them under the new techniques. The ad­ ditional profit disappcan-alld i f more me ans of prod uction are used to get access ro the new techniques, the rate of profit fa lls" l The IInpllcaullns of Marx's argument are far rea ching. The very sllccess of ca pitalism ar accumulating lead� to problems for fu rrher accumulatiun. Eventually the competitive driv e of capltali\ts to keep ahead of other capualists results 111 a ma ssive scale of new in­ vestment wh ich ,"mnOT be sustained by the rate of profit. If some capitalist:. arc tl) make an adequate profit it can ani) he at the ex­ pense of other capitalists who are driven Out of bUSiness. The drive to accum ulate le.lds lIle\'itably to crises. And the greater the :.calc of past accumulation. the deeper the crises , w ll be.

j\llarx's theory, It should be stressed, is an ahs tract account of the most general trends in the capitalist system. Yo u cannot draw (rom it immediate conclusions about rhe con crete beh.wiour of the L'CC)Ilomy at any individual point in space and tIme. You have first to look .11 how the general trends interact wit h a range of other factors. Ma rx himself was fuJly aware of this, and hlJllt Into hiS ac­ COUIll what he called "countervailm g tenden cies ". Two :lre of central importance. Fir�t, there is increas1Ilg the rate of exploitatio n. I f l'ac h worker contributes more surplus value thi s wil l cou nteracr the fact that thert' are fewer workers per unit of investment. The increased ex­ ploitation could result from increasmg the leng th of the wurkll1g Undcrst.!.nding (hI' 'i) ,(m-!: .\13r...

\:reaslng the physical inten"ity of labour or a bll in the cost of providing worker" with a livelihood as a resuit of increased pro­ ductivity. In this case the capitalist could increase the proportion

of each individual worker's labour that went into surplus value, tven if the worker's hvmg standard was not reduced. Such an in­ ,rease

And Jk\'ond

in

the rate of explOItatIOn could counter;)ct some of the

downward pressures on the rate of profit: the total number of workers might not grow as fast as total

111 \ esrment,

but each

worker would produce more surplus value {'ven If he or she did not uffer a wage cut or hase to work an� harder. There is, however. a limit to the capacity of thiS method to ...oumer the downward pressure on profit rates-the numher of hours ;n the working day. The number of hour� per day that go into

providing for "he upkeep of the workt'r can b I I frnm four to three, or

from three to two, hut It cannOt fall bdow zero! By contrast 10-

\cstment n i means of producnon can IOcre.1SC witholll lu uir"; Take the example of a firm which cmploys a static workforce oi '0,000. Even if it worked them as long 3S was phYSICally possible each day (say, j 6 hours) and paid thelll no wages, Its dailr profit ...ould not exceed the value embodied in .10,000 x 1 6 hours labour.

IhiS is a umtt beyond which profit cannot grow. But there is no uch limit Oil the degree to which lI1\es(mem can grow (and with

,uch a high le\'cI of explOitation there would be all enormouS quan­ lit)' of old surplus value to be turned IIltO new enlarged 111\ estmcnt}. �) a point wi ll be reached where profits stOP growing. even though �I)mpctition forces the level of Investment to continue rising. The I, triO

Tbe cOIl1ltervailh'g te" dlmcies

72

day (Marx'" "abarne price for a year ago. BUI that IS no help to him chine four times as gn-ater accumulated surplus value to bur a ma business only if he productive. The individual capitalist ,an stay m mcans of produc­ \pends as much surplus value as posslhle on new th3t only results in tion. If the means of production become cheaper. competitive suc­ his having ro buy more of them III order to achlcve available for in\'�tment cess. So long as there is more surplus value n of capital wil l than there was previously, the organic compositio no difference if the t('nd to rise, other thlllgs being equa!.'· It makes cheaper-that just physical means and materi31s of production are

�

I.:auses more of rhem to be employed.

processes raking place Ihrough lime. Simultaneous eqU3tlOns, hy defimtlon, aSSLlllle simultaneity. with no passage uf tilllt.'. The decline in the value of their invested c3pltal certainly does nor

make life any easier for the capiralists. To survive in business

they have to recoup, wirh a profit, the full cost of their past invest­ ments, and i f technological advance means the..e investments 3re now worth, sa)" half what they were previousl), they have til pay Undrrs(;Indmg thr �,slrm: l\\an: ;anJ IkronJ

Crisis and the falling rate d productivity But if the depreCiation of caplt31 through IIlcrcase it is combined with cannot by itself save the rate of profit, it can if es some capitals rometh ing else-rhe cnsis. For (he CrISis IIlvolv

The DynanlslC of the- S)Mrm

75

being made bankrupT. They are men fon:cd to dlspo�t! of their cap­ ital nnt lust at its depreciated valuc_ but for anythlllg they can get,

however linlc. The beneficiaries are those capitalists whu surv ive rhe l.Tisis. The) can pid.. up means of producflon-.u::curnularion s of v.l lut'--On the cheap, enabling them tn restore their own rare�

01 profit.

In this way depreciation can ease rhe pressure On tht! c.lptta],St srs.tem as J. \\ hole, wlm the hurden of paying tor It falltng nn those

capitalists who were driven our of business, but not on those who remained. Those capitalists who die bear many of the costs of de­

preCiation for the sysrem as whole, making it possible for rhos e \\ho liv on to do so with lowercaptral COSts and eventually higher �

ratt!s 01 profit than would mherwise he the case. "The crises are always but momemary and forcible soluflom of the existing. con­ tradictiullS. 1lley are violent eruptions which fur a lime restore the disturbed equlli brium ...·� There IS a continual double interaction between the long-rerm tendency for the rare of profit to fall alld cydical crises. The rille III

tht· ratio of investment to labour employed as new investme nt takes place dUring peflods of expansiun exertS a downward pres ­ sure on the rate of profit. ,USt as it IS under pressure from risin g r,lW material prices and wages. This can have a direer effect with ' he fall in the rate of profit causing firm� [0 Stop Im'eStlll�, SO C,lUS­ tng reccssulIl tn the capital goods indusrries which then spreads

�

elsewhere. Or it can happen indirectly if firms are successful tn protecttng the rate of profit temporarily by forclnl': down real wages. In that case, firms In the consumer goods industries cann ot !>ell aU their goods-or, as Marx putS Ir, the}' cannOt "realise the

surplus value" thar they have exploited-and their profits fall. agam producing recession."

But the CrISis tn rurn leads to some firms going bust and pro­ vides opportuniti es for orhe r firms to buy up thei r equi pment a nd raw mareria l and rake on workers at lower wagc=s. If enou gh . firms go bust, rhe crisis it�elf can work to completely cUlimerac t the lung-terlll downward tend ency of rhe rafe of profir. In shor t.

thl' decline in rhe rare of profit helps produce the C)cltcal CrISis, but the crelical crisis helps resolve the long-term decline in the rate of profit. Marx's account of the fall ing rarc of profit was not published until I I years after his death and did not have a big impact on the analyses of his followers n i the next two decades. [t b;uely featured 76

. bnc and Ik)ond Ilnd�r'tJnding [he "'ystcm, \

the most Importanr w()rk� of Manost analysis by Rosa I uxemburg. Vladimir Lenin ;lnd Nicolai Rukhann. It wa if the m:lrkct for irs outpUt is growing rapidly despite costs of producrion internally dc­ parong markedly fmm those currently pre\'ail i ng In the system as a whule. Thmgs are similar when it has gamed a major share of the markel in a sector of production that reqUIres \'cry large am()unts of fixed capital. The producnon methods associated with the phys­ Ical structure of liS fixed capital (its use value) can be much more costly than those available in the systcm as whole (eg \\ hen old ma­ chines u�lIlg man}' workers are used), bur the enterprise is prm{'Cted from serious competition for a long period uj tulle by the sheer COSt to new firms of emering the industry to compete with it. The exit Europe, it was compelled to stretch out its ten­ tacles to encompass the whole carlh, subjecting ever more Ilvlllg labour to it: The need 01 a comtantly expanding l11;1rket for Its products chases [he bourgeoisie over the entire surface of the globe. It must nestle everywhere, scnle everywhere, c�tabli�h connections everywhere. The hourgeoisie has through its explOitation of the world market given 'l cosmopolit,m character to production and con'iumption in every COuntry. To the great clugrin of reaction­ ists, it has dr,lwn (rom under the feet o( Industry the national ground nn which it stood. All old-estahllsht·d ndtional industries have been destroyed or are daily being destroyed. They are dis­ lodged br new industries, whose inrroduChon becomes a life and death question for all civilised nations bv indmtnes that no longer work up indigenous raw material, but rJ.w Olaterial drawn from the remotest zones; industnes whose produCTS are ,

.

n III the cmis and rhe contradictory forces that find, expressio The expansion of the downward prc�!.ure on the rdte of profit. wth In the productivc �ro e .. !.w rna a to d� lea sly eou an ult m si tem 'ys its livclihood-and of forces-the capacity of humanity to produce ce!> through the crip­ the transformation of these IIltO destructive for

pling of people's li,·es. tempted to write Capitalism ha s been a fotallJIlce hl� rime-a �ense of the ' HIS model providc�, as no other mass forward rush of capitahsm .ha!>, an account of a sy!.tem that had expanded to fill most of Western Europe .lnd Nonh America hr the Time of hi, death in 181:13-and expanded funher to fill the whole glohe 111 the 20th cen­ rury. Bur that is nor all. His mode! was nOt only of a self-expandinA system, bur of one whose expansion is based upon the imerplay of cs of the System .... I . Dytuml

85

(.HAYI ER FOUR

Beyond Marx: monopoly, war and the state

•

New developments

d

Marx depIcte a sy�te1Tl th:1I was very drn:'lInlc. bur also plagued With seemingly insuper:)ble contr:'ldictions. J fS vcry dyn:'lmism con­ !!!luaUy led capital to try to expand at a greater rate rhan could he �ustained hy the living labour power on which It ulrimately de­ prnded. The barner to capitalist production, Marx wrOte, lay in ".lpltal itseli. The Implication was th;lf 3S capitalism engulfed rhe whole world, i t would be subject to longer :lOd deeper slumps, In­ (l'rspersed with sharrer and shallower periods of bc)om. At thc . \tne

the concentration and centralisation of capital would I·roduce an c\'er greater polarisation berween a capitalist class time,

"hleb was dimmish1llg 111 sil.t' and a working class that absorbed IIItO itseU the rest of society. The model was by design an abstraction. Marx cUllsciousiy ig11I1re attempt to t7asp the undcrlymg tendencies bUilt IOto the mode of production as .Itch-its "general I:nvs"'. The way each of Ihe three volumes of f .Ipital operated at a different level of abstracrion meant thar the

Ih lrd volume, by Integrattng production and circulation, was closer

to the actual operating detail

of :lOy rcally eXIStlOg capitalist soci-

1 1\ Ihan the first vulume, even though its analysis depended on the It 1�1C concepts developed there. It dealt nO! only with the equahsa­ IInll of profit rates, the deviatIon of prices from values, crises, and I hI" tendency o f the mtc of profit to fa II. bUI alsu with credit and the j, IIIking system, commercial profits, interest payments to moncy I, ndc.rs, and rentS to land owners. Bur even the third volume delib­

,.Hciy paid linle attentiun to many Imporrant things: foreign trade.

U"dl'rs{d"dm,.; the Sysctm:

\tarlC a"d Beyo"d

87

!ht' unpue! on chI' clpl talis t system of ab"orbing the slIll enormous pre-caplrali!>t pans uf the world or the role of the ,tate. Marx had intended In rhe Original plan for GzpltlIons u nanswered about the COurse capitalism would take. These quc ..-

nons did not necessari ly seem TO matter that much euher to t\larx and Engeb or to the acrivisr... in the new workers' movements of the

1 870s and 1 RROs. These were the years of a long penod of crist'" known a, the Great Depression. The U� steel magnate Andrew Carnegie expressed the 11100£1 even in capimlist circles In 181:19 : Manufacturers . . .see savings of Illany rears ... hecol1ling less and less, with no hope of .J change in the situation. It is in a '>oil thu� prepared thar anything promising of relief is gladl)' wekomed. The manufacturers are in rhe posmon of patients that have tried III

vain every doctor of the regular school for ye.us, and are now

liable to become the victim of any quack that appears . . 1 .

A quarter century of falling profit rates" led to massive pools of PO\crty In Lundon and other citie� and to mass unemployment III

the mid -188 0s. I t was not surprising rhat Frederick Engels could feel that the logic of Mar.'I('s model was workn i g I(self out right III

front of his eres III England as "the decennial cycle of stagnation. prosperit)', overproduction and crisis� �eemed to give wa)' to "a

permanent and chronic depression .• The traJectory of capitalism soon. howe\'er, proved to be more complicated than rhe experience of the J 8805 suggested. Profit rates recovered III Britalll in rhe 1890�, and the US :lnd Germany went through a new wave of economic expan�ion. There were ...

cl.'rtJin positi\'e reforms for workers thar seemed to contradi ct Marx's picture: Bismarck granted pensions to Germany's workers

in 1 8 8 9 and a British Liberal government produced a similar scheme In Bruain 20 years later, along witb free schnol meals; real wages rose in the last fWO decades of the 1 9th century, even if they tended to stagnate after tbar ;" working hours everywhere tended 88

10 fall from 12 or 14 hour� a day to eight. and the working week to tall from six days to five and a hdlf: The apparent refutation of the predictions drawn from Marx's model led to a cnsis wuhin Marxist r.!Oks. known as the revision­ I

( controver!>)". Out of It enu'rged two very different trends In the

analysis of capitdlism which were to confrolll each urner again and again O\'cr the next century. Edward Bernstein, only a fc\\ years prniou...ly a close collabo­ r.1tor o f Engels, produced a root and branch ultique of Marx's methods and conclu!>uJIl!>. "Sign .. (II an econOllllC worldwide ..rash of unheard of ·violence have not been established " , he wrote. "Overproduction in single JIldu�tnes does not mean gen­ ('r;ll crises".' -WQ[kingmen", he concluded. arc not -universallr plluperised :1 \waS set out III the (;omlll1l11lsl AldllI/esto": These \hanges, be argued. had arisen becau�t' of "the enormous exten­ \100 of rhc world market" and rhe re,!!ui:nion 01 production with "the rise of the industrial cartcl�"

so

thai "'general commercial

lrises" were "improbable" . Bernstem '5 -revision" of Marl{ was rejected by Engels' other col1,lborator, Karl Kaursky. But Ihi� did nUl pre\-t'nt many socialists "..uvists coming to accept in pnlccice (har capitalism had stabilised I!..elf for the indefinite future. Challenging such views meant going lurther than Kaursky and adding to Marx's analysis. It is rhlS \\ hich,

each In their own way, Rudolf Hilferdlng. Vladunir Lenin,

�Icolai Bukharin and Rosa Luxemburg tried to do. Soon it was not only the purely economic funcrioning of the '��tem that required something mUfe than the basic account pro­ \Ided by I\larx. So too did a new period of Immensc polttical •nn\'ulsions

as

44 year!> of peace

10

western Europe gave W,ty to

!lIt most hOrrific war humanity had lei known.

I hlferding: finance capitalism and imperialism I he first Marxist economist to publish a detailed analysis of the dl.mges was the Austrian Rudolf Hilferdinl; in his work Finance « .lllllal,

in 191 1 . Basing himself Oil developments in Germany, he

Ift-\ucd that banking capital and industrial capital were merging to produce a synthesis of the two, which he labelled " fin,mce capI­ ,,"". On this basis giam trusts and Cartels were emerging that ,fluid dominate whole sectors of industry:

II)000 MJrx: \10"01'01),. \'l;'ar and {hc SIJIC

89

There i!> a conrlnual tendency for canelisanon [() he extended. Tht: individual Industries become Iflcn'aslllgly dependcnr upon the cambsed industries until they are finally annexed by them. The ultimJte outcome of trus process would be the formation of a general carrel. The whole of capitalist production would then he consciously regulated by a single body which would deter­ mme the \olume oi production In all the branches of industry.' Hllfcrdlng did 11(lt see competition as disappearing completely. He emphasised the importance of international competition, pOinting to the way rhe merger of finance and Industry IIlslde a country led to pressure on irs state to use prorecnorust tax duties to aid its cap­ ltalii!>tent that the im­ .. JIlcreasingly centred on I'(,flalist division I)f the world wa UlJustrial areas. "The characteristic tearure ot unperialJsm is pre­

Iy that it smves TO annex lI()t IlII/)' agrarian terriTOneS, but el'en most rughJy industrialised regiom (German .lppemc tor Belgium; I rench appetite for Lorraine)" , '. Bukh3rin's /'t;lperia!tsm and \'(lurid i:.C()IIIIIIZ)" wrmen shorrly

,L

"c(ore Leni n's work, bur appearing atrerwards WLth an lorroduc­ of IUm by Lenin, made rhe argument Just a� forcefully a, he draws Lhe consequences of the tendencies that Hilferding had described: Combines . . m industry and bankmg. . . ullite the entire "na­ rional" production, which assumes the form of a company of hecoming a state capitalist (rUSt. thus ..:ompanic..,.. Competitlon... is now competlfJon of the St3te capimlist truStS on the world market. . . Competition is reduced to 3 mini mum within the boundaries of the "national" ewnomie!>, only 10 flare up in colossal proportions, such as would not have been possi� .

ble in any of the preceding historical epochs . . . The centre of gravity is shtfred in rhe competition of gigantic, consolidated and organised ecnnomic bodies possessed of a colnssal fighting " . 11 Gtpacity in the world tournament of "nations . .

\\ming three }'cars after the end of the war, he drew out the Impli­ Il Ions e\'en more sharply; The state organisation of the bourgeoisie concentrates within Itself the entire power of thiS class. Consequently, all remain· ing organlsations... must he suhordinated to the state. All arc . .. militarised . . . . Thus there arises a new model of st:lte power, the classical model of the Imperialist state, which relics 011 state ..:apitalist relations of production. Here �economics" is organ­ Isationally fused with "poli ncs"; the economic power of the

.nod Mal':lr: Monopoly. WJr 3nd Ihe Srure

bourgeoi\ie unites itself directl y with the pol itical pow er; the \l3 te cC;lse!> (f) be a simple protecror uf the prOI.:e!.s of explOIta­ tion and hecomes a direct, capita li!>t collecti\e exploit er . . .

\'('ar now hecome.. cemrl , l ro the system. a rising from the competi­ tion between the " st,lte capitalist trusts", and al... feed o ing back Into and determinmg ther i Internal orgilD i ... arion : With Ihe formation of state caplmli!.t tru"ts, com pc uuun IS being almost entirely shined (() fOtl'lgn cou ntr ies. The org an... of the struggle wa�ed ahroa d. primarily state power. mus t there­ fore grow tremendously ... In . peac{'ful" times the mil itar)' state apparatus is hidden beh md the scene!> where II never srops func­ rion mg; m war tinlt's it appears on the !;Cene mOSt direct ly. . . The �truggle hem een state capitalist trusts IS decided Ir1 the firM place by the relation benveen the ir muir.lr} forces, for Ihe mili­ tary power of the l:ountrr i.s rhe last resort of the struggling "n,mona !" gro ups of capitalists . . . Every improvclllent in nllli­ rMy techmq ue entails a rco rganis:aion :md reconstr uctiun of the mil ita ry mechan ism: eveq innovation. ever} e.xp amlon of thl' mili tary power of one State, stimulates all the others. , .

-

Tht! 10Ai" of the argument presented by Lenin and R uk hari ll W.I� that the petlod of peace that followed the h rst Wo rld W:lr would, sooner rather than titer. give way to a new world war unless capi­ talism wa� overrhrown "The possihility of a 'second ruu l1d' 01 Imperialist war is ...qulte obvi ous , wrote Bukharin. ' As Wl' shall see late r the reacnon of rhe great capitalist powers to rhe was nor the export of capnal bUI the intlow of funds from other capitalist countries (ahhuugh there was some re-export of capital ) . Tbe focus on finance: became even

economy by "state ca pl l llisr trusts struggl ing globally .tgainst other "state capnalist trusts". ueh a struggle dId not have to concentrate on inveSTIng III for­ ('Ign countries. It could turn mtu "omcth lllg else: the effort to \\ rest na llonal

"

.

lrom ower countries already industrialised areas or sources of im­

l�m3nt raw materials by force. As Bukharm pur it. �The further it I l mperial ism) deve lops the more it will hccome a struggle for rhe

\.aplralisr ceorres as well n ••, i other wurds, to ttlrn \;tst ,Imounrs of value It was necessary. n 1I1t0 means of destruction-not onl} in urder to tr)" IO obtam more value bUI to hold onto that already possessed. Thl!. was the logic of Ihe capitalist market applied to the relauons between "tates. Each

more problematic in the quarter of a century after Lenin wrote. The quantity of clpiral lllveSfed abroad ne\'er rose above the level of 1 9 1 4 and then declined.·� Yet the great capitalist powers re­ mained inrent on imper ia list expan sion d ur ing the Interwar years,

hdd to invest in preparations for war in order not to lose out as the lither IIlvested �nore, jusl as each ca plt1 1 had to IIWC!.t III new means of produ ctio n so as to hold Iting huruclf on Hobson. Lenin in­

.

scale," with '�state caplra lisl HUsts". nor individua l firms. �rhe subjects of competition. The ··cxplosions of war" werc a re!>ult of "Ihe contradiction benveen worldWI de

Ihe producti ve fortes of the world eCO/lomy and the 'national ly' lunited methods of apprupriatioll oi the bourgeOisie separated by I.tles".� [n other words, lUSt as compelltion between capitals (and \\Ith it the free operatIOn of the la w of value) wa" reduced wlthm \1.Ues.

it operated on an c\'er more ferocious scale between them.

SISTed on the �paraSltlC" character of finance capital. Writing of: the extraordinary growth of...a social stratum o f relllu!rs, ie people who live by clipping coupons", who take no part in an}

Rosa Luxemburg: imperialism and the collapse of capitalism

enterprise whate\'er. whose profession is jdleness.�J

I (,1111l a nd Bukha.rin were nut the only M.1rxist opponenrs of im­ I'I·rialism to atte mpt to pro\e that il was an essential stage of • lpualjsm. Rosa Luxembu rg also did so with a rather different I llt""Orctica l a na lysis in her The Accumlllall011 of Capital. published III 1913.'- It rested on what she believed to he a central eontradic111111 w ith in capitalism Ihal had escaped Marx's notice. \tarx had p roduced tables in Volume Two of Capital showing

;"

This stress oil ihe parasi tism of finance capital has even led to some on the left e mbracing srrategies based on anti-l lllperialist allia nces with secti ons of Industrial capital ag,: u llsr finance capl ' ta l-precisel y the Kautsky policy thai Lenin attacked so bltrerl). M

"

Uukharlll's account of imperialism by and large avoids these fauhs. lie IIses the category of "finance capital" repeated l y. 13tH he expl iCitl y warllS against seeing it as sumeth ing distinct frolll industrial capital. .... Finance capital. . . Ill USt nor be confused with money capital, for finance capital is charOlcterised by being si. multaneously bank i ng alld i n dustrial capita I" ..... It i s I nsepa ra hIe, for Bukharin, from [he trend towards dorninanon of thc whok 98

Undt'rstandmg thr SY51rm: Marx �nd BeyonJ

Ihe in terrel :nion between aceul1lul.Hion and comu mption . Each rollnd of production IIlvolvcd uSing the prod ucts of the previous IBund, either as material mpurs ( mach inery faw materials, etc) or ,

means of consumption for the workforce. This required that the lII.uerial products III one roUlu.! corre!)ponded to what .....as needed Illr production to proceed at the next rOUlld. It was not merely a 1\

\t>CJd Marx: r-,·lor"lUpoh. \'('ar: llld Ihe Stair

99

qLlc�tlon of the right .lffiounrs of value p .lssing frorn one round to Ihe n�xt, but also of the right sorrs of usc values-such and such quanmie\ ot raw 1TI.1rerials. new machinery, factor} huilding, erc. and such and such qua nrmcs of foud, cJorhmg, etc, tor the work­ ftlrl.:e (plus luxury goods for the capitalis[s themselves). Rosa Luxemhurg, In examining Marx's tables, came to the conclusion thar discrepancies wcre bound [0 ariore between the distribution uf value from one round

[()

another anJ [he dIStribution of the use

values needed to expand production. More consumer goods would he produced th,Hl could be bought With the w.lges paid out to workers or more investmem goods rhan could be paid for Out of profits. In other words, the "ystem lIleVlrahly produc�d an exccss of goods for which there was no market within it. Overproduction was not jll"l a phase in the boom-slump cycle. bUI endemic. Conceived of as a closed system, in which all the OUtputs of one round of prnductlon had to be ahsorbed as inputs in later rounds, capitalism was doomed to tend towards a complcre breakdown. In rhe carl)' stages of capitalism rhis was nor a problem. It wao:; not a closed system. Precisely because it grew lip wilhin a pre­ capitalist world it W3), surrounded hy people whu were nOI pari of it-artisans, [he remnants of feudal rullllg c1a��es and vast numhers of .. ubsis[cnce peasams. They could absorb Ihe surplus goods. provldmg raw !luHerials in rCnlrn. But the more capiral. ism C,lrlle ro donunate in a particular (·ounrry. the more it would he faced with this contradiction-un less i[ expanded uutwards seize control of other, pre-capitalist, socieries. Colol1lsarion was III rhis way essential for rhe continued functionlllg of rhe to

sysrem. Without it capitalism would collapse. Luxemburg did nor simply produce this argument in an anal)'r­ ical form. Shc supplemented it with chapter after chapter showing III horrifying detad how the historical de\elopment of capItalism in Europe and North Ametlca had been accompanied by the sub­ lugation and cxplOiTatlon of the rest of rhe world. Her conclusion. like I eni n and Bukh arin's, was that socialist revolution was the only alternative to imperialism and war. Her ana lysis was, however, subject to trenchant and devast:lt. ing crlriq lies. most nota bl)' b}' the Austrian refurmist Marxiq Ono Bauer and b)' Bukharin. Bauer produced his own versions of the reproduction tahles, claiming [hat there was no problem gerring the inputs and Outputs to halance properly over ')everal rounds of production. Bukharin concentrated nn refuting poinrs Luxemburg 100

Undel"'\r .. ndln� rh(: 5)Urrn: Man and &'ond

ued that made in her "'anti-critiquc" repl} to Bauer. She bad arg an incen­ (here had to be something outside capitalism to prm·ide llgh for tive ro the capitalis[S to keep mVCO:;lIng. It W3S nOt good eno wing t'v�r mcreasing amounts of imeSttllenr (0 absorb the gro gain [0 output of society, since, she argued, Ihl'> would providc no Ihe capiralisrs to iuS[ify )'uch in\'estmem:

sake is, Productlon to an c\'cr grearer extent lor prodUCTion's from th� capitalist POint of \ ie\\, .lhsurd �ause In this way it is and impossible for the emire Cet:

�ew people have fullowed through such .1ttempts to develop such Insights into a ngorous interpretation of the world system. But '-Ome of their presuppositions are t,lken tor granted III everyday

ways of talking and wrIung ahout the w(lrld. People habitu ally reak of .. the econOl'll i c Interests" ot this or that stare, of h ow one 1\ doing compared with another, of the �profits" of one or other

\:OUIltry. So the recent ver) useful ac\:oum of cap![all�m slOce the ....econd Wo{ld War by Robert Rrenner emphasises the Interactions IIi "US capitalism", "Japanc�e capitalism" and " (,erman capltal­ with ncgotiation by states pla}'lJlg t world who wanted to base thernselH.'s on t:aplwlist forms of economic organisation: Throughout the world, tbe period of the final vicw!) of capital­ ism over fe udallsll1 has been linked up with natJonal movements. For the complete victory of commodity production. the bour­ geoisie must caprure the home market. and there mu�t be politically united tcrnrories who�c population l>peak a !>lIlgle lan­ gl1:1ge, with all obstacles to the devclopml"1lf of that langnage and ro it!> consolidation in literature eliminated . . . Therefore, the tendenc), of every national movement is towJrJs the formarion of lIatu)flal stat('s, under which these.: reql1ircment� of modern capitalism are hC'�( �atisfied . . . The national state is tYI)ical and normal for (he capitalist period.... j\ lodern states hJve not developed, accordmg to thiS conceprion, a1> e'ternal to the capitals (or at least, to most of the capirJls) hased

within thern. They ha\"e been shaped historlcall), hy the process b) whIch capitalist metbods o f accum ulating wealth began to tale root, first III pans of Europe and then III the ('St of the world. Those groups identifying with such methuds necded to protect

themselves agalilst the various social forces associated with the pre-capitalist society III which the)' developed-and vcr)' soon againSt uther capitalist groups located elsewhere. This meant seek­ I11g 10 shape political strucrures to defend their common Interests, oy force If necessary. in what could he a hostile world. Where old pre-capitalist state forms existed, the) had to get control of them and rcorganise them to fit their own interests (a� in Engl.1ild or France) or break apart from them to form new states (as With rhe Dutch Republic, the United States and rhe ex·cuJonial countries of the second half of the 20th cemury). By the hue 1 9th century 11 wa� not only existing capitalist interests whjch soughr to build such stares. So too did elements from old exploiting classes in places like German}" Tsarist Russia and Japan who wailted to sur106

Undcrs!andmlt [hI' �rSlcm: Marx and lk�onJ

were with the rise of eapualism. They were reshaped fundamen· tally, with a redr.lwlflg of old terrltoTlal houndaf1e� and tbe establishment for rhe hrst rune of cCnlrallscd structures that reached down into tbe lives of ever)' mhabltant /fur rhe first time they were all "citi7ens-)." The fact that the new srrucmrcs func­ [he deployment of force, not the production of tioned throu Io:ommodities for sale. did not stop lhem being shaped by the

�

(hanging rclations uf production and exploitation created by the rise of capitalism. And they were from the begmning-and remain today-----scructures that feed back mto the organisation of produc­ tion by capitals, influencing the tempo and direction of their accumulation. The logic of states was a product of the Wider logic

of capitalism. even if It frequently Came illto conrradiction with other eiemenrs in the system.... i three forms-as productive capital, as com­ Capital eXists n modity (or merchanrs') capital and as moncy capitaL·' Fxery process of capital :lCcumularion under fully developed capitalism mvolves repeated changes from one form to another: money capi­

taJ is used to buy means of production, raw materials and labour power; these 3re put together In the productiun process to rurn OUt commodlries; these commodities are then exchanged for money; this money is then used to buy Illore means of proJucriun, raw ma­ terials and labour power, and so 011. The forms of capital are

(ontinually imeraeting as one changes imo the orher. But there can Jlso be a partial separation of these three different forms. The Of­ pnisation of direct production, the selling of commodities and the \upply of finance can devolve upon different groups vf capitalis[s_

Money capit:11 and commodity capital c:tn be continuall), mobile, moving from place to place and across 113tional bound­ aries, unless obstructed by the state or orher bodies exercising lorce. Things arc rather different with productive capitals. Regarded simpl)' as accumulations of value, thcr differ from each kyond Mana rily act together to tr} to shape irs soci al and political conditions, that i� to exercise i n fluence over the stat e. As Nei l Brenncr puts it: In ItS drive to accumulate surplus value, capital stri\'cs to ...oller­ come all geographical barriers to its circulation process . Yet to pursue thl!> conflnual dynamic. ..caplral necess3nl} depends upon relamely fixed dod immobile territorial lOU aStr ucrures, such as urban regional agglomerations and territor ial srates . . . CaplraJ's endemic drive ... s i inrrinsically premIsed upon the pro­ ducHon. reproduction. and reconfiguratlon of rela tivel) fixed and Immobile configurations of territonal organisatio n. mclud. IIlg urban regional uAAlomerations, transponarion networks, communication systems. and state regulatory institutions . Most capit;!.li'>t enterprises operate not sUllply on mar ket (.. kula­ flons, bur also on rhe long-term relations they establis h with other enterprises that scI! to rhem and buy from them. Oth erwise the)' would live in conrinual fear thar an}' ch.mge i n market conditions would cause thclr supplier!> to sell elsewhere and those who trans. POrt and retail their goods suddenly to lose inn-rest in them. The)' seek to '"lock in" these other firms by a combination of financial incentives, business favours and personal COntact. To thiS extent 108

UndChra ndmg rhe Sys{l'm: ,,-13M" and Ik,und

rroduction docs not take place in indlvLdual firms, bur n i '"indu!>­ trIal complexes'", whKh have grown up over time:l Tbe market models of c1a!Osical and neo-clas!Oical economics l'Ortray capitals as isulated atoms which engage in blind competi­ tion with other capitals. In the real world capitalists have always Ined to boost their competitive POSHUll1� by establishmg alliances with each other and with ambmouo; political figures-alliances ce­ me.nrcd by moncy but also by tntermarri:lge. old boy nerworh and mutual socialising.·J Even the fluidiry of monl'}" cap!!al does not di minish the im­ portance of the particular n.lIiOIl;)1 Stale" fur parncular financial IIlstitutions. As COStaS Lapa\'l(sas has noted i n his analysis of money under capitalism. '"Trade nedn depend� on Iru-'>t among IIldividual capitalist enrerprlses that is �uhJcct1ve and private, ,mce such trusr�raws on knowledge that enrerpn�es have accu­ mulated about each uther in the course of theLr comlllt'rcial rclations'".-' And the networks thai provide such knowledge have to a very high degree been organised on a national baSIS. wllh rhe ,tate, througb tbe central bank. pbying a key role. �The institu­ tions and markets of the credit �ystcm. regulated and managed by the central bank, place social power and truSI at the service of 1:,Ipiraiisl accumulation " ." The relationship between states and capItals are relationships be­ tween people. berween those engaged in exploinng the mass of the J'IOpul:uion and those who control bodies of armed men. Personal \;,onract with the leading personnel of the State is something every lapiralist aims at-just as en:ry capitalist seeks to cultivate tics of truSt and mutual support with certalll other capLtallsts. Tbe "con­ !lections� lenin referrL-d to -, are immensel) important. Such interactions n i evitably leave an Illlpnnr on the inrernal make up of each capital, so that an}' parrkul3r capital would find It very difficult to cope if it were suddenly to be torn apart from the orner capitals and the state with wbich It has co-existed in [he p.ISt. The Lliltional StalC' and different nationally based c3pirals .;row lip together. like children

111

a slllgic fa mdy. The development

of one n i evitably shapes the development of tbe others. The groups of capitals and the state with which they an.' associ­ ,ned form a system in which each affect:. the others. The specific �haracter of each capital i s influenced by its inreracriun with the other capit:Jls and the state. It reflects not only the general drivC' to expand value, to accumulate, but also the specific environment

Rtyond. Marx, MonopoJr, W,u and {hI' St3te

III

109

whkh It has grown up. The state and the individual cCape fhl�

mechanisms persuade people to r.lke the easier path of integration

strllclIIral lllterdepelldence.

