How the state began systematically privatizing profits and socializing losses

In my previous post I showed that unemployment in the capitalist mode of production has its genesis in employment. Unemployment is not the result of a lack of means to employ the unemployed, but results from the fact that the steady bankers-dont-go-to-jailimprovement of the productive power of labor displaces an ever larger portion of the working class from all possibility of being employed productively.

In the mode of production, to be employed productively means the worker is employed directly for production of value and surplus value. It has to be understood that capitalism is not the production of useful objects in general, but useful objects only insofar as these objects also contain surplus value, i.e., profit.

With development of the productive forces — of machinery, technology, science and the division of labor — an ever larger mass of useful commodities can be produced in the same period of time. On the other hand, a given mass of commodities can be produced with a diminishing expenditure of human labor.

The capitalist is not concerned with the ever growing mass of useful objects that can be produced, but with the diminishing expenditure of human labor necessary for production. This human labor alone is the source of the profits that is the sole aim of capitalist production.

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Capitalism’s Dirty Little Secret: Employment creates unemployment

bushquoteIn my previous post, I argued the aim of fascist state “full employment” policy is maximization of profits, not maximization of employment. The term “full employment” is a deliberately misleading label chosen by the fascists to present the policies of the fascist state as necessary to promote employment in the interest of both classes. In fact, “full employment policies” do not in any way address the need of workers and are only designed to maximize the profits of capital.

This is a significant finding at odds with how the issue is often presented on the Left. To put it simply, “full employment” is only necessary for the working class insofar as the worker is treated as a draught animal to be kept constantly at work.

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‘Full Employment’ and Profits: An introduction

CTW-SpeakoutForGoodJobs-2coThis new paper, by Hornstein, Kudlyak and Lange, shows how simpletons are trying to minimize unemployment by constructing a new measure of what they call “resource utilization in the labor market”. The message of the paper seems to be clear: If you have no hope of ever recovering employment to pre-2008 crisis levels, explain it away with statistics.

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Prices, Profit and the Sraffian “One-Commodity” Corn Model

A drop in the rate of profit is attended by a rise in the minimum capital required by an individual capitalist for the productive employment of labour; required both for its exploitation generally, and for making the consumed labour-time suffice as the labour-time necessary for the production of the commodities, so that it does not exceed the average social labour-time required for the production of the commodities. Concentration increases simultaneously, because beyond certain limits a large capital with a small rate of profit accumulates faster than a small capital with a large rate of profit. At a certain high point this increasing concentration in its turn causes a new fall in the rate of profit. (Karl Marx, Capital, Volume 3, Chapter 15)

The problem of prices and profit and of the relation between the two, which has bedeviled the simpleton economist for two hundred years, has reared its ugly head again in a series of posts amounting to a food fight among bourgeois silverqueensimpletons. The question raised in the exchanges, which I have previously covered here, involves the question of the source of profits in the capitalist mode of production and the interrelation between profit and prices.

At stake is far more than is apparent in the obscure criticism raised by heterodox economists against the mainstream neoclassical school that the neoclassical school wants to determine profit by the marginal productivity of capital, and then calculate the quantity of capital in part by asking how profitable it is to own the capital goods. If prices and profit are dependent on each other in this way it calls into question the historical trajectory of the mode of production itself.

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Basic Income: Which class will be writing the legislation?

Since our Left supporters of universal basic income, like the working class in general, think they live in a classless society, it is no surprise that they forget there are two classes in society, each with antagonistic interests which will be dollarhandcuffsexpressed in whatever basic income scheme finally comes into being.

For our Leftists supporters of basic income, this interest may be expressed in a desire to see the end of poverty, to reduce the impact of unemployment on the wages of the employed, and to increase the capacity of the working class to fight against the other class, however, since there two classes showing an interest in basic income, we should not neglect the interests that stand behind the advocates of basic income on behalf of this other class and to examine basic income from the viewpoint of this other class.

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Proletarian Revolution versus The Real Movement of Society: A reply to Siddiq

revolutionA comment by Siddiq on my blog argues that I am off-base by suggesting there is no need whatsoever for a conscious revolutionary subject. I want to take a moment to respond and explain my apparent difference with value critique writers like Robert Kurz.

In contradiction to value critique theorists like Kurz, I assume the collapse of capitalism and emergence of communism are one and the same event. Disputing this opinion, the commenter writes,

“First hand experience, and historical precedent, leads me to agree with Kurz that there is no guarantee that capitalist collapse will lead to some sort of emancipation.”

His argument is based on his direct experience in Zimbabwe in the aftermath of its recent crisis, where he observed economic crisis led not to a post-capitalist order, but to

“grassroots capitalism, in which the entire population hustled to survive by any means PERMITTED, most of which involved entrepreneurship and trading.”

