John Bellamy Foster’s dead end ‘socialist strategy’

by Jehu

Michal_KaleckiIn an article published on the Montly Review website earlier this year, John Bellamy Foster manages to devote 5000 words to the source of capitalist crisis (SPOILER ALERT: he’s against capitalist crises) and a strategy for dealing with it, without mentioning reduction of hours of work even once. He wants us to know the crises do not happen because the capitalist class is “too weak” and a working class was “too strong.”

So why do capitalist crises occur? Foster borrows an answer from Kalecki.

“For Kalecki, the power of labor to increase money wages—although present to a minor extent in the normal business upswing—was not a significant economic threat to capital even at full employment due primarily to the pricing power of firms. Hence, if the system neglected consistently to promote full-employment through the stimulation of government spending this was not to be attributed to economic reasons per se, but rather to the political threat that permanent full employment would represent to the capitalist class. With “the sack” no longer available, the overall social power of the capitalist class would be diminished. The “rise in wage rates resulting from the stronger bargaining power of the workers,” he observed, “is less likely to reduce profits than to increase prices and thus affects adversely only the rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated by the business leaders than are profits. Their class instinct tells them that lasting full employment is unsound from their point of view.” It was in this context that he introduced his famous notion of the “political business cycle,” whereby the capitalist state would alternate between promoting full employment and balanced-budget austerity, generating a “controlled under-employment.”

I am completely speechless: First Foster asserts inflation is caused by wages being too high, then he asserts unemployment is political. But both of these arguments pale in comparison to Foster’s argument a recession is caused by the state “neglecting” to promote employment? Where in all of labor theory is it the state’s responsibility to promote full employment? I have read volume 1 of Capital and a good part of volume 3 and never came across this argument from Marx, so it must be in volume 2, right? Somewhere deep in the bowels of volume 2, Marx explained that the state should be out there promoting full employment?

Why do I find this idea preposterous?

It should be added there was no “severe downturn of 1974–1975, which marked the end of the post-Second World War prosperity.” In 1974, the Federal Reserve engineered a contraction of credit in a failed attempt to slow down the inflation it had helped create. The “recession” of 1974-1975 was completely manufactured by the state.

Now why would the state manufacture a recession? Simple: With the state counterfeiting currency to cover up a depression, the “economy” was tilting into hyperinflation. The depression which “marked the end of the post-Second World War prosperity” — a terrible statement — began in 1971, not 1974. The contraction phase of this depression extended from 1971 until 1981 — not 1974-1975. In fact, as far as I can tell, all of the recessions up until 1991 were manufactured by the fascist state — they were credit events. Every time the state’s counterfeiting of the currency got out of hand, the Fed stepped in and choked it off.

Foster spends the greater part of his article arguing against what he calls “the “profit-squeeze” theory of crisis.” The term looks just enough like the law of the tendency for the rate of profit to fall to be confusing. However, this so-called “profit-squeeze theory” blames rising wages, not the rising organic composition of capital for falling profits. Says Foster,

“Empirically, the slump was commonly attributed to a rise in the wage share of income, squeezing profits.”

The refutation of this silly theory rests on an equally silly argument by Kalecki: An

“increase money wages … was not a significant economic threat to capital even at full employment due primarily to the . pricing power of firms.”

As close as I can figure, Foster is suggesting capitalist firms under monopoly capitalism can pass higher wages on to consumers — a power that requires us to give up altogether on the labor theory of value and its argument on prices and exchange value. According to Foster:

“The ‘rise in wage rates resulting from the stronger bargaining power of the workers,’ he observed, ‘is less likely . to reduce profits than to increase prices””

So who is paying these higher prices? Anyone? Anyone? Bueller? It seems the higher prices are paid by the “rentier”. Thus,

“Full employment has little net effect on wages, but it does effect “‘discipline in the factories’ and ‘political stability’”.

This is argument by Foster seems to be lifted almost in its entirety from a lecture Kalecki gave in 1942, when unemployment in the United States was — what? — near zero?


Employment at the time was falling from a 1941 high of 10% to a 1944 low of about 2%. Not only this, 16 percent of the labor force was in the military and 40 percent of the economy was devoted to the war effort. Moreover, over that period, Washington built 1500 new military-related factories from scratch. Massive shortages occurred everywhere and the daily consumption of the working class was actively restricted by rationing. So where in all of this feverish expansion was there a breakdown in factory discipline and political stability? Foster never even challenges Kalecki’s argument with the data at the very moment Kalecki was giving this lecture to the Marshall Society.