The particular capitals find It easier to operate wirhin one state rarher than another., becaust they may have to profoundly restructure both their internal organ isation and their rela(ion� with other capitals If they move their operations. The

state has to adjust to the needs of parricular capitals becau-.e It de. pends on them for the resources-particularly rhe revenues from 13xati III

general. hut the conces­

"ons it makes ro II1tegratc other soci:'!l groups :'!nd cl,lsses into its rule. It necessaril)' displays :111 important degree (If autonomy. M:ux commented in 1 8 7 1 that "the complicaTed stare machin­

The " autonomy" of lhe state and the class nature of its

cry ... wirh its ubiqUitous and complicated military, bureaucratic,

bureaucracy

derical and judiciary organs, encoils the liVing society like a boa . u)nStnctnr. .. , The state bureaucracy arises to assure the domina­

The mutual dependence of srares and capltal� does nor, howC\'er. mean that STates can simpl)' be reduced ro the economic entme!>

that operate WIThin them. Tho'ie who do the aCTual runlllng of the state take on functions which competition benvccn firms prevent' firms themselves undertaking. They ha\'e to mediate between Tlval capitals, providing ludlCial systems and overseeing, through cen­ tral banks. the financial system and the natlollal currency. A� Claus OUe put It. "Since 'capital as a whole' exiSts only III the Idea I sense. . . lt requires special guidance and supervision by a fully dif.

ferentiated polJrical-adminisrranve system "." The stare al�o has to providc mcchamslIls for integrating the mass of people into the s)'srcm: on the one hand thccoercive instI­ tutions (hat bear people inro submiSSion (police, secret police,

prisons); on the other hand the m i egr,aivc mechanisms that diven grievance into channels compatible wirh the system (parliamcn­

TMy strucrures, frameworks for collective bargallllllg, reformist. conservative or fascist parties). The proportions in which these

tWO sets of mechal1lsms operate vary from situation ro Situation, 110

lion o f the existing ruling class. but in the process becomes a "parasite"" which IS capable of Mhumbhng under its sway even the ulteresrs of rhe ruling classes. . .

"-'

This autonomy reaches ItS highest pCllntS when governmental power lies with reformist. populist or f:1scist parties wuh a power­ lui base among workers, peasants or the petty bourgeoisie. There are cases when those who exercise such aUfOilomy are able to hreak with and even expropriate important capital ist interesrs Within their rerritory. This was to bc true on numerous occasions III the course of [he 20th century-German NaZism. Argentine !'eronism. Nasserism III Egypt, Ba'athlsm ill Syria and Iraq, arc aU l'xamples. There are also innumerable cases in which individual lapirals behave in ways detrirnenral to the IIlteresrs of "'their" �Iate-moving funds and investl1l('nt ahroad. doing deals with for­ tlgn capitalistS thar undercut other local capitals, evell seJ1l1lg wea.pons to states fighting their own. Yer there are limits to the extent TO which a stare can bre.lk free Irom itS capitals, and capitals from their sta.te. A state may override III

the IIltere:.ts of parth.:ular capitalists; It cannor forget th.1 t its own reve n ues and ItS own ability to defend itself agamst other stares depend on the continuation ot capital accumulation. Com'erscly. the Individual caplral can, with considerable difficulty, uproot Itself

themselves. Tht'\, are aggre�ates of people \\ hose relationshIp ((I material prod ucti on and exploi tation forc(·s them to au ro­ gerher collectively against other such aggregares. In a n inal chapte r to Volume Three ot Capital Marx 111unfilllshcd f

whi,h might disrupt ItS normal rh) truns of explOitallOn and again '"

�iSts that classes ,annot be Idenllfied �ll11ply b)' the "sources of revenues" since this would lead to ,In infinite dl\'l!.ion of classes, paralleling "the infimte fragmenrallon of IIltcrests and rank into which the divisi on of social labou r � pl J ts labourers as well as

uther c.lpltals and thelf starcs.

cap ltaitsrs

from one national Slate terrain and plant itself in anOlher; tml I t cannot operate for any length of time in a "Wild West" Situ:lllOIl wlln no effecrive st3te to protect It both against those forces below

A break between either a STate with us capitals or b) capi ta ls

i a difficult and risky business. If a state turns on with their srate s private capllal, It can create a siruanon

III

which people begin to

1 plral accumul,nion a\ challenge not mcrcl�' private cnJ

I II

by �lruggJes ,II the point of production-the f.;apltalists hy trYIrlj:!; tl) enforce' .l hl�her rale of explO1tanon. the wurkers by attempting

[Q �l·t v.'age increases. The halance of class forces deternHiles the leeway whIch exists for the stare to increase its revenues. These are part at the total social surplus value-parr of the IOtal amount bv ' whIch the value of workers' output exceeds the COSt of reproduc­ lIlg their talmur power. In this sense, state revenues are comparable to the other rev. ellues thai accrue to different sections of capital-to the rents accrulllg to landowners, the mterest going to money capital, the returns fmm trade gOlllg to commodiry capital and the profits of producti\'e Caplr:ll. Jmr as there is continual con(]ict between the differenr �ections of capital over the sizes of these different re\"­ enues, so there is cominual conflict herween the state bureaucraC)­ and Ihe rest of the capitalist class over the size of its

cur

from the

tOlal surplus value. The srate bureaucracy will, on occasiom. use its own special position, with its monopoly of armed force, to make gains for itself al the expense of others. In response to this, Ihe other sections of capital will lise their own special posnion­ industrial "Ipltal it.. ability to postpone IllVestment. money capiral Irs ability to move oversea�-tO fight back. Yet III all this. the di fferent sectIOns of capital cannOi escape their mutual interdependence more rhan temporarily. It eH:nrually asserts itself III the must dramatic fashion, through crises-the sudden collapse of the system of credit, rhe sudden inability to sdl coml1lodltie�, sudden balance of paymem crises or even the threat

nnction, berween those t.:orporations." We can add a further dis ua l c3.pital� an d those who manage the accumulation of IIld l\id the developmem of the who, through the state, seek to promote ual state-wha t may \Ibling capi tals operating Within all Individ

be ca lied "'political ca pltaIISts".

State capitalism and stale capitalists lm of the 10 th century One of the most significant developme nOlnlC sectors. The was the emergrncc of�blg �tatc-()wned eco dm:uon 111 Germany pro Jl ern Int of ole wh the n pla to e 'tate cam III ,he US and Britain as In the laner part of the hrst World \'{Iar Second World W:!r­ the uf st mu t ou gh ou thr any rm Ge as ll we to c.,orbachev and i n ,l nd, of cours�, in rhe US SR from 5tai1n .

C hin a under Mao. on sense" view that the mm "co the ept s acc yst al an ny ma as t JUS so they also refuse to ,tate i s somrthlOg outside of capitalism, · " . 1,,1. I Ita cap e b can s mie no ,Iccept that st.-ue-run industries and eco s rather differently. the classical Marxists, however, saw th ing Hmduding"' among Marx in Volum e Two of Capital was already state capital, so far as Hlhe sum of IIld ivid u.tI capitals", . . . the in mines, railways /o:0vernmenrs empluy productiv�· wage labuur italists".'" Engels speir l·tC, perform the function of industrial cap marck's nationalisatlon Ihls OUf much more ful ly III reacting to Bis n( the German railway system: H

of state bankruprcy. Those who direct the bureaucracies of the

is essentially a capI­ The modern Slate. nu matter whal Its form, ideal personificacion talist machine, the st,He of the capimlisrs, the ceeds to the taking of the toral national capital. The more It pro uJ.J1)' becomes the na­ over of productive forces, the more II act s. The workers remain rional capItalist, the more citizens It explO it relation is nm done wage workers-proletarians. The capitalist away with. It is rather brought to a head.�-

state may not own indi\'idual cbunks of capital, bur rhe)' are forced to behave as agents of capital accumulation. to !x.-come, ac­ cording to Marx's defi nItion. part of the capitalst i class. Marx points out in CapItal that with me advance of capitalist production there rakes place a divi�ion of function within lhe cap­ irailst class. Tht" owners of capital tend to play it less di rect parr in the actual organisation of production and exploita tion, lea VillA this [0 hlAhl}' paid managers. But, insofar as these managers con. tHUle

to

be

agents vf capital

accumularivn,

they relll:!in

capitali sts. Hdferding developed the argulllt.'nt further, pointing to the divisions within a single capitalist class nerwcen the mass of re"tll.'r capitalists. who rei}' on a more or less fixed rate of return on their shares. and "prolTloter� capitalists who gain extra sur­ plus value by garhering together the capital needed by the giant ' 14

UnderSl3ndmg Ihe S),sICm! ,\Ian and lWyond

original economic liber­ f..aursky could argue in the 1890s th:H the ism gets Its name) of the .I!ism (from which present day neoliber,ll ces the capitali�t cla�s" "Manchester school" "no longer m/luen ent urged the necessi!}' IlCc3.use "economic and pol itical developm te", forcing it HfI) take of the extensio n of the functions of the sta ns or industries". ' mto irs ow n hands more and more functio !I

ond Marx: Monopol). \\,';u and thl.' Statl.'

'15

Trotsk} could wme .1 quarter of a century L,ner. in The MllIl/feseo of the C(}/1/l1lltll/St IlIfer/wtional to tIl(' Workers of the World:

The stati"atlon of economic life, against which the capltabst lin­ crall�m used to prote'>t so much, has Oecome an accomplished fa(I, . It is Impossihle ro return nor only to free competition but e\-en til rhe dommation of trusts. syndicatl's and other econorllll <XlOpuSt's. Tudar the one and only issue is: Who shall hcreforrh he the bearer of stati..ed productiOo-the lI11pnialist Sfare or Ihe victorrous proletariar." .

"

Wh:JI all of

them recogni sed was tnat srarl' rather than prrvate ownership of the means of production did nOt aller the fundamen­ ml relations of production or the dynamIC uf rapn,llist accumulation. For Ihe STate, the purpOSe of nationali�cd industry wa� to en.lole domestic ,1Ccumulatlon to match that lIndena ken by foreign riv,lls so as 10 be able to survive successfully in cronomil' and/or military competition. Ttl this end, the Jabour employed re­ m:uned wage lahour_ and the attempt was made to hold ItS remuneration down to the minimal level requ ired to su�rain and reproduce labour power. The state might plan production withlll rh(' enterprises It owned, bm Its planning was su bo rdinated to ex­ tefllal competition. ,USt as the planning within an} priv3tely owned linn W.1S. The self-expansion of caplfill remained the goal. and this meant that Ihe law of \'alue operated and made Itself felt on the IlHcrnal uperatlons of thc emcrpriscs. In beh'HillS like this, stare appointees hehave as much like capitahs[),-as hying emoodlments of capital accumulation at the expense of workers-as do private enrrepreneur.. or shareholders, It was a failure to recognise: this that led Hilferding in the 1 920:. 10 come the conclusion that ms. It was driven forward by the ,arne dynamic and subject to the same contradictions analysed by Marx. This was (rue during the period at total war, in which the mlal sratcs did nor (mde d i rectl y with ea(;h other and naval block­ .Ides greatly limited their competition in foreign markers. Every \uccess III accumularrng milirar)" hardware by a 10rate forced ef­ tOrts to accumulate similar levels of military hardware III its tlvals. Just as the efforts of m'al car producers to outsell each IIcher bring the concrete forms 01 la huu r III different car plants mto a n unplanned inter-relatmn'ihlp with eal.:h other. tran!>form­ !llg mem into different :trnounrs of a homol!enous JbStraCf labour. o too the efforts of ri\al tank-producing states to oUfshoot one .1Ilorher have the same result. Marx desCribed how under the mllrkct caplt.lllsl1l of hIS lime: •

the labour of the individual assertS mdf a� a parr of the labour of society ollly by the relalion!> which the act of exchange estab­ lishes directly he(ween the products, and indirectly through them, between [he producers.'" In the world system af> It developed after Marx's death, military �mnpetition Came (0 play the same ro le 111 bringlllg individual acts IIf labour performed i n differem, apparently closed, STate entities,

ItHO a relationship WIth cach other. .__essary scale to Acquisition of the means of dc\tructlon on the ne( I'\ure success in war depended lIpon the same drive to accumulate III :Ins of production as did (he struggle for m:1fkers-and with thar \Vent the holding down of wages to the COSt of reproduction of tIhour power. rhe forcll1� up of productiviT)' to the level prevailing U " :1 world scale. and the drive to me the surplus for accumulation. As Tony Cliff poimed out lllore than 60 years ago. the nnly dif­ It rence, in mi!> respect. betw("t!n m ilITary and cconumiccompetirion YI,I!> thr: form the acculllulation look-whether it was terms of an 41t,:umul arion of use values that could be u�cd to produce new IlllIKis or of use values that could he u�d to wage war. In either case Ihe Ul1portance of these use values to those controlling them was d('lermined by c(lmparison wim use v;llues el!>l:where in rhe sySTem. I !,;omparison which transmuted them IIlto exchange values. rhis also meant the ratc of p ro fit continued to play a central nile. It no longer determined the distribution of investment be­ I ,.,.een diffe-rent sectors of the internal economy. The requirements " ,ond Marx: Motlupuly. "ar and Ihe State

117

of the nulitary did thi... But 1t operated 3S a constraint on the economy as a whole. I f the ratio of rotaI national surplus value to total Investment 111 the mil itary-industrial mach me fell. this we.lkened the ability of the national state cllpitalism to sll!otain .. clinc 111 the rate of profit It!oelf in warfare with its rivals. The d( could not lead to economic slump. since the war machme would go on growmg as long as there ....a.. any remalOlng mass of sur· plus value to he used up, however small. BUI It could contribute to milltar}' defeat. The same capitalist logic could be seen as operating III the States where new bureaucracies emerged to lake control of the means of production (the USSR from the late 1 9105 onwards." Eastern Europe and China after World Wl . f Two. various former colonial states in the late 1950s and 1 9605). Although they called th em­ selvc!> "social ist" their economic dynamic was dependenr on their inter-relations with the wider capitalist world. If they traded With the capita l ist countries beyond their horders. they were drawn into the logk of commodity production-and the rcquiremenr to remain competitive in markets by undertaking accumulation in an essentially capit

is

likewise Immedi­

I ht: competition between comnll.'rc1J1 capllali�ts with each other meant that each W divide

from the pockets of pre-capItalist explOIters-resources [hat coutd

the losses of individual capitalists among the capitalist class. But

then be used for productIve 3cculllulation. By contrast. the mer­

this does nOt Stop these equalised losses from being losses so far

chams or shopkeeper!> who handled rhe goods of the productivl'

as the aggregate socia l capital is concerned.I I

c3pltalists got their profit from the .tlready created surplus \'3Iue 01 the productive capitalist. They were not adding to total surplu, value and with it the further accumulation of capital. As Marx put It at one pomt:

'24

UndcrshlUdmg

I he distinction hetween productive and unproductiv(, labour is often seen as a merely scholastic question. Bur once seen in terms 01 what contribu tes to accumulation and what does not. It has

Ih( SYSltm: Marx and 1\(01'0111.1

125

enormous imphcalions-induding some rh;n Mary hml�elt never developed. \\ ha t is "productive of surplu\ value" fo r the individual capitalist (the definition of productive labour Marx used 111 his notebuoks) is not necessarily what IS productive In term!> of adding to rhe surplus value availahle to capital In gen­ eral for accumulation. And I [ IS this is that IS central for the d},namlc of the systrm.

The scale of unproducti\'e labour The

leyel of unproductive expenditures im'olved in sales and fi­ nance grew Throughout the 20th century. Shaikh and Tonak caleul.He· rhaT the number of workers employed in trade 1I1 rhe U� grew from 10,690,000 in 1948 to 24,375.000 in 1989, a nd 01 tho�e 111 finance anJ insurance from 1,1S I ,000 to 7,1 23.000. Meanwhile, the number of productwc workers only grew (rom 32.994,000 ro 4 1 , 1 48,000." Fred Moseley estimates rhe number.) In commerce as gro\\lI1g from 8.9 ro 2 1 million between 1 950 and 1 980, and the number in finance from 1.9 to 5.1 milliun, while the produ'tive workforce only grew from 28 to 40.3 million. I The figures do nor mdude the large number of managerial em­ pluyees who Marx regarded as non-pruductlvc because they are involved 111 poliCing those who acruall) produce value. Simon l\lohun has calculated thar the growth in their numbers and rcmu­ neratlon caused the share of "unproductive" wages and salaries in the "material value added" to the US to ri!oe from .l5 percent in 1964 to over 50 percent 111 2000," The.)e figures al!oo understate the tmal growth of unproductive lahour because they do not in. elude employees il1\'olved III non-productive state functions like the nulllary and rhe legal system.

Unproductive expenditurcs and waste production

1I1t0 this category. So too does labour thai goes into military wcaponry. Although such labour has usu;l lly been regarded as

rroductiH" br Marxists, If shares with non·productive labour the fact that It does nOl add to capitalist a,c;umulauun. For these ',',l.§ons it wa.) argued by Michael Kidron In the early 1970s that it h{)uld also be regarded a... non-produl:tive: The ageing of capirall...m... opened a gulf beTwt.'Cn the two criteria of producnveness that hc [Ma r--.-Cl-IJ used Imerchangeably­ cmployment hy capital and augmenting capital. .. Now thar capital i� king... the- twO criteria are no longer congruous. Millions of workers are emplo}'ed directly by caplral to produce goods and scnices whic h It cannot usc for further expansion under any conceivable circumstancc�. They are rroductlve hy one critenon an� unproductive by the other... (,,\cn the need to cboose, productive labour today must be defined a� labour whose final output is or C;Hl be an input into further prod uction. Only such labour can work for capital's self-expamlon ... To spell it out, n i Iare capitalism only part ()f the surplus can be lL�ed for the expansion of capital. The rest is waste pr()(Jw.:t. "

More recently Alan heeman has also suggested thar the notion of unproductive labour has to Ix- extended to involve the use of IJbour to produce things that are then used til an unproductive manner. "The workers who decked the European Bank for Reconstrucrion and Development III marble art' JUSt as unproduc­ live as the clerks who now walk across it ..... Guglielmo Carchedl, h�' COntrast, argues there i... lahour that is productlvc if It has cre· ;lied new value, even if this does not then contribUTe anythmg to Ihe next round of accumulatlon}- Regardless of how il IS catc­ Kflrised, [he proportion of labour that IS waste from the point of Hew of capital accumulaTion has become enormous. Kidron cal­ �lIlated that "three fifths of thc work aCfUaUy undertaken In the US HI the 19705 was wasTed from capitaJ'... own polilt of view"'"

There i.) another SOrt of labour that also has to be- taken into con­ sideration when examining 20th and lise century capitalism. Thi� IS the labour rhat goes into produdng commodities that are sold like orher commodities hut which do not then re-enter later round, of producllon, whether as means of production or as wage goods. The labour producing l uxury goods for the capita list class fall,

1 �penditure5 by individual c.1pirals that arc neither going to capi­ lal investment nor to the wages of productivc workers can be hroken down into different categories:

126

�IJre Spendmg and Ihc- Sys{c-m

Ihe state sector and non-productive labour

(.1)

Th(J�e conarned wirh the discipllnmg ot the workforce and ensuring I[ works flat out---expendrtures on internal secunty. supervisor)" labour and nm(' and motion measurement. dU'ckmg on work speeds.

(h)

Those concerned with kt:epillg the allegi:lI1ce of the work­ force, eg e),penditures 00 IIlternal public relations, work!> buJletins, management-run works cormmrtees. subsidies to works SPOflS teams.

(c)

Those de\'()(cd to financial transactions, ohtalOlI1g credit. bank charges, erc. Tho:.e devoted to sale�, ad' ('rtising, etc.

Ie)

Those cuncerned with keeping the workforce fit and able III work--company medical facilities. factorY cameens, etc, in •

�ome (;ases the provision of housing for the workforce. Those concerned with trarning the workforce-what maill' stream econfJmists often call " human capital". Expenditures on research and development.

(g)

mainrainrng social diSCipline and ensuring Ihe smooth reprodur.::­ lion of class rdatlons; maintatning state-run or financed forms

n( maintaining popular allegiance

to

rhe system, such as state

produced propagand::l and subsidies to religiOUS instlturroos; the �rperuarion of the ruling ideology through Sections of the edu. lational system; malOtalllrng the financi::ll rntrasrrucfUre of [be \}'>tem through the printing of national currencies ::Ind running engaging in economic competition for markets. As we saw in the last chapter. one of the greatest followers of Marx, Rosa Luxemburg, could not understand how capitalism could continually-expand the value embodied In means of produc­ tion without producing more goods for consumption. Similarl}. these MarXIsts have not been able to understand how capitalism could possibly benefit from conrinuallr expanding the means 01 destruction. The) have been so bemused by the irratlOna lit ) 0 1 what capitalists are domg as to try ro deny that this is how dH.' system works. But such expenditures had enormous implications for capital· ism in the laner part of the 20rh century. Waste expendlture� played a contradicwry role. Ther reduced the aOlOU", of surplu" value available for productive mvestment, so counteracting the tendency towards over-rapid accumulation llnd CriSIS. But the eventual effect in slowing down accumu lation was to create a whole new senes of problems for the srsteOl, as we Will sec In Chapter Nine.

Welfare and Ihe supply of labour power Not all the state expenditures listed earlier fall into the unprodu(':· m'e category as narrowly defined or Into the wider category 01 waste. Sratc-financed research and dc\'c!opmenr (corresponding [0 category (g) In the lISt above) that feeds through into aiding accu· mulation in the wider economy dearly plays a role for those capitals that benefit from it. similar [Q that of dead labour embod· led in means of production. Bur what of expenditures on health. education and welfare services (eqUIvalent to the expenditures {e) and (f) of individual capitalists) ? Here it is necessary to examine someth ing Marx only discusses In passing-the reproduction 0 1 the working class that capitalism needs for explonation. The first industrial capitalists of the late 18th and early 1 9th cenrurics in Britain did not bave to worry over Illuch about tile supply of labour power. It \vas available in abundance once " prlm· itive accumulation" had driven sufficient peasants from the !:ll1d. IJ2

I hey assumed they could bend former peasants and their children II) the discipline of unskilled machine mindi!lg.� while relying on Jr.1wing men trained as artisans mfO rhe factories for more skilled "ork. For these reasons, Marx, who dealt at length with pnmitive lu:umularion and the treatment (If workers 10 the facrories, virtu­ .l Ily ignored the problem for capitalists of getting a labour force wah the nght physiques and skil1$. Yet by the time of his death, the pread of capitalist mdusrry to ever newer new se..:tors of produc­ lion was making the supply and management of labour power---outside as well as inside the factory-somethmg of in­ �reasing concern to tnose promoting capitalist accumularion. The individual capitalist aimed to pay the mdlvidual worker lu�t enough by the hour, day or week to keep him or her fit and motivated to work. But this did nOl cater for a numher of impor­ l,lIlt rhings it labour power of the right quantity and quality was Kuing to he available for rhe capitalist class as a whole over time. It �lid not take into account ,he need for workers to learn necessary ,kills nor did it sustain them through periods of unemployment so .1\ to be able to �upply ,heIr labour power when the crisis ended. Ir \lid not deal with the prohlem of workers temporarily losing their \,lpaciry to be productively exploned through illness or injury. .o\nd it did not provide for the upbringmg or working class children ",ho would be the next generation of labour power!There were various ad hoc attempts 10 deal With each of these problems through rhe 19th century. Religious and other charitable lunds provided some relief for rhe unemployed or the sick. Pressure was put on working class women to bear the burden of ,-hild rearing through Ihe propagation of ideologies that treated men as rhe wage earner and men's wages as a "family wage� (even Ihough working class women alwa)'s worked to some extent and a man's wage was rarely adequate to keep a family):!' Some firms would provide housing under their own comrol--and sometimes l1Iinimal health facilities as well-for their workforces. Groups of .killed workers would run funds to provide for periods of unem­ ployment or sickness. Firms would Incorporate into the factory ",Ste.m a version of the apprenticeship system of pre-capitalist ar­ t;�anship, with youngsters learning a trade by working under ,killed wurkers for five or seven years on minimal wages. But over rime it became clear that the ad hoc methods were in­ .IJequate and that the st,1Ie had to take over man)' of the tasks from private capitalists and charitable concerns. In Britain it inrcn'ened '\I:.te Spcndmg

and Ih� Sysu:m

133

a!> carl)" as the 1 SJ4 Poor Law to ensure that thr conditions under whi,h the unemplu)"cd or the infirm could get puverty relief were so arduous that those who could work would. howc\'er low thc::

p.ly. In 1 848 It cstabbshed a Board of Health to act against the !>prcad of diseases n i working dass areas-which was affe([ing ri,hcr drcas too. Over tbe decades t i was caloled IIltO hmi[in� tht·

workmg hours of children and barring womeu from occupanons that might damage tbeircapacity to bear and bring up the next gen. eranon. In the 187051( moved to set up a state system ofelementM� education and to encourage the bUilding of homes for skilled work. ers. Then In the first decade of the 10th century it made the fir!>t

moves to coordinate the \'arious ad hoc measures of the previous 70 years into national structures to provide minimal social lnsur. ance benefits for unemployment, old age and 5Ickner.s.; Tht"

impetus TO do so came £rom the !>huck of disco\,fring 111 the cour..e of recruitment for thr Boer \Var how few of the working class were healthy enough to undertake military service. Ann Rogers has sum rnarised the reaction of the upper and middle class:

The belief that change was necc�sary if Britam was to compete successfu Ily with Gennan), and the UnIted States remained cen' trOll. Whether the :lTgumenr was formulated by tht' "abians or b} Lloeral Imperi;l lJS{s the concemration was on the damagt' that poveny wa!> doing [Q societ)' rather than the mi!>l'ry I I caused mdividual workers... The underlymg reason for the desire to Improve the health of the working class W:lS the need for a healthier labour force in the factories and the army. These measures \,>en: not simply a resuJt of capitailslS getting to­ gether and deciding what was ratIOnal for their system. They came imo bemg only after rccurrent campaigns ill\ olving u pper clas� philanthropists with a conservative disdain for the money·gran­ hing grubbiness of capitalism, middle class moralisers about working class behaviour, political opportunists OUt to get workinv. chlss votes, factory 1Ilspectors and doctors with professional can. cerns about peoplc's safety and well-being-and, alongside th em and often indcpendenrly of them, trade union and socialisl ac­ tivists. Bur such coalitions framed the proiects they pur�ued in terms of what they saw as rational for capitalism. And that meanT what was necessary to supply it with pools of suffiCIently health\ and skilled labour power. This was shown clearly by one featurr 134

Und�nlandlng Ih� SY�I"m: Marx .and ik)'onJ

Ihlt characterised the rdorms of the earl)' 20th centurr just as much as it had the charitable efforts of the early 1 9th cemury. Any henefits were always to be provided in such a way as to coerce into \Ct'king work all those who were fit and able. The principle of "less l'hgibllity" had to apply: getting the benefit must still leave the re· upients worse off than the worst paid work. What IS more, the h('nefits were not meam to come from a diversion of value from '-.1pital to laborn, but by a redistribution of income within the working ,lass through the "the insurance principle". Weekly pay· ments from rnoS(' able to work were to su

•

about the .. underclass ". The division hcnveen social expenditures that are in some wa} productive for capital and those rhat are non-pruductive cut& across some of the normal ways of dividing up national budgets. So education is both traiDing for productive labour and also tram­ ing for unproductive forms of labour (eg in SHies promotion or Ilnance) and [he inculcation of bourgeois ideological values. Health services and unemployment benefits both keep the work­ force Ilt and ready to provide labour power and are mechanism� for maJlltalOing social cohesion by providmg.1t least minimal pro­ \'j,lun for the old, the inllrm and the lung-term unemployed. These ambigUities become important whenever capital Ilnds the COSts 01 state pro\'ision begin to CUt into profit rates. At such points stares come under the same pressure ::as do hlg capitals when faced with sudden cOlllpetition-the pressure to reo structure and reorganise their operations so as to accord with the law of value. On the one side this means trying to Impose work measurement and payment schemes on welfare sector employees similar to those within the most compt'tltlve industrial firms. On the other side it means curs in \\elfare pro\'i�ion so as to restrict it as much as possible to :.ervicing labour power that is necessary for capiml accumulation-and doing so in such a way that those whu provide

fhi!> 1.lboW' power afC

prepared to do so .lt the wages the}

are offered. These pressures grow as managing labour power becolllt'!< more important for the state. In the process, employees working 138

Undcm�ndmg Ihe System;

M�rx and 8cyol1J

'Ute

S(X'ndmg �nd 1M- System

13'

I'art Two

CAPITALISM IN THE . 20th CENTURY •

140

dedine in output,z and worl d trade fell TO a third of us 192 9 level. By comparison, both world output and world trade had grown during the prev ious -Great Depression " uft he 1 870 s and I 880s.

priced themselves out of their lobs by not accepting cutS Ul their money wages. Had they done so, the magic of supply and demand would ba"e solved all the problems. Irving Fisher belatedly put

forward a monetarist interpretation, arguing that the money ..upply was too low, leadlllg to falling prices and so cumulatively

The I 920s boom The Ideological shock of the crisis was lflcreased by the way capi­ laltsm had sl'emed to have reco\'ered in the pw:edlllg years from the destrucrion of the Firs[ World \VaL Industrldl Output In the U� h:ld doubled from 1 9 1 4 TO 192 9, with [he emergence of a host 01 new industries that bt'gan to revolutionise patterns of consump­ tion-radio, rayon, chemicals. aviation, refngerario n, and the replacement of horse·borne hy motorised transporr. The boom In the US had a beneficial impact in Europe. Germany, rac ked bv ci\ll war In 1 9 1 9·20 and tben unparalleled inflation in 1 923 , ha then seen industrial output grow 40 percent ahove irs 1 9 1 4 level. [n France industrial produnlon had doubled. The pre ss had dis­ played a system 10 which the anarchy of the market and the tren d towards crisis had dis.1 PPCilred.' Suddenly Ihe}' were all proved wrong. The imtial reaction uf mainstream politicians and their fellow tra\'ellers n i the economics professlC)n was 10 assume that the} onl y hold to walt a short tlOle Iump would heglll to cor rect itself. �Recovery i� lUSt around the corner," as US preside nt Herhert Hoover assured people. But recovery d,d nor come III 1 930. 1 9 3 1 or J 932. And The economic orthodox}' which had bee n so confident in ItS pr�lise o( rhe wonders of capitalism so recenrly could nOi ex­ plain why-and it by which the different ('\:IOrs adj usted to each other, much as Marx saw the crises as able ".,"iall)· to resolve internal contradKtlons IIl l;apualism-but what

\-farx viewed negatively HJ)'ek viewed POSUI\·e!y. HIS theory srill, however, had a big hole iQ It. Why should the lag berween the sec� lurs cause so much greater problems than in previous decades?

