Class Struggle and the Breakdown of Production Based on Exchange Value

2002_currency_exchange_AIGA_euro_moneyYou have to notice what the labor theorist, George Caffentzis, asserts in his essay “Marxism After the Death of Gold“. Although, according to Anitra Nelson, Marx believed the credit system itself “signals the disintegration of capitalist relations”, according to Caffentzis, the final detachment of the credit system from gold refutes Marx. Caffentzis and other labor theorists had two ways of interpreting Nixon’s actions in 1971: the death of capitalism or the death of labor theory.

Guess which one they chose.

For labor theorists like Caffentzis, the collapse of the Bretton Wood agreement wasn’t a signal that production on the basis of exchange had finally broken down completely, rather, it was a signal that Marx turned out to be completely wrong about such an elementary and fundamental category of his labor theory as money.

Thus, throughout the 1970s, we have these Marxists who are trying to explain the relationship of the state to the mode of production yet don’t even realize production based on exchange value no longer exists. Moreover, as the recent publication of Caffentzis’ essay demonstrates, even 40 years later they don’t realize it. Yet we are expected to believe these labor theorists are able to explain the relationship of the state to a mode of production that effectively ceased to exist in 1971?

It is, of course, a heresy these days to suggest production on the basis of exchange value no longer exists, despite the fact Marx predicted just such an outcome. Even if Marx had not predicted precisely this outcome, all the evidence at the disposal of labor theorists point to this conclusion. The fact that on top of Marx’s prediction, the evidence available to labor theorists supports this conclusion only makes their errors that much more egregious and unforgiveable.

If production on the basis of exchange value had already ceased to exist by the time of the debate of the 1970s, what then was the “function” of the state? The question answers itself: the function of the state was to facilitate the production of surplus value in a period where exchange value no longer existed. The production of surplus value did not cease, but the newly produced surplus value could no longer be expressed in the form of exchange value. To be expressed in the form of exchange value required a commodity money to serve as standard of prices, however, in 1971, the US was forced to end redemption of dollars with gold under the Bretton Wood agreement. Henceforth dollars could only be redeemed for dollars, or, what is the same thing, the dollars themselves become “world money”. The role played by gold as world money came to an end along with breakdown of production on the basis of exchange value in the world market.

Facilitating the production of value amidst the breakdown of production based on exchange value is not a function of the state in general; rather it is a function that can only be played by one state in particular: Washington. No other state has this capacity and, therefore, in relation to Washington, all other states are merely failed fascist states. Thus, by the 1970s, the relation of the state to the mode of production came down to the relationship of Washington to the total capital of the world market.

Since the relationship of “the political” to “the economic” (as Clarke puts it), is the relation of any given state to the total capital of the world market, it is obvious that, contrary to Holloway and Picciotto’s argument, the class struggle of any country has no impact whatsoever on this relation. The class struggle in Britain is over which class will control the state power in Britain, but the state power in Britain has no control over the total capital of the world market. The same, with more or less the same degrees of validity, can be said of the class struggles in Greece, Spain, Russia, Ukraine, etc.

What does it mean to say production on the basis of exchange value finally broke down in 1971? It means, in first place, that capital could no longer become money and, unable to become money, could not be exchanged for labor power. As explained in Wage Labour and Capital,

“Capital perishes if it does not exploit labour-power, which, in order to exploit, it must buy.”

To exploit wage labor, capital must first become money, i.e., the surplus value produced exploiting labor power must be realized in a sale. The breakdown of production on the basis of exchange assumes no more than this leap of value from commodities to money cannot take place. This is exactly the situation France and other advanced capitalist countries found themselves in when Nixon closed the gold window. The dollars they accumulated through trade surpluses with Washington were only placeholders, tokens, of money to be redeemed for gold. When Nixon refused to redeem the dollars for gold, these countries were forced to recognize the dollar as “money”, just as previously their own citizens were forced in the 1930s to recognize the tokens issued by each state as such.

But the recognition of US dollars as “world money” amounted to the exchange of commodities for a symbol of money having no value at all. It was, in fact, the recognition that the commodities themselves had no exchange value and, therefore, that the surplus value they contained could not be realized. Although nations protested this state of affairs, outside the dollar zone the limits of surplus value realization was severely constrained.

