Society chose Barbarism and it has its own peculiar political economy

Adam thinks the society I am describing no longer resembles the capitalist mode of production as described by Marx in Capital. He wonders why changes in the monetary system would have such far-reaching changes in how the mode of production operates. And he questions the validity of my reading of Marx’s labor theory:

The implication, Jehu, of what you say is that since April 5, 1933, capitalism has been replaced by a different system of society, an implication which no doubt you accept and which is the basis of your whole approach. But I don’t think it holds water. Society today is still based on the ownership and control of productive resources by rich individuals, corporations and states; production is still carried for sale on a market with a view to making a monetary profit, and is performed by people hired to do the work for a monetary payment. The change in the currency that took place in the USA in 1933 hasn’t altered this basic social fact. And, as a purely monetary change, there is no reason why it should have done. That workers should be paid in tokens for money rather than money itself is not a significant change. Nor was 1933 the first time it had happened.

Has capitalism been replaced by a different system?

Donald Booker: “What is the value of a worker’s labor power, today? Zero is clearly a bullshit answer…”

Donald Booker takes exception with the argument I made in my previous post. I will try to paraphrase his most important objections as best I understand them:

According to Donald, it is wrong to say workers get paid in a currency that lacks exchangeability. Workers can buy food and other goods with their wages, just as they would do with a commodity based currency. The prices of commodities may increase, but it is not as if the rate of inflation is intolerable. In the short term, the debased fiat dollars work for them to buy things with reasonable predictability. Workers with higher income even have savings and retirement options. Not many workers would want to be paid in alternative monies like bitcoins or in the currencies of many other countries.

So, Donald asks, what is the value of a worker’s labor power, today? To say the value of labor power is zero “is clearly a bullshit answer”. But he concedes the value of labor power “is murky in the end.” While we can no longer tell what labor is necessary and what labor is superfluous, we can see empirically that labor remains generally necessary.

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The working class hasn’t been paid wages since April 5, 1933, Adam

I received this extensive reply from Adam in a comment on my previous post. I feel it is important enough to post it here in its entirety with my response:

“OK then, enlighten me (but not by gas, please), what is the actual value of labour power today? Since you maintain that workers are currently and have been for decades paid less than the value of their labour power, you must have some view as to what its value is.

And which part of Marx’s theory of labour power set out in chapter 6 of Volume 1 of “Capital” does Grossman dismiss?

What follows then is an extensive, and likely familiar, quote from Capital, chapter six, on the subject of the components of labor power:

Getting past semantics with Adam

Adam Buick left another very interesting reply to my last post.

In it, he expresses some confusion regarding my reaction to his opinion that Marx’s prediction of a breakdown of production based on exchange value was a thought experiment and not actually a prediction:

“I don’t know why people are getting hot under the collar over the term “thought experiment”. It is not the theory of the tendency of the rate of profit to fall nor the theory (fact) that most commodities tend to become cheaper and cheaper that is this. It’s continuing these trends to their logical conclusion that is. I don’t think Marx expected, let alone predicted, the rate of profit to actually fall to zero or for commodities to be produced so cheaply as to have a zero price. For him, these were just tendencies.

Both Adam Smith and David Ricardo thought that capital accumulation would eventually come to a stop due to a falling profits. Ricardo explained this in terms of conditions outside the system (exhaustion of fertile land). Marx set out to explain this tendency as intrinsic to the system.

In any event, we are nowhere near the state of affairs where the long-term rate of profit is even approaching zero. It’s the same with the price of commodities. Nearly all commodities still require some significant labour-time input (from start to finish) and so are nowhere near becoming price-less.

The theory that capitalism was saved from collapse in the 1930s by the replacement of fiat money for commodity-money is a different issue. I would tend to think that this happened because a currency convertible [on] demand into gold (or silver) at a set rate was no longer necessary. Also, some form of link to gold (via the dollar) did of course survive until 1971.

Listen, Adam, I am going to try to state this as simply as possible, because I don’t know if I have it all right. Marx was a shit-load smarter than me — and, as far as I can tell, every frigging Marxist who came after him for that matter. But he left us some important pointers to his thinking in Capital, volume 3.

I haven’t yet discovered a tenth of the connections the guy left behind, but I am working on it.

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Breakdown was more than a thought experiment

I received this response by Adam Buick to my post, “The collapse already happened, Adam”,

Frankly, I don’t see how anybody reading the Fragment on Machines can come to any other conclusion than that Marx was writing about a theoretical situation where productivity had become so high that the labour-time content of individual commodities would be so low as to mean that their exchange value would be virtually zero. It is not about money or the rate of profit (though of course at this theoretical point the rate of profit too would be zero). And it wasn’t a “prediction” (i.e something he expected to actually happen) but rather a “thought experiment” based on assuming what would happen if current trends continued to their mathematical end.

I don’t think Marx thought that the abandoning of a currency directly linked to gold would mean the end of production based on exchange value. Fiat money (“inconvertible paper money issued by the state and given forced currency”) is even discussed as early as chapter 3 (section c) of Capital where there no suggestion that capitalist production could not continue if such money were to become the only currency. There is also a good discussion of fiat money and its relation to commodity-money (silver) rather than gold) in chapter 2 of Hilferding’s Finance Capital.