Why, in parricular, should the production goods sector nor keep Ivowing faSt enough to putt the rest of the economy behllld It? The

,lI1swer he put fo'ward in passing in 1935 (and whIch nevcr made II into the Hayekian orthodoxy ) was that profitabilllY fell with the

npansion of what he called ·'roundabout processes of "roduc­ (lOIl"-rhat is processes with a high ratio of means of production to

workers, or as Marx would have put it, a high organic compo­

" tion

of capital:

That [profitl margins must exist is obvious... if it were not so,

there would exist no IIlducement to risk money by investing it in

the essence of the situation is to be found in the collapse of Ihe marginal efficiency of capital, parricuiarly. . . of those types ot caplral whICh have been contributing most to lhe previou.. phase of hea\'y new investment.'

production rather th.to to let it remain idle. . . These margins

must grow smaller as the roundabout processes of production -' increase in length. . · .

Keynes's cxplanatlon for this was grounded m his overall "nH.r­ ginalist" approach, With us acceptance that value de(X'nded on

In other words, both Keynes and Hayek recognised, though the)' (ould not dearly explain, the feature which is central to Marx's theory of capitalist crisis-the downward pressures on the rare

fall until, eventually, it reached zero. - This theoretical reasoning scems TO have been too obscure for most of Keynes'" followers.

In fact, Marxist theory can provide an explanation of the slump which avoids the comradictions of a t t the mainstream theories. I)rofit rates 111 the US had fallen ahout 40 percent between the

supply and demand. As the supply of capital mcreased 11 would grow less scarce, and the value to the user of each extra unit would

The '"declinmg marginal efficiency of capital" hard ly a ppe.:lr� In ?lO�.t acc� ) � nrs uf his ideas. Ycr it is the most radical single notion 111. hiS wrmngs. It Implies that the obstacles to fuJI emplo yment lie . . With an IIlbudl tendency of the existing system and not just wuh

the psychology of capitalists. If that is so, there would seem to be no point in governmenrs Simply seeking to "restore confidence" ' since [here is nothing 10 resHlre confidence in.

110

Caplt.1hSIII In

.he- 20th umury

of profit.

1880s and the early 1 920s,'" those in Britain were already in de­ dine before 19 14'1 and those in Germany had failed "to return to

Such declines could be traced hack i es inrhe ratio of investment to rhe employed work­ to long-term r s force (the "organic composition of c.lpital"), about 20 percent in

their pre-war 'normaI' level

"

.'1

the case of the US.4J American profitability was able to make a \matt recovery through the 1920s on the basis of a rise in the rate 1"he Gn'al Slump

151

of exploitation. But the rise was not sufficient to induce produv rive investment on the scale m�cessary to absorb the surplus valul accumulated from previous rounds of production and exploit;! flon. Firms were tom between the competitive pressures III undertake investment in massive new complexes of plant and eqUipment (the Ford River Rouge plam, completed

111

1928, wa'

the largesr in the world ), and the fear that any new equipment would not be profitable. Some would take the risk, but many did no{, This meant that the big new plants that came into operation towards the end of tnt boom necessarily produced on 100 big a scale for the marker, flooding it with products which undercut the prices and profits of old plants. New investment came to a halt, leading to a fall in employment and consumption thai wors('neu rhe crisis. The bhnd self-expansion of capital had led to an ever greaTer accurTluliltion (If constant capital compared with livi ng hlbour. This expressed itself on the one side by a rate of profit consider· ably lower than a quarrer of a century before and on the other h> employers holding back wages and so diminishing the share ot output dun could be absorbed by workers' buying power. "Overproduction" and the low rate of profit were aspects of tht: same process that would evenluaUy lead to the slump. An up surge of unproductive expendirures and credit could postpone this, bur do no more. The stage was set for ,a deep cmis-and It only requlrl:d scares in the stock exchange and the financial sc( turs for it to occur. Tht: uisls In these respects was verr simIlar to those de'iCribed hy Marx in passages where he analysed the crISes of 1846 and

t with Grossman's interpretation 1857 In Brnain." It also fi s

at

cen­ 1.lng-term trend i n Ma rx's account-the concentration and , as If.tlisation of capital as the s)'stem aged-a lso pla} ed a role "as suggested i n Chapter Three. . econ­ At first it delayed the outbreak of the crisis. The Bolshenk

1. omist: Preobra1.hensky, arrempting It) analyse the crisis in 193 Then .rgued that there had been a big change since Marx's time. s and al­ rr..:essions had led to the elimination of IneffiCient firm

now I'lwed the rest to enter into new rountls of accumulation. But were the system was dominated by big near-monopolies whICh They ithle to prevent rhe liquidation of their IOclfiClem plants. If If "j}uld do rheir utmost to-keep their operations IOta(.."l, even l ca­ meant their plants operating at only a fr,Kllon of their usua a ['acity and cutting investment 10 the min llllurn. This produces rransltion from crisis to recession" and pre­ Hlhrombosis in

t�e

for an y�nts---or at least delays-the restrucrurlng necessary emerges as � factor of tmergence from the crisis: "Monopoly exdecay in the entire economy. Irs effects delay the transition to r'lI1ded reprod uction..... . l or stria Once the crisis erupted, the sheer size of individual indu of them hnandal capitals was such that the collapse of any one the threatened to drag others down with It. The banks would lose Its sup­ money they had lent it, and so cur off credit to other firms. r firms pliers would be driven out of business and so dam?ge othe and Jepcndenr on them. And thc cnd to its "pendmg on Investment le. The wage bills would reduce demand III the economy as a who . h c�uld not au­ whic one, d nifie mag h muc a ,leIayed crisis was now to t" maticaUy resolve itsel f. The response of the big capitals was tum to the state for "bail-outsn to keep the system going.

Marx's account, With Its stress on the way In which firms art pushed 10 undertake new mvestmenrs that thre.nen to make the al ready low rate of profit drop to such

an

extent that much of thc;

new Investment becomes unprofitable so as to cause all investment to freeze up." But there rcmalllS something else that has to be explained­ why the automatic market mechanisms which had always in tht past been capable, ultim ately, of lifting the economy out of ensl" n o longer seemed to be working . Three years after the cri�i\ started, industrial production in the US, Germany, Britain and France was still declining. To explain this it is not enough iu .. t TO look at rhe tendency of the rate of profit to fall. The othe r ISl

Capu"hsm m thr lOrh Ccmu(\

The rum to state capitalism

�

m­ :\r first gO\'ernments continued 10 pllce th�ir hop�s in the u tr �

llted JIl I melled operation of the market Illcchamsm, wah only to get actions to prOtect some banks. But the crisis continued damage worse, particularly in the US and Germany. Enormous . . ll With ttle was being done to capital itself as it tried f() operate . time e sam the At ls. leve on ucti prod ious prev its more than half e ies desperation was leading the mass of people to loo to rem . or sections of capital Maj . over ety soci of le who the turn ht that mig blems, hegan to look for an approach that might solve their pro

�

The- Grral Slump

�

153

however much it broke with old idcologlC.:al shibboleths. By thl summer of 1932 the head of General Electric in the US was cam palgning fur St.He imCfventiOIl. The shift which eventually took place was from forms of monopoly capit.llism In which the St;lh' kept III the background. providing services to big capital but keep IIlg away from arrempnng to direct It. to forms in which 11 attempted to ensure the international competitiveness of nation ally based cap it�1. That came to involve consciously restrucfUrin� . IOdusrry by shifting surplus value f.rom one sectiun of the econOlln

The 1920s had shown that the non-producti�'e expenditures as­ ,"oclated ,,·ith monopoly capital ( marketing expendi[ure�, 'HJverrising, speculative venrures, luxury consumption) could post­ I"me crisis but not Stop its evenrual impact being greater [han

previously. The 1930s showed that "pump priming" by govern­ ments mIght produce a shorrlived and limited revival of production, but could not give a new lea!.e of life to rhe system

('IIher. A more profound change in the direcnon of state capitalism .....lS needed.

to another. i the later stages of the !-irm for absorbing a n ever growlIlg "surplus" and wh)' taxation IIverproduction.'• They could nor, however, explain r ducing demand. :Isewhcre In pay for it did not have tbe eHeer of : the m11ltary pur­ Itl the economy. And, as Bleam·y has pOlOted out, a major direct .. hases of the US government could not. have played '" ics. nom eco an ope Eur rhe ing st boo rule in Chrlpter The acCOunt of the impact of waste expenditure (see ed b)' Kidron live) on the dynamic of the wider economy provid point was not was able to deal with such problems. since its starring expenditure, "unde.rconsumptiollism" hut the rate of profit. Arms

�

lhe Long Boom

167

like "unproductl\e" expenditures, might be a deduction from prot Ih 111 the short term, hut in tbe long term It had the Impact III

redtu:ing the funds available for further accumulation and ,n slowed the rise if! the ratio of in\<estmem to the employed IahOlif force (the "organ'c composition of capltal" )< Kidron's logic found empirical confirmation III what actually har

pcned [0 the org. l rlic composition of capitaL Irs rise III the post-\.\ .H decade:. In the US was much slower than in the pre-slump decades. It was alsu much lower than that which occurred III post-W.H

Europe. where the proportion of national ourpUt going Into arlll' spending was comiderably lower lhan in the US."

mrplus value", to use Marx's terminology ). This changed their 10tl'rnal operations i n ways which seemed to contradict the usual " \umprion aboul capitalist behaviour hCIll� motivated by short­ It'rm profit requirement and price competition for markers. Galbraith paimed a picture of how the �Ituanon appeared: The market is superseded by vertical llltcgranon. The planmng unit takes o..er the source of supply or the oudet; a transaction

thal is subject to bargamlng twer price:. and amounts is rhus re­ placed with a transfer witlun the ptanlllng unit. . . As viewed by rhe firm, elullInarion.of a market converts an external negotiation ilnd hence a partially Of wholly uncontfollahle decision to a maner for purely internal deCJ.Slon. Nothlll�. we shall sec, hener

Arms, accumulation and planning The MillS economies were not a result of a consciuus srralcg\ aLmcd ar warding off slumps. They followed from the logic of inl­

perinlisr competition in the Cold War era. But sections of capl!.ll certainly appreciated their effect:. i n keep1T1g the bOOJll going. "Military-indusrrial complexes" eml'rged. drawing together thr

military and those in charge of the arms 1T1dustries, which had .1 direct imerest in pushmg forward the inrer-impenahst confli,t�.

They were able to unite the rulmg class as .1 whule behind their poliCies not Hnly because of fear of the rival power, hut also he cause of the effect of arms budgets in sustaining accumul:mon. John Kenneth Galbraith described In rht' 1 96(h the Huer-relation between go...emment expenditure and what be tt'rmed the "planning system" hy which each large corporation planned its Im'esrmenr, many years In I . dv:mce: Although there is a widespread supposition to the contrary, tIm Increase (in state expendiruresJ ... has the strong approval of tht businessmen of [he planning system. The e.xecut!v{' of the gre,1I corporation routinely opposes prodig:llity in government ex­ penditure. But irorn his pleas for public economy defence

expenditures are mt·ticulously excluded."

One effect of such expenditures was to allow the grear corpora­ tions ro unden,lke long-term planning of their own investment�

explains modern industrial policy-- like coal mming, Iron and stee l and the eXpa1HlO11 of exrorrs. The Ministry of I t('rnatiolla I Trade and Indu�lry (M ITI) is�ued

�

The Olher advanced capital isms

"Ruidehnes" to mdustry which It Ignored at )fS peril. The gIant

The picrure so far has been of rhe us economy in the pOSt -W,1 f boom. It was responsible for approachjng half of tota l world OutpUT at rhe end of rhe war, and its dynamic determined to a gre. 1I extent what happened elsewhere. But rhe hig European econ Ollue,. with substantial bur [ower levels of arms spending, show ed many of the same features. In Britain and to a lesser extent Fran ce, gre.1I IOVeStments In :I rillS Indu�tries had the effect of dmwIng the rest ()I the econom)' fonvard, counteracting some of the pressure s for rlH­ organic composition to rise and the rate of profit to fall, and per mining continual c..'ConomlC expansion-all without reso n to

Keynesi,11l measures. In Genllany armaments were less important. But the role of tht' government remained important. One Marxist account tells hOI\ : (:lr more than in any other capitalist t:ourltry the bourgeoisie 111 the Federal Republic made uSt' of the state apparatu�es and

liw monetar), and fi�caJ system to force capi tal accumulatio n 1''11

means of f,lvourable depreciation rales, credits for reconsrr u� rion at favourahle ratt's of n i terest and finance for mvesrmenl .

All Ihi s took pl>1ce 111 comradlction to the official neol i ber>1 1 eco­ II nomic theory . . .

In Japan SI.lre capitalism advanced further in its IIlflucnce on'r civilian industry than alm ost anywhere else in the Western 170

world-desplte a low level of direct state ownerc;hip. The state and

Capl{.lhsm in lM 20th Ctmun

firms thar had acceprcd the dictate� of the war cconomy hefore ,,"ugust 1945 as essential to milirary expansion now a.:cepted the

Jlctales of MIT! as essential to peaceful (.'Conomic expanSion: Japanese entrepreneurs are vigorous in mvesnng. They will not confine their fixed investment within the limit of gmss profits or

mternal accumulation. unlike the case of entrepreneurs in other advanced countries. Even if the fixed Investment is over and above their gross profits, the enterprise will undertake invest­ ment so long as bank finance IS available." In other words. the heads of big business and the state worked to­ t4cther to ensure the growth of Japanese nallonal capITalism by

mobilising wards

the whole mass of surplus value and directing if to­

"strategic"

sectors,

regardless of considerations of

�hort-term profitabiity. l What other state capitals did with military umsiderations uppermost, Japanese nate capitalism did In the

lfl­

[crests of ovcrseas market compet1t1on. ��xports played a very unporranr role

in driving the economy

forwards. And that meant

that Japanese growth was u lrimu lely dependent on the US arms economy_ As Robert Brenner ..how� in .I hIghly empIrical study: German and Japanese manufacturers derived much of theIr dy­ namism by means of appropriating large segments of the fast-growing world market from the U!) .l nd UK, while beginning me Long Boom

171

invade the US domestic market, This redlstnbution of mark\'! share-the filg lin of orders (demaod) hy German and Japane "t manufacturers tbat had formerly been supplie d hy US produ.. er'i-gave a powerful boost to their investment and output." to

If was not "sociJI compromise" and the "welfare state" that pro duced the long boom and the '"golden age'". Rather they were all by-products of militarised state capitalism. Prosperity rested un

('�erywhere-was the draWing of married women into paid em­ ployment. Yet each of rhe ways of enlargmg the labour force ..reared new problems for capital and the stare. Squeezing labour from agriculture could work only if resources were put into agriculture

10

order to Increase It:> productiVity. This

�ould be very expensive. Bur the aJrernari\'e was that the provision 01 food for the growing urban populatlun and raw materials for

the cone of the H-bomb,""

mdustry would suffer, creating working .,;lass discontent and bot­ denecks in accumulation. And eventually there was little in the

Labour power in the Great Boom

way of spare labour power leh in the counrryside to provide for the need) of industrt as the peasanrry �hrank In numbers. Migration from the Third World was a very cheap way of getting labour power. The advanced coumr} had 10 hear none of the COStS

Throughout rhe first post-war decades une mployment was .11 level!> known previously only during brief boom periods, In the Us Ihall 10 percent of sav­ ings comp,ued with some 50 percent before; .lIld returns on foreign invesrmenr have been runntng at '>llghtly o\"er 2 percem

conflicts hetween thr W{'St European powers.

of nanonal lncome compared wllh . . . 1 0 perl:enl In 1 914." 'he foreign investment that did t,lke plal.:e was deueastngly dl­

Decolonisation and developmentalism in the Global SOUlh Eighty five percem of humanity lived oUlside rhe advanced indu .. Iri31 countries. Tht-ir expeTience of the "golden age" was vcry Lu ·

from golden. The great majurH"Y still lived in the countryside, :llld there was little ch. mge in the poveny that plagued their daily live.. One importam political change did. howevt-r, take place. TIl(· West European powers, were forced. bit hy bit, to abandon dired

colom a I ru le a process starting with a weakened Bntain ending II' 190 year old empire In India in 1947 and ending with Portuga l .

handing o\"er power 10 li beration movements in Africa in 1 9-,. The US replaced Western European in fluence in som e region �. II took control of South Vietnam when the French withdrew III 1954 unlil lt too was forced to withdraw aher the most bJrtl.'r nl

wars in Ihe mid-1 970s. It he�.

EIGHT

ThiS led him (0 make a prediction that would soon be put till tesl-and pro\"Cd dramatically \\ rong: As for future proSpei..'ts, the World Bank's view is that Ihe m" iority of countnes In the 1970s will, as in the 1 960s, remain Irn of debt servicing problem!>... The first three years of the 19-�), strongly suggest that this will be the case. Warren had ("ken the crude account by Gunder Fr.mk and Bar.\ll that had maint:uned development was an Impos!>ihllHY of and simply turned it upside down. Lacklllg was any sense of thl chaotlc, unpredictahle character of economic growth for till weaker sections of the world :.ystem that Trotsky insiSted Oil whell re,"ogni�ing that capitalism does nor always lead to stagnation: By drawmg countries economically closer to one another allli levelling out their stages of development, capimhsm operates h\ methods of its own, that IS to say, by andfchistic methods whllh t.:tlIl\tantly undermine its own work, set one country against an OTher. one branch of mdustry agamst another. devcloplllg SOllll pans of the world economy while hampering and throwing "ad the development (If others. . . Imperialism...attalO., this "goal � 1\\ such antagoll.lst!c methods, such tiger leaps and such raids upon backward countries and a.reas that me unification and levellin).! of world economy v. hich it has effected is upset by It even marl· violently and convulsively than in the preceding epoch.' It was a truth thar would affect the lives of many hundred!> of 0111 lions of people over the next four decades. In the Global Sourh, as n i the West, Japan and the Eastern blo... variants of what Lenin and Bukhann had called "state capitalism ,. did pennit a long period of economic growth. But those who e... trapolated from that to sec a smooth, crisis-free future were soon to be proved wrong.

190

CaplCahsm in tht lOth C.tntun

I he crisis of Keynesianism

The National Bureau of Economic Re�earch has worked Itself !lilt of one of its first jobs, namely business cycle.. ·· So proclaimed 1'.lUl Samu�ls()n in 1 970. Less than three years later the cnsis which was supposed now to be impossible broke upon the world--r-o at least upon the advanced capitalist countries and a " IllS part of the Third World. The golden age" had come to a .

,udden end. The reaction of governments everywhere was to try ro keep it "mng by resorting to the Keynesian methods they had come to be11�'\·e infallible. Government budget deficits, rare in the previous three decades, now became the norm. They failed to restore the '�'�tem to its previous health. Not only was there the first lapse IIltO negative growth-a real recession as opposed to the "growth r�'i.:essionsM sometimes known previouslr-wuh soaring levels of

unemployment, but it was accompanied by ri�ing levels of infla­ non, which in a country like Britain could approach 25 percem. There were ;uremprs to explain what happened as a result of the Impact of the sudden very big lIlerease in the price of oil in (ktober 1973 due to the brief "Yom Kippur" war between Israel .lOd the Arab states and the accompanylllg emhargo on oil exports h)· Saudi Arabia. But the effect of the price increase was only to reduce the national incomes of the advanced cnuntnes by about

IInc percent-and mo!>t of the money that accrued to the oil pro­ ducers cnded up being recycled back to the advanced countries \·i" the international banking system. It was hardly enough in itself [(l t'xplain the scale of the impact on most of the world system-an llnpact which Keynesian methods should have been sufficient to Jeal with according [0 the then conventional economic wisdom. What is more, the oil price increase did not rake place in isolation 191

from other de\'elopments. Already rhree years earlier a ··�rowtl rtt("ssion" had hll all the major economies slmultaneoU!ily In I

t Ihour's prime mmistl!r James Callaghan \'ltrually adnurted rhis ,.hen he told 1-1IS party's conference in September 1 976:

way which had nor happened in the prc\!ious quarter century, an.1 had been followed b) a very sharp economic upturn and aceelC!

We used to thint... you could Just spend your way OUt of reces­

.H1ng mflatlon even before the oil price rise,I In short, the reee��Hl11

.,ion by cutting (axes and boosting governmenr borrowing. 1 tell

that began at the end of J 973 was the culmination of precisely th,

you i n all candollr th:n that oprion no longer exisls; and insofar

of economic cycle thar Keym·slan-style state IIHerventions h�hl

as it ever did e,.-isl, It worked by injecnng inflJti(ln inw Ihe econ­

SOri

supposedly consiAned to rhe history books.

omy. And each time that h,l� happened. Ihl" ;I\'crage level of

Mainstream Ke)llesians were at a loS!.. They found that rht·u

unemployment has risen.

rhoory no longer Jld any of the thmgs they had claimed for it. ,.\ one Keynesian. Francis Cripps of the Cambridge Eco"omlC Polk

I he poim was repeated 20 years later b�' the luture Laoour prime

RelJiell', later put It. the}' suddenl}! realised that:

nlln1Sler, Gordon Brown:

Nobody really understands how the modern economy wod.. ,

Countries whICh artempt to run national go it ,110ne macro­

Kobudy really knows whr we had so Illuch gwwth in the pm!

economic p(;'\icies hascd on raJ\., spend, borrow policies

war world . . . how the various mechanisms sloned rogethcr.o

boost demand, without looking to the ability ot rhe supply

to

side of rhe economy, arc hound these days to Ill" punished by Ihe form of stiflingly high interest r(l[es and

Many Keyncsians dropped their former Ideas overnight and en

fhe markers

dorsed the wmonet.uist" theones propagated hy t\ltlton Friedm.lll

collapsing currencies.'

and the C:hIC;lgO School of economists. These held that the

III

at

and

academics who

rempts by gmernmems ro control economic behaviour had been

Pnltticians

had

been

broughr

up

on

misconceived. There was, they argued. a Wnatural non-mflacion.lf\

Ke) nesiamsm camc to accept the same parameters for decldmg

rate" of unemployment, and attempt.. to reduce II by governml!nt

,�onomic policy as their old opponents, with no ahernarive to

spending were bound to fail and to merely cause inflation. All

hIgh levels of unemployment. welfare cuts, " flexihilifyM 10 milke

states should do, the}' insisted, was to control the supply of monn

",nrkers Wmore competitive" and bws to restram ;'trade union

su that 1t grew at the same speed as ·'the real economy" -and ralH­

I'\()wer". Keynesians who did not drop their old beliefs were

such action as wns necessary to break down "unnatural monopo­

pushed to the margin!> of the economic establishment. By 2007 a

lies" by trade unions or nationalised tndustries, while holding

rudy showed that "72 percent of economic students" were at ed­

down unemployment henefits so [hat worker!> would then he per

IIcational institurions with out a single '· he terodox economist'·

suaded to accept Jobs at lower wages.

who challenged "the neoclassical and neoliheral assumptions".'

The repl} of apologists for capitalism to ItS crttics for 30 year"

But the rush towards monetansm by supporters of the system nor any more able to come to rerms wuh (he crisis than

had been that it could be made to work with state Intervention

", lS

Now it was Ihat it could only be made tn work if State tnter\,fn

Kt."}'nesianism. Monetarism was, arrer all, lirue more than a regur·

fion was scrapped. As the di�!>ident radical Keynesian JOJU

�lIation of the neoclassical school which had dominated bourgeois

Robinson summed up rhe mamstream shift:

feonomics uncil the 19305. Jusr as it had lx·en incapable of ex­ Wl'

"I.limng the unprecedenred seventy of the illler-war slump, It was Incapable of explaining the crisis of the 1 970s and J 9805. still less

made a mistake, we were not offering full employment, but thl'

flf dealing with it. In Britain the monetatist Howe budget of 1979

narural level of unemployment. Of course, they suggested that.l

was followed by a doubling of both inflation" and unemployment,

Imle unemployment would be enough to keep prices stable. But

lnd left industrial output in 1984 15 percent below its le\"el of 1 1

now we know (hJ.t even a lot will not do so.

vears before.- The monetarist measures did not even manage to

The !>pokesmcn of capitalism were saying: Sorry chaps,

192

t:.lp'l;al.sm 1II th" lOth uDiun

The Emf of Ihf' Golden Age

'93

comrol the mooe) supply; its broadest measures (what eConon1l\h call MJ) grew in 1982 by 14.5 perct:nt Instead of the 1mended f, I" 1 0 percent.' The policy merely served to destroy much of local m dustrr, exacerbate the crisis of [he early 1 9805 and lay the groun.! for another crisis in 1 990. Some economisrs who had abandoned Keyne5ianism for mom

rarism 10 the mId-I 970s could be seen desertmg moneramm in 11

rurn in the earl) 19805. Financial Times columnist Samuel Bntl,l II, who had done much to popularise monetanSt ideas In Briram, \\ .1' by 1982 criticising many monetarist policies and calling himseJt .1 "new-style Ke)nesian". In the United States, Reagan's economl� ad\li�ers, faced with th e failure of monetarist policies to end .1 severe slump, quietly ditched monetarism" and abandoned one ot monetarism 's central principles-me balanced budget. Bur much mainstream economic theory muved In a different direct1On. A "new classica l" school gained influence that con tended, vcry much along the lines of Hayek in the 1 930s, th.n what was wrong with monetarism was that it left a role for tIll'

which saw the slump-h()Om 'Yde ,1 5 Inenta h le--an d a good thing. I he srstem. It argued. was capahle of non·stop expansion, but IIn ly on the basis of �creative destruction" whu.;h destroyed old

jorms of production to clear the wa) for new ones. ,l Bur it was no fIlore able than the mamstream Ke) nesial1s. the monetarists and the new classlcals to answer a centr.11 que�[lon: Why was the

y)tem plagued once again by rewrrem (fi�e, and hy a long (erm llocline i n aver.lge growth rates afler three dec.ldes of unprece­ ,1('moo, almost CriSIS-free growlh?1J It was rhe failure of the anti-Ke)nesiam to come (0 rerms with \I,-h problems that Jed some Kcyncslam-.1nd some Oil the far left mfluenced by Keynesii.1Illsm-to "lame them for the demi� of rhe "�olden age�. It was not the system as \uch. rhe�' .Ir�ue, thar was hehiod the recurrent crises. But, a� Notermans ha' poimed out: •

if neither the recovery from the Crear Depression or post-war

growth can be attnbutcd [() Keynesian policics... [lrJ cannot serve as an explanation for the termination of full employment. I'

state-Intervening in money markers. Fnedman, they claimed.

had falien iOlo the same trap as Keynes by urgmg governmelH moves to shift the money supply: he was, in a certain sense, " ;1

�o where does the explanation lie?

i sisted, could not alter busme", Keynesian" . I" Such moves, they n behaviour in rhe hoped for way, since the "rational expcctal1on�� of entrepreneurs would always lead mem to discount governmt'1lI intervention in advance. Fiddling with the money supply, hkl'

Where the crises came from

acting with each other properly. �Booms and slumps", It V..h

�lissing from all the most influential mamstream explanations lor me end of the "golden age" was what was happening to the rale o f profit. Yet various efforts at measUring it have come to a

Ing".11 It is an amazing commentary on the remoteness of mO'1

carly 1 980s.

government deficit spending, stopped supply and demand inter

claimed. �are the ourcome of fraudulent Central Resen'e bank

academic economics £rom any contact with reality that the ne\\ i tellectual credibility when they demeJ dassicals could maintain n the instability and irrationality of the laissez falfc economy in .1 period which saw three major international recessions. The high POlllt of these ideas was With a shonlived boom in th�' mid to lare 1980s. It se('med to vindicate their Opt un ism about Iht' benefits to economic growth of deregulation, privarisation and thl removal of all restraints on the greed of the nch. But they losl some of their lustre with the renewed deep recession of the earl� 1990s. A different school of free market economists gamed som�' supporr within (he mainstream. This was the variant of till' "Ausman school" influenced by the ideas of Joseph Schumpeter. "4

Capitalism

In

rht' 20th (;entun

\ingle conclusion: It fell sharply between the late 1 960s and the The results are not always fully compatible with each other. �ince there are different ways of measuring investment in fixed ....lpital, and the mformatlon on profits provided by compames and �overnments are subject to enormous dlstonions." Nevertheless. rred Moseley, Thomas Michl.I' Anwar Shaikh and Errugrul Ahmer Tnnak .l- Gerard Dumcnil ;\nd Dominique Levy, Ufuk

Tutan and Al Camphell," Robert I�renner, EdWin N Wolff," and Piruz Alemi and Dunc;\n K Folt'y- have all come to very slluilar conclusions. A cerram pattern emerges. which IS shown in graphs gIven by Dumenil and Levy ( Figure I ) for the whole bu� ine�!> \Ccror in the US and by Brenner (Figure 2) for manufacrurlng 111 the US, Germany and Japan. rile End of (ht' Gold�n i\g�

\95

"'sure I: US profitrat�s accounting (Qr (-) and abstrachng fro", (_.) thr

1 1197" was "stdl only half of ItS value of 1 1;'48, and between 60 md 75 percent of its average "alm' for the decade 1 956·65"." There were artempts to explain the decline In profitability in the I I/70s as resulting from a wave of workcr�' ..ITuggle internation­

12

Illy which had supposedly forced up the workers' share of total IIKoml" and cut into the share goin� to capLtal. That argument was

impact offinandai rrwtlonsll

"

.,

, , , , ,

.

.

--

'

" '''

'

6

"

, , , , , ' "

,

10

"

.

,' '' -

'

v

,

... "

,

". ,

'

.....

l'L1t forward by Andrew Glyn and Bob Sutdilfc,l' by Bob Knwrhorne.;'" and accepted in pan by rrnest i\l.lndel.' Glyn's

,-,,

,

,

'.

