‘Business confidence’, counteracting influences and Marxism’s dead end strategy

by Jehu

This is a must read piece: A depresssing line of thought on socialism and disbelief. I believe you will not be disappointed by taking just a moment out of your day to read it.

GhGwPS86Ed Rooksby has written what I think is one of the more insightful reactions to the disasters the Left has suffered this year in Greece, Venezuela and France. He locates the problem in the very failed strategy the Left has pursued for the last one hundred years or so by dividing the aims of the movement into two distinct phases: an immediate program of ameliorating the conditions of the working class and a long term aim of abolishing wage slavery.

“The terms of the problem, briefly, are that there is no way to move straight to the end goal, but the process of attending to immediate problems (i.e. amelioration of the worst effects of capitalism by means of reform) puts you in the position of attempting to transform from within a system that has definite structural limits and embedded systemic mechanisms to enforce these (capital flight, inflationary pressure, balance of payments crises) – inevitably you end up managing that system within the boundaries it presents. Adam Przeworski sums this all up in terms of ‘business confidence’ – this is the major structural mechanism that enforces the limits of capitalism and that systematically blocks attempts to transform capitalism fundamentally from within. It is rooted in capitalist control over the investment function – i.e. capitalist ownership of capital.”

The premise of Rooksby’s argument, as the passage above shows, is that it is generally accepted we cannot move directly to the abolition of wage slavery. Yet, efforts to counter the worst effects of the capitalist mode of production run into the definite limits as the mode of production itself “systematically blocks attempts to transform capitalism fundamentally from within.”

What Rooksby has identified here are none other than the counteracting influences first identified by Marx in volume three of Capital to offset the falling rate of profit. Marx identifies six major influences, “which cross and annul the effect of the general law, and which give it merely the characteristic of a tendency”.

Briefly stated capitalism is reacting to socialists’ reforms as it would to any fall in the rate of profit brought about by a rising organic composition of capital.What Rooksby has pointed to are none other than the counteracting influences to the fall in the rate of profit first identified by Marx in volume three of Capital. Marxists should already be familiar with the counteracting influences the mode of production employs to counter the impact  on profits of a rising organic composition of capital. The context within which the counteracting influences operate in this case, however, are not a rising organic composition of capital,  but socialist legislation to ameliorate the conditions of the working class.

The mode of production reacts to socialist legislation as if this legislation produced a rising organic composition of capital. Among these reactions are those Rooksby identified: capital flight, inflation, etc., in a phrase, “business confidence”. In this case, the fall in the rate of profit results from efforts to ameliorate the conditions of the working class.

However, Marxists who propose the reforms to ameliorate the conditions of the working class, have not seriously thought through how they will address  the reaction the mode of production must have to any threat to profits. Profit is the goad of all capitalist production and capital’s reaction is rooted (as Rooksby notes) in control over investment.

This is hardly a reason to not pursue the economic interests of the working class vigorously. Knowing that the capitalist mode of production has built-in processes to protect the rate of profit should not be feared nor used as an excuse to not go ahead with the reforms. Rather, this predictable reaction should be anticipated and employed to our advantage.

To give an example: Suppose a socialist measure was brought forward to increase the minimum wage to twenty dollars or more. This increase would not make up for the decline in real wages due to inflation since 1971,  but capitalists would react to it as they would any other cause of falling profits. This means: reduced employment, introduction of improved machinery to intensify the exploitation of labor power, devaluation of capital (bankruptcies), rising unemployment, export of capital to less developed regions of the world market and mergers between capitals.

It should be emphasized that these reactions of capital to increased wages are not a negative in my view, but rather are the aim of the reform in the first place. By raising wages, communists hope to generally reduce the employment of wage labor in production and to force the capitalists to replace the employment of labor in production with improved machinery.

Since wages are rising, profits are falling and capital is forced to intensify the production of value and surplus value. This implies an accelerated rate of development of the productive forces; and the reduction of the employment of labor in production generally. Since this would necessarily result in the displacement of workers from industry, socialists should push to reduce hours of labor.

Our long term aim is to abolish wage labor entirely. Even a simple reform such as raising wages sharply can be a step along this road. The reaction capital has to simple reforms like raising wages should be anticipated by socialists and use to make further inroads against capital.

Capitalism cannot be fixed, but it can be turned on itself to accelerate its demise. Communism has nothing at all to do with managing economies; it is about the working class asserting control over their own capacities. What Ed Rooksby has done in his essay is identify a process that should already be well-known by Marxists although in another context.

We should be making better use of it.