Moreover this situation was not confined to the United States: Germany first announced full employment in 1936 to an astonished world. Japan also had full employment — in fact, so far as I can tell, “the sack” was not available in any industrialized country at the time of Kalecki’s lecture. Under more or less direct state war-time management, industry was running balls to the wall trying to pump out as much military materiale as possible, in as short a time as possible. Where was the capitalist “class instinct” that told them “lasting full employment is unsound from their point of view”? Moreover where was the lack of factory discipline and political instability Kalecki predicted?

Monthly Review reprinted the lecture 30 years later in 1972, with more than enough time to test Kalecki’s hypothesis with the empirical data. It has now been 70 years since Kalecki’s lecture. Has Monthly Review published any data showing correlation between employment levels and strikes in any country in the world market? Between the end of World War II and 1982 there were 9 Federal Reserve Bank induced recessions in the United States. Which of these deliberate economic downturns was induced because of the lack of factory discipline or political instability?

Here is a list, Mr Foster, of all the panics, depressions and recessions since 1789. Please point to one confirming Kalecki’s hypothesis. (See, this is the sort of bullshit I rant about. Worthless academics who can just pass off any shit they want as labor theory.)


According to Foster,

“Some economic analysts on the left, however, rejected the profit-squeeze view from the start. Although they had given prominence to this perspective by publishing Boddy and Crotty’s article, Monthly Review editors Harry Magdoff and Paul Sweezy belonged to the same broad Marxian theoretical tradition as Kalecki and Steindl. For these thinkers the main economic contradiction of monopoly-capitalist accumulation in the post-Second World War period was seen as lying on the demand side rather than the supply side, reflected in a tendency to underutilization of productive capacity associated with problems of surplus absorption endemic to the system.”

There is, in other words, not a tendency toward a fall in rate of profit as in labor theory, according to Foster, but toward stagnation, toward “underutilization of productive capacity associated with problems of surplus absorption endemic to the system.”

What does this even mean? 1. We have underutilization of productive capacity; 2. this underutilization is “associated” (how?) with problems of surplus absorption; and 3. this problem of surplus absorption is endemic to “the system”.  Note here there is not a problem of ‘surplus production’ but of surplus absorption. Exactly which “system” are we speaking of here? Are we not speaking of the capitalist mode of production? Is not the capitalist mode of production the production of surplus value? So when Foster explains there is a problem of “surplus absorption”, could he possibly mean the absorption of surplus value?

Which is to ask, does Foster think the problem is too much “surplus” in the abstract or too much surplus value, i.e., surplus labor time? And how do you solve the problem of too much surplus labor time? We are, in other words, not talking about “underutilization of productive capacity”, but “overproduction of capital”.

The difference here is critical: If the problem is framed as an overaccumulation of capital, the solution is to stop producing surplus value. How do you stop producing surplus value? You simply reduce hours of labor. But Foster doesn’t want that; he wants a role for the state. Which means we mustn’t frame the problem as the “overproduction of capital”, but instead as the “underutilization of capital” — what he calls productive capacity. If the problem is posed as underutilization rather than overproduction, the solution proposed can be fascist state measures to increase utilization.

Foster is trying to make a case for state intervention, not the abolition of wage labor (which other aim he only finds room to append at the end of his post). He is building a case, not for the abolition of wage slavery, but for more fascist state intervention. So there is this bizarre thing where John Bellamy Foster deliberately poses capitalist crises in a way that requires statist solutions. He could have just as easily posed the problem in a non-statist way, but he is an ideologue pure and simple. There is, among Marxists, people who really don’t think it is “socialism” unless the bourgeois state is involved in the solution. Not some future “state of the working class”, mind you — I’m talking about the present bourgeois state, drones, dead children and all.

Although this idled capital clearly presupposes a previous overproduction of capital, drawing attention to overproduction of capital doesn’t fit Mr. Foster’s objective: to lobby, along with that fascist ideologue, Paul Krugman, for fascist state intervention in the “economy”. While for Marx, the overaccumulation of capital — resulting from a falling rate of profit — itself produces a plethora of excess small dispersed capitals and a mass of superfluous workers, Mr. Foster prefers to treat the two masses as under-utilized. This way, he can argue for fascist state intervention aimed at a problem “lying on the demand side rather than the supply side”.