Indud",)! li.nan..;e

2

AlhtraQmg fro'" finan JCCt ro low levels of i nrernational economIC cumpettllon, Thl

rax3tlon to pay for rhe US arms budget cut nita the profit� 01 Amencan finns, for rnsrance, but this did not greatly disadvant;lgl

an} one such firm III its domestic com pemion with another. Alid there was linle for ca pita l ists to complain about so long as rIll

overall rate of profit did not decline much from Its high level in rhl irnmediatt' POSt war period. The positive effel.:ts of arms spendln):

more than compemated for thc negative effects. Bur over time the unevenness did come to matter. The US, ,I' part of Irs programme to use its dominant economk posllion 10 cement its hegemony outside the Russian bloc allowed acccs� (0 I(S markets to (he West European states and Japan. But economl(' with Illw levels of arms expenditure could invest proporflo nareh more and achic\'e faster growth rates than the US could. Over tif11l' ther heg.to to catch up with its levels of productivity and to 111 crease their relative i mportance in the world economy. Capital growth m Japan over the period 196 1 · 197 1 was J I .X .

percent per year, while n i West Germany Over 1950-62 It wa� 9, 'i percenrj these compared with figures for the US for 1948·69 01

only 3.S percent.' Japan accounted for 17.7 percent of the C01l1 billed .. dvanced Countries' GNP in 1977 and \Vest Germany 1 1 ..:! percent; III 1 953 the figures had ani), been 3,6 and 6.5 percent rc specrivcly. Meanwhile, rhe US share had fallen to 48 from 6'/ percent. ,T The shift was explained by the benefits Japan and Germany gained from the high level of worldwide arms expend I

ture, especially by the United States, without ba\'ing to sacr ifill' their own productive investment to pay for it. Had all cuu nrri("

had comparable levels of productive investment to that of the \'h'\ 1 Germans and Japanese there would have been a very rapidly ri�lll ).! 198

Klobal organic composition of capital and

J.

down ward trend in

Iht' rate of profit. As it was, capital h..d grown

III

Japan ··much

Inure: rapidly than rhe labour force-at more than 9 percent a year, IH

mOl:e [han twice the avC'rage rate for the \X'estern industrialised

\ IlUntries . . . " JI

Non·military state caplral isms could only rxpand

� Ithout crises because they operated withll1 a world system con· tJommg a very large military state capitalism. So the Japanese and German experiences did nor contradict the Ihl"3is of arms expenditure as an explanation of rl'orld growth and \1,Ibility. But the)' were a contradictory heror

111

thiS growth. Their

wry success meant that� growing .:hunk of the world economy ..... . 15not

wasting investible output on arms. t-\or was that the end

of the maner. Tbe ver)' success of Ihe low arms spendmg ('�:onomies beg"n to put pressure on the high arms spenders to witch resources away frum arms and towards productive invest­ ment. For only then couJd they begin to meet the challenge they 1.ICed in market competition from Japan and West Germany. This was most clearly the case for Britain. Its economy was lllghly dependent on foreign tmde and it ran into balance ot pay· Inenes crises with every spell of rapid economic growth berween the

1.1fc 1940s and the late L970s, Successive British governments were fllrced, reluctantly, to abandon their notions of imperial grandeur .and [Q reduce the proportion of the national product gomg on de· knce-from 7.7 percent of GOP in 1 955 to 4.9 percent in 1970. In the case of the US, the pressure was less obvious at firSt, since C'ven in 1965 foreign trade only amounted to about 1 0 percent of (,NP and tbe country enjoyed a trade surplus throughuut the 1950s and 19605. Nevertheless, arms spending dedined from ..round 13 percent of GNP during the Korean War to between to 1�[Ween 7 and 9 percent

Ul

the early 1 960s. The pressure of arms

\J'II!nding on its international competitiveness was suddenly te· \ealed when it shot up by a third with the Viernam War. The new level was not anything like that of the Korean War. But it was tOO much for a US industry facing vigorous competition for markets. rhere was an upsurge of inflation at home and Wall Street turned ,lgainst the war.JY Then, in 197 J for the first time since the Second World War, US imports exceeded US exportS. President Nixon was forced into two measures which further undermined the stability uf the world economy: he cut US anllS spendingiQ and he devalued the US dollar, in the process destroying the ··Bretton Woods" system of fixed international currency exchange rates that had The End of Ihe Golden Agt

199

acted

.h

a framework for the expansion of world trade throll).:h

om the post-war period. The dynamIC of market competition wa.'> relentles!>ly underi,:LH nn� the dynamic of military competition. Wh:n some people l"all�· I the "CtiSIS of hegemony"" of the s}stem III the 1 970s was, III t.1l1. the offspring of something else-the inherent instability of a wnrl.t of state capitalisms engaged

III

two qune different dlillensiom "I

competitioll, tconomic and miluary. wuh each other. One of the paradoxes of capltaJism, we saw III Chapter Three. that, although a rismg organic compoSlllnn of capnal reduces

engaging in capital llltensil·e forms of Investment, cur world profi1

r.ltes. wh ile raising their own national sharc of world profit... Thclr increased competitiveness in export markers forced OIhl.r capitallsills to pay, with falling rates of profit, for the increa \l.d Japanese and German organic compositions of capital. But t hi � III ,

turn. PUt pressure on these other capita lists w mcrease their COlli pt'tltiveness by raiSing their own organic compositions. The failing profit rates of the 1970s were the resuh. By 1 973 the ratcs were- '" low that rhe upsurge in raw material and food prices caused by th�. boo m of the previous rwo years was sufficient fa push the ad \"allced Wcslern economies into recession. Sudde nly there was no guarantee for the maror capitalist cun cems rhat new IIlvestments on the scale they needed to keep up wlrh IIlternational competition would be profitable. )1l\·eSII11CIlI began to fall sharply and firms tried to protect therr profits by ,,:ut ring back on employment and labour costs. Declining marh.,. then led to further falls in profits and lIl\esrmem. The old panem of boom turning into slump had rerurned ahn It'i 30·year break. When governments reacted by IrYIllS to bum1 demand wlrh budgetary defici ts, firms did not l1nmediatcJy rl. spond. as the mainstream Keyneslans held thar they should, Ln increasing investment and outpur. Instead the} increased prices til Iry to recoup their profits. [() which workers who strll had a degrlT of confidence from long years of full employmenr responded III fighting for wage increases . Governments and ccntml banks wcrl. then faced with a choice. They could allow the money supply fI! protect prol

us. Or they could try to restrict the money supply wirh hi�h shorr·term interest rares, rdYlllg on firms then being forced to 200

the late L970s. Bur me I�n);)cb in rhe mid·1 970l> to the �econd III of I"'::CesS in restori.ng investment and creating a new period succeeded in Kmwth did nor last long eYen when governments had ld not be uhduing working class reSistance. Tht., rate of pront cou nd I I· d abOl·e the pre-crisis level of 1 973, and in 1 980-82 a seco serious rul shock" was sufficient to push the world into a '>CCond di­ I ·ession, proving that monetMism could no more restore con Iluns to tbose of the long haom Ihan I.."o uld Keynesiallism.

.11

�rage profit ratcs, it raises the profits of the fir...t capltali.,t I. . Introduce new machinery. So the Japanes(' and West Germam. hI

�xpand so as to allow firms to further raise prices and

st workers' demands. TYPically Ihe)" turned from the nrst ap­

\i

I

Capn3i1sm In the 20th C..nrur

I he limits of state directed capitalism italist .l pitalism was commg up agamst Ihe liml lS of Ihe stare cap worked tr.1tegy for �aintalllilig accumulation. That 'itrateg�· had on Ihe u long as states were aole to Ignore the Immediate eHecrs lus I.ne of profit of d i recti ng some- of the mass of Invesnble surp

t

into areas that were- not i mllledia lel ), parricula rl), profim ble waste !the Japanese prioritising growth over profitability) or into the production (rhe arms economy). But rhis depended, firstiy, on secondly, on bemg r.\le of profit not dropping too sharply, and. par­ ,hie to ignore how the competiti\'eness of the production of ro th.u u..:ular goods within the national economy compared uage. f.lking place elsewhere in the world sysrem (or, in Marx's lang d with pro­ III Ignore the law of value on a world scale compare y). By Juction within the individual unus of the nanonal econom

\ ,due

1 970s both preconditions had been undermined by the ll)nrradiclOry development of the long boom Itself. e un­ The rate of profit had now fallen to a degree which mad of productive expenditures or not particularly profitable areas And the IIwcstment an increasing burden on further accumulation. d ynamism of the long boom had produced a growing inter·

The

mid

-

¥cry

foreign �onnectedness between national economies. By 1979 US percent in trade amounted 10 3 J percent of output, as against 1 0 had to 1965:' A much larger proportion of indusrry than before ole in­ worry about the international comparisons of its costs. Wh

to be dustries suddenly found that the value of their output had e it with reca lculated on the basis of what it would cost to produc of other fhe more advanced techniques and lower l a bour COSts "ad· �ounrries-and that meant it was not high enough to provide «Iuate" profits. Ihe End of the Goldrn AS�

101

This seems to explain the well known stagnation of labour rr/) ducm ity in the US In the 1 970s-the value of the machiner� ntl

which labour worked was ongmally reckoned In terms of hrm mUl:h it COSt to produce or replace inside the U�, but with mJJ1�

tllternational trade, what manered was the lower figure th.u would h.lve ohtalned if world comparisons were used."

In any case, the feature described by Galbraith, of firms beltw able to downplay the importance of profit in the mtereSIS ot

growth, was undermmed. And this was not only a very 5ignifil:.1 n1 change for the srate monopoly capitalism of the US. It was to ha\\

devastating cOnC conrmued regardless at

The economic crisl!>, as i n Poland, turned into a political ,1Il�1 social crisis. Gorbache� had intended 10 permit a limited openlllg ("glasnost" ) of diSCUSSion in the ruling partr and the media (0 i,o

that were needed. SUI they had no more idea than the ministrie� at

\\hat the government dId, leading to ever greater discontent and 1ltlliricaJ upheaval. An attempt by Gorbachev to take a hard line to

late those III the bureaucracy opposed fO his reforms. But peoplr increasingly took advantage of this to give expression to old grin

Ic�tOre central comrol in the spring of 1 99 1 produced a new wave III discontent which forced him to retreat. A coup against him by

ance� and their di�onlent with the deteriorating economl' situation. An unprecedented series of mass demonstrations and riots took place m the non-Russian national Soviet republic� ut

Iho� who hankered ,lher a return to the past in August 1991 fell Irart, lacking support from the most important genera ls. There Io\-as no popular constituency for trying to rerurn to the old order.

Armenia, Kazakhstan, the Baltic states, Georgia, the Ukr:lJnt". Byelorussia and Azerbaij:lIl, fusing struggles for national rlgh,..

nUl those who preached reform did not have a way forward either, Ilc!>pite the brief popularity for " I OO-day" or "300-day" pro­

with grievances at the social conditions people experienced. So thl' prOlests by the Armenian minorit), in the Karabakh region nt

�r,lmmes promising miraculous economic recovery. Such progmmmes were utopian III the extreme. The collapse of i a monopolistic or u:ntral control left the giant Soviet enterpnses n ....·mi-monopohstic position. They were ahle to dictate to the market

Azerbaijan "began as protests against catastrophIC mismanagemelll and mi�rable economic conditions".M PrO/Ida said that in 1 9N" (even before (he crisis deepened) there was 27.6 percent unelllplO\ mem in Azerbaijan and 1 8 percent III Armenia.'7 In Kazakh�!.ln "only half the young people had a chance to find a iob in 1 9 8 1 85"." The head of the stare-run unions said that across the USSR .1, a whole 43 million people were living below the po�·erty llile. Estimates of the fOral number of unemplo)'ed varied from 3 pen:cul to 6.2 percent (8.4 million people). Then mmers right across thl' 208

Capltahsm

In

the 10th ("n"I!'

.tnd to produc(: what they wallled rather than what was needed by fhe economy as a whole; they were In a position to raise pnces and It) simply ignore contractua I obligations to other enterprises. There ",.IS

no stopping the combination of deepening receS!>Ion, inOation

,Ind acure shortages of consumer good a devastating �lllmp, the corruption of the Yeh..,n years and the Jomtn3tiun of

I hI" economy and sOCiety by former memhers of the rullllg hureau­

.racy

and

mafiosi

rehorn

, \'>

pnv.He capll,l l1M

oligarchs.

Meanwhile, Id"rhe resr of the world rhe grear malomy of polm­ < l.1ns and theorists in the social democratic and former St.llinist Idt drew rhe conclusion th:1I it was socialism that had failed and

Ih.1I [he future lay with Western sryle markets, £al llllg to perceIve Ihe depths of the crises brewing there roo.

tions of it capa ble of adj usting to (he current international level cil the forces of production would expand while others closed duwn. But this was bound to be an enormously palllful undertaking. nOI JUSt for those workers who suffered in the process bur for the rn.h\ the

of

individual

membeh

of

the

bureaucracy

as

\\'l·11. Restructuring the Bmish economy between (he mid-1970s and tilt ll1id-J 980s had in\'olved shurting down about one facrory

til

,hr\'\'

and desrroYlIlg capnal on such a scale that gross industrial il\\ r.:�t mem

III

1990 was still no higher than

111

1972. It is very douhttlll

thar It could ha Vt proceeded smoothly if British capItalism had IIC II had the lucky bonus of enormous Norrh Sea oil re\enues. TIll USSR's economy was much larger than Britain, and its emerprlw' had been much more insulated from the rest of the world for h(l years. The proportion [hat was to be destroyed hy an Jmme(h.llr opening to International competition was currespondingly greatn This, III turn, did considerable damage to the remaining comprll rive enterprtses as they lost suppliers of materials and compolH:I1I' on the one hand and burers for their outpUt on the other. The rOOtS of the crisis lay in the pressure to accumulate for thl' sake of accumulation char arose from the burcaucr;lcy's position .1' part of :1 competitive world system. The Soviet econon1\' h,l.! ,

reached the poim at which the precondition for a further W3\l' 1,1

210

C"lplta1i�m In the 20th (:rm"

Japan: the SUD that Slopped rising Ihe world's second ecnnomic power at the hcginning of the 1980!. W.1$ the USSR. Japan took its place as the Soviet crisis of the [atc 1 '1805 turned Into colldpsc.'I Japan's average growth rate through­

1980s was 4.2 percent as against 2.7 perceor for the US md ).9 percent for West Germany. Irs annual investment in man­ III.lCrunng eqUIpment was more than twice that of the US."Z That

IIU[ the

the future lay with Japan was the near Ulllversal conclusion of media commentators, A committee of the US Congress wa..rned in , CJ92 that Japan could overtake the US by the end of the decade. 'After Japan � became the slogan of European and North American industrialists trying to motlvalt> their workforces to Kreater feats of productivity. The " threat" from the "nsing sun�

hl'Callle tbe excuse for tbe job losses experienced by American aura workers. Keynesian commentators like Will Hutton and William "('egan wrote books extolling the Japanese model of capitalism.

Then in the 1992-3 a financi:l l crisis pushed Japan inro its own

"period of stagnation", with :l growth rate :l\'eraging just 0.9 per­ �tnr a year between 1990 and 2001.·J By 2007 its econom)' was Ihe End of the (;olden Agt

211

only a thrrd ofrhe size of the US's (and the European Union's)" ,r" againsl esrimates as bigh as 60 percent in 1992.-' The blame for what happened is usudlJ} ascribed to faults in Ihl runnIng of Its financial srstem--either du e to financ ial markels Ilt It being � free" enough in the 1 980s, or to Inapprop riate anion b\ the central banks once the crisis had started. The con clusion trom such reasoning is that the Japan criSIS was unique and has linle It I tell us about the direction in which the global s),slem is gOIng. Till sudden inability of the world's second biggest eco nomy to gm\\ then becomes the result of accidents. Yet all the clements of the Marxist account of the CrIS is of tht­ imer-war year:. are to be found in the Japanese case. J3pan had .1 rapldly rising ratio of capital to workers from the J 950s to the latl 198 0s. Thi!> grew in the 1980s by 4.9 percent a yea r-more Ih,m four rimes as fast as in the US and 70 percent faster than Itl Germany:· Tht result, as Marx would have predu: ted, was down ward pressure on [he rate of profit. It fell by about Ihree qU:lrter.. between the end of rhe 1960s an d rhe end of the J 980s jllp'm�k profil Tale'" Afunufacturmg 1960·69

Non·pn,wllal lorporJI.·

16.1

25.4

1 970--9

24.S

20.5

1980-90

24.9

16.7

1991·2000

14.5

10.8

Rdwrn on gross non-'U.thntial stoek. 1960

28.3

19-0

18.0

1980

7.'

1 990

J.'

'

I bis required higb le\els of tOvcsttnent. Tht' Untied States, for ex­ "mple, invested JUSt 2 1 percent of liS ('DP durtllS the 1980s

�I)mpared with a Japanese figure of 3 1 perccll{. Accordtllg to one �­ lUnate, thc ratio of capnal stock to C.NJl IIl Jap:l11 was nearly -,O percent higher than III the U!:'.· Tht' concenrranon of tnvesnnent rntO certain industries rn d'lls way ral!>ed rhelr product\'"Ity, even though it r:mained faIrly low in the re�t of rhe Japanese economy." nut such high investment could only be sustarned by holdrng down Ihe consumption of thc mass of people. Partly thiS wa� done by keeping down real wages; panly it was done through provldlllg rmn­ . Imal state provision for Sickness and penSions, forcmg people to _ave. As Rod Stevens pointed out when the boom was at its height: Real wages in Japan are still at most only about 60 percent of real wages in the US, and Japanese workers have to save mas­ sively to cope with tht' huge proportion of their hfetime earnings which is absorbed by such thrngs as housing, educa­ rion, old age and health care.'� "ut this level of real wages restricted the domestic market for the new goods Japanese industry was turning out at an ever rncreas· ttlg spttd. The only way to sell them waS to rely on expOrts. As 'I(evens ' also pointed out:

The decline seemed manageable until rhe end of the 1 980s. Thl' Sfate and the banks worked with private industry to sustalll g.rowth Without much attemion to profit rates. So long as Ihere was a m.I�' of profit available for further investment, the Japanese system en sured that it was used. Japan had been hit h:lfd by the gloh.l) recession of the mid-1 970s, but was able not only to recover from il hcfore most other counties bur also to restructure industry I I I such as way as to keep expanding througholll the early 1 980s whclt rhe us and Europe were in recession: 1I2

The crisis [of 1973·5 1 Indicated that future growth on rhe basis of heavy and chemical industrialis:ltion wa!> untenable. The role of me state in changing the strategic dtrectlon of Japanese capt­ talism WaS fundamental. Adnuni'lotranve guidance by MITI [Ministry of International Trade and lndu\try-CHj began to nudge Japanese capnal to the direction of electronics, automo­ biles, capital equipment and semiconduu(}r� ...

Capll;Jlism '" Ih� 20lh C.eIlfUfI

Because of capital's increasmgly strict wage control and author­ ity in rhe workplace, growing labour productiviry in the . consumer goods bram:hes of the machiner), industnes (eg motor cars and audlo-visu:tl equipment) had to find outlets in export markets if the Japanese working class's limited buying power . .. . was not to mtcrrupt aCCUI1111I:llton. High productivity in the select range of prioritised industry made the . required level of exportS possible, with J:lpanese cars and electronrcs rbc End of tbe Golden Age

213

Increasingly penetrating the US market. But It brought complu':,l rions in It!. wake. Japanese economic SUCCI$S W.1S very dependent nil US good wilL When the US demanded that Japan accept an upw:lr\l

re\'aIUJtion of irs currency to make Its goods less competltl....e agam�1 AmcflCtructure itself through blind �I)mpetition. taking on trUSt ideological claims that It would pro­ Jllce new mlfac1es. Or they could play safe, knowing they might nc,,·er get out of long-term stagnation. The rulers of Russia chosc Ihe first path and saw tbelt economy, already halved with the loss of

Gross 'O,·tStffitm

the rest of the USSR, halve in sizc again. Japan's rulers took the uther path. and their economy went through a decade and a half of llcbilitating stagnation without seeming any closer to a solution to

II problems at the end than It was al the beginning. The big ques­ tllln both raised was, how wOllld other countrie!>, particularly tbe

IS·

US, react if rhey fell nto i rhe s.'une stagnation trtlp?

• ••

CO"tnunem purchastS

J O +---�--,�-��_�_�_�-,---� 19&1

19116

1988

1990

1992

1994

1996

1 998

(Sourc�: /-UffiIO HayashI and Edward C. PreSCOtt. �Tht 1990s

2000

In Japan

Ike impact on the Global South '\

1 lOst Dl'("adt�) 216

I he collapse of the twO state-orientcd ideological models. Kcynesianism and Stalinism, had a profound effect on polilical

CapItalIsm m the 20th Ctllt""

ht End of rhlt' Goldlt'D Age I

217

forr.:es aspiring after the �devclopment'" ofTh,rd World eCOnOl1llt' into full and equal components of the world system. It pu!>lw.l them to look for new models of capiml accumulatlun in placc ,,[ the state-dIrected import-substitutionist model, which was alrc.llh displaying problems. In ASia (he tightly regulated Chlnese eConOffi) and the It" tightly regulated, but still centrally directed, Indian econol1n both began to sho\\ worrying signs of stagnation by the mid 1 9705,"' forcing go\ernments to look for alternatives; in Latin America the import-substirurionist model was found w3ntln� III its Argentinian homeland as economic and polaical eml', erupted; in Africa rhe promises made by proponents of " Afri(,:,l u socialism" were nO! fulfilled as industrial growth was restrtUI,.1 h)' the narrowness of nanonal markets and the meagre resour(.:t" left after the depredations of imperialism. Adding to these proh lelllS was a decline in the price on the world market for r,1\\ malerials and foodstuffs-the main source of the CXpOrt carnin),:, needed to import equipment for new industries, Particubrly after the onset of recession in the advanced countries in 1974, non 0 11 produci ng Third World countries were caught betwecn incrca��',l oil COStS and a decline in the terms of trade for primary cum nwdit)' exports of nearl), 50 percent. Those runmng industries which had grown up within the pro tecme barriers of the old model began pragmatically establishlll� links WIth foreign capital. Argentina, Brazil and Mexico were f)pl cal. Their mdustrial bases had been established in the 19405, 19m, and 19605 by the state mtervening to direct investment in industr\, often imo stateoQwned companies. But the more farsighted ,"du, trtallsts-whethcr in the state or private sectors--saw that th�'\ could not get the resources and modern technologies needed In kecp up with worldwide producriviry le,"els unle of the West. \.IIhose n And there certainJ) wa!> growth . �For almo"t 1 .� years ( 1 965-80) the average rate of grot\'lh was 8.S perl.:cnt, making Brazil the Inunh fastest growing cuuntry" ' Other Latin Ameflcan States hegan to ('mUI,He the Rrazili.m policy. The mil\[ary coups in Chile ( 1 973) and Ar),:entlna ( 1 976) were followed by an upcmng to external c to Nasser in Egypt. The COil versions were not always voluntary. The In terna l1on.l l Monetaq Fund and the World Bank intervened where they could. making offers. m... fia style, ro dt"bt-laden countries which thelT ru ler.. rarely found themselves able to refuse, since doing so woulJ rule out any sort of aCl.:umulation strategy. The various debt pro gr;1TTlllles were mort" concerned with protecting the Interests 01 Western hanks than with ameliorating conditions in the indebu·J countries. But more was involved than Jusr a surrender [0 impen allsm on the parr of the go\'ernmentS that accepted them. Tho�\ capitals, private and state auke, that had grown during the penod of state-directed "'development" did not see any way of cominu IIlg to e.xpand within the confines of limited national markeh They wanted access to markets and to rechnological lI1nOVatlO11� o utside 03tional borders. They might allow. even encourage. n.1

tional governments

to

haggle mer the rerllls on which capHal lll

the metropol itan counnies .1110wed this to happen, hut they would

not reject them outright. And in the process some of them wcr\" indeed able to develop more than a national profile. So the Argentinian steel maker TechNet tOok control of thr Mexican steel tube maker Tamsa in .1993, acquired the Italian �tl'l'l rube maker Dalmikne in 1996, and then went on to expand in to 220

Capnalism In Ihe 10th Ct-nrnr,

IIr3zil, Venezuela. Japan and Canada, adopting the name i a similar pattern for some f\.ll'xican companies. 1 Lna ris Lt.. There s In lhe late 1980s Alfa. the largest mdustrial group in ;\1exico, wilh 109 subsidiaries spanning automorh'e components, food. petro� ,hemicals and sud, embarked on a growing number of joint 'tpt'.fanons with foreign firms. The glass maker Vitro, which had hl1ught twO American companies. became "the world's IC3ding 11.1ss container manufacturer, with irs market almost equally split and Me'Xleo� . The logical outcome of this in I Iween the .

US

Mexico was for its rulin g dass 10 forget ils old nationalism :lI1d to 111m the North Amencan Eree Trade Area Jn d inm '., reporred the Fmallci,,1 TUlles. But a),!,I Il! amnesia soon set In ;1nd financial commentators were desr.:ribll1� the er.:onomi" paille ot a few months earlier as "the recession th.u W.1�

o\('r before H b�gan"·--de!.pue, or perhaps because of, th,

lo!., of one m si x manufactUring lobs in the us. Renewed nom ir.: growth

111

[he us led to even gn·ater Optll111Sm dun

after year rhat the picture fur the fmure was of fast econOlli1 111

Apnl lOO-:-

,I

typical

IMF pre!.s release about

I"

mOM recem world survey read, �Global economy on track In! cominued strong growth". There \wre a fe\\

-

l or those commcntators prepared to look honestly and go a lin Ie �leeper than immediate appearances, there were disturbing signs. While the

I1\�F, for instance. was exuberant about prospects, re­

\Carch commissioned by the World Bank painted a rather dlfferem picture. Growth for the world :IS whole was well down on the levels not only of the long boom, but also of the first decade and a half after its end:

Gmph tI"u; u'l'Jrld GDP gmu'tIJ rut( J 96' ·2006

•

7 , 5

e(1I

hefore. The Interna[ional Monetary Fund ('Ould declare )"r.H growth. So

Ihddcn problems

malnSlre.1111

doubters, hut their worries were only ever discussed lTl order II'

be di!>ml'>sed,

, J 2

1

o,+-��--���������s 196j

The overall message was that capitalism was going (HIIII

1970

1I11S

1980

1 98j

1 9�0

1 99j

2000

200j

without media references to the " new giants", Ch im. and InJI.I.

conclusion . as an LM F It was only possible to draw a different d [0, by starting the Knl ph i n the April 2007 World Review seeme of the long boom.' 'lCries in 1970-with the beginning of Ihe end a long-term slow­ Parallel with the decline in growth rales went the IM F revealed (see down in global investment, as research for

and soon compliments were heing poured on the other COU\HTI�"

graph below).

Hrength to strength with supposedly record world growth (1).t ures. Even those sceptical about the claims for the advan�Td COUlltfleS often accepred a modified version of the optllni.,m when it came to rhe system as a whole. Hardly a day went p.I"1

230

The Nc.... Age oj GlobJl ln>I.lf>1I

Ibc Y�al'$ of l:Hluslon

231

"'Qrld IICCllmllilJrilm'

But rhe restructuring through cri�c.., did not have the fuJI effect il

�

� �

14

.

-

•

h IJ had in the "'free market" period of caplrali �mor.11' depreciation). Compuren. and softwarl' becomeobsole'iCem bt'l.:au'

of technical advances much more qUickly than other capital equip mem-in perhaps IWO or three years rather than ten, 20 or e\u 30-and [he n i creased depreciation costs cut into profirsY This was ignore
cheap compunng power was the basis of a new era ()f continuolI' growth. As we saw n i Chapter Three, rhe mon° rapIdly finm haw [I' repla!;e their fixed capital. rhe: more it cub into any innease in pwl Its the} gut from n i �ralling it in the first place. What is more, onCt' .1

--

Jd P:II' '" Il'l �

70

--

60

"""

-- ..

'--...---. � '

•

'

-

,-

- -,

new technology h.ls spread heyond the firms that fir�t IIltroduce it. II,

effect is to reduce the value of each unit of output: the late 1 9905 ,Ind the early 200Ds were a period in which the prices of goods produu:d b> the new technology rumbled, leading to increased competiml pressure on all the firms in these industries. A wave of mnov,\tIol! could no OlOte create an endless boom in the late 1 990s and carh 2000s than It could 111 the "new era" of the 1 920s. The must lmporranr factor in renving profit rates was nOi com puterlsatton, or the reorganisation of capital as such, but till" IIlcreased pressure capital was able to put on those who worknl for i[ as successive wa...es of restructuring disrupu."d old patlcrn, III

working class resistance. Capitals took advantage of the redun danc[es and dislocations caused by restructuring to put relcJ1(I�'�' pressure on workers to work harder while wages were held down, There was a decrease in the share of natiunal income gomg [II labour 1n all of the major Western economies. In rhe United Statl.... "productivity grew 46.5 percent between 1973 and 1998", whilt the median wage fell by about 8 percent'" and that for productIon workers by 20 percentll (with workers only able to protect th!;! ! living standards by an increase in average working hours from 1,883 hours in 1980 to 1,966 in 1997lJ.). Western Europe did nor see the same increase m hours (aparr from in Bntalll, where unp:'lIt1 o....ertlme soared) or a reduction i n real wages as in the US III lhl 1 980s and 1990s, but governments and firms began to pu,h

H6

1hc Nt'" Age of Global

In�t.:lhllll'

so+---�-�-�--�-�-�-� 1970

1 990

1980

1995

2000

2005

lor both in the new millennIUm. "R�al wages have fallen dram.Hi­ I;.dly and working hours are nearly back [040 a week", reporred the BSC on Germany in 2005.' It was oat only wages and working conditions that had to be put under pressure. So [00 did the variau!> services provided by the stare �and in some case by pnvate firms) that make up the "social wage-: healthca.re, pensions, education. During the long boom these had

l'lttn, as we have seen in Chapter Seven, hy and large, paid for out of Ihe taxes on the working class, as is shown by figures by Anwar "Ihaikb for what he calls -the net St:K:ial wage�-the difference be­ tween what workers pay III and what the} get out (see Graph A helow).�· But the impact of recurrent cnse�, rismg unemployment

. nd an ageing population had hccn to pu.!>h welfare expenditures up­ t wards (Table B). until even 1Il the US the cosr could no longer always he covered by the taxation all workerlo and therefore tended to hit l.:apitaL The figures show cnurmou� unevenness between the degree 10 which different states-and firms operating in those states-were hit by both the overall le,·el of the "net social wage" and the rise III the welfare expenditures

to

the 1970s and 1980�. They responded

by a series of "reforms" (in reality coumeNeforms) which, undl'! the lallel of �modcrnis.1.rion". aImed at rC\'crSJng thl� trend. Nd soaa/ ll\1gt as !>"Ctnt of GNP (Gr.rpll A)

1

'

,

1

''''

/ -

J

I'

'..

"

I

'..

v', ,

I

---

� /,

", ,

, -

,

"

1970

1965

1960

/

'

:

, " , , , , , , ,

1975

,

/

\

--'

-

1980

198;

Crr",:!n}. Canada, thr L t.., AII'lrJ"� and t" link up with overseas Chinese capitalist interests in Hong Kun).! and elsewhere.

the world. What they meant for workers was portrayed graphi­

�illly n i the 2003 Chinese film Blmd Shaft, in which the degrading lunditiollS under wbich rhe millers work lead fWO of rhem to

The surplus passmg from the peasantry into the hands of thrn

lIIurder a co-worker in an attempt ro blackmail corrupt managers.

he closeness of reair l y to the fiction was shown n i a mining disas­

groups of capitalists (state, -village" and overseas) was still 111.1\

1

sive despite the reforms, while low peasant incomes meant a reaJ\

It·r in Guangdong (supposedly China's most "advanced " province)

supply of workers for the new indusrries, which did not even han

11\ the summer of 2005. As more than 100 mlllers suffocated un·

to provide the guaranteed minimum livmg standards and 500.11

Ilcrground, the owner fled when it was revealed he had paid our

protection (the so-called "iron rice bowl") of the old Stare-flill

IllllJions of dollars in bribes to take over the preViously shut down

heavy iuJu.stries. In effect, there was a new model of capit;l hsl .lt. .