To realize the surplus value in the form of a trade surplus, this trade surplus had to be realized in the form of valueless American tokens. And this was because no other nation was willing or able to run the trade deficit necessary to absorb the excess capital accumulating within the world market. Just as Keynesian style deficit spending had been shown to be necessary to avoid depression within each nation, the deficit spending of the United States was now a condition for production of surplus value in the entire world market.

8 thoughts on “Class Struggle and the Breakdown of Production Based on Exchange Value”

  1. It is not clear what you are addressing. What do Holloway, Clark, and Picciotto’s interventions in the state debate in the 1970’s and early 80’s have to do with your point about exchange-value no longer existing?

    They were specifically addressing the problem of how we could talk about a capitalist state as such (the problem of historical particularization) and how we could call all states in the world today capitalist in spite of their particularities.

    As such, the discussion was about the functionalist analyses of the state given by Engels and Lenin and the attempts to overcome them by people like Nicos Poulantzas and Ralph Milliband, representing Althusserian Eurocommunism and Social Democracy respectively. Neither in the end does a very good job of comprehending the state in relation to the value-form, that is, to the central form of capitalist social relations.

    Holloway, Picciotto, et al argued that the capitalist state as such comes into existence as an expression of the separation of life into discrete “spheres”, especially the separation of production wealth from the power to secure the mode of production. In other words, the capitalist state is not a capitalist state because “it” is a thing controlled by the capitalist class, a container waiting to be filled with a class content. Neither is the state an object with “relative autonomy”, since that only is a more sophisticated version of the former.


    1. In historical materialism the state is “relatively independent” of the bourgeois class because of the nature of the bourgeois class, not the nature of the state itself. The class itself is riven by competition and is on hostile terms with each other. Their common material conditions as a class, therefore, achieve an independent existence over against them as members of the class. The state is the ideal representative of this common interest only — of the interest of the class only when taken as a whole. The state in no way represents the sum of interests of the individual members — still less, is its form determined by the class struggle.

      This is still not understood by one Marxist in a thousand today.


      1. That explains exactly nothing. The nature of the bourgeois class does not explain capital or the state. There is not even a class in that sense. Class is a relation (Postone understands this, you do not), not individual entities “related” to each other. There is the capital-labor relation, but no one should care about the capitalist class or working class. The point of the abolition of class is the abolition of the entire relation.

        The state is a social form in the same manner in which Marx speaks of the value-form, commodity-form, etc., that is, as a specific social determination of the capital-labor relation. That all the relations of capital are antagonistic and contradictory (that is, both poles of the relation subsist only through their mutual opposition) was the original meaning of the class struggle as determination, that is, a “structural”, constitutive condition, not the phenomenal, day-to-day struggles.

        Your way of posing it, on the other hand, is a tautology. What “common material condition”? All classes in capitalist society are “riven by competition” and are “hostile with each other”. So maybe all states are workers’ states, by that logic.


      2. Yes. In the sense you discuss, the proletariat is exactly the same as the bourgeois class. With this exception: unlike the bourgeois class the proletariat has no interest to assert against the ruling class. Hence it is in position to abolish all classes.

        Frankly I am suspect of your interpretation of Postone, so i will not comment on it unless you give me a specific piece of his to refer to. However, my understanding of classes is based directly on Marx and Engels here:


  2. I don’t think we can say that production based on exchange ended in the 1970s or that US dollars are valueless tokens.

    I think of “exchange value” as describing a relation among all commodities.

    The exchange value of a unit of commodity X is a summary of its instantaneous price relation to units of commodities A, B, and C at the moment of exchange. Exchange value describes the ratios in which various commodities can be, in effect, exchanged at a given point in time.

    Exchange value meaningfully exists so long as there is a good tendency towards short and medium-term price stability, allowing price comparison across many commodities within the temporal scope of a small number of cycles of production.

    Consequently, the specific price establishment role in of a commodity money like gold is incidental: merely an accounting and technological convenience at certain points in history. What counts is the ratio of prices among all commodities.

    Moreover, I think that in the modern era capitals are more apt than in the past to plan in terms of the dynamic, relative prices among commodities — rather than thinking simply in terms of price. They have more information and compute power available to them for modeling whole markets.

