How the Marxist debate over the causes of crises serves as a screen for the fascist state

by Jehu

pallet-of-cashFor the life of me, I cannot understand what argument Hillel Ticktin is trying to make in this article, “Stay as money, face death as capital”. The abstract at the beginning suggests he is going to explain why capital cannot escape the present crisis, which he characterizes as one in which vast sums of uninvested capital is laying around idle in huge hoards of cash. Oddly enough, however, Ticktin also argues the crisis we are experiencing has been ongoing since 1870 or so, which suggests the crisis in 2008 is just business as usual.

So which is it? Is capitalism on its deathbed or is nothing of the present crisis interesting or unusual? Moreover, why does the state play no role in Ticktin’s discussion of crisis?


Let’s start at the beginning:

Ticktin argues the present crisis has deep roots going all the way back to the 1870s:

“Basically what we are talking about is the point at which capitalism ceases to be competitive in the classic sense and when the capitalist class can no longer control its production in order to maintain profits. In other words, its historical function to raise productivity, which Marx goes into detail about, has effectively come to an end.”

If I understand him correctly, Ticktin believes that around 1870 or so, capitalism entered a monopoly phase of development, where it lost the capacity to maintain control of the production of surplus value and increase the productivity of labor.

I really haven’t the slightest idea what this means, but as evidence for his argument he points to the accumulation of essentially idle capital, amounting to a $76 trillion+ hoard of dead capital now being held in corporate coffers and not being invested.

“In other words, there is a very large proportion of surplus value that is not going into investment. And money that is not invested is not capital: it is not being used to generate more surplus value.”

Ticktin argues monopoly allows firms to regulate their production at the point where profit is maximized. Because they can do this, they have run into a situation where they accumulate excess profits they cannot find a place to invest. The problem with this argument is stated by Ticktin as follows:

  • a. the capital just sits idle — it is no longer really capital at all but just a hoard of cash.
  • b. Instead of being employed to produce more surplus value, this cash now costs the capitalists to store it.

Another problem: why hasn’t capitalism collapsed?

As interesting as these observations are, they are not the only problems Ticktin’s argument. To the above problems we can add a third (theoretical) problem — not for capital, but for our analysis of capital.

Frankly, this is not how we would expect capital to behave based on the assumptions of labor theory.  According to labor theory, the capitalists should aim at employing the new surplus value even at the expense of the value of already existing capital. New masses of capital should be struggling to find their place in production even if this implied some portion of the existing capital was forced out as a result and made to stand idle.

To be sure, I am not saying there isn’t $76 trillion+ in idle capital laying around somewhere; I just think Ticktin doesn’t do a very good job of explaining how it got there and why it hasn’t brought down the capitalist mode production yet.

To put it another way: if Ticktin’s explanation was accepted, there would never be a crisis in the first place. In a crisis, the capitalists would simply bank their excess profits in massive hoards of gold. This might be expensive, but it is just an overhead cost. Over time the cost of storing their excess profits would fall, just like any other form of overhead.

Capital abolishes money within the money form

Here is the thing: In labor theory the development of the forces of production does not lead capital to become more like money but to move away from money entirely. Capitalistic credit money is a step along the road that must eventually lead to abolition of money. I can buy the argument the monopoly capital makes possible huge masses of new profits, but you can’t explain why these new masses of profits end up as lifeless hoards of money based on labor theory. We should at least expect this capital, which produces no return for its owners at all, to suffer devaluation precisely because it produces no return to its owners.

As a workaround to this thorny theoretical problem, Ticktin argues the value of the excess profits of monopoly capital was “stabilized” by imperialism and war. Imperialism allowed for export of capital to realize relatively high returns, while war absorbed a lot of new “investment”. The lucrative returns made on imperialism and war, however, only mean more excess profits are accumulated that can’t be invested – the general crisis returns.

That seems right, but I am going to put an * (asterisk) on it, just in case, because I think Ticktin is smuggling in an assumption. What assumption? Let’s come back to this later.

Tickktin’s timeline of monopoly capitalism

I get the age of imperialism and the scramble for colonies — Africa was carved up, etc. And I get the inter-imperialist war — 1914-1945. This gives me a bit of a timeline:

1870s: monopolies and cartels;
1880s: the rise of Imperialism;
1914-1945: the inter-imperialist war years.

As far as I can see, Ticktin lost 70 years or so of history somewhere; the period roughly from the end of World War II to 2008 has disappeared. But that is not all that is lost: We also lose the Great Depression and the collapse of the post-war world economic order, (established under the domination of the United States), in 1971.

The period begins with Europe dividing up Africa and it ends with the US collecting all the marbles; the European colonial powers of the 1880s became the colonies of the United States by 1945. However, the world system that emerged from World War II had collapsed in ruins by 1971 in the depression of the 1970s. Not only does the depression of the 1930s disappear in Ticktin’s timeline, but the hyperinflationary depression of the 1970s is not even acknowledged. Finally, the 2008 crisis is examined in a vacuum, rather than being treated as an expression of the current deflationary depression that began in 2001 or so.