I take this to mean, in the aftermath of the crisis, people tried to reconstruct their lives on the basis of barter relations. This is not at all unusual; as the commenter points out, evidence of this sort of thing can be found in any number of countries hit by an economic catastrophe. I can personally attest to seeing just this sort of behavior in the aftermath of the Argentine crisis with my own eyes. So I can vouch for the general view expressed in the comment, if not to the specifics in the case of Zimbabwe.

So what is the takeaway from these sorts of experiences with economic crisis and their political impact?

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The core fallacy of Leftist basic income schemes

I am spending some time looking into the argument for basic income made by some of its defenders. In the course of my surfing, I came across this article by Carl Gibson, “The Case for a Basic Guaranteed Income for All”, which attempts to popularize the argument of basic income advocates.

logo-UBIEAccording to Gibson:

“By providing a basic income for all citizens through ending tax loopholes and preferential tax treatments for the super-wealthy, we’re directly correcting the ever-growing gap between the few who have more than they could ever spend in multiple lifetimes, and the vast majority fighting over crumbs.

More importantly, we’re also giving the poorest Americans a fighting chance at fulfilling their dreams, rather than spending their best years slaving away for a corporate giant that doesn’t respect basic human needs. We can’t call ourselves a free country until working Americans are freed from poverty wages and dead-end jobs.”

From the point of view of getting completely beyond capitalist society, basic income poses at least two obvious problems: First, a basic income does not and cannot get beyond money relations. Second, a basic income cannot get beyond the state. If basic income cannot get beyond money and beyond the state, it cannot get beyond labor despite what its defenders argue.

Why can’t basic income get beyond labor when so many of its defenders claim it can? The reasons are simple: First, although almost all basic income supporters never realize this, money itself is only an expression of socially necessary labor time. Typical of the sort of thinking in our society, most basic income supporters simply see money as a numeraire, not an expression of value. Second, the state itself is wholly funded by surplus value.

These two facts together mean basic income itself is funded by the surplus value, (i.e., the surplus socially necessary labor time) of the working class.

Making Capital Pay?

This presents us with the bizarre situation where one section of the working class lives parasitically on the surplus value squeezed from another section of the class. The typical response of basic income supporters to this bizarre situation is that this is not necessarily true. Instead of adding taxes to the employed sections of the working class, the fascist state could garnish some portion of already idle capital.

Carl Gibson, for instance, proposes the following measures to employ the excess profits of capital to fund a basic income scheme:

“The cost of guaranteeing every adult citizen (approximately 225 million, according to census figures) $12,000 a year is roughly $2.8 trillion. That sounds like a lot, until looking into just one of the least-mentioned sources – offshore tax havens.

Currently, $32 trillion is stashed in offshore accounts in notorious tax havens like the Cayman Islands and Bermuda. Much of that is profit made in the US by American corporations, but booked overseas to avoid taxes. And as journalist Nicholas Shaxson wrote in “Treasure Islands,” much more of it is held in blind trusts operated by oppressive authoritarian regimes, drug cartels, human traffickers, and other unsavory characters. $2.8 trillion isn’t even 1/8 of that amount. We aren’t asking for the whole pie, just a piece. And we’ll even save them a bite.

A few commonsense loophole closures like getting rid of the “carried interest” loophole, eliminating transfer pricing schemes like the “Dutch Sandwich” and “Double Irish” tax loopholes, and instituting a one percent sales tax on all financial transactions on Wall Street would be more than enough to cover the cost of a universal guaranteed income for all. And we still haven’t even discussed other widely-supported, commonsense initiatives like turning wasteful Pentagon spending like the F-35 project into money set aside for a universal basic income, taxing investment income at the same rate as real, actual work, raising the inheritance tax to pre-Bush levels, or creating new tax brackets for millionaires and billionaires.”

Thus, Gibson believes capital can be made to pay the cost to support idled workers through a combination of taxes on offshore accounts, closing loopholes, ending defense contracts and raising inheritance and capital gains taxes to pre-Bush administration levels.

This proposal, however, is simply a shell game since the origins of this idle capital is none other than the excess labor time of the worker. Assuming all of these forms of subsidy to capital were eliminated, we would still face the same problem — only now the capitalists would be intermediaries for an indirect tax on the employed workers. The capitalist would extract surplus value from his wage slaves and split the proceeds with the fascist state. The fascist state would then hand out the loot extracted from the workers by capital to the unemployed.

Although it appears as if capital is being taxed to maintain those unable to find work, in fact one section of the class is being made to support the other by working longer hours than is necessary.