    The switch from a gold-pegged dollar to a system of floating fiat dollars doesn’t signal the end of production based on exchange so long as there is some short and medium-term price stability under the fiat (after the initial shock).

    That leaves the question of what the removal of the gold peg did mean.

    One place to begin answering is to look at the accumulated debt of the world currency sovereign (the U.S.). What does it man?

    The accumulated debt of the U.S. is a large slice of an even larger pie of accumulated reserves.

    Reserves in general, considered in isolation, can be described as unrealized profits: capitalist exchange frozen at the mid-point. A capital has exchanged some useful commodity for money but has not spent the money. The capital holds reserves.

    That’s why quantities of reserve instruments are usually measured in the same unit as the market price of the instrument.

    Over time, the exchange value of reserve instruments (treasuries, dollars) evolves as the price ratios among commodities evolves.

    Speaking informally, “excessive” reserves can be a symptom of a general condition of over-production. Capitals collect a nominal profit on what they sell. There being too few opportunities to realize the profit it becomes added to reserves. This can become in some sense “excessive”.

    What might “excessive” mean? Perhaps: If concentrated reserves grow to several multiples of global product, then the reserves represent unrealized profits that could not even be realized over the course of a few production cycles. Nobody can meaningfully say what the totality of reserves are worth, at that point, except as relations among one pile of reserve instruments vs. another. The whole totality of reserves has no price-stable meaning in exchange, anymore.

    The existence of excessive reserves *does not* make meaningless the value of reserve instruments in general.

    What is meaningless with excessive reserves is the exchange value of *highly concentrated reserves*.

    In contrast, diffuse supplies of reserve instruments — money actually in circulation — can still be regarded as having a meaningful exchange value (which by definition is revealed through the ratios of various prices). For example: the exchange value of $1.00 in currency may revealed in the price of a cup of coffee. At the same time question of how many cups of coffee can be bought for seventeen trillion dollars is meaningless.

    Reserves “considered in isolation” are unrealized profits, but what happens when they are “loaned” to the government?

    Unrealized profits in the form of reserve instruments represent claims on future surplus. Actual surplus, in contrast to these claims, is manifest in concrete and useful form (e.g., a new factory).

    The U.S. policy of matching deficit public spending with borrowing of reserves enables a kind of conversion of (some) reserves into manifest, concrete form.

    The mechanism is that the government “borrows” reserves and spends the corresponding amount in markets. The government “borrows” the realization of the unrealized profits that reserves represent.

    Much less than 100% of new reserves are converted in this way to manifest surplus. In particular, the government also borrows to refinance old debt and debt service. Only the portion of government borrowing associated with other forms of spending is actually realized in manifest form.

    In a condition of excessive reserves, for all intents and purposes some portion of accumulated reserves will never be spent. It will be continuously refinanced. Let’s call this “permanently unrealized profit”.

    Some fraction of permanently unrealized profit may represent “missing output” from existing real productive capacity that stands idle for want of profitability.

    Here is a concrete example: Suppose that there is food deprivation in the world. Suppose that wage labor could be hired to grow and distribute more food to the deprived. Suppose this could only be done on a break-even basis.

    Capitals may choose not to hire that labor and produce that food if that refusal protects their rate of profit.

    If the profits a capital protects this way are not realized, but instead become permanently unrealized profit, the net effect is to maintain a condition of deprivation in a process necessary to create a demand for wages.

    Another fraction of “permanently unrealized profit” is neither idled capacity, nor is it realized as real government spending. This final fraction of reserves is a nominal profit that is never realized and never could have been realized. That raises the question of what it is. Is it some kind of accounting error?

    I think we can describe the unrealizable profit as an accumulation of unearned rents that reflect the pricing power of (some) sellers. Some portion of nominal wages, once spent, ultimately becomes unrealizable profit. Capitalists compete over many things, including that seemingly valueless fraction of wages: unrealizable profit.

    Holders of large amounts of unrealizable reserves literally can’t spend it all. Nevertheless, holding such large quantities of nominal reserves gives them “economic superpowers”, informally speaking.

    For example, an economic superpower can attempt to corner some markets, constrained mainly by the inflationary effects of their own spending. Even when excess reserves grow quite large, the relative size of “economic superpowers” of major reserve holders are a point of competition.

