Decoding the Ideological Bullshit of a Bourgeois Simpleton

by Jehu

This is part 1 of a two part post.

Labor theorists of various persuasions have spent a lot of time discussing the causes of the present crisis. That discussion is extremely important, because it seeks to find Michael+Spence+Goodbye+Globalization+Forum+3SVoSUyrYW4lthe causes of the crisis that result from its fundamental premises. However as important as this discussion is, it is clear the crisis continues and the capitalist class is not so much concerned about its cause, as it is about how to cure it. In this spirit, I spent some time trying to understand how exactly the capitalists think the crisis will be resolved. In an essay, published by Project Syndicate, “What’s Stopping Robust Recovery?”, Nobel Laureate Michael Spence explains why the so-called “recovery” isn’t robust and what has to be done to change this.

(WARNING: you will need to set your Marxist decoder ring to “simpleton” in order to translate this bullshit.)

1. The problem of recovery in the aftermath of the 2008 crisis

Spence begins explaining the problem facing the world economy:

“The growth map of the global economy is relatively clear. The US is in a partial recovery, with growth at 1.5-2% and lagging employment. Europe as a whole is barely above zero growth, with large variations among countries, though with some evidence of painful re-convergence, at least in terms of nominal unit labor costs. China’s growth, meanwhile, is leveling off at 7%, with other developing countries preparing for higher interest rates.”

For Spence, the question is why “economic recovery” is so tepid in the advanced countries, and his answer is simple: “Many advanced economies must still address the end of the pre-crisis growth pattern generated by excessive domestic demand.”

This is where your “simpleton economics to labor theory” decoder ring will come in handy: The term “growth”, as employed by Spence means the expansion of the production of value, or the expansion of socially necessary labor time; it should not be confused with the increase in the production of material wealth. Although it is true that the expansion of socially necessary hours of labor is conflated by Spence with the expansion of material output, this latter expansion is itself measured, not directly in the form of production of actual use-values, but in terms of the aggregate prices of the commodities produced.

I want to suggest, therefore, that Spence is really asking why the expansion of the total labor time of society has been so weak. To put this another way, Spence is asking why the expansion of gross domestic product, i.e., aggregate prices, is so tepid in the advanced countries. But these aggregate prices are nothing more than the aggregate exchange value of the mass of commodities produced; and this aggregate exchange value is, in labor theory, the phenomenal form of the value of these commodities — the expression of the values, or socially necessary labor time required to produce the commodities, in a particular money-form — fascist state issued currency.

Thus it would be wrong to imagine that Spence is discussing the expansion of the material wealth of society or the expansion of the real consumption of this wealth by society. His sole concern, as we will see, is that labor time of the working class should expand, whether or not this results in an actual increase in material wealth enjoyed by society. “Recovery” (defined here as expansion of value production and the growth of exchange value or prices) only aims to increase the labor time of the working class.

This has to be emphasized since many critics of state policies never realize the whole of state management has as its aim the extension of hours of labor, not satisfaction of human wants.

Spence says advanced countries must still address the problem that before the crisis most of the expansion of social labor time took the form of excessive “domestic demand”. Spence doesn’t explain what he means by this — and he needn’t since he isn’t speaking to us, but to a closed circle of technocrats employed by the fascist state. The term, “domestic demand”, is his way of saying that the largest share of the produced value of the advanced economies was consumed within the home market.

Moreover most of this consumption was financed by debt, i.e., it was not paid for by the proceeds of a previous sale of a commodity. The person who consumed the value did so on the basis that the value was advanced to him by the owner of another commodity. The value consumed in this way did not add to the total sum of value produced, but only consumed value that had already been produced. Since no commodity was produced by the consumer of the credit financed commodity, the time has come to make the consumer pony up.

According to Spence, if this value is to be made good, it has to come from expansion of what he euphemistically calls the “tradable sector”. What, you may ask, is the “tradable sector”? Good question. According to the wiki:

“The tradable sector of a country’s economy is made up of the industry sectors whose output in terms of goods or services are traded internationally, or could be traded internationally given a plausible variation in relative prices. Most commonly, the tradable sector consists largely of sectors of the manufacturing industry, while the non-tradable sector consists of services, including health, education, retail and construction.

Tradable jobs can be performed by individuals outside a country: manufacturing, consulting, engineering, finance. Non-tradable jobs can realistically only be performed by domestic workforce: government, health care, hospitality, food service, education, retail, and construction.”

The “tradable sector” is a dog whistle term — a term that has meaning to one portion of Spence’s audience but not the other. Think of it as the economist’s version of “those people”, or “underclass”, “the poor”, “the sub-prime borrower”, etc. These are dog whistle terms used by white people to refer to black people, without actually being rude enough to call them “the niggers”. Well, rich people have their own dog whistle terms for white people who aren’t rich. They call them, among other things, “the non-tradable side of the economy”. When Spence speaks of “the non-tradable side of the economy”, he is talking about everyone who is part of the working class, including “the niggers”.

The consumption of this “non-tradable side of the economy” was supported by credit over the past two decades or so, but now is the time to repay the debts. This debt, if it is to be repaid, “will depend on the tradable sector’s growth potential.” The tradable sector is that portion of the working day that can be turned into exports, while the non-tradable sector is the portion of the labor day during which the working class produces its wages and state social expenditures. The goal of “economic restructuring” (or “rebalancing”), as Spence sees it, is for a given country to consume less of what it produces and export more at the expense of its own consumption.

According to Spence then, the expansion of socially necessary labor time (i.e., the production of value) depends on the growth of exports. And here is how he thinks exports can be expanded:

“To realize that potential, the tradable sector has to re-expand at the margin: as a weakening currency causes imports to fall  and real unit labor costs decline as nominal wages flatten out, unemployed labor and capital flow toward external markets  for goods, services, and resources.”

Spence proposes that the currency must be depreciated, which will, in turn, cause the real purchasing power of money wages to stagnate; this, in turn, will reduce real wages and the ability of the country to import. The resulting “adjustment” will force constant and variable capital of the country to flow into forms of commodity production that can be exported.

So, according to Michael Spence, Nobel Laureate in Economics, the way to resolve the problem of expansion of socially necessary labor time is to turn every advanced national capital into a export platform as has already been done with the less developed nations. If one country can expand total labor time by exporting its surplus capital, surely all countries can do this at the same time.

There is nothing wrong with this picture, right? We’ll examine it in part two of this series.