\IMe·owned mine, and at rhe same tIme ro buy himself a senior po­

of exploitation 311.1

Ltion in the local police force. In thi., way he had been able to

repres�ion of the old state capitalism with a turn towards catetln).:

IKnore all safety precautions while parading himself as an exem­

for markets-and rhe markets came 1Ilcreasingly from expOrTll\).: i crr.h to the rest of the world system, while providing for the n

pbry "entrepreneur" for his role in suppl}'ing coal to satisfy the t·nergy needs o f .l booming economy. -

ingly consp'cuous consumption of the old state bureaucracy on [lw

AlongSIde th't attack on the old working class was a renewed

one hand and its children as they rook over priv'ltised industrin

upping of the level of exploitation of the rural workforce, who still

on the other.

made up fWO thirds of the total. One (banned) Chinese study told

cumulation, combining rhe high

level

The new hybrid economy had contradictions of its own, WI! II

r)f a fall of 6 percent in peasants' per capita farming incomes afrer

the ups and downs of market capitalism superimposed on rhe up,

1 997, and "given the rising COStS of health and education, their

,lIld downs of the old state capitalist accwnulation model. Thert·

real purchasing power bas probably fallen still furrher".J' But the

were wild fluctuations in growth fares. The scale on which the

,lVerage does nor tell the whole StOry. Class differentiation within

m'\�

industries competed with each other for resources created shan

the peasantry involved local officials using their powers [Q grab

ages and forced prices up, until rhe state tried to impose son1l'

money ( in the form of local taxes) and land off orher peasants with

order on the market by curtaihng funds for further investment. 1.,11

the aim of enriching themselves a_� perry agrarian capitalists-the

the growth rare could be above 20 percent in 1984, down It>

'tili low livillg standards. The World six of the population, still lived on less than $1 a day. Other cs­

The key to China's rapid growth rates was an unparalleled level

24')

In recent years. no OECD or emerging market economy h.1J ,I

U1C'n t o r private Amertcan consumption (graph"), whIch then pro­

r3r10 greater IhJn 30 percent (averaging over three year�

w

'01

,moorh om cycUcal effects) . . . Even compared to Korea and J.ll'.11

dUring their boom rears. the ratio in China todav looks hi�h.

The rising investmtnt was paid for out of to[al savings In the e":llll omy also rising to ov('r 50 percent of outpUi. Some of the was hy workers and peasants, who needed It

111

".1\

1,led all outlet for further Chinese exports. 10

Pn'-,ltco �On)UmplI(ln

flcon JellIco)

..

15

III",

-

10 �el expons

they handed over a ponion of their incomes to srare-run hank, ,

which havc then loaned it to Slate and privately owned enrerprr\I" III

- - - - - - - - - --

order to pay I .. ,

emergencies like medical care and for rheir old age. Erfecmd\

But

20

the early and mid-2000s an increasmg proponion of ..a'lflr,

came our of the profits made by companies, which rose by a huul �

IO

5

fright s.:akl_

--_-�----�-�-_+O 2002

2000

percenr of GNP In the eP lerms; I�..t (han Britai n or France) and 60 percent \1l1;\l Ier 111 " growth rates were ani) a Ilftle aho\le 60 percent of that of perccm in ( hina in the late 1.990s., rising hrien) to Just Ie)!', th an 90

Ihe mid·2000!o; ItS share of total world expom In 1003 was only i 31st position. II.7 percem, putting it n There were some pa ral lels with the Chillese patrern: an early ar­ I, mpt at star�-dlrcctcd industrialisation (the period of so-called Nerllvian socialism ") was followed by a few years of stagnation in I he mid and late 1 9705; and then the Introduction of reforms aimed

a m uch more market based Illudel of accumulation. Bur there were significant differences. L'u:king the crude power of the Chinese I.lle, lndia's state and private capttalists were not nearly as SllCCesl>' lui in subduing other classes (on the one Side the old landowning I.l� on tbe other the workers and peasants) and SQ achie\'ed less in

.11

Ihe period of state-led pmllTflVe accumulau(1Il when the Indian II.rowth rate was probably three qu,merl> of Ch1l1a's, The) were

resources available for consumption by China's population (sin�r domestic prices of basic foodstuffs Like rice and basic services IIkl' urban transport fares cost a quaner or less of those III the We,t I. B ut it is the exchange rate measurement that is important in dl'

Ihtrefore less able IU benefit from a turn to the world market-ex· porting le.los and remaining much less artrac(I\le 10 foreign capital tlun their ChInese competitors. .. Refonns pushed up the care of ac­ 25 to 30 percent of GNP. But � umulation, with 1I1\estment rcaching fillS could only be sustained on the haSI!> (If a growlI1g portion of I)urpur accrUIng to the capitalist class and the upper middle class, al

termining the degree to which a country can imporr and '11 provide a locomotive to pull tbe rest of the world economy for wards. And it was a grave mistake to believe that Chill;,!, accounting for 4 or 5 percent of global buying power, could sonK

111 the 19905, the top of the population enioyed a 5uhstanndlly

.

how compensate for the effect of a maior economic crisis in mUl;n of the rest of the world system. The Chtnese economy was not yet big enough for it to be an :11 le rnilu

M

Ihe expense of the workers, peasants and the poor. As a 2007 report fur the lJ\IF showed:

larger share of the gains from economic growth compared to the previous decade. This had significant effects on income Ill · equality which grew wirlun states, across states, and between ,

rural and urban areas....

An analysis of lIlcomes tax data �uggCSt!o up to 40 percent of growth ,nded up in the hands of the tOp I percent of the population.·' l"he Ytani of DdusKm

lit

Apulogists for capita lism tend to a�sume rising growth mu'>t .111 romaric.llly lead to falling poverty and quote various ofhd.ll stJmncs showing a decline in tbe proportion of people livlll).! III ah,>olure p<werry hy 1 0 percent in the 1 9905. But in the '1(1m, decade there was J fall in food consumption per head III the rur.11 .lteas, where twO thirds of Indians live. Abhi,it Sen, re-anah-..in '

�

the official figur�, concluded that the total numher l h i f! lit poverty probably grew in the 1 990s, that the pruporrion helo\\. til' poverty line only fell ver)' slightly. and thiS was .. "lost decade" III terms of figbting poverty." Tbe Dumber below the pm-erry lUll' III 2002 was JS percent of the lndian population, some 364 milluOl1 people. But even this underesnmated the degree of suffering.

H.III

of all lndJ:m children are clinically undernourished and almost ·H I )X'fcenr of all Indian aduhs suffer chronic energy deficiency.' I \\'11 i n the supposedly prosperous states of Gujarat, Karnaraka. Kt'r,l1.l. Maharashtra and Tamil Nadu, �more than 70 perccnr of the nlf.11 population consumed less than 2,200 calories per day"'" India's Il1sertiun into rhe world system means that industrl.11 investment, like that in China, has been overwhelm11lgly capll,d intensive, with the capital output rising suhstantially in thl I 990s, Employment growth was stuck at about I perce", a y�',H, 0.87 percent in rhe �organist'd" (ie formal) manuf'lclurul� sector!' even if growth was a little faster in the "ullorganised" 111 formal seetor where average firm size is less than two peopk, MOM of the people flooding from the countf)'side to the cifll" have ended up tr}'ing to make a livelihood in the service sectur, doing unskilled labour a t very low levels of producrivit\ III

Irial society In Mum bai, llyderabad or Bangalore would stili he parated by stretche!> of rural poverty bigger than most European ..'Ountries. And long before rhat rhe whole proce�� of rapid growth

u)uld be thrown off balance both by inrernal factors and by the Impact of instabilir} Internammall)'. We have seen what happened to the Mtigers" in the !atl' 1990�, and before that ro the Brazilian "miracle'" of [he 1960s and 1970s.

Ihere was therefore a lot of �mne!.ia I!l\'ulved when people

lumped together a \'ery disparare collection of countnes, Brazil, !tussia, India, China and South Afne,t, and d.lImed [hal somehow mgether they represented an alternative drt\er for rhe world

�\stem. In facl, renewed c�onomll: growlh In Brazil, Russia and \uuth Africa de-pended typically on an up�urgl' of raw m aterial ilnd agriculrur� l prices 111 a boom which was bound to come TO an ,·nd eventually-and whell it did so It would hit [hem seriously. The great mind s that extolled the system paid no greater :ltten­ lion to these contradictions 1Il 1iteir rosy picture of Asia than rhey

did to the underlying problems 111 Europe and North America. I.tpan had problems, they usua lly recognised, bur this was be­ i,:.luse of the lack of wisdom displayed hy a govermllent which had !lever really absorbed the lessons about how a free marker should

operate. As late as the auru mn of 2007 financial journalists, gov­ ernment ministers and the stars of academic economics were all "greed thar capitalism had found a new long-term stability-and �'teo some Marxists spoke of a "new lung upturn .... They were "non to look as foolish as those who foree,lSt endless peace io the ,·.trly summer of 1 9 1 4.

return for the 50 rupees ( S I ) a day needed to JUSt about keep ,I family alive-sweeping and cJeaning, working as domestic vants,

washing clothes, pushing

barrows.

'in

peddling C\dr

rickshaws. hawking goods. porrering. waitering, guarding. I Ill' much publicised call centres employed only 400,000 people !If 0,008 percent of the country's workforce in 2006:1 India's growth, like China's, means that by the mid-200(h II represcllIed a much bigger portion of world capitalism than SO III even 20 years earlier, and this had important implications for [hi system as a whole. Bur it was still quite small by the st;1ndard� I I I the US or even Japan, Germany and China. This could chanf:.�' ! I the rates of growth of the mid-2000s were sust;1incd for anuthn two decades: in dollar terms the Indian economy would end up being bigger than rhe UK. Bur the most modern centres of im.lu. 252

Th� N�w A!;.. ofGlohll InSlab,

'he Yrars of Dt'luslOn

, HAPTER TEN

Global capital in the new age

-

lIursring through borders I he decades � the great delusion were decades In which caplral hurst our of national confines in trade, Investment and produc­ linn. By Z007 international rrade flows were 30 rimes greater than in 1950, while output was only eight tLmes greatcr.' Foreign ,Ilrecr investment shot up: flows of it rising from $37 billion in 1�82 to $ 1 ,200 billion Ln 2006;' the cumulative stock of FDI lase from 4 percent of world gross domestic product in 1 950 (less than balf the 1913 figure) to 36 percent in 2007,1 The direct mganisation of production across national boundaries also took nif in a way that had been very rare in the past and the multina­ IlonaI corporation became the generally accepred stereotype of Ihe big capiraiisl enterpnse.' The movemenr of finance across national borders, which had tJllen sbarply since Ibe crisis of the 1 930s, now grew explosively, with governmenls dropping exchange comrols as part of rhe more general process of deregulation. By the mid-1980s rhe trend was tor Mbankers to map out new strategies which, for most of them", .Imounted "to establishing sizeable presences in the major finan­ ,-1.11 centres, London, New York and Tokyo, and some secondary

nnes as well".' There was a proliferation of bankll1g mergers. The old-established Hong Kong and Shanghai Banking Corporation look over one of the �big five" Brttish banks, relocated its head4uarters to London and moved on to buy b'lOks in a dozen (Quntries. The rwo big Spanish banks, Ihe Bank of Bilbao and Vizcaya, and the Bank of Santander, bought up a very large pro­ portion of the banking systems of many Latin American counrries, until they alone owned almost one third of the assets of the 20 2504

The r.;"" ASI: 1 Cilohal ln\I,r)' n

25S

hlgge$t b.mb,' and then branched out into other rypes of Im!>I11..." Min\c!>tmcnt banking, Insurance and In p'lrticular participatiol1 lll pemion lunJ mJnagemenr", acquinng "mmority shares 1 11

�orH'

non· financial enterprises, basicaUy in sectors where other Spanhll Invesrors are \·el)' acme (telecommunications and energy) M. There was a parallel process of concentration of industri.lI .1, TJ\lties ac:ms'i national borders. The huge firms that had emer�' ,I In

the old industrial cOllntries in the previous period. ohen ullli.

the tutelage of rhe state, were now able to dominate not onh 1I11 ! national market but also carve our huge chunks o( the \\1111,1 market. Their competitors could on I}" survive If they looked to .111 Intern.trianal mobilisation of resources, that IS, if they roo bee,tll" muhllldtional, 11m only when it came to trade bur also when I I c;tme to production. The most successful firms in many ke) inJu, tTles became those With International developrnelll, produl.noll .\Od m::arkenng srrategles, based upun buying up, mcr�ing wilh

01

establishing 'itrmeglC alliances with firm� in other COUIltTlCS. In motors, the Japanese car firms establisht·d production faull

re­ 1I1fl!rnationa! takcO\·ers ,lIld collahoration agreements that were I'''rted b)' the Find1lcial Times e,er y day. If the typical capitalist firm of the 1940s, 1950 s or 1960s WdS

a domlllant role in one national economy, at thc ht'!�inrung of the 2 1 st century it was one that operated in a score IIf mort" Countfles-not merely selling ourslde us home eountry lml producing there a, well. The biggest deplo)'ed tJ.r more eco-

,,"l' whic h pla)"ed

st 1\llmiC resouree� than man)' states. "29 ot the world'� 100 large . �'Conomic entities are tran�national corporations ... reported 11NCfAD. The process of national firms hranchmg out mto tbe H·�t of the wurld was not cnnfined 10 the advanced mdustrial g nuntries. It affected the Third World and New l y Industrialisin previously l ountries where the Statlfic3tlOil (If industr) had Irnded to go even further than in the \'(fest, as we l-aw III Chapter

�

""-'ven. It Ult nsified with the restructuTing of IIldustry that rook s as firms rationalised production, lllace in each Crisis of these year

,hut plants and merged WIth others.

ties in the U�. turning uut more vehicles than the third bl��I" 1 American firm, Chrysler; the nationali,cd hench firm Ren.wl1 began a series of acquisitions in rhe U�. beginning with the �m.dl fourrh US car firm American Motors; Volvo took ovcr Gencr.11 Mowrs' hea\y truck production in the US; rurd and Volkswagl'l1 rtler�eJ their car production in BraZil; Nissan bUilt an assemhh plam in nonh east Fngland [() produce hundreds of thuusand, 01 C3r�

.1

re.1r. while Honda bought a 20 percent �tJ.ke in Rover. III

ryres, the hend firm J\t\ichelin made itself the world's hlggest pro dm:er by raking o,'er Umroyal-Goodrich

111

the US

III

1988. Thl

p..rrern contlnuoo 111[0 the 1990s and the earl} 1000s. MenTJl' Benz took O\'er Chrysler (before selling it again 111 2007); Ren.I,,11 formed an Malliancc" with Nissan (huY1l1g44.S percent of 11, Willi, Nissan bought 15 percent of Renault) wuh a joint dllef execumr; General Morars bought Saab, rook 20 percent stakes

111

SU7UI..I.

Subaru and Fi,lt, and acquired 42 percent of Daewuo; the inJI.w group Tata wok over the Anglo-Dutch steel firm Corus ((urmed hI a previous takeover of the privatised Bnrish Sted); hday's glohal economy some central IIsion

I

industrial strategy for this countryM, agreed �J Logic's Corrigan.

mg, kaleidoscopK paltern which was upset every time II �ct'Il1.-.1 ,Iic"" as Marx had PUI II-bur nor ;n rhe way the crude gloh,ll. _� atIOIl theory held. For capa,ll's old companion, the '>1.11. entered inl'O rhe process at every point.

I he result of that strategy was that by the end of the 1 990s rhe

NEe

world's top

semiconductor compan� was no longer !I.lpanese) but �ntel (Amencan), widl Motorola and Texas Instruments (both American ) in third 3nd fifth position. The US \

Stales and capitals in Ihe era of "globalisation" All the advanced capitalist stares still maintain hi�to ril'al l} H'II hIgh levels of �tatc ex:pendirure, only surpassed h Istoricall y dUrlll1 the wne of total war. And although busine ..� often compbin about the level of t.lx:ation, it ne\'er seriously suggests guing h,l l� die Jel'e1 of expenditure of a cenrurr ago. The reason is that (.11' t lIal.. today. far from nor needmg states, require them as nHI.1I (0

as-if not more th.lO--t'ver before. The} need (hem first because the continued concentration til capitab In particular geographical locations nece�sitate5 facilllln thal are not automatically provided by rhe operation of th. market: police; Judicial sysrem�; a framework to linul the defr.lUd ing of .,orne capitals by others; ar least rmlllln.11 regulatiun 1)1 [hI credl! system; the provision of a more or less stable currenl \ Along with these they also need some of the functions fulfilled 1\\ the state during the period of the state-directed economy: rcguLl tion of the labour market; ensuring the repruductlon of the nt'\1 generation of labour power; the provision of an mfrastruclure tIll tr:msport, communications, wate-r and power; the supply of md, tary contracts. Even the big multinationals, With half or more 01 their production and sales located 3bro3d. still tely for much III their basic profitability on their operations in their home base, amI therefore on what a st.ne can provide for them. Th� N�w

reqUIred",

Hackworth of Cirus Logic explJined. �Sol1lebody has to haY{' an

other. The outcome was not some new model. nUl an ever shill about 10 atl.lIn some fixiry. � All that is saUd" did "mel! J Il l . .

s i

Age of Global ln51Jl'odll'

tatc also managed to bring about a similar ranonallsation of the

liS aerospace industry, culminating In the merger of Boeing and ,'''Donnell Dougl:ls into

a

firm thai controlled 60 percent of

�Iobal civil aircraft sales, .llld a turnover In military aircraft pro­ duction twice as great as the whole of the European industry. As the New York TUlles put

If,

"Presldenr Bill Clinton's admrnisrra·

lion" had '"largely succeeded In turning America's military \.onuactors into instruments of making the economy more comtitive globallyr ," The ;nrernariunailsation of firms' operations. far from leading

to less dependence on state suPPOrt, IIlcreases

It

in one very

Iln­

portant respect. They need protL'Ctlon for their global interests. A I,\,·hole range of things become more Importa!lf to {hem than

III

the

early post-war decades: (rade negOtiations for access to new mar­ kets;

exchange rates

between currencies; the allocation of

contracts by foreign governments; protection aga1llst expropria­ lion of foreign assets; rhe defence of intellectual property rights; enforcement of foreign debt repayments. There is no world 513te 10

undertake such tasks. And so tht.' power of any national state (0

force others ro respect the II1rerests of capitals based wilhin It has become more important, not less. Floating exchangt.' rates between malor currencies mean that me capaciry of a government to mIluence rhe v.llue 0 1 Its own currency can have an enormous effec"[ on the mternational compemiveness of firms operating withrn its boundaries. This was shown, for IIlst:lnce,

Global Capllal on thl: Nrw Ag�

26S

by the "Plaza Accord" of 19 85 , wh eD the us per�uadeJ th. European and Japanese governments [Q cOO perate with II III for... lll! up the \·alui' of me ren against the doUa r. In the aftermath sail·, ,01 U) firm� internationally "grew at thei.r fas test rate d u rmg the pml Wolf period shooting up at an an nual rate of 10.6 percent betWCl·" 198 5 and 1 990""; It was shown agalll wh en the political det;i�I()1I of the government brought ro Qffice in the aftermath of Il,. Argentinian uprlSmg of December 2001 to devalue the currenn h\ 75 percent ga\e a consider.tble boost to the industrial and agrl . r!.1lI capitals based in rhe country." .

A change in the excbange rare ahers the amoul11 of globa l \ ,111 1. whlt:h a firm operating within a nationa l eco

nomy gets in retur.. for the labour It has used in prodUCin g commodities. As DI l� Bryan ha.. PUt it: The eXl.:hangc rate is a critical determina nt of the di!>tributlon 1,1 surplus va lue amongst capitals. . . Becau se nation-!>tares ,If,· deemed responsi ble for the global comm ensurahility of (ht'J r" currem:)", globalisation . . . is nor about era dicating the natlOful dimension of accumulanon. Indeed, globalisation is nor cl,icn about the natiunal dimension "hangl11g on " in a process of slo\\ dis"olution. Global accumulation is actIJaUy reproduci ng rill" nationa l dimension, albeit in wars dif ferent to past eras'" "

Again the same cemralif) of states I� sho wn to international tr.llk negon,Hions conducted through the WT O. They gather ;IS the rt'r resenrativt's of the capitals clustered tog ether within their bordl'r,. Different firms ha\·e different interests and will look ro the andl vidu.!) states o\"t'r which they have inf luence to achieve these. Thl' is JUSt it:. true of firms who look to est abhshing glohal domination through free trade as of those with pro tectionist i.nclinations. All are dcpendent upon " thelr� stare to pe r!>uade other states to k-I them get their way. So the US nate is an ess ential weapon for firlm l ike MIcrosoft, GlaxoSmithKlein or Mon santo III getting the cnor mous royalty payments that accrue fro m world recognition 01 their intellecrual copyrights. Likewise the financial power it cxer cises thro ugh the LMJ-: and the World Bank has safegua rd ed till" foreign loans made by American banksand has helped U5.ba snl lI1dustrial corporations gain from the cri ses facing smaller state,:>. liS when Ford and General Motors ga ined (antral of two of thl· Korean car companies at the time of the Asian crisis!'

Neither do JIlternational mergers show that the Imponance of

I.nes is declll1ing. Part of their r.Hionale is for a multin:ltional to

1'C" able to extend its influence from its home ..tate to other states. 11\ and Ja pa nese firms Invest in West I:.uropea n countries so as [0

I,... able to "jump" natiunal boundaries and so Influence the policy

lit these states and the European Community from within: hence the spectacle n i the early 1 990s of US mult ina tionals like Ford and ( .cnera l Motors lobhying European governmenrs for measures to

f('strict the import of Japanese cars: hence ald unass.,ilable at the end (If the Second i the decades that (ollowed the US fedred succcs­ World War. Bur n Ive challenges from other srate� which were growing much more l ilpidly than it was. Ru!o.';itl was seen .IS ..Ill economic (as well as military) th�at IJ1 the 1950s, however absurd that might seem mday, J"panll l Ihe 1 980s, and more recently Chllla. The determi­

lI,nion of the US state not to fisk losing its position explains Its nlassive levels of arms expenditure and rhe wars it has waged in the Global South. The scale of the problems it faced first began to hit home i n the late 19605 when the US ruling class found It could not afford the escalating cost of tr}ing to achieve aU-out victory in Vietnam.

Ihe histOry of US capitalism smce h.lS been very much a history I)f its attempts to re.ses-and all paid

The US is actually in no bener position to dictate the gluh.11 agenda unilaterally than n was at the beginning of the Col.l War.,. The United States wil l face economic compef ltion 01 .1 kind it ne,er experienced during the Cold War. .. China

pl'f\sate fur losing 1(5 old lead in market compenrion by using the "lie thing it has that the other powers do not--Q"erwhelming mil­ IT.lfy mighr. Ir was an updated version of the logic of Imperialism

I..

011

the mad to superpowcr status . . . China's GNP will app ro,ld, that of the US by the end of [he second decade of the 2 1st '.Tn rury. Long before th:u China's shadow will fall over Asi a'" \'(Ihat IS more, a quarter of a century of growing inrerna llonah�.1 tion of finance. invesnncnt, trade and production madc \ . , capitalism vulnerable to evems beyond Its borders. Its great mu ll, national C()rpoflltions needed some policy which would enable !ill" mighr of the us state to exerci!->e control over such eve nts. Alrc.llh towards rhe end of [he Clinton Adm lmstration there wer(' mOH·� towards a more aggressivc foreign policy designed to .Khievc tim. With rhe push to expand NATO inro F.. l stern Europe, but rhi!> Jld l10t go far enough for a group of Republican politicians , bU!>lIIl'" men .lOd academics-the infamous neoconservative "Pr oject for ,I New American Century" formed In the late 1990s. The ir stMtlllg point was the I11Slstem:e that the war to srap Ha dechne in Amcrll.1II power" was a refurn to a "Reagamte" policy based on large 111 crca..es in defence spending. the building of a mis sile dcfenu· system, and acnon to deal with "thre,lts" from "dlctato rships� III Chlll,I, Serbl3, Iraq. Iran and North Korea"· "Having led the \X.l·�1 to \'icrory III the Cold War, America faces an opport unity and .1 challenge. We are 111 danger of squandermg the opp ortumty Jnd failing the challenge". ' The Republican electoral victory of 2000 and then the natioll,11 panic caused by the 911 1 destruction of the World Tra de Ccmn· gave them a chance to implement their policy.

It amounred in practice to further buildiJlg up the milit.lrl might of the US-and thcn USlllg It to assert US glo b'll dominanu· againsf all comers. Increased arms spending and mas sive tax ClU� for the rich were meant to pul l the US out of recession, just as Till "m ilitary Kcynesianism" of Reagan had two dec ades bdon· Increased arms spending would lead to recover) from recessiun, to further military handouts to finance technical adv ances tor m

lilt by even bigger Investment flows lOra the US as it demonstrated I" overriding power. The aim was for the U5. to more than com­

described by Bukhann in the early I 920!>, with the difference Ihat the rival capnalist states were not going to be forced mfO sub­ 1\

,('rvience by wars directly against them. bur by [he display of the lIS's capacity to wield g,lobal power through wars It and its client 't.m�s waged in the Global South. Hence the attack on Afghanistan and then, 1 8 months later, on Iraq. The "ncocons" helieved they had a perfect opportunity to Ilcmonstrate t� sheer level of US mIlitary power and to increase u)ntrol over the world's numher one raw material, oil. This would weaken the bargaining power of the WeH European states, '.Ipan and China, since they would be at lea�t parrially dependent nn the US for their supplies. The assumption was that the wars would be won by little more than a dl�play of US 3irpower at very little cost. This o;eemed a viable war for achievmg shared goals to those who r3n US-based cl)rporariom, and the Democrats in Congress voted for war. h was a gamble and hy the spring of 2004 it was clear thar the Mamble was going seriously wrong. Tht' US had taken control of Kabul and Baghdad eaSIly enough. But ItS forces on the ground were not able to prevent the growth of resistance in Iraq-and of growing Iran.ian influence there. Within another two ycars It also laced serious resistance from a resurgent Taliban in Afghanistan. The turn to military Keynesianism St.'ellled at first to be successful In economic terms. There was an unexpectedl)' quick recovery from the recession of 2001-2: "Official military expenditures for 200 1 · 2005 averaged 42 percent of gross non-residential pnvate 1I1vCStment" and "official figures . . .exduded much that should Ix- in� duded in military spending".11 All this provided markers, in the ..horr term, for sections of US industry. Bur the high levels of military expenditure soon showed the same negative effects they had �hown at the time of the Vietnam War and under rhe Reagan administm· lions. They increased economic demand without incr('asing overall mternational competitiveness and so ca�ed ballooning trade: as well as budget deficits. By 2006 the comhlllation of escalating military Global Capi1.l1

In

the New Age

27J

costs and the risk of defeat in Iraq was worrying important sel,;!n ,"\ of the ruling dass. A 2006 report fmm the Iraq Study Groul'. headed by Republican Party hea\'yweight Jame!' Baker ,111.1 Democratic Party heavyweight Lee Hamilton, bemoaned the 1m.... "

I

"blood and treasurc" with an estimate of the COStS to US capit,ll"tll 01 [he Iraq venture of a massive il ,OOO billion (equal to \l'\t" Illonths output from the British economy). 'J

thfficult for them [0 be succes,ful. l t is a wurld. I n short, beset bv " multitude of contradictory pressures and compelled, therefore, III experience onc convuls,\'e political eftsis after another. This ht'..:arne clear when (hc great economic dehlSlon gave way to a II.TI�at eCODomlC CTlSI!>.

Meanwhile orher :otates-and the capitals opcranng Ir,,'1 them-were able to take ad\3mage of the U�'s perceived wcaknt \l''>1 10 advance their own positions. The most ttnportam \ European st,lres, France and Germany, h.ld refused In hal,;k th. 2003 Jraq War, unlike the first lraq War of 1 99 1 . The French \1.11, III parllcular saw a weakening of U� influence in thc Middle 1 ,hI as an upportunity

10

advance the interests of French capilal 1ll rt

glons where its IlltCf{'sts clashed with the US·s. ChUla W,IS ahlr I" benefit from the US entanglemcnt in Iraq ilnd Afshani�tan I . . expand its own Influence, particularly in Africa and LUIII America. TIllS went hand in hand with growing Irade links, .h 11

-

•

looked to mineral imports from Africa and agriculrura l imporl\ from Brazil, Argentina and Chile. Soon Russia [00 was flexinp. II' rather weaker muscles, as increased oil revenue allowed it ttl rt' cover from tht: economic collapse of the previous decades and til exert pressure 00 some of the other former Soviet republics; Ir.m took advantage of the US's setbacks to increase its leverage in Ir.h( and Lebanon; the BRJCS formed an ad hoc alliance 10 advanL\' their common trade IIlterests in oPPOsition to both the US and Ih\' FU, so paralyslllg the Doha round of trade negotiations from which US corporations had hoped to get even easier access 10 lor eigo marken., The US discovered that when three of its client ,tall" launched wars for objects it supported-Israel in Lebanon 111 2006, Ethiopia

III

Somaha

III

2007. Georgia against OS5 across borders. It re­ tjulred mternational financial networks if II was

to

rcpatriate

Iltofirs or estabbsh ..ubsldlaries elsewhere in the world. An impor­

thc wurke" and middle classes [0 provide themselves with p�'11

siam in the ir old age. As Robm Blackburn has shown, pcmLnll

cOtllrihutions fed mto the mushrooming expansion of a finatl�l.ll system over which rhe conrributors had no control.I I This rise of fi na nce was accompanied hy a great incrca�e in ! ll t

"

frequency of financial crises. As Andrew Glyn said in CaPIl,llislII U"ICdshed, "Crises involving banking crises. which had allllO\! died (lut in the Golden Age. reappeared in strength from 19-3 011 wards and became practically as frequent after 1987 as durmg tht

period . I: Martin Wolf noted " 1 00 significant banl..lllt-: ...

crise!> over the past three decades"." Yet after each crisis Iht· system as a whole seemed to revi\'e aga i n, m that on the eve 01 11' ' greate�t cnsiI

another-in Brazil and the East Asian NICs tn the late I 970�. III Japan and Germany in the 19805. in the US and the East A\I.Ul NICs again in the mid to late 1990s. in China and to a lesser e_"�'1II the other BRlCS in the 2000s. But profitability was not sufficiem I" raise productive accumulation throughout the system as a whoic I I '

its previous levels.

Globally this meant there was a growmg pool of growth ot money capual-money in rhe hands of prod ucti ve as well as non­ productiv e capltals-searchmg for out1er� that seemed to promise Iligher levels o f prufitabiliry. He nce the pressure on firms to delil-er hon-term rather than long-term profits. So tOO the succession of

recularive bubbles and the repeated M Minsky" shifts from specu­

I tlon to PonZI schemes iO which financiers used the monev•

1 ntrustcd to tbem by some 101 estors to pay off orher Invcstors and

hne (heir own pockcts." All sorts uf speculativ e unproducnve ac­ IIvlties flOUrished, from poUring money Into Mock markets or real I ta te co buying 011 paintings by old masters. In each case. tbe rush .

There were Increased competitive pressures on individual tinm

III specu lators into buying thmgs 10 the expcaation of ming prices

to underlakc large individual investments so as keep ahead of ril ,d fi rms. bur there was less certainty than before abOut being abh: I" make a profit on those im'esnnenrs. Firms, wealthy individu .l l,

other, prices did indeed [1St'. In thl!> way the ups and downs of the

and investment funds reacted by being cautious a bout commit Iltl.: themselves to such investments lest it leave them without readl cash ( " liquidity" in financial parlance) next time there was ,I CfI\l\ The result was an inel·itable tendency for tbe average level of pw ductive Itlvestment to faU.

19�O--9

4.2 �rccnt

19110-89

1.1 per(ent

199 1-2000

'.J �rc:cnt

l'I.1nded as a consequence, sillce it played a key pan in collecting

IIIKCthcr rbe funds for specularion, and could (hen usc the J.ssets whose value had Increased because of speculatl(lIl as coll,Heral for horrowing more funds.

looking for any opportumty where it seemed there might be prof­ Ill> to be made. Already In the eConOlTliC rcc overy of the lare 1980s:

cauntrits"

5.0 �rccnl

p

productive an of the systcm found a magnified reflection in tbe lipS and downs of various othcr as!>ct!o. The financial system ex­

There developed a mass of ca pi tal wandering round the world

Grou,tlJ offJril'41� stelar "'01 non-rr'sitU"tial cofJital stock In ImluJtnoJl

1960-69

was, for a time, a self-fulfilli ng prophccy. As the)' outbid each

Financial activity became frenetic, wllh stuck and share and prop­ erty values soaring upwards . . . Property speculation rose to new

heights, and private borrowing reached record levels in the US.