So here is an interesting thing: at this point Foster offers us reason why the 50s and 60s were periods of “prosperity”. And then we are transported to the 80s and 90s, where the stagnation predicted by the Monthly Review school did not emerge as  … predicted. In between the 1960s and the 1980s was a period giving rise to “the financialization of the capital accumulation process”. This “financialization of the capital accumulation process” operated as a countervailing tendency that, along with military spending, lifted the economy.

I’m having a hard time with this argument, first, because Foster clearly does not even realize there was a depression in the 1970s. Second, he does not even realize the bottom of the depression occurred just before Reagan took office; leading to a new expansion. Third, he does not even notice the sudden massive inflows of capital into the US following the Volcker shock in the form of both federal budget and trade deficits.

For the Reagan years, the federal budget deficit averaged $237.5 billion — 4 times the previous administration.


And here is the explosion in the US trade deficits emerging out of the 1970s depression:


Essentially, the entire planet was sending us all of their stuff for free! And all they asked for in return was a growing mass of IOUs that can only be repaid in worthless dollars!

Might the sudden massive flows of capital into the United States have something to do with the expansion coming out of the 1970s depression? How would Mr. Foster know, since he doesn’t even know there was a depression in the 1970s or an expansion in the 1980s and 1990s. All he knows is that there was a “financialization of the capital accumulation process” — whatever the fuck that means.

To be clear, “financialization of the capital accumulation process” basically means people send us shit, and we hand them treasury bills and bonds. It’s called “financialization” because real shit is being exchanged for financial instruments like treasury bonds that are worthless.

You can try this at home: just pay for everything you buy with IOUs. If someone asks to be paid, write the total you owe them on another piece of paper and hand it to them. All set! You’ll probably go to jail for this, but you will prove Marx right. The working class and the entire planet is being starved by the Washington’s “inexplicable privilege”.


I have pointed out that Foster deliberately set out to make a case for fascist state management by suggesting the main economic contradiction of monopoly-capitalist accumulation after World War II is a tendency to underutilization of the existing capital. This sleight of hand, is an attempt to redirect our attention away from Marx’s argument regarding the overaccumulation of capital to the utilization of this excess capital after it already has been produced. The law of the tendency for a fall in the rate of profit produces a mass of superfluous (i.e., underutilized) capital and a superfluous (i.e., underemployed) population of workers.

This overaccumulation arises from the basic imperative of capital toward constant self-expansion. The definition of capital, self-expanding value, already presupposes overaccumulation and for this overaccumulation to become absolute. It therefore includes the possibility — actually, the necessity — that an ever increasing mass of capital and an ever increasing mass of workers are idled.

But what does it mean to be idled in this case? It means an increasing mass of capital and workers no longer find a place in productive employment within the narrow confines of the mode of production. There is no overproduction of material wealth in general, but an overproduction of material wealth that can take the form of capital. Material wealth that takes the form of capital is material wealth whose production only serves to produce surplus value. With overaccumulation of capital, we do not arrive at the limits of the possibility of producing material wealth, but only the limits of the possibility of producing material wealth in the form of capital.

Strangely for someone who claims to be a Marxist, Mr. Foster considers this limitation a defect that must be remedied by the fascist state. We have encountered the limits of the production of surplus value, of profit and of exploitation itself, but Mr. Foster wants to preserve it. In this he proves himself demonstrably to be not a follower of Marx, but a follower of the Keynesian fascists who, as Krugman explains, “came to save capitalism, not to bury it.”

This is why Foster considers the “main contradiction” of our times, not the overproduction of capital, but the subsequent underutilization of this excess capital. There is, according to Foster, not enough exploitation, not enough profit, not enough extraction of surplus value from labor. The intervention of the state is required to remedy this by lifting wages because “capital was too strong, labor too weak.” This should serve as context for looking at Foster’s argument on wages in the second section of his paper.

According to Foster’s reproduction of Kalecki’s argument,

“Kalecki contended in 1944, in an analysis with which Keynes agreed, that the main routes to full employment were either by means of increased government spending or by income redistribution. The income-redistribution path to full employment, he argued, necessitated politically “squeezing profit margins” through taxes on capital.”

