Schrödinger’s Capital: Money, “technological unemployment” and the cold war

by Jehu

NOTE 13: Historical materialism minus the history part

I have been reading, “Marx and Monetary Theory”, by Matthijs Krul. At the outset, Krul makes this statement:

“In the context of the current crisis, with ‘quantitative easing’ to the tune of hundreds of billions of dollars on the one hand and the rush to liquidity that accompanies financial crises on the other, it may be useful to take a look at how Marx’s economic theory relate to issues of money and monetary policy. The aim here is to provide a clear and understandable overview of what Marx’s theory of money was, how it relates to our current-day monetary system internationally, and how this relates to his value analysis generally.”

image-A699_4D98869BAccording to Krul in this 2010 essay, the financial crisis makes it useful to compare Marx’s approach to money (and, by implication, value and exchange value) with bourgeois monetary theory. The problem, however, is that in Marx’s theory money is the expression of the values of commodities. By contrast, bourgeois theory lacks a theory of money and treats money as a mere system for counting up incommensurable use values.

Since the commodities themselves are incommensurable, what else the prices might represent is unclear from Krul’s discussion — he never mentions the word, value, until he discusses Marx. It is possible that bourgeois economics believes money is a system for counting itself. As Arthur puts, money is both the form and measure of value.

In any case, bourgeois theory bounces between two poles: in times of relative calm it adheres more closely to the Austrian theory. During times of crisis, it suddenly declares, in the words of Milton Friedman, “We are all Keynesians now.”

A problem of theory or the mode of production?

Unfortunately, Krul provides an essentially ahistorical view of the split in bourgeois economic theory over money and monetary policy and this leads to a host of errors. The problem between the two schools he identifies appears in his recounting as one of theory (or lack of it), not the capitalist mode of production itself.

To put it simply, before the Great Depression, there was no need for a theory of money, because there was nothing that could be called monetary policy. But after the 1930s, monetary policy emerges; bourgeois simpletons now need a theory of how money works, because money is the instrument by which the fascist state manages capitalist production. Just as there was no bourgeois theory of money prior to 1929, there was no monetary policy; the state simply managed its currency’s peg to gold.

The so-called ‘neutrality of money’ is essentially the claim a unit of currency must represent some definite quantity of the money commodity. Austrian theory still lives in this fantasy world where the state should concern itself with maintaining the purchasing power of currency against gold; never realizing the state seizes control of money only to progressively depreciate currency against commodity money.

Keynes: capitalism was eliminating the need for labor

There is a problem with Krul’s discussion, however. For Keynes, capitalist economies were not simply prone to crises, as Krul seems to believe, crises were inevitable in Keynes’s argument. The capitalist mode of production was being progressively undermined by improvements of productivity it unleashed.

“For the moment the very rapidity of these changes is hurting us and bringing difficult problems to solve. Those countries are suffering relatively which are not in the vanguard of progress. We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come—namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.”

The implications of this insight were obvious: capital and wage labor were doomed. Keynes stated this plainly in 1930. This was not the “possibility of disequilibrium”, as Krul puts it, this was the inevitability of capitalist collapse. Krul is also wrong to state that Keynes “admitted” the possibility of gluts and crises. Keynes’ fundamental argument had nothing to do with gluts or any other imbalances; he argued the need for labor itself was going away.

To be clear: even as late as 1943, three years before his death, Keynes is on record — in writing — as arguing hours of labor must eventually be reduced. At best, his policies of countercyclical state intervention were only short run alternatives to reducing hours. This is not my impression, nor my interpretation, these are words Keynes himself put down on paper.

A permanent Keynesian revolution?

Keynes divided his programme into three phases, recovery, long-term economic management and reduction of hours of labor:

Of the first phase, Keynes said:

“In the first phase, therefore, equilibrium will have to be brought about by limiting on the one hand the volume of investment by suitable controls, and on the other hand the volume of consumption by rationing and the like. …

This phase, Keynes though would last about five years. Then on to the second phase:

“We then enter the second phase, which is the main point of emphasis in the paper of the Economic Section. If two-thirds or three-quarters of total investment is carried out or can be influenced by public or semi-public bodies, a long-term programme of a stable character should be capable of reducing the potential range of fluctuation to much narrower limits than formerly, when a smaller volume of investment was under public control and when even this part tended to follow, rather than correct, fluctuations of investment in the strictly private sector of the economy. Moreover the proportion of investment represented by the balance of trade, which is not easily brought under short-term control, may be smaller than before. The main task should be to prevent large fluctuations by a stable long-term programme.

This second phase, which is typically treated as a permanent state of society by followers of Keynesianism,  would, according Keynes last no more than five to ten years. Then on to the third phase of his program:

“As the third phase comes into sight; the problem stressed by Sir H. Henderson begins to be pressing. It becomes necessary to encourage wise consumption and discourage saving,-and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours.”

Taken all together, according to Keynes, within about fifteen years at most following the end of the war, society would have to begin reducing hours of labor — roughly 1960. Thus, never once in his career did Keynes argue his policies could be maintained indefinitely. The policies that failed in the 1970s really can’t be called Keynesian, because Keynes thought phases one and two of his policies would have to end by about 1960.

Productivity and the cold war

So what happened to Keynes’ program? Under the Truman administration, the Americans took Keynes’s policies and tried to turn them into a permanent mechanism to manage the economy and it blew up in their faces in the 1970s.

Keynes long term solution was less work not Keynesian deficit spending. It is, therefore, completely untrue that, as Krul puts it,

“Keynes created a disequilibrium economics in which money plays an independent functional role, in other words, in which money is non-neutral even in the long term.”

This is complete hogwash. The idea Keynesian policies could be permanent is not Keynes own idea; it belong to Leon Keyserling, one of the architects of the American cold war. Keyserling argued a permanent military buildup to encircle the Soviet Union could be maintained by continuously absorbing surplus labor and capital into a long term expansion of global military power. “Economic growth” and “full employment” would be created by this artificial expansion and in turn would provide the excess capital and labor required to pursue US global aims.

The “unwanted surplus” that Keynes wanted to get rid of by reducing hours of labor, became the “increment” to be “siphoned” off GDP growth by the fascists to encircle the SU. None of this REAL history ever appears in the fantasies and myths about Keynes put down by Marxists.

Just to be clear, Keyserling made it clear he was never a follower of Keynes. (Just as the IS/LM model often still taught in undergraduate courses is not Keynes theory and never was intended to be Keynes’s theory.) The first thing Keyserling did when he moved from Truman’s administration to the AFL-CIO was to lobby for an end the labor federation’s demand for shorter hours of labor. That is what happened to the shorter hours movement — Keyserling went to the AFL-CIO and killed it.


Marxists are historically ignorant. They know nothing of the real history of the working class. Ninety percent of the bullshit they vomit up could be addressed just by opening a fucking history book.