Britain, and Japan ... There WdS real lndustnal growth, bur It was dwarfed by thc ex pJ.nsion of thc property markcts and by various

ductive lO\'csrment, since a growing share of investlnenr wem 111111 rhe non prod uctive financial sphere. And it was not only in the old

fonns of speculative activity .. General business lIl\'estmcnt grew considera bly faster than manufacturing IOvestmCnt-Ul sharp contrast to the 1960s and early 1970s. when manufacruring grew

Industrial counrries rhat a falling share of surplu s value went i nru productive 1Ilvcstment. The " tigers", the NICs and the BRit "

about a third lower 111 the US and Japan, and about cwo rlurds

These figure!>. It should be noted. understate thc slowdown in pro -

drew a sharp 1 III order to lend to those prepared for, or conned into, paying hi�lh I IntereSI rates. Birs of various loans were then parcelled togelhl'l

into "financial illstrumenrs" to be sold 3t a profit (Q other fin.lII cial insmutions which 111 rurn would sell them 3gall1. Those;1( 0111 of end of the chain of lending and borrowing would not haH' Ih, remotest idea where interest was coming from at the other end. III fact, many of {hose expected to pay it wcre poorer sectluns 01 111\ American population desperate to get somewhere ro live bUI pT' viously regarded as u ncredltv ..onhy. They were lured mto t.lkHl� out mortgages with -ncklern fixed term low rates of illler",1 which could then suddcnly be increased after two or three yl.:.11 Rising huuse prices werc supposed to make lending to thcm .. 111 . since If they defaultcd on their loans thetf homc� could be rl'\'D' sessed and sold at a handsome profit. The fact that ir \\ 1 ' precisely the willingness of financial institutions to bid agJ l lh! each other to offer loans to buy houses that was raising lht prices-and that prices would inevitably fall if they all beg,1Il r,' possessing-was something tbat escaped the notice of I1lf geniuses who ran these institutions. .

286

The more corporations inflated rheir wealrh by losing touch "lIh reality the more the)' wefe honoured. The British bank Northern Rock was " the toast of a gllt7y Oty dmner where it was

The Nev. Age of (,lobaI 1n.I,

lU'it months before Jr was revealed th.1I he h.ld detrauded hiS own �umpany of one billion dollars. Again It has to be stressed th,ll the speculatIve ventures of these years did 110t JUSt inl'olve financial (apl whsts. Industrial and com­ mercial cap Ital ists rook part. More than ha If the supposed growth 11\ the worth of the whole of the non-farm, non-financial corpo­ r.lte sector o the US in 2005 had been due to inf1ation in its rcal

f

(·,tate holdings.c, The finance-led bubbles were not, however, JUSt important as a ourcc of profits for the supposedly productive sector of the econ­ umy. They were also central In ensuring it had markets that neither m own investment nor what it paid its workers could provide. Ihis was rru(' of the bubbles of the 1 9805 and 1 990s The combi­ .

i1ation of reduced investment and attempTS IU hold down wages in Ihe old ind ustrial countries (.lIld success in cutting them in the US) lIlade consumer debt increasingl)' important 111 providing demand lor Output. It was even truer in the early and mid-lOOOs. Without the "housing" and "subprime mortgage" bubble there would have I n very little recovery from the recession of 200 1-2. These were years in which the real earnings of workers in rhe liS, Germany. hance and some other countries tended to fall. I hey were also years n i which producri\-e in\cstment was low in JII the "old� capital isms. "Investment rates have fallen across vir­ i dustrial country regionsn. ..aid one IMF study.­ tual ly all n Another report, for JP J\lorgan, raId 11\ 2005: The real driver of thl" savlIlg v,lut ha� neen rhe corporate sector. Between 2000 1. nd 2004. the ... witch from corporate dis-saving to net saving across .he (;6 j France, Germany, the US, Japan, Britain and Italy] econOllllCS amounrcd to over $ 1 tfillion . . . The rise in corporate saving has been truly global, spanning the three maior regions-North Amcrica, Europe, and Japan.lI hn.ncialis.mon and (hr BubblC!l th.u Bum

187

In other words. "'lIlstead of spending (hell' past profiu", U� blbl

profits a t the expense of wages were responSible for tbe IllcreaslIlg

nesses were " now at.:wmulating them as cash" .1.

tlt'pcndence of consumption on debt. It was also the attempts to

A Im\ level of Investment combined with falling real wagn

mJincain profitability in the face of an ever greater piling up of

\\ould, In normal cir�umstaJlces. have resulted in conrinued rCLr�

hxed capital that led to the holding back of consumption in

sion. \Vhat prevented that was precisely the upsurge of lendinp. 1 1.1

( hina-and, as part of doing so, efforts to srop any rise in the in·

the financial system to American consumers, including rhe reClpl

It'rn:ltional value of the yuan. And the memory of the crises of the

ents of suhpnme mortg:lges. It created a demand for tlll"

1 9905 taught [he other BRICS and N1Cs thar their own economies'

construction :lnd consumer goods industries-and vi:1 them h l l

profitability was not high enough to protect them from global in­

heavy industry and raw materials-that would not otherwise h.1\1

lability, leading them too to pile up surpluses. In general, it can be

existed. Recovery from rhe recession depended on the buhhll'

,lid mat the different sectors of world capitalism wouJd not have

what the Ilalian Man:iH Riccardo Bellofiore has aprJy called " 1'1 1

become dependent on th� bubble had profit rates returned to the

vatised Keynesiani-sm" . .

ll'vels of the long boom.

The product!\{, capitalists who were the beneficiaries of the 0['

Financialisation provided a substitute motor, in the form of

eration werl' not just [() he found in the US and Europe, hut ,1 1,"

\lcbr, for rhe world economy in the decades after rhe US arms

across the Pacific

Iconomy lost a

m

Easr Asi:l. Japanese industry. still sufferlllg

g60d part of its effectiveness. The permanent arms

from rhe decline in profitabil i ty in the earl) 1990s, staged some fl'

l'..:onomy had to be supplemented by the debt economy. But by its

covery by exponing hi-tech t'quipmenr to China which then used II

\I:rr nature a debt economy could not be permanent. The massive

(along with components from the other East Asian states ,Iud

profits that hanks make during any bubble represent claims on

Germany) 10 build up ever greater exports to the us. And it

W,I\

v.llue produced in the productive secnons of the economy. When

the surpluses on their trade wirh the United States that Jap.lI1.

there is a sudden decline in the prices of the assets they have previ­

Chma and the other East Asian economies dcposlwd in the l l\,

ously bid up

which helped finance the nubble and so provided a boost to till"

markets) they discover those claims are no longer valid and that

whole world economy. including their own part of it.

Ihey cannot pay their own debts unless they get cash from else·

A� Martin Wolf rightly commented, "Surplus savings" creatnl

(ill

the housing, property, mortgage and share

where. But tbe very process of trying ro raise cash involves selling

"a ueed to generate high levels of offsetting demand"," and lcnd

lurther assets; as all banks do so, asset prices decline still more and

ing 10 poor people provided It: "US households must spend m(II'l'

their n i dividual balance sheets deteriorate further. TIle bubble

than their Incomes. If they fall to do so, the economy will plungt·

hursts and the boom turns imo a crash.

into recession unlc�� something changes elsewhere ":'] "The h·d

As Marx put it:

could h:lve avoided pursuing what seemed like excessively e"p.1 I1 ,\

All this paper actually represents nothing more than accumu­

prolonged recession, possibly a slump".]] In other words, onl� till'

lated claims, or legal titles, ro future production whose money

financial buhhle stopped recession occurring earlier. The implll.1

or capital value represents either no capital at all. . . or is regu·

tion is that there wa(' an underlying crisis of the system as a

lated independently of the value of real capital which it

sionary monetary policies only If it had been willing to a�cerl

\\

hllll·,

which could not have been resol\'Cd simply hy regulating financln, Wall and others who emphasised the imba..l3nces in the glnh.11 productive economy did not locate their rOOts in problems of rro!

represents... And b}' accumulation of money-capital nothing marc, in the main, is connoted than an accumulation of these claims on producrion.H

irabiliry. To have done so would ha\'e required at least half I, TIll II from neoclassic:l1 economics to classical political econom)'. :lnJ

t"

What happened through the early and mid-lOOOs was that the

pccially to Marx. But low profitability was, as we have seen, behlll\l

banks assumed that these claims were tbemselves real va lue and

the slowdown in productive accumulation in North Ameru . . 1.

l'lltered rhem in the positive side of their balance sheets. A chas­

Europe and Japan. while the partially successhi I attempts to SU

nate of trying to stop this can become almost unbearable. it is true that "financiaJjsarion", having risen out of a situation of low rates of profit and accumulation, fed back into both. There was enormous waste as labour and skills went into moving money from one pocket to anuther; as potentially productive material re· S()urces were used to build :lIld equip ever more grandiose office buiJdings, and as the financial "Masters of the Universe" gorged themselves in conspicuOus consumption. It may also be, as Ben Fine has argued, that financialtsation had the effect of driving a Mwedge... between real and fictitious accumulation":' mOl kin� it difficult for capitalists to see through the fog of the markets and recognise productive investment opportunities. But, ultimately. It FinancLahs:mon and Ihe Bubble� thaI Rur'l

was the deeper problems facing the producrive secmrs of !.:aplr.IJ

I'\;onomisu offering advice debated with each other whelher I I

that brought this situJtion about. Finance is a parasite on (he h.1\�

would be enough to halt the transform ation of recession into slump,

of a parasite. nor a problem that can be dealt with in isol,l 1ll1l1

whether governments would be able to raise the money withOUI

from capitalism as a \\hole.

Inrcing up the interest rates they were rrying to lower, whether they o.hould tum ro "quantitative easlng"-that is, printing maner-and whether any success with thiS might not risk bnnging aOOm a new

The contradictions of the new Keynesianism

lI1i1ationary spiral and an even greater slump.1O

The problem did not JUSt lie with the size of Ihe banks' losses. It The way the CriSIS W:I.S rooted in the economic system as a \\11lI11 was shown by the sheer difficulties gO\'crnments had in reacllnJ.,: II'

it. ThiS was a crisis that hurt big capitals and nOt just those \\ho laboured for them. Humpry Dumpty had indeed fallen oft rht wall. Yet it seemed that all the klng's horses and all the king'!> n1l'n

,lisa lay with the massive internanonalisatlon of the system com­

I,ared with eimer the 1930s or even the 1 970s. The Keynesian

r('medies which were supposed ro deal with the Crisis were reme·

Jles to be applied by national governments. none of which had the r�sources to pay for all the losses of the global system of which

could not PUt hun together again.

tbey were part. The biggest states might conceivably be able to sal­

The response of \inuaJly all governments to the crisi� 111.11 erupted In 2007·8 was to turn away from tbe free market pollul:�

\':lge a good

they had proclaimed for three decades as the only ones that would work. Overn ight they ditched Hayek for Keynes and kept nnll

tn,1t bit of Friedman th:n urged increasing the money supph tl' ward off deflation."

But the conditions for applying Keynesian policies with al1\ hope of success were worse than they had been when they h,ld been tned and abandoned 30 years before. The known scale of till' losses made b) the banks dwarfed those of the mld-1970s-and 1111 one knew, a!> each hank went bust, which other banks were owc:J

�art

of their national financial system. But the

problems even here were vast, and rllul'

Ulflict on those whose labour sustains them. As states stepped in to intervene in the economy to cope with

posedl)' did in the summer of 1 930 by raising tanffs on Cerr;llll

the crisis after October 2008, some sections of the left believed

Imports. As Peter Temin has noted, "The idea that the SmuU1

that the resurrection of Keynes meant the resurrection of the wel­

Hawley tariff was a malar cause of the Depression is an endu(Jn�

lare policies of the long boom. In Britain, Ken Livingstone, former

conviction ... and has found irs way inro popular diSCUSSion ami

mayor of London. declared that the �econt)mic assumptions of

general histories"." But he adds. " Despite its popularity, thilt

!\'ew Labour's thinking... ha\·e been abandoned". pony Toynbee

af

gument fails un both theoretical and histOrical grounds." Expom

proclaimcd, "At lasr, the party of social justice has woken up...

only fell b)' 1.5 percent of us GNP between 1929 and 1 93 1 , whlk

The

"real GNI) fell 1 5 percent in the same years" .• And the first re.ll

tary of the biggest UK trade lIllIon, Unite. saw the pre-budget

-

ew Labour era is over." Derek !:tImpson, lomt general secre­

movement from the depths of [be slwnp twO and a half years tarn

report as "a welcome warm up exercise after 30 years of inaction

carne after measures by Roosevelt which included putting nation.1 1

olnd neotiberal economics". Yet reality soon proved otherwise. The

capitalist mterests firSt with an effective devaluation of the doll.1T.

governmenr aimed to pay for a short-term economic boost with

Even more effective, as we have seen, were those measures takl'lI hy the NaZI state 111 Germanr

long-term cutbacks in expenditure on education, health and social

For those firms that produced mainly for the national markl'! (the great majoriry in early 1 930s), it was better to be in a protel

'iCrvices. The l1t:w Keynesianism fur capital was comhmed with a continuation of neoliherali�m for those whu worked for it. This was not a peculiarity of Bmain. In every sector of Ihe

rionist st:lte than a non-protectionist one. That was the ratiOtl3lr

world system the attempt to deal with long-term downward pres­

for stare capitalism and Its ideological correhHes: Keynesianislll.

sures on profit rates continued (0 mean cHUrlS to push through

dependency theory and Stalinism. If the state could get control n!

counter-reforms in working home;, welfare provision, w3ge rates

the most important investment decisions in the narional econnnn.

and pensions. The push was intensified as global economu;

it could assure that the mass of surplus value was absorbed in 01:\\

growth fell to zero and threatened to fall further. The turn [U

302

huncialisauOfJ and lhe

Th� N�w Agt of GJah"l lnstabll",

Bubble51h;1I Bum

101

Igntlt nor serve the imerests of the workers. the peasams and the POI" Keynesianism could neither reS[Qre the system to its old

\

IIMl Four

The system was only able to recover from the CrISis of the il1l11 war year� after a massive destruction of value through the WOh' ..

lump capitahsm had ever known followed by the worst war. Thl

gre;uer siLe and Interconnectedness of capitals [Oday means th.1I the destruction of value would have to � propof[]onately gre.lIn to fetllen the system to a new "golden age". After all, even tll\ bankruptcy of tht world's second biggest economy. that of til, USSR, twO decades ago had only marginal benefits for the reM 1,1 the sysrem-a lower global price of oil rhan would OIherwise h,1 \1

THE RU NAWAY SYSTEM •

been the case and some cheap skilled labour power for \Xl'" European firms.

h is necessary ro repeat that this does not automatically me.1 I! endless slump. The hmits on the degree to which some capitals .. 1Il .

gain from the destruction of others do nor mean that no gams .It all ;lfe possible. The wiping au{ of man}' small and medium sin·d firms can provide some relief for rhe giant firms thar states prop up. New bubb les ;lnd periods of mpid growth

III

one part of tilt'

world or anorher are n(lt only possible but likely. Bur they will not involve the whole world economy moving forward uniformly anll will anI} prepare the way for more burst bubbles and more criSl'�_ And the consequences will not only be economic.

Thr Nrw Age 01 Glohal lnstabdll.

•

, flAPTE.R TWELVE

The new limits of capital

-\ system that undenpincs itself ( apitalism became a global system 111 the 20th century in a way it Iud nor been before. Not only were there global marketS and global Imance bur'lllocapitalisl industry and capitalist structures of con­ \l1mption arose in every region of the globe, although unevenly. As Ihat happened a tendency noted III Its embryonic form by only the most far sighted thinkers of the 19th cemury, including Marx and !"ngels, developed until by the end of the century it was visible to everyone who cared to look. This was the rendency for the system to undermine the very process of Interaction with narure on which II, ike l

evcry other form of human SOCiety, depended. The most dramatic expression of this has been the way the ae­ \:umulation of certain gases In the atmosphere are raising the Klabal temperature and producing climate change. Capitalist industry and its products always had devastatmg en­ vironmental effeers. Observers of all sortS bemoaned the pollution of the water and atmosphere in the industrial areas of Britam III the mid- 19th century. Charles Dickens wrote in 1854 of his fic­ tional (hut all toO real) Cokewwn, "where Nature was as strongl) hricked out as killing airs and gases wefe bricked in";1 Engels raid of how, "Bradford lies upon the banks of a small, coal black, foul­ �melling stream. On wt.'ckdays Ihe town is enveloped n i ..l grey doud of coal smoke".! Epidemics of cholera and typhoid would �weep through cities; tuherc ulosis was a curse rhat mo�r working class families were acquainted with. But the disastrous environmental effects of capitals' blind self­ expansion were local effects. II was possible to esc. 1 pc from the \mog filled CiteS, the rivers so pollured that fish could not surv;\'c 111 them. rhe slag heaps and the open sewers. The bigger scale oi l.:ap­ ltalist production and accumulation in the 20th century meant '07

bigger environment.!1 destruction-the transformation of agn� I I I rural land into a du�t bowl i n pans of the US in the 1 930�. 1 1 1 1 horrendt)u� e..cape (If gases that killed thousands in Bhop,ll III Indl,l in 1 984. the nuctear accidcnl:!> at Three Mile Island III Pcnn"yl\.lnl.l and Chernobyl in Ukraine. the de\'3st:nion 01 ,Ilt Jives of the people

ho lived around the Aerial Sea as the) 10)( 1 \\ . ,

\\

[hlrds of their water ro conon production and salinauun SCI m. 111' collapse of cines built on earthquake fauh lines. These were, ho\\

_"Wng i n earher. as, for instance NASA's James Hanson argued 111 I\llriI 2008 ): To avoid that point being reached. cMbon conccn­ trl1uons have to be kept down-the IPee argues to between 445

,Uld 490 ppm but even 400 ppm might push the temperature up 10

dl� 2 degrees threshold.'

Over the last n\'o decades governments have come to accept th,lt global warmmg is a threat to much of humanity. Tne Stern ish govemmenr, for Instance, concluded in 2006: • port for the Brit

ner, still local disa�rers, desplle the scale of the human loll Suppurter... (If capitalism-and of tbe state capllali�m U,(I,1I11

All countries will be affected by cltmate change. but the poorest

called " socialism"-- in the dlrecllon of a normal working day. '. IIld this mean .:hat capitalists flocked til campai!!n for shoner \\orking hours and mure humane condirions in the factories and ....arking class localities? A few. more far..ighted about the long \, rm

needs of capital as

\\

hole, did. Mo!>t. however, campaigned

'I�ains�any restrictions on hour'>, even for children who would one ,by become more producti ...e, adult, labour power. Again Marx today. Capitahst politicians make beautiful speeches abour the 1bc New Limn,; of Capn�1

,I
lbili{\ "I filling some of the gaps in the global food supply and there \\,'r,' li g of 2009-a1thu\l�h limited falls in sOme prices by the beglllln

not (0 the level of twO years earljer. The crisis was more likely to be an omen for rhe future-III" threat of immense hardship to hundreds of millions of peopll' rhan the Immediate onset of global carastrophe.'9 The "real

m�

remained of a "food crunch at some point in the future. \\hl�h would bll parricularl)' hard nn import-dependent cOUiltrie�'d III rise again" as long-term '·resource scarcity trends, notably chm.llr change. energy security and falling water availa bility") wou Id 1'111 pressure on prices and production.�' The food shortage of 2008 showed the way in which thl' .Ii! ferent elements of crisis endemic to capnalism in the 2 1 st ccntlll

\

can interact with each other. For the shortage was not JUSt .1\ .1

m

The RunawJ' \"

Ihe New umlt5 ....f Capital

111

, IIAPTER THIRTE�

The runaway system and the future for hum ani ty

-

•

·\nthony Giddens published a book wlth ;l mange mle in 1999 at the rugb point of illusions in globalisation and the "new economic paradigm". He was (and still is) Bnrain's best know academic ad­ \,locate of the "third way" that ditches old social democratic .Htempts to tame c3pitalism and was aptly described as -Tony l\lair's court sociologist".' Yet the mle was The Rllnaway \Vorfd. It ,onveys the image oi ;I bolting horse, which governments, social movements and indi\idu als alike cannUl StOp but have to try to halance on precariously. The nest they ,an do is to try to influence where it is taking them by spurring It on It with investments in

ial capItal on the one side and reining it in with cutback5 in wel­ fJre expenditures on the mher. Yet rhe succession of crises and wars that have punctuated the last four decades show the futility of such efforts. The runaway world is, in fact, the economic system as Marx de­ ,,"ribed it, the Frankenstelll's monster th3f has escaped from buman ,onrrol; the vampire that saps the lifeblood o f the living bodies It leeds off. Its self-expansion has indeed led It to encompass the whole globe, drawing all of humanity ioro its cycles of competing in order to accumulate and �lccumulatlllg III order ro compete. Its expansion has been marked. as much

III

the 21st ceorury as

in (be mid-19th century when Marx did his research for Capital, hy fits and srart!>, by frenzied fonvard motion suddenly interrupted by deep crises. Running through the cycles of expansion and re­ ..:ession has been the other feature Marx pointed to: downward pressure on profitability causing capitalists to try

to

cut back on

wages and welfare benefits at the same time a� pressuring people 324

to work harder. en:n though in doing so this cutS II1to the nl.l l �' 1 for consumer goods produced by other capita lists. We Jun' I I I how these eic-ments came rogether to produce the great �Iurnp " the inter-war )ears. renewed cnsi\ in !.he mld-1 9�Os. and rhl: I" "

t

dr,lwn outJapanew crisis of tbe 1990�. We saw also how thl'\ I duc£:d the debt economy bubble culminating ill the gUM cr.l"h ,t 200"'-9. We will Iand!o still. Competitive accu mulation remoulds everythlll/! II touches and then. when it has hardly finished. remoulds II .ill again. The very speed of change itself has enormou!o importanl(·. II means that the relative economic weights of the differelH St.ltn withlll which the umts of capital are based are continually 11l tlll\.

rout in Afghanistan. Significantly, Barak Ohama's first budget in­ (Teased, rather than decreased, military e.xpendirure. And so did the budgets announced in the same month for Russia and China. The blood)' road which led from Korea ro Vietnam and from Vietnam to Iraq is not yet at an end. But that is not all. The �new", environmental. linllls of capital will react back upon irs old �onomic limits. Climare change, peak oil and global food shortages will add to the overall economic insta­ bility of the system expressed 111 the boom-bust q-cle, the dOYlJ1\\'ard

pressure on the rate of profit and the flows of capital from indusr.ry to industry and country to country. We had a glimpse of this in the first half of 2008. Rising food and em'rgy prices produced an mfla­ nonary surge which added to government difficulties 111 dealing with the credit crunch ar the same rime as causing prurests, riors and

saikI'S in a score of countries. We can expect many Illore dashes within and between stares as problems of fnod security and energy security lead to shifts in surplus value from some sections of capital to others and provoke popuhtr outrage. And all the time dimatc change tipping pOiilfS can suddenly impact unexpectedly on hun­

11I'>t a� the states have to try to intervene to prOtect their capltall�1 from rhe recurrent convulsions of the global system.

dreds of millions of people's lives, in much the sallle wa" that economic crises and wars do, but even more destructively.

326

The RUl\.3way 'iys[�m ..nd the Future tor Ilumdnlt)

The RunawJ\' SHh

127

The starkest recog11lrion of the possible conr.cquences caow from the US, Department of Defence, the Pentagon , at the timl' when the of ficial position of the US govern ment was still to refuSl In

recogn ise the reallry of climate change. It warned of the dangel

ot "food shortages due to decreases

III

. "....PTER FOURTEEN

Who c a n over c o m e ?

net glohal agncultural pru

du('uon"', decreased a vailability and qU.llity oi fresh water in kt'\ ..

regions due to sh ifted precipnatlon patterns, causing more fn:­ q uem floods and druughb", and disrupted access to energ\. "'

supplies due to extensive sea ice and storminess", The out(.;()me, as If saw it, would be

an

increased occurrence ot

resource wars and civi l wars: As global and local carrying capacities are reduced tension .. .

could mount around the world leadlllg to two fundament 1 1 .

,

strategies: defensive and oHensi\·c. Natiuns with the re�our(.;t'.. to do so may build virtual fonresses around th('Ir countries, pre

servlllg resources for rhemselves. Less forrunate nation�. especially those wirh a ncien t enmities with their neighbou rs

.

may IOitiare struggles for acceS3 to food, clean water, o� energ�. Unlikely alliance!> could be formed as dr:fence priorilles shil t and rhe goal is resourccs for survival ra ther than religion idl'ol .

ogy. or national hono ur. .

.

There would be �an I ncreasingly disorderly and pOIemialiy \111 lem world . "

This wiJl be disorder In a world

111

which eight of the bigge�t

stares possess nucl ear weapons that are targeted at others, scorl·� have "cunvenrional Wl'apOnty- much more destructive and hor rific than that of rhe Second World War, a nd proliferating cinl nuclear energy can pro\'ide convemional wea p ons wuh deadly tM­ getlo. The runaway system threatens more than dcvastOlnn}: peflodl � sl umps al1d horrific wars. It puts IIltO question Ihe yen .

POSS iblity of susraming human life 011 Eartb. The s)�tem of aliel�­ ,

ared labour I� approaching its highesr pOJllt of de!>tructivcness Tht. .

que�tion is whcth�r those who produce that labour are ca pable ot

seILIng control of Irs wealth and s ub lectmg it to conscious COllimi.

l'he decisive question. sta ble, which breeds economic un IS ich wh m ste sy a in e liv We up the very environmental g i n l ea is hich w d an rs. wa d aises an onent national sec­ mp co its d lea to ing go is is Th . on basis it standl' ical crises in the course of Ihe lit po d n a l cia so d ate pe re o t n i IOrs il :1 century of wars, civ s wa ry ntu ce th 20 the as st Ju y. li st centur he 2 J Sf cen t ury. But this leaves is t O to so , ns tio lu vo re d an rs wa n. What forces exist that arc tio es qu ive cis de the ive cis de optn a d transforming the world? capable of taking on the system an er was simple. The growth of sw an e h t , sm xi ar M l ca ssi cla r Fo by the growth of tbe class d e i an mp co ac y ril ssa ce ne s wa capi talism and this would be at the centre of ss, cla ing rk wo e th d, e oit pl ex 11 not the first exploited and op­ s wa It m ste y s e th sr ain ag olt the rev om the 200 or so fr ed fer dif It t Bu . ry to his in pressed class that preceded it in very impor­ s ve sla d an ts an as pe of ns i o t a er gen s concentrated in huge wa n o ri ta i o pl x e st ali pit Ca . tant respects nurbations, giving the working work places in giant industrial co ty in wbich it found itself. cie so the III s int po v e is i c de at r we class po gene ity in rhe con di­ mo o h e duc o r p to d de ten n tio �uch exploita eatedly red uced differem forms rep l ta pi ca as s er mb me irs of ns tio capital required an ex­ d An r. ou lab t ac str ab to r ou lab of concrete re of literacy, numerac), and ploited class that has a level of cultu than preced­ -greater n ot merely ge lar at rld wo e th of ge knowled ecedi ng ruLng classes. r p st mo an th o als r bu es s clas d IIlg exploite potentiality for it to take COIl­ the ate cre to d ine mb co s tor fac These s in a way th:n was nOI nd ha n ow ItS o int ole wh a as ry rcol of socie .

,

true of its predecessors. The development of ca pital­ . ty ali tu ac t no s wa ty iali t en t po Bur ess that had irs Impact oc pr rd wa up th oo sm ple sim a ism was not ere was unevenness o\"('r time Th . ted ea cr it ss cla ted loi e p x e th on

.

The RLlnaw�� "o)\lnl'

with the concentration of workers into centres of exploll.lIl1,jj dUring booms and the expulsIon of some from those ("l'1lI1I during slump. There was geographic une...enness. with SOIlll' �l lI tre!> oIfising in ("onnection with national srares before other... ,lIl.1 then !>Omctlmes declin ing as new centres supplanted them. "I h, ,. farlm ot capitalist unevenness led to unevenness within the \\ III � mg dass, wIth different le\'els of skill and payment aris ing. \\III! competition for Jobs and secunry of employment bclween Jilin ent groups of workers, with seeriOns of workers identifying \\ 111, the particular state that conuolled them because It seemed a 10< 1 1 for achieving reforms of the system. Nevertheless, for da��ll,d Marxism, this was a class which would be driven to unite perJ" d l cally by the very pressures of the system upon it. Skill dlfferenll .1 ]' which had arisen at one point would be eroded ar anolh('l Compention between workers would fade as they fought togedll1 to achieve overriding common goals. National ideologies would lose their hold in the face of the horrors of imperialist wars. This notion, rhar the working class provides the agency that l,1!1 change society, has been chalJenged even more than Marx'), ,H count of rhe economic dynamic of the system. M:lrX was a brilll,1111 economist and a pioneering sociologist, the argument goes, but it'll into an apocalyptic viSion of the future which ascribed a mel.1 phYSical role to the working class. The spread of modon capitalism, the argument continues, has nOI been accompanied hI the growth of the working class, the conditions of those work�'r� that do exist haye not been homogemsed, and they do not de\elop a consciousness In opposition to the syst("m. Such contenrions were already very widespread durlllg ,hl' long post-war OOom. As a notable sociological study of Britl ..h workers told: '

A malor and recurrent theme--and most notahly In liberal qU,H tefs-lwasJ thai of me incipient decfme and decom/Josltl(J/I lit rhe working class. As the development of mduslrial socic.'tlr� continued, it was sugge�tcd, the workins class, understood ,I" .1 social Stratum wirh its owo distincrive ways of life, value� .l1ld goals, would hecome Increasingly eroded hy the main current.. of change. The very idea of a working cI,ISS had been formed ill. and in facr belonged to, the infancy of industrial society: in th, era to come it would steadily lose its empirical referent. SOClal l., equalities would no doubt persist; hut these would be moditit·ll no

The Runaway \)'n,,",

uld .lI1d structured in such a way that the society of the future wo whICh the he an overwhelmingly "middle-class" sociery, within dIVisions of the past would no longer be recognisable.' the rlunk­

\0.) pervasiYe were these arguments Ihat they influenced Mills' IIIg of radicals such as the Amencan sociologist C Wright

able SOCI­ ,1l1d revolutionaries like Herben Marcuse.) while fashion society" ,,[ogistS generalised the argument aoout "post-Industrial ked rather fool­ 10 the advanced countries as a whole. They all loo eral strike in I..h when French workers undertook the biggest gen swept hl\tory so far in May 1968 and waves of industrial struggle years through italy, Britain, Argentina. Spain and Porrugal in the s as the 1 969-75. Yer the argument revived Ifl the 1980s and 1 990 old es­ rctotructuring of capitalism through crisis decimated many led to a labljshed s�ctors of the working class and mdustrial defeat waning of class combativity. tual Ladau and Mouffe were swimming with the ride of intellec midl)pinion when they asserted in an infl uential work in tbe neity of 1 980s, "It is impossible today to ralk about the homoge d in the Ihe working class and to trace it to a mechanism inscribe and logic of capital accumulation"" So too were Michael Hardt ustrial Antonio Negri when they claimed in 2000 rhat "tbe ind has not working class" had "al l but disappeared from view. It posi­ ceased [Q exist, but it has been displaced from its privileged tion in the capitalist economy ",' loso­ Yet, not for the first time, the common sense among phi of the phers has departed from empirical reality, A detailed study ulated world's workforce in the mid-1990s by Deon Filmer calc non­ thar of 2.474 million people who participated in the global salaries, domestic labour force, 889 million worked for wages or the land, 1,000 milbon people main ly for their own account on ices.· and 480 million for their own account in Ifldustry and s("rv e been Probably about 1 0 percent of Ihose employed wil l bav e tban members of the new middle class wh o receive more valu kers. they creare in return for helping to control rhe mass of wor h about a This means there were around 700 million workers, wit l size of thl' thi.rd in "industry" and the rest ill " services ". The tOta have re­ working class including their dependant" and those who recent tired muSt have been between 1 ,5 and 2 billion. More sugge!>t figures from me United Nations Dc\elopmcnt Programme her than a global total for those in industry subsranriallr hIg Who Can Ovuc:omc?

311

Filmer's.' Anyone who believes we have said "farewelJ" to t i l l class IS not living III tbe real world.

