A reader has written a response to my post, I have posted the comment here for convenience and because it raises some important questions regarding how Marx and Engels should be interpreted. I hope to post a reply to the questions tomorrow:
I received a very welcome and interesting comment on my blog post, “Deficit reduction is not austerity; it kills capitalism”, from Rschard1. The commenter argues that my own argument is technically correct but ignores the messiness of historical contingency. I am, the commenter states,
“glossing over the uncomfortable truth that recessions caused by voluntary deflation have, without any exception I know of, led to horrid consequences for the working class.”
As support for his/her view, the commenter presents the classical case of fascist full employment policies of the German Nazi party. While the German Marxists followed what the commenter argues is essentially my solution for the Great Depression, the fascist introduced a series of measures to create jobs by rearming Germany and preparing it for World War II. These policies rapidly brought Germany to full employment, just as Keynes predicted they could and aided the fascist rise to power. Austerity, as the commenter argues, is great for the more advanced countries, but terrible for countries like Greece.
According to the chart below, each attempt to reduce the federal deficit in the last 30 years or so appears to undermine capital itself:
The correlation suggests that if the Left is committed to a society beyond capitalism, ending all fascist state deficits can be a path to realizing this end. The correlation is explained by the fact that capital at this point is producing more surplus value than can be reinvested profitably in productive employment. The absence of sufficient outlets for newly formed capital is not simply a problem for capitalists like the owners of the largest American corporations who must sit on the uninvested profits: unless the fascist state deficits constantly increase, overproduction of surplus value eventually forces a general devaluation of capital as the mode of production for profit grinds to a halt.
This tweet came across my Twitter feed this week and grabbed my attention:
Buenaventura Parsons @Iron__Hammer: Joe Anderson determined to make Liverpool “the most business-friendly” urban environment in the country. You know what that means.
The tweet itself is not all that unusual, but it struck me as interesting because it jarringly raises an uncomfortable question for communist strategy: Why is a business friendly politician politically appealing to what are mostly working class voters in the middle of a crisis? What is the appeal in the term “business friendly”? How can a politician walk among the workers of a town like Liverpool and tell them he is going to make the town “business friendly”? Most of all, what does Joe Anderson know about how the workers of Liverpool think about economic issues that communists do not?
This is the most glaring example of a disconnect between how radicals think the world operates and how it actually operates. Although radicals explicitly or implicitly assume the working class is radicalized by crises, this bourgeois politician has no problem at all saying he aims to make Liverpool the friendliest place for exploiters in all of the UK; and he doesn’t get lynched for this, he gets elected.
At Nathan Becker’s (twitter: @netbacker) suggestion, I have been reading this piece by Billy Mitchell on modern money theory, Deficit spending 101 – Part 3. If you have any background in the assumptions of mainstream economic theory, you will notice that the piece makes a number of surprising claims:
The idea that a currency-issuing government is financially constrained is a myth. The funds that government spends do not come from anywhere and taxes collected do not go anywhere. Taxes do not finance anything and government spending is independent of borrowing. The government deficit determines the cumulative stock of financial assets in the private sector. Moreover, when government runs a surplus, purchasing power is destroyed forever. Finally, government expenditures do not crowd out private expenditures.
That is a lot of heresy in one short (by Billy Mitchell standards) article. People hearing the MMT argument for the first time must have the same reaction I had the first time I heard Warren Mosler explain it in simple language: “That guy is insane.” Over time, I gradually began to realize what Mosler was saying: modern money (as they call the floating dollar/gold standard) was the practical result of the US withdrawing from Bretton Woods in 1971. When the US went off the gold standard, the fascist state no longer was financially constrained in its spending, i.e., it was no longer constrained by the requirement it exchange its worthless currency for gold. The implications of Moser’s talk was that the fascist state’s capacity to absorb excess surplus value is limited only by the quantity of excess surplus value produced in the entire world market. Previously, a given fascist state could appropriate (i.e., borrow or tax) the surplus value produced by private capitals within their territories (including colonies). Since 1971, however, the United States has been able to do this to the entire planet, because it alone controls the world’s reserve currency.
What is behind the concern over secular stagnation? Is it possible to understand this concern within the context of the labor theory of value? I ask that because almost all discussion of secular stagnation takes place in the context of neoclassical/Keynesian theory. To answer the question, I will look at several papers and article on the subject written from within neoclassical/Keynesian theory that attempt to make sense of the problem.
My perspective, however, will be unique in relation to the writers, because I will argue that stagnation is not a symptom of capitalist crisis per se, but a symptom of increasingly ineffective fascist state management of national capitals. In my perspective, capital has already suffered the breakdown of production on the basis of exchange value. This occurred in the Great Depression and was irreversible. However, after that breakdown, the fascist state stepped in and assumed management of the production of surplus value. The subject of the discussion of secular stagnation is the increasingly ineffective system of state management of capitalist production, not the operation of national capitals, per se.