The solution offered by Kalecki then, to the approval of Keynes — because, apparently, the fascist Keynes’s approval is what should matter to Marxists —  was that excess profits of capital had to be squeezed through taxes.

Foster never even notices we are now already addressing the mirror image of the actual problem as predicted by Marx. In Marx’s view the problem was one of absolute overproduction of capital; in Kalecki’s view this overproduction has resulted in a mass of underutilized capital that the state should expropriate through taxes. Capital, in other words, continues to operate as before, but the surplus value produced — to the extent it cannot be productively employed — must end up in the coffers of the state.

Why did Kalecki want to address the problem this way? If clearly the source of the problem was overproduction, why did he think this could be addressed simply by taxing away the profits of capital? The problem here obviously is not the profits of capital, but the capital itself, which is already overaccumulated and adding to the crisis.

So, what sort of airhead runs around with a fucking mop trying to clean up a wet floor when both faucets are still going full blast and the sink is overflowing?

Honestly, I am not trying to score points here — what sort of airhead counsels this sort of action? Simple: One who is dealing with the fact that “Capital is too strong, and labor too weak.” Foster counsels this sort of strategy because he thinks this is the only possible strategy available. And this difficulty is not unique to the Monthly Review school. Marxism, to the extent it has reached the conclusions of the MR school, knows the problem lies beyond redistribution. But this problem appears well beyond the capacity or consciousness of the mass of the working class to address.

But here is the problem: if the class is too weak to address the overproduction of capital, how is it strong enough to address the results — underutilization of this overproduced capital? Somehow you have to smuggle in the notion that the working class may not be able to directly address excess profits, but it can address inadequate wages. Thus, John Bellamy Foster spends an inordinate amount of time trying to show why, according to Kalecki, higher wages means higher profits. He hopes he can prove that this path is a win-win for both “productive classes” and only operates against “the rentiers”.

It is necessary to show this is, in fact, not true: the biggest recipient of the social product under a Foster/Kalecki scheme are “rentiers”

In his 1844 manuscripts, Marx describes the characteristics of this rentier: The rentier “consume[s] his capital himself”, i.e., unproductively, in a fashion that does not add to its accumulation. If we were to employ this term loosely, it might be called a form of capital that is not employed productively either directly or as loaned capital. Roughly it would correspond to the term fictitious capital, but with the caveat that this capital is not even indirectly related to the growth of real production.

Is there a form of capital that might correspond to a concept similar to the rentier and to fictitious capital, but is not even indirectly related to the growth of real production?

Yes. Fascist state debt.

With fascist state debt, the money-capitalist lends his capital to the state, which then consumes it unproductively; and the state pays interest on this debt by counterfeiting its currency. In fact, we find empirically that just as the United States emerges from the depression of the 1970s, a massive inflow of capital occurs, which is absorbed by the fascist state. The mass of already produced superfluous capital, which, according to Foster himself cannot find profitable outlets for investment, is absorbed by the fascist state, which, in turn, now pays interest on it. This allows for the momentary restoration of profits that produced the expansion of the 1980s and 1990s

But this is the important part: it did it WITHOUT any improvement in wages whatsoever. The very same assumptions that argue “even if we cannot address excess capital, we can address inadequate wages”, leads to the conclusion that neither excess profits nor inadequate wages are addressed. If capital is too strong to address the problem of excess capital, it is too strong to address the problem of falling wages. And the logic of the Monthly Review school, as explained by Foster, leads us into a dead end as usual.

The problem Foster faces here is that a working class unable to impose revolutionary change on society cannot impose reforms either. The argument made by Marxists is that, somehow, the working class might be too weak to impose revolutionary change but still able to impose some minimum of limited reforms, like a rise in wages. No one has demonstrated this has ever been true. The argument rests on the assumption that the capitalists will have no choice but to concede to a somewhat restive class to keep it docile.

When did that ever occur? I distinctly remember something called Hitler’s Germany. Precisely in Germany we find, in the 1930s, the most organized, developed and politically aware proletariat in Europe — and the solution the bourgeoisie chose to address this class’s demands was Auschwitz.

Marxists are fucking delusional. They have this narrative about capitalism that is a complete fantasy. We just cannot continue to be this goddamned naive about how capitalism works.