}.tarx made a distinction between a class which exists /II 1t.\I·/1 al> an oblective element in the social Structurc=, shaped by rhe rd .•

tions of people ro the means of making a livelihood, and a \\1" saw In Chapters Five and Seven, health provision and the edul.,l

hea l r h i tion service. Today there are over 1 0 million employed n and educational services in the US (around one 10 t3 of the worl. force), and US capitalism could not function without them. And the long-term trend IS for most of them to be forced increaslll�h into condition!. comparable to those of industrial and routllU office workers, with payment by results, assessment and appral�.d systems, Increased concern with timekeeping, and enhanced dl\ll

""'rvice" working class is subject to proietarianls3tion as caprtal \ClS OUI to reduce the COSts to it of non+productive and indicecd)' productive functions. Each CrISis in the last four decades has involved sudden io­ "reases in unemployment-in some cases permanent-and the Wiping out of old established centres of production (factories, Jocks, mints, etc). Capital and its apologists have then tried to I.lke advantage of workers' feelings of insecurity to remould their Irves around its own continually changing reqUirements. Its slo­ MIlQ.S have become "flexibi ity" l In labouring time, methods of work and l abour marken.. all justified by the claim that "lifetime a past age". Much academic research bas

pline codes.

employment belongs

There is the myth that the "service" sector workforce is m,Hit­ up of weU paid people with control OYer their own working SltU.1

,lCcepted its message, and " Thud Way" social democrats and those

ro

un the "autonomist" left have taken it for ao unquestionable

tion who never need to get their hands dirry. So Guar,1t.m

truth. Typical-and excessively Influential-IS the sociologist

columnist Polly Toynbee writes:

r.,'lanuei Castells who argues there is:

We ha\'e seen the most rapid change in social class in recordnl

Strucfl\ral unstability [sic] in (he labour markets everywhere,

history: the 1977 mass working class, with twO third!> 01

and Ihe requirement for flexibility of employment, mobility of

people in manual johs, shrunk ro one third, while the rest 1111

labour, and constant reskilling of the workforce. The norian of

grared upwards into a 70 percent home-owning, white coll.n

the stable, predictable. professional career is eroded, as rela­

middle class.'+

tionships between capital and labour are individualised and contractual labour conditions escape collective bargaining."

If Toynbee had looked at the Office for National Statistics' Ul'/II� /II Brita", 2000 she would have found 5 1 percent of men and 38 � I

cent of women in its various �manual " occupational categoric". This is because the �service industries" include refuse workers, ht"

pita1 ancillary workers, dockers, lorry drivers, bus and train drl\'l'r�, and postal workers. Alongside them are a huge number of women50 percent-in the "intermediate and junior non+maou.r 1 ·

categories, where wages are typically lower than in most manual 01. cupations and working conditions otten at least as hard. In the LJ\ 11\

2001 , 50 percent of the 103 million employees in service related If
III o\'eremphasise how precarious jobs are in order to demorali\t workers and lowl'r the level of resistance. Those voices on the Idl who exaggerate that insecurity can add to rhat demoralisation. rather than countering It with a recognition of the counter-factor, that provide workers with continued strength i f they have tht confidence to deploy it. The evidence does nor justify a picture of a uniform, relent I!.'" spread of precarious jobs. The crisis of the early 1990s did cause .l substantial increase in "precarious" jobs III Western Europe. Blil that still left 82 percent in permanent jobs, as against only 1 8 per

t)ne survey i n 2000 showed only 5 percent of BTltlsb employees (III temporary contracts,l. whIle the number of people who had worked at the same workplace for more than ten years bad risen Irom 29 (0 31 percent.I' Even i n Spain, whIch has the highest level of Mprecariery" in Europe, 65 percell! of workers have permane.nt lobs. Capital cannot manage without workers who have certain skills .md it prefers workers who have some sense of responsibility for the job. It rakes employers tune to train people and they are rarely •

keen to" 'ose them if they can avoid it. They therefore do nOt always treat workers as "disposable, even when it comes to semi­ !lkilled and unskilled labour. They can benefit from a generalised msecuriry making the majority of workers WIth relatively secure Jobs fear that they may lose them. But that does not mean rhat cap­ ital can really dispense with such workers. And that means they have the potential to pur up resistance to its demands, even if they are often nor aware of It.

The new working classes of the "Third World

Of

Around 60 percent of the world's industrial workers are outside tbe "advanced" countries of the OECD. with perhaps 25 percent in China, about 7 percent m India and around 7 percent in Latm America.1" Such statistics do no more than provide a snapshot of the enormous change brought about by the sweep of capitalism'S self-expansion across the world. Sixty years ago 80 percent of the world's population lived in the countryside; and 3D, 40, or even 50 percent worked on the land even in counrries thought of as "advanced" like France, Italy (lr Japan. Today d()!;e to half rhe world's population live in towns and

cem in non-permanent jobs-a proportion that remained ahllO�t unchanged between 1995 and 2000. There has a huge variation ben'Veen countries,» but a 2001 lLO srudy of Western Europe as .1 whole concluded that:

cities, and (he urban pC)pulation is a majority even in countrie� people ofren think of 3S rural-84 percent in Brazil, 76 percent III Me.xico, 63 percent in Ecuador and 63 percent in Algeria.�· Urbanisation and the spread of market relations are not nece.,­ sarily the same as the growth of wage labour.l' People worldwide

336

Who Can O,C'ccomC'?

J17

have been leaving the countryside at a much greater rate rh:w II,. growth of stahle livelihoods for them

Jfl

Illodern ..ectors ut ill
tetor in such cities everywhere in the Third World. Yet EI Alto s 54 also ;'the principal industrial LOne of the La Paz region ",11 with percent of the region's mdustrial workforce and an increase of 80

percent in the numbers employed in mdustry In (he last ten years. lity' What is significant is "the combination between 'mforma and/or small businesses based un family labour on the one hand and the degree of incorporation of the labour force in wage labour

of in productive tasks on the other", so that neighbourhood forms organisation have a class (as well as an indigenous) content. Under these circumstances, struggles by workers have the capac­ e ity to act as a focus for all discontents of the great majoriry of thos living in the slums. So in South Afnca a senes of protests and riot� h: over the delivery of basic services created an atmosphere in whic the public sector gencrJI stf1kc in June 2007 was the largest strike since the end of apartheid, pulling many people into trade union action for the first lime. The potential cross-fertll­ s isa[ion of these srruggles- of community and workplace doe not live only in the mind of 'Ictlvists, but, as the sun'Cy su�­ gesrs, expresses the real household Ci:onomy of conremporary South Africa." WhQ Can OverCQOle?

,rIJi;C l;OI,"em[v ..ho Jld nOi )('(' hl� 0\", "'�lcm .1> dl'p3rt'"� Irom \IaT>;'�, Ih(IUlth ('1«>1'11' like Ian \tI'Nl'lan �'t U>l'd hl� ..mlOK� In Ihls !>Cno, nll� ....as . [hc �ondu\lon .nml'J 3[ , h\ . AnahrKal \h�l�rs� I,ki' G .-\ Cohtn an" 1:. .. .. OlIO Wnfthr. 5 «. , for IOManu:, ( A tohl'lI, MTh" Llhour Them)" 01 V�lul' anu Inc Con..:tpl of � . 'l:pIOIl:l[i()n �. 10 Ian 'i[f�man I , nd o[her�, Thl' \;,11,1' CtmtrOl'1'r5Y (Lond',n. Verso. I 'Jill I. rp10l·21J. 7 Adam Sml[h, The \Vraltb of NII/io/l5, Book One, Chapter �, al·"dahlr at hllp:lfwww.econlib.urw LI hrar�6mllhlSIl\WN.hrml 8 Mar"l(, C.lplt.1/. Vnlume One, p39. 9 Mar,\:. CaPIIIlI, Vfllume One, 1'39. 10 S(lm� [ransiallo", InlO English use Ihe archaK wnrd MahquolM for proportiooat�. addlO� conslderabh' ro Ihl' J,ffi.-u1n· of Mar,,', ...... 'rk for ne" readers. J I Karl /o.Ia�, �Lclt�r tn "'ugdmao � ( I I Julv 1868), I n "ad �Iarx and h�JencL. Ellgd�, Colltcud Works, \'olul1)(' 41 (Nl'w York. 1 '.187). 11 MMx, C..apltlli. Vol� Onl', p'j. 1 3 The USI' "I th� "'Ord ..mbodlr:d� somefl rnr� t:auscs (onfus.an. �or daTlh«Dl5 to Imply Ih .. Jalltr. and th.u; is how soml' people read Marx. The ]>a[u, rather th:l.lI Rlcudo's �erslC)n. whrrc Jl IS boour performed. ]J J M Kqllts, GI!'JeTa/ T"('Qr"1'

U

2J M.igo�[ Angel Garcia. Ml(ar[ Marx and thr Formauon ollht A>cragc Rail' of Pr06t�, InttmatlOnill Soculml', 2,5 11979); Anwar Shaikh. -Marx·s Theory of Valut

of Employment I"tlfrest lind Mont}'. 1'41,

14 ASilOOvc. f'p21J-214. I S Mau •• Capital Volume One. rll 16 A rise: III tbc pncc of basIC (:on�urnrr gn of Marx on thIs poml I!> known as thr smglc S)SlrmIfIlrrprctal1onM. Some of tho!it who hold 10 II also a�CCf'l, M

hle me, Ihc tnnporal um:rpretatIOn. With thr combmallon of boI;h belllg (and rso known by lilt cumbrme wmewhlll offputtmg) phrase: MThe Temporal Slngir S)'Slem InlrrpCelaliorl or nSI. 28 Carehed., Frontl�rs of Poll l.Crs him (and A Saad Filho) ope dr b}' 10 Ihc very oblr'Cllon ma Bohm-Sawuk. 'I G ulC("hcd" hon/lerJ of Polil/fiJl economy, pllJ. .

Ch�pter Thr«: The Dynam;cs of thc SySlcm I J � MIll . r'IIfClpies I)fPI)/mcill Ec.O/lOlll}' (London. 19 1 11. pJ39. re 2 See I W�lrIlS. Elenlent5 of P'l ·on�, ... F,conmnrcs, p3 81, For Jl of !itt Eri' Roll, A H,story

. Ec.ono.nif Thought [London Faber. 1962). pr6

3

Anwar Sha,kh. KAn Innodu...non 10 Ihc HISIO!" 01 CnSI$ Thf'On.·�. ln Bnu.:c SleHlbc,.,. and

Olhe rs

(cds).

(".;1/111.1"$'" In (r,s,s (�e.. York. l'Ill"" uf R ad ..,,] Pllhll�al l.\

�ain,

20m, pp3-4. �vallable �I hnpJ/wwv..lrcs.ud.ac.be/I)P/lRt'.s DP/2oo5·S_pdf; $("I' also Randall E p�rker, E(O'lmmcs of tlie Creal

1

/)eJirtS$l()n. p2?

M�n;, ("Apltal. Vol ume One,

�

As above, p I I 1.

ThiS. ror IIlsrance.

IS

8 9

dlspropomonahn' wcrc pft" -al, amoog reformiJ! sociah�n lO !h

hI'S! dK.lldL'!I of Ih[ 10th (tIlIUt

5« Paol S....eel�, Tht TI,t'P1') "I

CapllCrY "md,

summJ!}" of Ihc fir51 lour chapt.

of Volume Two 01 Marx's c:,.I{m (M05oCO"', PrO@Jcss. 1984). 13 'bne, (.apr/oJ/. VoIulilc Two. p I un 14 Marx, ("oJ/lllal. \,,)Iu",e Threl'. p4 1 5 As abo,·c. p"9.1. 16 Sec, for eXdmple. -In "r,lI\>lJT)' S�I.lllSm I IQndon, ILP, 19091. flpRO lind 83. 9 A$above. plI9. 10 R Hllferdmg, F",.mu c.:.uplt3l. p304. I I As aOO\'e, pJ04.

12 As above, pU5. 13 As "I)ewe. p366.

1 4 A� ahlln, p23S.

15 " I aOO\'e, pp289·290. 16 A. abo\·e. pH4. 17 A� aOO\·e, p194.

I II S« WilH:nn Smaldon�. Rlldolf Htlfcrdmg ( O'en, 10001, plOS. 1 9 r-"I SJlladurl, Karl Kauuky and tbe SOCM/1St R�L·ollll1on. 1880·1938 {london, Vtrw. 19791, 1 "'" 1 . 10 hom '" KaUlSl�. �Impcnalism �nd Ihe War�, /lIIrnr.Uloll.:ll SocUllI$l Rrt'l/'u· (November 191 4), lIvAilable on www.marXISI§.org 1 1 J A Iloh"un. IlIIptrtaliSIII: A �t"dJ INew York, 19()11. naila ble .11 hlrrJlwww.�Qnllb.orgllibrnry/

'" 1'1 U\oohlHobsmv'hhoinJmp.brml 12 �or de"uls set: Barf}' I:'.lC�ng.r�n. (."loboliJy,/ hn:mu (pnocemn. 20081, pJ4.

23 Norm an Angell, Tht GU.lt I//"slon IToromo. \1cCkllanJ &

Goodl:hll d . 1910), 1'269, mulablc OIl hnp:l/ia3506 1O.us.arch1\"t'.orgll l

IItmslgu-a,IIIu.�lOrIStuOOange110ft} grt� IIIIIISlon�tuO{)..ngeuoft.pdf 24 Nigel I bTr1�. All PCJI0: Accumlj�tlon ofC.aplIlJi (Allen

I..ne. 19721, fl267. 3� �, for in�tal"'e, Elkn Meik�m' Wood, � I1�'C!i of Power� , p2l. 40 F'gures froll1 1-1 Fels, [uropt: TI..,· World's Holnkrr: 1879·1':1 14, quuted on ;\1 Kidron, �lmpermlJ�1I1 The H l "hCSI Sug.. Kut One�. In /nternoltloll.JI'iIlCl,llmn 9 lfir�1 �ries. 1962I, pll1.

41 The arglllnent and Ihe figur�$ for thisare prOVided by fU§ �·ItWS on the $Ule:, Set' j·bl Draper. Ki3rf Atal'%'s Tllcoryof RI!1IOfUllon: St.Jtt and Bureat"T,uy (N"",,· Yorl, Monthl) Re-',e'w. 197':11. 56 Graph a'a,labl", 31 hftp:l/www.�OIl lib.org/hbrary/l:nc l /Go�enlment Spcnding.hnnl 57 For a forceful cntlct�m of th" VII'\,>. s.ee Juslin Roscnbc-rg, Tht hnlllft of CtL'ii .'ioclety IVerw. 19941. 511 This wa' an Imponant POint made by (;o(,n l\arker In dlscu§§mg "3nous vnslon� "f th" M(lIpilJI den\'3uun � Iheorl es of Ihe �Iafe In his articles. �The Stn!� as CarIlJI�, Inttnr.:WOfWl5«III(,$In. I t 1 9711 I; Chapfer Four

fale of profit, ",nl and so

forth.

60 Ellen Melkslns Wood, � l.ogICS of flowerM. pLS. Even DaVid Harvey, who accepts fhut is all a:onormc

fauonale 10 ImpcnaLmn, WnlCS .11 one poml of �tcmtonal and

ahSl loslCIi of pow·tr�! 3.5

caplf

dlSflOCf from tach other. � DaVId

I!af\"l')', Tbt Ntw lmperw//.5m, p19.

61 Sce �Two lnslghts donolMakta lbeory �, ill Im,.rn;1tIO"01I SOCUlI,sm, 100 (firST sal�. 197�1. 62 My lim ned knu" ledge of Iheltt debates I� IIIdebl«l 10 a paper prt'5Cm�d al lhe NIJ\'emher 100., confercnce organised br HIstorICal M:lteTl.lllsm n i London. Sec Oll\'er NachlWC) and To ht3S ten Brink. " l.osl

m

Irall�luon-lh
J!1 CIIstums ill

CUrllmon Iu,nuon, Pcnguln, 1;193),

JlP3"1'0-400.

366

27 I-ur a dClldopmcm of thiS arilUIlI\ I wnh hmoncal referen.:rs, KC Suzanne de Brunhoff, The St.lf(· Capllol and EconomiC Poltr.

(London. I'luw, 1978), pplO·III 28 See Londsc)' Gtrman, Sclt, C/oJu and �ltlllsm (Lon don, Bookmarks, 198 9), ppj3-36.

29 T H Marshall, 50cwl PollC)' ( London, HtJlchmson, 19611), pp-'l6-S9,

30 Ann Rogers, "Back

�Empluymclll. Edu";:HHJI1 and Human CaplfalR, 10 II. Huud and I'

Johnson, The CAmb"dge f.(Qnoml( HIstory of Motil!T7l Bntam, Volume Thrn ICambrldge. 2(04). 17 Assuming !he lahour !he,' tram is

s:oillg to cnd up I/•.

OfTbe Gnat Dtprtnllln. 31 J M Ke:yl'lc:s. Gf!YIual Tb�r)' 01

19931, p154;

'17

48 Ch.rb KlDdlehergtt, The World In

SI\'es figures for thc 1920s only. 41 For pWhlab,I'l)' before- 1914, S« Tony AmQld and Sean McCarme-y, "National Income Accounung and Sector�1 Rarn Qf Ret .. m on UK RIsk-Bearmg CapItal, 185.�-1914 , Ess.ex Um\'cr!;lty \'('orklng papt'r,

Mont),. pl64. n As abo,'e. p59. 3'1 .AJ abo\"t, pp 13.1-1 36 and 214 35 As above, p219.

Dtp'tu.on /929-39.1'.2":"2. 49 Figures SI.-en

No,'em�r 2003, 3Vallable ;11

K,,)·n..s's account of Ihl:' �marKlllal ('ffi(l�I1" of capllal� and ItS u:ndtnq 10 �dJmilllsh", set pp 135-] 36,214, and esptclall�, 31 4-324. For a

37 As 3bo�'e. p221. For

htlp:/Jww�.t'sStll.ac.uklAFM/Rt'Sea rchl workms-papf-n/WP03-IO.pdf

For profita blhty �fore and after the First Wor ld War, �e Ernest Henry Phelps Brown and Margarel

comparison of Ke)·ncs·s poI fconOlIllCS Ilondon: Macmillan. 1985) p4�.

LrWI� Corey, The

D«lrnt af A men�o" Capltolum

I;.mpIQ}"mmt. intf'TPSI and

tbe

of Ihe raIl' of profil to fall.

the Profit Rat� (Edward Hgar,

33 As abov�_ ppI61-162.

1 9 A s abm�, p I 70.

MarXist C'CQn()ml�l\ (If Ihc h'\1 decadrs of the lOth cemu.... he did not PJ)' much Jtte:ntlon 10 thf pass.agrs (n Man on Ihe lendtn(,·

and Its Relnanct for the US Economy� jPhD thesl§ Columbia Uruve:rslly 1 963. releas.ed thwugh

imen'lews Wlfh p3�t and prestm malllSlream ecO:JomlSlS p unmjl, fQrward dlffereJII IlIItrpretilfion scc: the twO �olu""," b.· Randall E Parker Refit. .58 Trotsky had devdoprd thi S nUllor!

In the 1 9)0" alk:! il �onllnlled 10 he acceptw by �uppo�dJy �orthodoxM TrorskYlsls until tht"

col1aploC of t he USSR

1!1

199 1-.ll1d

In a few CBIoCS rvrn aner",,'ard�. .59 M ReIman, The Birth of �ta/lmsm

(I,Qudon. Ta urus, 19871, pp.F- 311,

prQ\'ldes an account of thr crt'ls based on IIIltrn;!1

drx:umrnts.

60 As above. pll'1. ."

" I ( No,·e. An

uonomu: /Iulvry ottht USSR.

p387. Angus "hddlM)U'S mort reeem

l'aiculatlons sugg"'�1 the

output of the USSR grew ab out Ihr�·fold bttWttn 1945 and 1965, ,

lighTly

faSTer Ihan the 19 5T3tes he

Includes tn Wt'5tem f.uropc- and more than SO (lC"rccnt faslcr Than thr US. hrtp:llwww.ggdc.netl rnJddisun/HlstorleaCSta[[nicsl horil.oma1·IiIt_OJ·2oo7.xls 45 PUn-dol, 24 April 1970.

46 Thl� was a k...) tnslght Qf Tony Cljff

Tht N3tU.t (ltSt3l1mst Russw [ 1948), repnnleo.l In ,\furxisl Thtflry A./lt. Trotsh. pp80·92. 4- D W Conlkln, �Samcn m m

Tt.;hnolOttIC"1I ChJngr In Ihe USSR�. $"'"It! ::Jludlrs i 19691, I'l'i9.

4H J�f (,oldman and t...arel Korba. fconomlC Grim·th In Quhoslomit.J.1 {Wh,te Plams, N', Inr...rn;lIionaI Ans and xienu-s

Press. 19(.91. '19 Branko Horvat,

MBusln�� eyell.·s ill

Yugusl,)\·J,1� fas",m f.uropeuol •

j·.conomrcs, V olulTk X, 3-4 /1971 I. SU

Karmond l lutehmg$. MPeClodLc Fluctuation

1!1

SovIet Industrial

Growth Rate�", SOI'let Stud,es, lO:3

i 1 969), pp331·3S1. The

unevenness from ) ...�r fO year IS

shown d�arly ill

,\.bdlSI)ll·S ligmcs

for GDP, sec hup:llwww.ggde.net/

III

add ISQn/HiSf'oke.�JuI -lrnoscle)'IRRPE.hrml l4 Gcr.ud Dumtnll and Dommlqu,· Uv). MThc Real and FIILallelal Componems of ProlilabllllY15 Andr.:w Glyn and Boh Sutlhff.:. BrItISh eaf/ltoJllsm, It'orkl!'rJ JII,I tb� Profits SqUI!'Ui!' (Harmondswonh, l)mgum, 19-2 26 Bob Rowthotlle, -late CapllahsmM, New ufl R�I" tt/.

1:98 ( 1976). p67. 27 I'..�I f\hndel, Loll.' CdPIMIIS", t London, New left Ilooks, 1975). p 1 79. 28 Martin Wolf, Flxmg Global Finallce ( Yalt, lOO9) pxii, 29 For a summary of th� eVidence. \,1.'\ Chris Harman, E.xpla",mg the emlS, ppl lj.124. JO Victor l)l'Tlo, -The New Propagand� of i)eelullng flrofit Shares and Inadequal�

lnvCliunelllM, ppSJ·64, For a damnmg reC�nI refulalion of Ih� view Ihat Incrused wages \O,ere Ihl

cause vf !';riling prohl ral�S M'(' Robe:n Br.:nner. l'he #:;conomll:s "I Globaf TI" b../ePlct, p i 39. 31 M N Baily. "ProducllviI)' and Ihe Scrvu:.:s of Capil�l and Labour-. BrfHll/",gs PIJP"S on EconOlPII(c ACtlL'Ity, 1 98 1: I 32 Bank of f.ngl;md Q_rterl)' B..lletm, 1978, pS17. 33 FIII,,,,ewl T... ,�s, 3 Mal't"h 1 97" 34 Thomas MIChl. -Wh)' Is Ih� Rale UI prolit Slill Falhng:M 3.S Edwin Wolff, MWhar's Behmd Ih� K,� In f'rvlitab,llI)' III Ihe US In Ih ....,h rar�s 111 the U...\K a, helnll oowec:1\ 1\00 rh,rd� and three quaner.; of Ih.·

figur.:s are g",'en 11\ loseph

�I':lndl. �Sragn.mon Theor)' and 1'011!! figuce!i w.:re b�sc:d all oficial f Eastern bloc wllr�� al {he I1lI1e: .

Chapt.:r Elgh!

1Il,'oh'cd m produ�lIlg. n H liehenslem. MAlloome In dfi�lcnq" \'. ·X.lndt1cienq·�, AmNlta/i ECOllomlc Re,�ew. June IYI'.O. i4 Robe:n!, WhllesclJ, �Whv Doc:s the USSR Appear tll n... Allocativdy [fli..!enr�, ,scn'lel St"J'e5. 42:2

11 990). p259.

.1" ') V \el) unUl, SolslallltlSchelu<J),o

IIlduJrr"'• .1" Janua!} 1988, rran5 ialN III Cunen l DI.I{i!'St ofthe 501'''' P,ell. H FehrUll!}' 1988. """ ,llso ,\ boch.:"k... Mllow to D"·,,I.: the PoeM. Moscow ".�'$ H, 1989. See also Ihe figum frum l":arodllOC' t..hmua,sl\o SSR. 111 ,\hk� I·blnes.

·t ranslanon).

17 09751.

March 1 9116,

.

14

47 EmC'S1 \\andel, -Thc �n..ralianonal l>rodua ACCQunlln,C, III CIA DIIKlolOlte (If Inretbg.:nc�. Measunllg Sm'ld G.' P. Problem5 · lind So/lIt,om Wuhlngton 1990. 5 1 ""'JIIlY SSSR, 28/69. S2 "ol/henIlS)n's shon 51()1} fonr ,,,.. G()()Ii of IIJ� CdIISt' pro\'ldes a ltraph" ....Il"c of lhe frustration anJ !-!!Icmess thl) caLJ�d to thosc

RUUla: C.Lm and POU'f'T /91 7·1{l()()

S6

(London, Iklo\..m:uks, 2001), �Iar)(, CAlmal, Volu� On.:,

pp648·6S2.

'i7 �An Opcn Leltt'r II> Ih... Part},M.

...L puhhsh('d m English as Ja, Kuro n and Karol Modul..",�L,. A ReJlQ/utlotJa'1' SocW/lst M,m,fl!S.l() Il.ono\lII. JllIernalional Soci311�1\, ndl, pJ4. ;8 B�lar� SlnlJlUplng, Forward 10 T"� Polish CCU"f)n"r CrISIS

(lundon, ROIJII�J"e, 1994). S9 B,Imnj; S"nalUpang, Thr /'"lIsh f(O/lQml( CTlsis. p3. 60 As I wrote," 1977. bnngln�

logelh�r Ih� 3nal}�s of Ton' ( hft and ]..:uron and \1(Jdtdc,,�kl. MTht m

Pohsh ensls IS an f'lCrreSSlon nf

Mn!i.�(h usnt5 \l'orkmg Paper 2006-4, l'ebru3ry 2006, av:ulJ bl,

somelhlng much greau'r. Thl' �T� in ·hl�h Ihe �!a!1' ..:nuld pro!«t ...

http://www_UII'I3ss.edu/«ooonll.< pubIIQII01l5l2006·().I.pdf

n�tlonal upu.llism from th� d,rC'Ct Imp�C1 of ""orld cnSIS IS draWUlg!O an �O\l D'5CuS-Slon on 'Slatc

dlSW�Slon of lhe world S)Slem of

dat:1�. World Bank, I July 21111 75 Cosus ....OSSI!i, �Mlrad� Wllh"ul

stIlI' (arnahsm ... Each lUuonal

End -. Maddl!iOn's figurrs suJ/.lo(�'

SI;lle c;(r'tJh�m I) more and lOOn:'

wu lUSt o,'er -iO pt'rcem of the l'

sucl.:.td 1010 a lhaQrK, UI�Qrgam�J,

SllI' m 1992.

"'Qrld ,yMl'm whcrc Ihe only ordcr IS Ihal which IS provldcd by lhe

Schrcyer,

world markct It!>l'lI--ChriS

� Poland: ensis of SUII' Capnalism-, /rller>wt.(mJ/

TheAggrc-gatl' And Se 5hQW Japanfie' '

Gl\.I' m'enakmg IhOlI of the USSR In 19117, sec hllp:lfwww.ggoc.neli

Age of Un,enalllty-, Ntw Left

Rn'lcu' 1:200 (2003). 85 Costas Lapa\'J1sas, -TranSItion ami ensls III the Jarant'il' � Inan.lal

Inaddlson/H'510ncal_SlaIISllcsl

S)§ltm: All Analyulal OH�r\'Ie... .

honzontal-filc_OJ-2007.xts

(.IIpu,,1 a- CIJss, 62 ( 1 997).

72 Figures g,tven h� COS!,!S Kmsi�

� Mirade Without �.nd�. InttrnQluJ",,1 S(JCIQll5'n 54

m

( 1 'J92), pI 19.

73 h"u re$ from Angus Maddl!iOn,

gll·tn m Tahshl Nakatani and PCler Skott, "Japanese' Growth and Slagrullion: A Ke)"rleslan J76

86 K�rel

Win

Wolferen, "Japan In Ih�

AJilc of Uncen�lOry�. 8i

flgures j!JHn by Gavan

McCormack, � Brcaking Japan\ Iron Tnangle-. Ntw Lt'f/ ReFlcw. 2: 1.1 (2002).

!Ill RegrtRabl)', )Q01" left wlOg commcnt;Hors wLlh a QUite Iusllficd

Paper.l7, Kell� In�U!ute.

19tU�, pIOS.

103 hgurts gl'-en In A A Hoffman, GJpltai AuuHlula/wlI m lAIIII

AmmcQ ( 1 9921. 10-1 Repon b) the TechlOl group nf

prc:KonlpapcrslJapan»d(

COmpaOll'S, June 200I�e

90 As above. 9 1 Paul Krugman, -Japan's Trap�,

www.lechlnlgroup.com

May 1998, availahlt a!

http://....cb 1996, a'-dliable 31 hup:JI", ww.olt,_ -

·

0l'CIlJI

t"tarmngo, 20001, pll,i. 14 John Ilulltma�, -(.lob3. 1 Car"(;Il and Ihe l'Jllunal ')t .1"h;ld Mah·hul Urn, contrlhu\lon 3t oonf('rence 011 Millsk)' and Ihe cns.s. 1..n'Y

fllS/ltute R�po't. 18:3 {ZOO81. p6. Sc"aSIIJn ihrnt'S and Garr)' Young. �The Rise til US

Hnusch old Ixbl: Asscssmg ItS

(;au�1"S an d .!luna ma",hlV�. BUllk of/- PlglJlld Working Papr, 206 (100J J, Chan Four. p I 3, avallJ ble hup:l/www.d(.mogra phI3.cOm/ db·usdl"bt r�\lI)·history.pdf Mr

10 \'i:'orld Sank. Global Del'eiullmrll/ flno'let (2005 1.

1 1 Robin Blackburn, Hal/killS 0" DI;'I1//', Or flll'filmg In L.fr (Verso. 1002); Agl' Shod ; HIJW Fo1'/I11/-:

UJ (Vl"tSO. 2(07).

F;PlI1P1(1;' Is

1 2 Andrew Glyn, Caprrulrsm '"

Unltilshtd, p69. 13 Mar tin Wolf, f"'''1It:UlI T,mt�. 15 J�nu;u� 2008. 1 4 FlgurH as gIH'''' In Roben Brenner, Tht f.cu"'mllcs of Clootl/

lj"b" lt"a, pZ81.. I .� Ponv ....n . an hahan lID1rugram who plied such a schtme In Iht US aner World War One. but Chults Dld.em dcs.:nbed su.;h a s.:helJl(' long htfore In Ab�tln CJIHu/t'ml. As I ..�� wnnng tnl� Bernard Madoff In the U� admlned to ama.�mg $40 billion In such a schemt and ::nr Alltn STanford was ,1ccused of a Similar liCam. 16 Chris Harman, MWhtrt IS Capitalism Gomg? M, '"'e"'t1/,(,,,'/1 SOCla/os", �8 ] 19 9;). 1 7 MI�hel AglitlU, M A Comm�nt and S(1O't Trick) QueSlions-. Economy t1nd SooNy 39 (2000), p156. Th� dlKu�slon betwetn Aglictra and Bon', was Indicau.e of a �l[u.:Ili(>n where the RegulaTion Schoul's elion 10 e).pi;l.In the long'Term trJlecwry o( cap'talism �omC$

adrift. �vr a (ommtn ! on II, S('"t John t.r�hl and Paul Teasue, '"Tht' Regul.
Economy ,mJ

Sa.:ltty 3 9 ]20(0), pp 169·170. 18 For a

(ull cxplananon st.: D",k

Br)an and M ,�hael Raffertr,

C..tipllal,sm umh Dtrw.UII't5 (l'algr.1\t. 2006). p!".