Money in 1971 is not the money of 1870

Further, Ticktin’s discussion is about money being unable to become capital, but not once does he ever discuss what is happening to money during the entire period. What served as money in the 1870s is not the same as what served as the money of World War II and the money of World War II is not the same as money in the 1970s. In about 100 years our conception of money completely changed.

This might seem to be unimportant, but Ticktin’s argument is precisely that capital is turning into money:

“There is – and I am surprised this is not cited more in the press – something like $28 trillion that is held in the bank of New York Mellon alone.”

So, is this 1870 money, 1945 money or 1971 money?

The question is relevant because, this is a lot of capital to be just left lying around idle and not invested. The capital is certainly not sitting at Mellon in the form of a huge hoard of currency or gold bullion — in fact, I don’t think there is a building on this planet that is large enough to hold $28 trillion; and I’m pretty sure that if you gathered all the gold ever produced in all of history in one room it would not amount to $28 trillion. So, how is this $28 trillion in New York Mellon (and another $48 trillion elsewhere) being held? In what money form is the dead capital being held?

I would suggest that this is the form taken by that $28 trillion.


Simply stated, the vast majority of this dead capital takes the form of the public debt of nation states. However, the accumulation of sovereign debt that has occurred since World War II also never appears in Ticktin’s discussion of the crisis of capitalism, although it is how a considerable portion of that dead capital is held. In 1870, the excess capital held by a firm might have been held in the form of gold bullion in some bank vault under guard; today it is held in the form of an IOU from some government.

Which means Ticktin is wrong to say, “When you put your money in a bank like that, not only do you not gain interest: you pay bank charges.” This might have been true in the 1870s, when excess capital was held in the form of gold bars, but it is certainly not true today. Today, this excess capital is lent to fascist state in Washington and pays 2.77% for a 30 year treasury bond. The bonds are so liquid and riskless, some economists are concerned that they essentially acting like money in the economy — a “money”, mind you, that, unlike gold, pays a handsome rate of interest for no risk at all.

Capitalists are not misers

If excess capital was stored today as it was in the 1870s,this would raise a lot of questions that could not be explained by labor theory about what is going on in the economy. Capitalists are not misers. They accumulate in order profits in order to accumulate more profits.

It seems to me Ticktin is trying to find a middle ground between the falling rate of profit school (Kliman, Roberts, et al) and the multi-causal crisis theorists, including Heinrich, Harvey, Monthly Review, etc. Unfortunately, Ticktin seems to combine the worst of both schools of thought. Both the falling rate of profit school and the multi-causal crisis school try to treat capital in isolation from the state. However, the state is not an exogenous category to the capitalist mode of production. Marx doesn’t even leave chapter 1 of Capital before he first discusses the state and its relation to commodity production. According to Marx,

“The mediaeval peasant produced quit-rent-corn for his feudal lord and tithe-corn for his parson. But neither the quit-rent-corn nor the tithe-corn became commodities by reason of the fact that they had been produced for others.”

Marx is making an exception for the state in simple commodity production: its economic relation to society involves no exchange value. The state does not acquire a portion of the product of social labor by producing a commodity for exchange in the market as others do. This exception to simple commodity production may seem unimportant, but to ignore it overlooks two things: First, unlike in Marx’s day, the state consumes half of the total social product today. Second, as I mentioned earlier, much of the profits of capital do not reenter production but are held in the form of sovereign debt.

If Marx is correct, the first point suggest fully half of the economy can no longer be characterized as commodity production and exchange:

“To become a commodity a product must be transferred to another, whom it will serve as a use value, by means of an exchange.”

This sort of exchange of values does not take place between the state and the community. If a considerable portion of idle capital takes the form of sovereign debt, this has profound implications, because it means the capital lent to the state has disappeared into a labor theory black hole. If the commodities the peasant provides to the feudal lord has no exchange value, it is likely capital lent to the state no longer exists.

Now, I suppose someone can make a counter-argument that this does not happen — the value of the lent capital still exists, albeit as a mere entry on a ledger — but now they would have to explain where the exchange value to actually repay the loan plus interest comes from. There are three main sources for repayment of a state loan: taxes, more borrowing and counterfeiting the currency. I am not aware of any other major source of revenue for the state — but perhaps I am overlooking something. Taxes are expressly addressed in Marx’s argument in chapter 1; more borrowing simply rolls over the original loan; and counterfeiting the currency is addressed when Marx discusses why counterfeiting inconvertible fiat currency only leads to devaluation.

Ignoring the critical economic function of the state

Which brings me back to what I called Ticktin’s unacknowledged assumption that he just smuggle into his argument:

Ultimately, we cannot explain monopolies, the carving up of the entire world into colonies, inter-imperialist wars for redivision of the world and massive hoards of excess capital without explaining the state’s role in all of them. However, this is just what Ticktin, the falling rate of profit school of Andrew Kliman and the multi-causal crisis school of Heinrich, Harvey and the Monthly Review want us to do — ignore the critical role the state plays in “stabilizing” capitalism.