As to the rate of profit, we need to distinguish between the short-term fluctuations that govern the course of the business cycle and a theoretical long-run tendency for it to fall. This latter is, once again, a thought experiment, not a prediction, as Marx was well aware that in practice there were countervailing tendencies. In any event, the long-term rate of profit has not fallen to zero.

Let me first say that I am disappointed by this response, Adam. It did not move the ball one foot in either direction. You say Marx’s “collapse statement” was a thought experiment. I say Marx’s “collapse statement” was a prediction. Then you repeat that Marx’s “collapse statement” was a thought experiment. This accomplishes nothing.

Having set out our initial disagreement, what we now need to do is to agree to disagree, concede one or the other of our respective positions or buttress our respective positions with evidence.

Since I don’t want to waste my time engaging in a sterile “Yes, he did. No, he didn’t.” debate with you, let me try to move the ball down the field a bit.

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The collapse already happened, Adam

In his essay, Is capitalism collapsing?, Adam Buick is skeptical that capitalism will collapse any time soon as Ben Reynolds has argued in his book, The Coming Revolution. Capitalism in the 21^st Century.

According to Adam, Ben’s argument is based on an out of context fragment pulled from Marx’s writing in the Grundrisse that purports to predict the eventual collapse of capitalism owing to the progressive reduction of labor time required to produce commodities.

Says Adam of this prediction:

“This, in fact, is the only place in the whole of Marx’s published and unpublished writings where he used the words ‘break down’ (zusammenbrechen) in connection with capitalism as an economic system. Not that this is how he expected capitalism to come to an end. This passage was a thought experiment about what would happen if capitalism were to continue indefinitely and which showed that in fact it couldn’t. Marx’s view about how he expected capitalism to end is set out at the end of the last-but-one chapter of Capital on the ‘Historical Tendency of Capitalist Accumulation’ where he wrote that the working class would end capitalism by ‘expropriating the expropriators’, i.e. by human action not mechanical breakdown.”

First, let me say that the concept of ‘mechanical breakdown’ introduced here by Adam is nonsense. There is nothing ‘mechanical’ about the idea of a capitalist breakdown. Capitalism is a social relation composed entirely of human beings. All action within the mode of production result from human actions. That the event takes place outside of human control no more makes it mechanical than anthropogenic climate change or the law of value, both of which operate outside of human control but both of which result from human action.

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Britain is so completely fucked…

It’s wonderful.

Reply to a comment from Joymo on MMT

I received a comment from Joymo on one of my blog posts on modern money theory, MMT is right … which (paradoxically) is why it is wrong.

The comment begins with a quote from that blog post which accuses MMTers of doubling down on the sham of fascist state deficit spending in order to subsidize capitalist profits:

“Now, MMTers could have used their knowledge of how “modern money works” to expose this scam, but they have chosen instead to lobby for more of it.”

Commenting on this statement, Joymo writes:

I don’t think you’ve taken an honest look at the the positions of MMTers. One of the key points of MMT is that it shows that the state **doesn’t need to issue treasury bonds to finance itself at all**

Most MMTers call for an abolition of the treasury bond system and correctly equate it to “welfare for billionaires”.

I also get the feeling you haven’t fully digested the theory when you say things like: “In return for this service to the capitalist of generating riskless financial assets for them to hide their dead capital from devaluation, Washington get to consume the excess capital unproductively to build the largest military in human history.”

No, the whole point of MMT is that a powerful enough state could do this anyway, with or without the capital of the capitalists.

Joymo misunderstands my argument. I readily accept that, within certain definite limits, the state can finance its operations without taxing or borrowing. This was not the point of my post. As simple as it appears, however, the last statement by Joymo, that a powerful enough state could could build the largest military in human history, with or without the capital of the capitalists, is really quite wrong.

Doug Henwood is not the only simpleton who spends a lot of time weirdly bashing MMT

I am sure Doug Henwood has read this recently published paper by Larry Summers, On falling neutral real rates, fiscal policy, and the risk of secular stagnation. If not, he should at the earliest opportunity. The paper literally shreds his argument against modern monetary theory.

Summers paper should remind Henwood how dishonest his own examination of MMT was.

Which is fascinating,considering how little the two men are thought to have in common. Henwodd styles himself a socialist and “critiques” — if that is the word — MMT from the standpoint of the radical Left. Summers, by contrast, is the archetype neoliberal, a former economic adviser to Presidents Clinton and Obama.

Henwood essay on MMT is a sloppily written diatribe that never quite gets to any real point. While Summers employs complex mathematical models to demonstrate that what Washington calls a neutral real rate of interest may be significantly negative were Washington not running massive fiscal deficits. This means conventional fascist state economic policy as it has been implemented since the great stagflation of the 1970s is dead — and, it is likely capitalism may soon be joining it unless some variant of modern money theory is adopted — and quick.

Oddly enough, however, despite their differences, Summers, like Henwood, seems rather perturbed by MMT despite appearing to argue for it.

Did someone drop yellow vest protesters on their heads when they were infants?

Say you want to hurt Macron, right? Say you want to see him down on his knees begging for mercy.

What do you do?

In France, you spend your free time on weekends protesting his austerity program, right? Eighteen weekends in a row that you could be spending with you family and friends you sacrifice to make the point that you don’t like Macron’s policies.

And then, on each Monday, like good little boys and girls, you report back to work to create more surplus value for Macron, the capitalists and the fascist state, satisfied that you really, really showed that asshole how much you dislike his policies …

… that you made possible with your wage labor on Mondays.