1 9 I"homas �blowskl. -}kthmkmg tht Relation of InduSlTlal and hnan,'al Capllal�, papt't g.,·en 10 HutorlcJI MJltrw/.sm nmfnence, December 2006. 20 -lmmtlldvwn �, r.collomlSt, I 7 ApnI200S. Z I hntlllcwl Ti",('$, 6 Seplember 2001. 22 Auoove. 23 As aoove. 24 Fillall,,,.1 Tlmt�, 15 September 2007. 25 Sp«ch opening tht London HQ In Canary Wharf In Z004 Z6 �Flow of Funds A,counu of [he United S[ales, Sc,lllttln,

Fm,mnahs"llon a"J lilt! \t'orLJ

Snmuills-. anllable 31 hrtp:llkrugman.blogs.n)·uolf'S....oml 2009102I01Iprotecnonism-aod­ sumulu§-wonk�bI S2 Nicolas Vcron of the 1ku!',C Ihmk

-Sollll: $ryhzed Facl5 on Ihe

(.,t'.mmng. p 1 79. 8 John Vidal. CU.Jrd,all, 20 9

!iet: Gcorse Mnnblol. GUdrJiall,1 I)tcemlx-r 2008.

to Quoted by john Vidal.

GU,lrdlolII,

10 r)">,emlx-r 2006.

I 1 George

Monb'ol, GuardIan.

S May 2007. 12 Cli>'c H�ll11lton. Mijl.l,lding on ":YOIO-, 1 3 hgul'CS from Jonathan Neale. Sfop (;1(,b.J1 Warming. p71. 14 GeorgI' Monb"Jt, MEnvlTonmelllal Fetdba,k: A Reply 10 Clive

Ibmtlton n, ( 19'7). 1 S t;lern quoled by jnhn Bel1.o1my I'osler, Bre:1I Cl.oIrk and RIChard Yorl m MF..toIOSY: The I\1oDlenl (If Trulh-. MOlIlMy Ret'lew, 60:3 (2008), p5. 16 FIona llarve). � �.co-G!Oups �ear an OPIMmuni1y Lost", F",•.,,(IU/

Timcs, 14 March 1009. I"" GUardlUII, I I Mar�h 2009. III Oburt·t'r, 1 S FebruJC}' 2009. 19 ,\IarllP Ginboll \Varmmg. C/)Imge fhe World (London, Bookmarks,

200S), pI": �J>l'neer Wearl,

(fillannal Tlma, 29 JJllliar, 20U\lI.

Wa rming -. hrrp:l/www.alp.org!

7\1 "i« �harb accomp.;ln\'U1f1, �1:Inln

6

George: Monb,ot, -En"lronmenlal Fetdba,k: A Reply 10 CIi"e Hamllron -, New Leff Re�.,t,.·, 2:

�or brief histories of Ihe -.;ienc", see

JanuJI'}' 1009 �um;'ll" I.f 1< l"o�

ongmaullg In the U� \\'JS $2.2 t!1iJ,on

5

Dccemlxr ZOO6.

S3 Ser Cilloan T�1t and PCler Thai

ImpcTlaI15m�. HlSIl)ncul

SaJd Fdho ,1nd Oc:l>or�h JI.hll�mn

(,t. Roher! Brenner.

May 200S ;'InJ

in hIS prescnmuon al Ihe HlSturI• •11

Modl'm £collon!/( History of

l

III

IZ008), p52.

SI I'..ul Krugman, MProlcctioOI�m and

111

MFm:u\CI4lIls.lIlI>l and !hI' S,lowdown of

'\onfinan..;lal Corpor.llloD

ro Gro"lh, and Ih� tmprum'e Inr Socialism M, Mon/My Ret'leli' 60,3

M�neru.u, 24 No.'Cmbc:r 200S.

-2 MIChel Huswn. �s.urfing 1M LUI> Wne"• HISlonc;a1 A I. lferll.rl Kaulsk\", T/If� ARran,1II QIIl'S/lOn, Volumc 1

(Z10.an. 1988), ppx."",:i-l{]{X.Ii. 63 Dan ) u W�ng, -Steppmgon Two

Boal�: Urhan Smll(:gles of Chme�e

l'ea•.1 ms 8nd . rhcir Children�, in InremllllOIlIl/ RC�'/CJIJ ofSoccwl

Hmor)' 45 (2000). p170.

64 As above. p 170.

65 S Rodwan and

I Lec.

Agr.mlln Ch:lrIgt III EID'Pt

Glossary

(Bcckenham. 1956).

66 For dn a�-';()unl IOf Taen! re�all:h un

� quo"ons

.

1"Jt>on by oorrowmg. ])epartment One :,.,etlon of {""conoml

charauen$ocs Qf any act Qf

whICh IS IIIvolvcd III rurnmg out

boour-what dlstmgulshN, for

equIpment and maa'rials for f"nhn

example, the bbour of a carpentcr

productIOn (callC' keep

up

..,

age rales.

Fonnal s�ctor Jobs in which workers have Icg31 em ployment Tighs. t Friedman, Mi l ton Conservative fret mark�1 economl�t5 whQ bcheved siale could stop crises by (oncet

of or exchangeable for materl,ll

conrrol of money supply. Inspired

with value 111 il.$ own right, such as

gold or �11\"er.

HmonetanStH ro1icies of Margarel Thatcher 111 �arly 1980s_

fictitious cap ital Thmgs like �harcs

and f("�1 C$t.lIe In ,·e.nn ents th�1 are

advanced tconomiC"'i prevcnred

not pan Qf th� proce§s of

r

conomic dfvelopnll.'nt.

Depreciation of capital Reduction in

the rri�t' of pl�nl. machinn�' and '0 Q" during their period of operanon. This ca n be duc to wear and lear, or to the "de\'a]ualJon 01 capl la l (see below). -

Devalu31ion of capital Rcductlon 111 the

production but which proVide tht owners with an IlKQlIle out Qf surplus .alue. FI)I. Foreign Direu lnvestmenl

In\"csnnent hy � firm U\ one country .....hich gives it more than 10 per celli Qf QWllershlp Qf a

firm in

anothcr country. In''cstment that

value (Jf plam, equipmem and '" "n

dOl'S nOI S've that level of

as teut

!O m i ply that financicrs are Ihe real

....

hl.:h grew up in l31e 196()' and 1970s, beyond the conrro! of nanonal governm ents.

Eur01.one Currencr union of 16

.1I1d C<julpmerrt whllh lru.{ for SI:\"CC3! cycles Qf production.

contrast to mOlletary medium made

Third World economics on

held outSide the U�.

Fixed (apital upltal II1ve�led III planT

producllon industries ... .. ith Ulllon5

not he I.lsed as means and IIlJteriah

later wrOlC an imporram Man:isl

generaI 5eCretaTle!i"-�taI1ll,

Fischer, Irving Leadlllg ncoclasslcal

m3tenall�' c�pand Ihc l>urpUI of

(somellllles call«l �wagr goods� I.

Fiscal measures 1:1>1" and spc:ndlllit

France. Germany, GrcC"Ce, lrcland.

which

be con�umed by worker­

other scetors.

undcnakell by govcrnment...

�tay ;n h"sine\s, bUI which docs not

will

III

Aunna, Belgium. Cyprus, Finland,

(oncemed w"h turnmg OUI gllOds

of p roducTion and whllh will not

CPSU R"ling pal"ly with," USSR. Its

lendcr. It eurrent!y conSISts of

Expenses of production Spendmg

Amencan Communist Pan)" who an a l� sls of Ihe slump ufthe 19305.

adoptcd the euro as Ihelr Mlle legal

European UlIlon Stdles ....ruch . h3"C

po""er

III

the economy as a ",hQle.

t h . of th� 11inanciali§alion Gro....

financial section of thc cconom)" Jnd ,ts intluence. Often the term Implies rh.s is demmemal lO eapnal Glonary

Galbraith. John Kenneth Amcnc,1n econOlmst of the post-war dc:cade,

CTIUCai of unrcsrrawed £ree markets. GO!' Grns� Domestic Product, measure uf the market "alue of all liml

gQOds and Sl:rviccs m ade IHllim the borders of a nan!)n owr a year.

GNP Gross National Produ ct,

J �

GDP

but also mdudes the net meom.. fr()m 0\C1>Cas IIlvesanent.

Gold standard Srslelll under which Slates oed the valu.. of th�1r

Il

ational

currenllo 10 'l"anlll,e, of sold and paid Qff debts to each mher w;lh 1(. Slates broke '\'lth It dunng W..rld

War One and from t he early J �J(). [[) the end of World War T wo. Operated

111

modified form under

pr.I�t- l �45 Hrl'tlon Woods Slsrtm that collapsed m 19-:'1. Golden Age TefTII �llm�l1m{"; U'it'J fur long boom !II the decades foliowlllg

Ihc �ond World War, Grtat Depression Term u�d for period of cme� In Ihe 1870s lind 1 880s, and again for slump of thc 1 930s. Crotsman. Hcnry\.! PoSh-Ausman Il Marxm .IC11VISI and «onomlSt of first half of twcntleth ccntury. Hansen, Alvm One of leadmg mamstream us «onomlSts of middle Ihlrd of 20th century, convencd 10 Kc)ntSlantsm by CrISIS of 1 9305. Ha)"e\.!. Friedrich von Conservauve «onornlSI who (lppo'\td :mempls of Slatc 10 mlt1gnte Imp3Ct of c:o;;onomlC crl§tS. ci a Imlng thl� could only nu\.!c thmgs worse. Admlrcd by Margaret Thalcru-r. Hilferding, Rudolf Publuhcd pioneering wurle on Impact of financc and munopoly on capilalisrn. bUl later kned as financc mmlster ill WeImar Repuhli
\liagl" UJhouf and up/tal, TI·I'

Cntlq"c ofPoIlt'Cll1 Economy and

chapler one of Copual, Volume 0111'.

Lc\'enge BorroWing to magmfy Ihl' hu�ing powl'r of small cash pa�mcnls for sharI"!. property anJ Olhn assclS. uquldil) Having (.;Ish In hand (or asscn Ihat (an be easily turned mUl cuh) to meet claims Ihal fall d� or. GlosSI!)·

thc tilst of I bank, mttI w"hdrawl[ requests. Luxemburg, Ron Pohsh-German Marx"" leader of revolunOllny OPPOSItiOn 10 German)" (0 hlSt World W:ar. murdered by counter­ rcvolunonanH n i January 191!1. in

Macro«onomic Ref('rring 10 economy as wholc, as opposed 10 "mlcro«onomlc� reiaoon!l bttw�n IndiVidual ekmcnu wllhm It. "MacrotConOtnlCS� is branch of m,IInstrcam econom,,;s concerned With frylllg 10 gUide nauonal tConomle�. Marginalism Another name for ltOC t l nsl Cl..l tConotmo:. i Matlihall, Brlllsh «onomi,t of lale I !lth and early lOth centunes and a lec)' 6gurc In neocla�I�..1 c:o;;onumlcs. Merc3ntile or merchant capital In�ntment alm('d at malemg I profil WIthOUt cngagmg in pmdU�"1:10n, for mstanle m thc buymg and sel lin,: of Kooth. Mercosur A reglonal lradl' aKrt't'mcnt betv.·t't'n IiQme Soulhern Aml'flCan states (Argentma. Brazil. P;l.rlguay ilnd Uruguay). Microccooonllc ste macron:ononliC. MMilil:ll'Y Kq·oC1tIOlSm� Term ustd for economic Impaci of n�mg military e�po!ndlrurl' paId for out uf governmenl deht during Ronald Reagan pre"dcncy m 1980s U!;. MlIIsky. H)man I\.on..(lnhodox malllSfr�m ('conomlSI of mid-lOth celltul) who rccOKnistJ mel nahtlil) of speculan�e bo...ms and bU�b forcapitaltsm. Mm Powerful JapatlCSt' mtOlSlry 01 trade and mdu)lry. MOoetilrum Doctnne whICh holds crises C3111101 be soIled hy g(wemmenn lIlcrcaslIlg thelT s�ndmg 10 morc than theIr tax mcome. Irn:rtasing the supply of money, Ih.. holds., WIll stmpl} lead to lugber p�C5. Under lhe namc Ihe quanltry Iht" lime of capi lal Tum laken

aCfi\'IIIt'SM). Dcoo\('d b� s. SWee1), Paul AOlcncan C'Con(lmi�1 who wrolc a palh breaklllg

from begmnmg (If rloducllon procC'SSIO final sale of goods_

attoun! of de\'elopmcol of \Iar'l(I�1 Ideas

III

UNCfAD Unlled l\al1(ln�

19405 �The

TlirlJry IIf ('A/llt.JilSl DeL·e/opme"t)

wllh Raran, an account of mid 20lh cenlur!' l.:apltJ.l!slll in and,

1960s � /Ifonopoh' ug hl alld sold.

Manr

t'(:onom!�{s h,1,-" claimed It 15 I mpass lhie {(> wi,e Ih.. rroh!cm. 400

•

de,clopme:OI agency and Importam

WUTce

of economIc naIlSI"':J.

Under-consumptionism Theory whKh

blames C1rllahst CrISIS 001 011 fhe law of Ihe: failing rate of pronl. bllt on Ihe 10

a

•

lleged 1naj" hry of capllahsm

pro\-ide a matktt

produa:d wlfhm II. lehions of the

ftlr a II goods

The fiN

theory wtrt PUI

furward hy cady 191h cemury ('Conom"", 'lieh as Sismondl

.

bUill

has b«n lK,

\-alue Am(lum of ahslra�1 bbour cOnlalned in a �ommodll):

detcnnlll� Il� ..,,�hJoge ",1luc and.

after some rC(_h�tnhL1t1on of surplu�

�rween eapllal"" , 11\

prl�e,

�omum to vJrlRblr l.:aplIal,

d,ftcr,

1

alu('

\'alu� C'ODlpoSltlOn of (::lpllal KallO ot

frum "rgallic compos!I1un l;Iy lakmll mtll a�(oum chdn)tcs due If> mher factuU a� ".·11 as ch,Hl,l1.e In {cdtnieaI romp<J'omon.

Variable C1lp ital C.�plla! l1l\'e�red In

�mp l(')'mg wag� labuur. l)enorcd

h, ". Vance. T N American

C'Conu

m "t ""lin 401

Index

1834 Poor I�w 13'1 1968, role of 1T1Igranf wbrkefl In J7J; 19M:I-75 w�H' ot mduslrJ.11 SfTUggJes 331 Abalkm, on W1Vlet srnkes 20'1

Ab5011lle �url'lu:IkC' uf ,Kcumulanon 36. 84: nnerendln� 52: and cldSS 107, 1 13-1 15:and logiC of Slate 1 12-\\"; .md ll�SR 158: and CriSIS 11\ USSR 204: in Chma in early 2()(){h 24 ;;-6; an.,! consumpnon lit ChllT:!. lit ",;Hlr l000s.., 1"6lgr.lph 24-1: a nd cn� of t'..aSI",m bloc '"'"'I: and corruption ;!lTd n:pn:.'i�lon 111: structures of

and m",rl!.Y uS!: J 16 sa Il/JO Capital accumulation

AdvC'nlSlng. as

u

unproo cti.",

121; C'lry

Margmahsl school of economICS 9, 23.

Brown 303

I og"- of capl l�I and greenhouse g.lSC'S Jlj

I"QgK of $tatcs" cou"terpo��d to IOJllc of cap/ral 107 rniswktn ellplanations 16.;, 1 6� Long Term C....pi lal Ma!lagtm�nI, lifehoat operation 234 1.osses dut 10 ttlo:coms buhbl., 286

I.ucas, Roben . on f:ululC' 10 understand cause of slump of 19305 9

u nf'rodU�lil'e labour m Capital ,.f up,tah�m 84; skilled and

unskIlled lahour 50; rdutanon of Marx's, Iheory of \"alue. crll1cisms of 41

Integnue arm� spending 11110

accumulallon 118; seekmg

[IITIl'

as a probl�m

menlS III a labo ur

theory of valut 44

1I1,"estmerll

11\

I 980s, 19!Kh �nd

20001 281

Manhew5, R C O 163,164 Ma�wdl Empire 2J3

McCormack. Gavan. on Keynrsl1In mcasurts mJaran In 19905216

Marx and Engds. Tt)t1:1

Mal,huslamsm 320.: on c:lpllalosm's

Mengrr 4 1

des.ructivt effect on hum3n

I\ltrchJnt�' capnal 107 l\I�rg"rs, Internallonal as proportlun of 1Ot.11 260; and I umplIIg national

producti�e forces 8 1

Marx. Karl, Ideas 21 -40, 55; on

W:lS',

and or�nic COmPOSlliOn of caplIJI 129-30; financ.al prolil$ as p"per

stale barrie" 267

Mrxlco 2 1 8. 22]; Cri\I' of earl� ]990s 22'

claim on etal prodUtllon 289; on

Michl. Thomas 195. 197

rolt of finance 281; on role of

Middle dasses, aSPJr�m In poorn

credlls�s.em and fraud 64:

Index

disnncl10n berwtoen produn,,"e and

Mass of surplus value, :Jnd

II11er3(110n wl lh nature 307: on

Long boom 161 -192; common

cXf'C'ndnmes 129: refints

analyses 165

41, 16Z;set aiw nC()l;la!.sical

to be IKtJored 42;

I I I; on sudden ,)uthrt>ak of crl�IS

.nlt'T"'A':H slump 152·2; [adurts 10

neocl3ssiClI dll"or)- wru-n It cOlnn

u�lllgstooe, Ken, pr;IISC for GorJon

1 9th century Fl3IlCt

look IIIw.llds 15; expl3nolli0n of

Marginal ,"alue of c�plldl 44

real world 10:

111

\larxist econorruc thtOry, lendency to

MMa'l:inal uulllY" 23, 43

til

on labour ,lnd nanITal world 8182, on orgamsauon of prodUCllon

Say's law 57

M .. ushalL Alfrni 4 1 ; on fallu rt of

labour 33

-,

122·12, on va mplrt-hkt char�cter

China

M.arkellsallon 240

I wmg UI RnlaUl 2000 334 lInnJl laboul 84; and Obl«"uJ1ed

rlstS 10 prott CapitalISm 82; on

Wllhll1 tnltrrnse 79; on state

rat� of profit 150

Les�eligiblht) )35

d,�uss,on on /inanet I n Vulume

of Impt"nalism 99-101; luxury

Mann, MKhael. on hml!S of

lIfeboal operations and ('(:ono.",c

I.abour. co.lerete 26

lad.lO and \1li�fI"ns 265; .nd role 01 statcs In aldlllg aceumul3110n 265; US.

prodtKtl,'�unproductlvc

affihate Sdics mainly local 261 sU'

164; Ie�el durUlg boom 165·6;hy

dlsnnl;llon 127·8 Mlhlary h�rdw.re, connnu;)1 role of 26'

ulso Translluioll.1.hty md..x

Multinational (';Iplt.l)., ronnlct1ng �genda 268 MullJpolant)' 274

MilnAr)' M'lIe lOlpltahsm 156

Mumhal, texnle strike of 1982-3 j4�:

,1,,1 111, Juhn Stuan, 6"; dCOl('5 possibillry

Muillpll('r ..ffect 162

Ann-MlIslrnl Clols of 1992-3 345 MuruaJ Assurc(h,)()1 of ecollOmlC), 10, 14, 22, 23,26, 47,53, 144, 369; crmque of Alarx, 4 1-46;

COntrad,ctions III, 42, 44; failure 10 explain

CflSU 9, 56: Kt)'nes and,

_"'urales, Evo j46 M(lrtgnge bubble of c;ltl} 200(k 286

44-45, 162; Ihery ,)f lIalue 013; Sl.'e

,\Ioseley, Fred 126, 195·6, 197,

cconOnlln

c�kulalions of profit rale� for mid 2000� 232 416

137·238 l(tl1Iph) 237 New classiCa.l5al Cflse! JOI

II I

Neo-pupuhsm 347

and global compe[tl'l�encss 265

of general cnsis of o�erproduct'on 56

�Out'i()un:lIlg� overSC3S, hmll'

New York Tlmel on mlhldry contUctS

Mlhulry Keynesianisrn Undl:'f Reag.m 272; In 2000� 273 Milnary'lnduslrlal complexes 168

Neoli beral � polICICS 240

Nn SOCial wdge n i 1970s and 1980!.

1heorv 96; .nd econom,c Mdllary expendlrurr, 3nd long boom

k

Intkx

Ponu schemes 64, 283 Poseo 242 POSt IIldu5lTlai SOCIfi)', th('QIII"S of 33 I, 132

I'o\'trt)·, In ChlOa III early 200lh 24�: III

India

III

1990$ and earl) 2000, 252; III USSR in late 1 9805 208

Prill1tia 011 unemployment III USSR 208 Prehi�h, H.�oul l �6

Precariuu� l0b!i. rcal lel'cls III \'('r:st�rn !-UTOpe, 336·7 I'reobrawensk)', E\'geny [.59; on �)ump of 19JOs 153; ImpaCT of world 411

cnSl5 on USSR 1 5 8 I're!\(;olt, �.dward C, nn bllure 10 und�r�tand CiIIU§(" of 51ump of 1931h 9; on Japane-sc nl�15 of 1990s 21.S Pr"e ilgnals aod dimale change 3 1 1 Price :llld values 46; den�uons from values 8"" i"nmlti\e ac(umulanon 39-40, 132, 258·9; aod slavery 40: In USSR 176: Chm.. 245 Pnmlllvt commulllsm 21 PrWalt equlI} funds 2"'9 Pnl'anse
Producm"e caplfaliSIS and nedlt 61-64 ProduCf,\"e forces, can bt-c;ome deslrucrille 81 Productl�e 1300ur, and dyo�m" of sym"'m ll� whole 125 PToductlvlly of labour. and rate of profil 73; Europt stoll!' catchmg up wlfh U) In 1990s 239 Profi, margms. China mid 2000s 248 Profi, rale. Ihoory of le-mknC) [0 fall, Marx on ccnuahry of meary 69; and cns.s 75·78: counrervailmg tendrnC;le$ 72: wme Ma.,osts cnucal of theory 69; Marx,sl thoory dler Marx n; and S[ale capitalism 201 Profil rates, equahsauon of 87; [aUmg III mid 19th cemury 88; r�o\"ery n i Bmam m 189!X 88; before and aher ht$1 Wurld War l S I , frum 19705 TO t'3r1y 2000s 232; fall m. lind ;l[[raCnl'ellt's� of financial U\1"es[rnent 181: d:llm! thai Ihey reco�cred sufficiently m 1990s 299 and ulVeStl1lem, mJapan 171 Profirahility, in China, and low 418

lOIermrional �",lue of Yuan 289, and lOvenmem Inlow energy production 3 1 1·11 l'Tol�t for a New Amen....n C..emurl and US hegemony 272 Prolt'lan",msanon of public scc;tor employcd 138 pfO{ecl1on�m 145.302; Hilferdlllg'li aa:ount of rlSC' of 90 Proxy w",rs, l)plO;",1 of prtKnt pt;nod '"

PublIC expendnurt'S lind clasii sfTUggk 138 Pubhc works 116 MPump prmllng� .lnd slump of 1930s 155 Purcha.mg Power Panry 250

Quanntal1ve ellslIlg 30 1 RaIU. RamahllgJ. lndl:i·s MYoung Enlreprt'neur of the Year" 287 RaIl' of profil, and productiI"i[y of laDour 73 and lmpenalism 102: ami ,m"o:
H. 30. 4�; th«lTV of falling rate 01 profit 69: producrive

of value

and unproducme labour 1 2 1

Smoot-I Ia",ley Act 145; n()l 10 blame fur world slump of 1930s )02 "SOCIal eunltact�, mrth of durmg long boom 164. 171

State capial, t in Cap/lui Volume Two 115 StateC3pllllhsm, 104. 1 .S9;e.:onomic dynamiC 1 18; (;.c,rmany and Japan In

1930$ IS5,duling long bquare prult's.... of l'II'l 244 "liger (uhs" 242

�Tige....- H2; .!.fter Asian

'flS;S 281

'bppintt pOinh JOR. 127

Ton) (;hff. on mllifar}' ,oml'Q$1I10n 7J

in 1960s 189

a:ooomy 201, 206;arniSlale

Social exclUSion. Id�loglCal charactt'r

Solialiution

to profir.abllJly 312

margmal to gloh.:!1 capll�1 1l4,

and war 156; mdustrialisatlon, In

Social wage U-

Marx on f.l.l1mg raIl' of profit ';'1 Stemdl,Josef 1-46 Stem upon 309; suggesllons uulored

to accumulation wllhm a nallonal

Soci31 Democracy, Id�lugy 1 64 oftcnn 341

Stttdman. bn 4S: alleged rc:!ut3110n of

•

Slave labour In USSR under Stalin 1511 different explan.:tuOfIS 149; rate of

the era of -globahsauon n 264·70

Sto.;khammcr, I:ngelbe", and finane ..

Stalin, on -catchmg up· ",,"h West 1 58:

1930$ 144·168,325;

Mux 102; In lemn'� thl'Ory 93-5; III

Stem, Tl)(!d Jil

281, 283.285.321

through lime 74 Smgapore 2 1 IS, 21 1 , 142

of

rc:latlODsblp left unr60IH:d br

Techlllcal �omposllllln of .:�pllaI 69.

Index

Tory Pan}. splrrs en 19'X)s and dlfferem multmauonal agendas of dlffermt ,.apllal, 26R TOta1if:lTlal1l�m, fheollt"

fad to foresee

CII)!;'S In hstrrn hl,)(' 17'l To)'n��. Poll)'. spreads mrth of two tblrds of populatIon totmg middle class 334: pral§(, for Gordon Brown

10] Trad.. Jnd bud�rI ddi:,ts uf US In 2000s r3 1 r,u.l.. .:ydc .�6 sr.. ,l/$" RU51n"�$ ndC'l 'J radt' ncgouiluuns 127

Tran�tornuu"n "f values 1Il10 pn.:t'S 4� TrarufMmalion problem 46,50, -4: umqut\ 01 Man:'i wlUUfln 4� 5"

,lIs" OklShlo Theorem TrJo)oalLonaluy Inde� 260

MTnad� of �orth Amenca. the EU and Japan !62 Trostle, Ronald, un IOnm'.IILOn and inability flf �mall f3rrmn to pa) ropJrIt"> Hl

Trot�kr. l..eon 1 59; on c:Jp ,u hsm hVing

h)' blV1h of fort lSSl trade 10

Vanat.1t (aplla I 3 8, 70 Vtntzuda 221, .1 5 1 ; and US 011 3 1 9 V,ewam 184, )8S; Fr�n,h wllhdra".11

116

20th "nd Iisl

CenlUrLa J3-: and !tJ'Owlh of wage

labour. JJ6 US capluhsm's mlerest and clLnure change .11-'

Usc \ .. Iue 2.1; in Adam Smllh 11 U� ,alue ;tnd e 'lchangc "alue IDS, 1"'6; �nd (Cns.s 59: IIndtr milnarv �umpetLllon 1 17

USSR, (Ch",acter of b;onomy afl('r 1919 158; n:onomLC m«halll�m, eSIOlbhshed III 1918-9, 1 ';7-9;

accumulatiun and �OnWmPIl\'O

I- -', 1f14 ; bur"amcr.le)' �u bS!IImes i t...:l f for ,apltJhSI cbss 157; sla\e lallour 1 76: and lnw 01 vaille 1-'6, 204; n::onomic growth 1950·19-0.

182 Vietnam War U":

nd"(N IIIl!e;

...

171,1911 Village IOdustTIC1> 143 \llro ll1

\'okker "coup" 196 Vokkef_ Paul, ralstS uuercu ra!1':'. 1 'F9 196

\'On Bonl..le" ",2, on tran\lunnanvn of ,,,Iu� rnt.., ron�n 48·9 \'('ad�. Kvh..rr, calls lor grealer Tt1:ulal!Un 192 Wajl,e comrol� I"'S W,lge l�houf III USSR 158 \\Jg,'d cmrlnymeO(, fall in

....

vnal

Afrl(an 'ountrle� 119 \\'ag..." :lnd deve!upmtnT vf CrI)CS 60; III

175; SC1:n as modd lor Third

ri.�� in U�

e�r...ndlrurc: in GNP dedlne5 durmg

World de\'dopm�LlI 18";

of low profiu

10nJ( boom 1 98;

Impenalism In

workef� III 1970§ 197; Japan m

1970, 101, share of arms

l;'I;()nunliC

policy,

�a'lem

I'.uropc 1 11 1 ;

1980s 194: (;,,11 10 median wage

ComfM:'li ll"n w>th WesT_ SrC7.hlle\

19"1J·98 136; !,rodIlCII,-e

on 10 1: �auO uf

\'('J�, WJ!(W by U!I in {.l()b.ll SoUlh

cause� and ....al". of 1 11 1 , 21)'7,11;

comp,u"d I..,.h JaJ'ane� �ns15 01 1990 l i e'; why mMktl relorms wert nOI ,1Ilswtr 110·11; utlLuon

World 268 Wa�hUlg{On Coos.cnsw; 2.!1 Waslc ...xpend"ure 2)4; III tlS, I 'FII J1�; Jl\d a..�umulal!om, 12'1-.111; a

J.11; arms sprndlOS 20H; 134;

rC\'o!t5 of nJuonal 1I111l0TIIle� 108;

\'(a'le J'f(lduLtHm 126

habn�e ot trade 198; IT,lde �nd

collapsc of 1,4

"",-pur,mOllS o'enak" Japanese m 1 9'K1l; 165; IlIIport of IOPUIS In

19� and t".Irl> 1O()4h 161; Con!tl'css, fear that Japan would ovenaJ.e liS 21 1 , mvestment 221; nwnher of wotktn m 1998 comp m :d

wnh 19"11 Olnd !'HO

budj\el ddiclh 10 1000� 173; hlow� 10 hegenlOn)', 274; overseas hegemon)' �nd CTISIS of 2007·9 J27; nJtiom;Jhsc-s Freddv �I.i(; and hnny MAe 2n: sourCt5 of 011 .1 1 9 ; world's blggcst lIlJnufa(!unn�

1980s_ 102,J; HISIS of Idte 19St),_

of bte 1989 and carl) 1 9 9 1 !08;

VJ1(m�'I!II," P Value added

III

schools 135

Vahlt 15_ 31. 33; sllhsmnce 01 16: and prlC�s 46-50; d llTn i g nlscs 60·6 1 , \iau: on productivit), and 27; and [echlllc.ll ad\'and' 2"'

WUntry 331·3

Unproducti�'c: expend!tures, ;lOd Ihe IlIde"

VarnpLrt'-lik� "h.lra�'ter of �3plfah�m S4 Index

271_ 17j; hut. W.l�cJ In Third

."O(radKlI1r\' rul.. 131; � \'('�IKhIless (\;onom\ 25"

"

3.11; 1Il\!h III

WeltJre e.;..pclldilure. I'roJu,IIIt Jnd unproJUI;liL e I ��; ;1, rrUpllrllClIl lIt (".])1' in different collntTle� I 'F� 'I� Ilahl...I 238

\'('elf�r.. prOVISII.m_ eOldy developmcm 11\ SWam 114; dl.'Hlnpmem III '!Uth c('muT)' I 35; dU rLn� Ion!, h.,."m '"

to WeSlcrn Europe and

164; C0515

US 174, ,:uII 13:-

Wclf.ltc State lind �d5 of rapllal 135

'«cn 11.11>:'0, quofed on 1fl§I.1buily of Chiot'Sl'a;I)nmy

�bl!p� HI; quottd on

financLlII CrLsn 280; quoted on

-ddc\'crag.tng� 290; on role of US

hnu!>Chold OOIr()WtOl; m kecpwfl, gluh:.l.:.:onOln)· gome 188

Wolff. Ed....l0

19(-6. 195.

Womcn. m.1rnrd. eOI!>R

20.

Khcmes 137

Workers. Ilum!xr In world 3 ecordmK 10 Deon swdy JJ I; as prnpomon of woricforcc in US 334

WorkHlS

•

dJ.'�. 11\ dasslcal '\[anHSm

12 9.3u; [hr, >nullon JJ-; une\'ennt)) ","hm 3 ,0;

Zei(,s, uo and Ctruu. CIJII"t". on

tebUoil ol lhe lorm.11 and

.fumble banh I I

mfonnal

South AfrICan townshIp 34J

Index