Even 80 years later the Left has learned nothing: A reply to Rschard1

by Jehu

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.”

“Der Kampf gegen die Arbeitslosigkeit”

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.

“[With] no ready-at-hand communist mode of production available to replace it, austerity will continue to be a losing proposition for workers and the poor.”

The argument is hardly contestable on many of the points mentioned, but it is nevertheless wrong taken as a whole. For instance, I completely agree with the view that “recessions caused by voluntary deflation have, without any exception I know of, led to horrid consequences for the working class.” I have more or less agreed with this proposition all along; which is why from the very first, I stated deficit reduction is not austerity.

There is, unfortunately, a very stubborn view among Marxists that eliminating the deficits of the fascist state is identical with austerity. Marxists hold to this view although they know, at least in principle, that a reduction in deficit spending need not be at the expense of the working class. Whether deficit reduction is accomplished at the expense of the working class depends entirely on what portion of state spending is reduced.

Deficit reduction is not and cannot mean austerity

What Marxists do is deliberately conflate deficit reduction with cutbacks in social spending. And they do this on the pretext that only the working class is likely to be affected by deficit reduction. If pressed, Marxists will admit this is not necessarily true, but only “politically likely” — i.e., “historically contingent”. I am not ignoring the messiness of history, but I am also not willing to reduce  contingent measure like deficit reduction to laws of iron necessity.

Moreover, there is, in fact, no reason for deficit reduction to affect the working class even in the theory of bourgeois simpletons; and this is because of my “technically sound” argument that deficits are a now necessary part of the profits of capital. I am not alone in stating this: it is actually a core assumption of neoclassical economic theory. If deficits are, by definition, simply a portion of the profits of capital, then deficits, no matter how large, do not benefit the working class. Any attempt to reduce deficits at the expense of the working class must lead to exactly what we are witnessing in Greece and the periphery of the European Union: namely, economic collapse.

Insofar as state spending takes the form of social supports for the working class, reduction of these supports only intensifies the constraints on the subsistence of the working class. However, we already know that in a crisis the consumption power of the working class is too low and the profits of capital are too high. To further reduce subsistence of the working class in a crisis cannot fix this, even if the social spending is directly handed to capital.

What was the problem in pre-Nazi Germany?

Adolf Hitler on September 23, 1933 the groundbreaking ceremony for highway construction between Frankfurt/Main - Darmstadt-Mannheim, as a means to eliminate unemployment.

Adolf Hitler on September 23, 1933 the groundbreaking ceremony for highway construction between Frankfurt/Main – Darmstadt-Mannheim, as a means to eliminate unemployment.

First, I want to thank the commenter for making my point: only fascists ever thought deficit spending was a solution to the Great Depression. No serious Marxist of the time believed a depression could be fought by Keynesian style intervention — and they were right. On the other hand, the German communists were entirely wrong in another area: What the commenter does not mention, (perhaps he does not know) is that most German Marxists did not think capitalism could suffer a catastrophic breakdown that Marx called the collapse of “production on the basis of exchange value.”

German Marxists like Hilferding seem to believe that capitalism would progressively evolve into communism. Marxists who warned that capitalism was headed for breakdown were labeled “catastrophists”. Thus, when the catastrophe hit as predicted, the German party was taken unawares and never realized what had happened.

Those who are unfamiliar with this debate should read Henryk Grossman who predicted it in 1929. Grossman’s argument is a refutation of folks like Hilferding et al, who deluded themselves that imperialism would gracefully evolve into communism. The mainstream of German Marxism was making an argument that made complete sense, but which was based on a fundamental error. If capitalism could not suffer a break down as the mainstream asserted, the crisis would eventually restore growth. In this view they did not differ at all with bourgeois simpletons, who also believed capitalism could not suffer a break down.

The error, in first place, was not that they stood by and let the fascists implement their program, the real error is that Marxists did not realize something fundamental had changed forever. After the Great Depression, there would never again be a capitalist expansion without fascist state intervention.  Did this mean there could never again be a capitalist expansion? No. But, it did mean that intervention in the economy was now a permanent function of the state. The breakdown of production on the basis of exchange value should never have been a surprise to mainstream majority of German Marxists, because Engels had made this prediction in what was a basic Marxist introductory primer: Socialism, Utopian and Scientific; the equivalent of ECON101 for workers.