Unemployment and Poverty as the Product of the Employed Worker

Supporters of basic income argue the scheme would make it possible for a large portion of the class to withdraw from the labor market; giving freedom to some workers to live entirely without laboring. In fact this is only true for that portion of the class that has already been rendered superfluous to productive labor. So long as the portion of the working class that composes the surplus population depends on value squeezed out of the employed section, the “freedom” to live without labor is materially limited by the rate of surplus value.

In any case, the mass of surplus value extracted from the employed workers must be equal to the average rate of profit, plus the expenditures of the fascist state, plus the basic income paid to those not working. The social spending formerly undertaken by the fascist state has not disappeared at all — it has only been reorganized. In place of a host of targeted programs, we now have a cash allotment handed out to those who have already been rendered surplus by capital. Assuming the program is revenue neutral, it only represents a change in the form of distribution of social spending and who receives it.

By and large the supporters of basic income will not listen to this argument, since they are not familiar with labor theory or think it is wrong. In their view, money and profit has no necessary relation to labor time. Money can be created out of thin air and is simply a numeraire, while commodities enter circulation without values: in this confused argument, the commodities only actually acquire value in the market when they are bought and sold. Thus, profit is produced by capital, not labor, and can be taxed without any impact on labor time generally.

Finally, there no recognition of the connection between the excess population of workers on the one hand, and the overwork of the employed. If there is any connection acknowledged in this regards, it is only that the unemployed represent a threat to the employed by holding down the wages of the latter. The essential role the employed workers play by actually producing the unemployed workers is never acknowledged.

Along with a steadily growing mass of commodities, resulting from improvement of the productivity of labor, the employed workers produce a steadily growing mass of workers who cannot, under any circumstance, find a place in productive employment. The unemployment of one section of the working class is, thus, the aim and purpose of the activity of the other. The employed worker never realizes this, until she is confronted by a mass of unemployed who attempt to undercut her wages by offering themselves on ever more desperate conditions. The worker, therefore, never recognizes these competitors as her own special product — the direct product of her own labor.

The advocates of basic income believe this mass of workers, who are now utterly dispossessed even of their labor power, can be made to disappear simply be taxing capital. This is their ignorance, their stupidity: they refuse to recognize that their own labor is the sole basis and fundamental premise of capital and its profits.

Stranded on a dark, deserted road somewhere between reform and revolution

A comment on my last post makes three rather interesting and concisely formulated points:

getfctIf activists want to achieve anything they need to be political and they need to have a program which places demands on the state. That is not a statement that the state or the capitalist economy can satisfy these demands in anything more than a marginal way. It is a strategy, and your contribution does not seem to indicate any strategic direction except for a maximum program.”

I think at least two of the three points cannot be disputed. Here is a response from my perspective.

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Piketty is singing to our choir

Okay, so here is an argument unfortunately touching on the subject of M. Piketty and the whole inequality thingy. For those who have had enough of the mention of this simpleton’s name, I can only ask you to bear with me for the next 1000 or so words: I promise this will not be a simple regurgitation of what has been previously stated in the arguments of other writers for or against Piketty.

17-4094_hiresI want to draw attention to the parallels between Piketty’s work on inequality and the thinking of activists in the movements for an increased minimum wage, basic income and jobs guarantee. In large measure, Piketty’s work shares many of the same assumptions of activists in these movements and could be thought of as a theoretical argument for them.

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“Karl Marx was right, but it doesn’t really matter.”

I have been reading this short piece by Matthew Yglesias “Where do profits come from? The obscure feud that tears left-of-center economics apart”. As the title states, the crux of the discussion is the failure of neoclassical economics to offer a credible alternative to Marx, who asserted that labor is the source of both wages and profit. The inability of the bourgeois simpletons to offer a credible alternative to Marx’s explanation results in a rather bizarre set of assumptions:

“Heterodox economists argue that it is circular to say that the profits accruing to the owners of capital are determined by the marginal productivity of capital, and then to calculate the quantity of capital in part by asking how profitable it is to own the capital goods.”

takethebigbagLabor theory says that profits are simply that portion of value created in excess of the value of the wages of the workers, while mainstream economics holds profits result from the marginal productivity of capital.

It should be clear that mainstream economics has already conceded this point to labor theory: labor is the source of all profit. No matter how this argument is obscured in all the gibberish of neoclassical economics, it has been demonstrated both theoretically and practically that there is only one source for both wages and profit: the labor of the worker.

As Yglesias points out:

Mainstream economists went through a few iterations of attempting to refute this objection before essentially concluding that it was correct. This is, indeed, one of the reasons why people on the heterodox side often seem to be embittered. The mainstream concedes the point, but tends to deny its significance.

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