    Finally, even if an economic superpower holds so many reserves that adding marginally to them has no effect, still, the superpower has incentive to keep competing for unrealizable profits to prevent those unrealizable profits from accumulating to others.

    Capital controls provide a check on the exercise of economic superpowers. (This is a clear example of the state implementing a class interest of bourgeoisie that is not identical with the individual interests of members of the class.)

    What if the dollar were pegged to gold?

    If there were never any run on gold the peg would not be operational and it would be exactly like the post-1971 situation.

    On the other hand if there was demand for real convertability, then whatever capitals are able to command enough pricing power should use that power to accumulate gold reserves … until an oligopoly of such capitals has cornered the market enough that demands for convertability are sufficient to cause sovereign defaults.

    At that point other capitals either accept those winners as having a monopoly on credit or else they give up on money pegged to gold.

    In the presence of the imminent concentration of pricing power sufficient to corner gold or any other potential commodity-money, it makes sense that a critical mass of capitals would agree to switch to nominal pricing in floating fiat currencies (rather than gold). Again, so long as prices (after the shock) tend to be somewhat stable in the short to medium term, exchange-based production can continue.

    (Who knows: Maybe by 1971 oil producing cartels were seen as imminently in possession of enough pricing power to corner gold.)

    A switch to fiat money allows reserves to be meaningfully accumulated (to acquire economic “superpowers” and to try to prevent others from doing the same). At the same time capital controls provide a check on those superpowers and, in any event, no amount of reserve hoarding can create a monopoly on credit. It would appear that permanently unrealized reserves can accumulate forever, in any quantity because they will not ever be deployed en masse. It would appear that they will tend to accumulate indefinitely, so long as capitals compete to obtain or block economic superpowers.

    (I wouldn’t claim to be able to quantify what portion of current reserves are permanently unrealizable. I would guess the number is relatively small on the basis of comparisons such as: China’s USD reserves are about the price of one year’s worth of crude oil production. The US national debt is about 6 times as large as that.)

    Finally, there is the question of whether U.S. dollars after 1971 became “valueless tokens”.

    I suggest we look at “value” here two ways: one based on exchange, the other based on labor.

    Exchange is simple: dollars at least act as if they have an exchange value because prices are relatively stable in the short and medium-term.

    In terms of labor: even fiat dollars are, technically and perhaps importantly, a commodity produced by labor.

    Capitals who control banks oversee the production of some dollars by credit (and their terminal consumption by debt repayment). Congress oversees the production of other dollars and treasuries by government spending and borrowing respectively. Congress also oversees the terminal consumption of dollars in the form of taxation. All these processes of production are nearly nothing but the application of labor.

    Dollars produced by private lending have an obvious price of production, manifest as fees and interest. I suppose one could say without it being too much of a stretch that dollars spent by the government in a given year, *plus* government revenues received by the government that year, are the price of production Congress is charging for the dollars spent.


  3. Exchange-value is a form of value and value “itself” is the essence (which is socially necessary labor time). Thus, the valueless token dollars are an “empty” value-form, which completely detached from the value-essence of SNLT. So, while production remains based on exchange value, it is no longer related to the essence of value, which means that the law of value has indeed ceased to operate at this stage of capitalism.

    All the surplus value in the world is basically claimed by the FED (compare: and then distributed “according to credit” down the line (chains) of financial, state, and corporate institutions. Naturally, corporations and individuals compete for access to that credit, and accumulation of commodity value-forms (in the course of production and trade) is a major way for them to secure that access (assets as “securities”, etc.). So the commodity exchange remains the basis of the existing mode of production, but it is no longer equal.Technically, everything is exchanged for nothing – the “pure credit money” – and then that nothing gets again exchanged for something. Individuals and institutions with better access to credit (owning more more capital) have the edge to manipulate the exchange value of the commodities they deal in [also: monopoly prices, etc.] so as to accumulate more value (despite the fact that there is no longer an instrument to adequately measure it). These manipulations are mostly concealed (including from the bulk of the manipulators themselves) under the marginalist doctrines dominating the bourgeois economics.

    In short, the “general formula” of circulation of capital from M-C-M’ turned back (well, not exactly “back” but on a new level) to C-M-C’.


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