Now here is the thing: In the pamphlet, Engels and Marx lays out the default case for the future of capitalism. I want to be absolutely clear on this: they laid out the default: Which is to say, they do not address any “historical contingencies” in the discussion. The default case they laid out was that the bourgeois state — the existing state — would assume the function of the national capitalist; it would become manager of he national capital. Yes. The workers might try to seize political power, but even if they tried and failed, the state would for forced to take over the functions of the capitalist class. No matter what the outcome of the struggle, the capitalists were finished.

Despite this prediction, nothing in Marx’s or Engels’ argument suggested “there was literally nothing to be done except let the system melt down until socialism magically appeared.” The fringe Marxists, like Luxemburg, put the contingency inherent in the situation forward in the form of a well known slogan: “Socialism or Barbarism”; but, as I mentioned earlier, they were brushed off as “catastrophists”. Thus, even as the breakdown of production on the basis of exchange value unfolded before their eyes, mainstream German Marxists did not recognize it; nor did they realize that there was more than one outcome possible from the breakdown — not just socialism, but fascism. Luxemburg called the predicted outcome barbarism, but the Nazis called themselves fascists; and their economic program was, as the commenter states, identical to Keynes.

Keynesian policy intervention is fascistic

Now, I don’t have to make the argument that Keynes’ program was fascistic from its inception, the commenter graciously makes it for me.

And that program was simple: the state borrows the excess capital of society and employs it for its own unproductive ends. With this excess capital, it can employ the industrial reserve army and put it to work for those ends. Since the workers cannot consume the product of their labor — which are munitions and war machines — there is no possibility this can lead to any increase in their real wage. Their labor time increases, but no additional wages are forthcoming. Thus, fascist state deficits add to the profits of capital, but can never increase the wages of the working class. Moreover, the munitions and war machines can be employed to destroy the productive capital of rival nations. Since the crisis is caused by overaccumulation of capital within the world market, this destruction eliminates rival capitals and makes it possible for the winner to produce surplus value on a larger scale.

I want to be clear that there is nothing in my argument that says this strategy to address capitalist crisis cannot work. In fact, I have been rather emphatic in the other direction: Fascism represents an advance in the capitalist mode of production. Most Marxists, unfortunately, identify fascism with regression to an earlier stage of development of the productive forces, when it actually represents what Engels calls “production upon a definite plan of the invading socialistic society.” Engels argued that fascism is most definitely not socialism, but it does solve the problems of socialism “technically”.

“State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.”

In other words, it is not true that, as the commenter argued, that there is “no ready-at-hand communist mode of production available to replace” capitalism. In fact, the fascist state was compelled to produce the machinery necessary to manage the national capital even if the workers are unable. Again, the DEFAULT case in Marx and Engels argument is that the state does this, that it creates this machine. Whether the working class itself actually accomplishes this task is a messy historical contingency. And we all know how that turned out.

There is more than one solution to capitalist crises

One last point: When the crisis hit, it was not true that the working class only had a choice between austerity or deficit spending. I am not sure about the working class of Germany, but the American working class, although of considerably lower political development, made a determined effort to force a reduction of hours of labor to 30 hours. Whether the German working class attempted this, and why, if not, they never tried, is unknown to me. But I do find it absolutely staggering that this solution to 30 percent unemployment is never mentioned by the commenter.

Why anyone who stands for abolition of wage labor can’t see in a crisis, like the one currently unfolding in the eurozone, the possibility of progressively winning this aim is really quite bizarre to me. Communism is free disposable time away from labor and nothing else. To argue, on the one hand, that ” no ready-at-hand communist mode of production” is available to replace capitalism, yet ignore the existence of a huge mass of workers locked out of production solely because hours of labor are too long, is frighteningly ignorant of the post-war Left.

I becomes increasingly clearer each day that nothing whatsoever has been learned 80 years after the Great Depression. This is not just sad, it suggests we are doomed as a species. If you cannot fix a simple problem like unemployment without the economic gymnastics of neoclassical policy, how the fuck do we fix climate change; what hope do we have? Capital no more cares about what happens to the planet than it cares what happens to the working class.