Capital, commodity production and collapse (II)

by Jehu

Part Two: The ambiguous case of the Soviet Union

To explain profit, Marx proposed the existence of a new type of commodity peculiar to the capitalist mode of production. This new commodity, labor power, had the characteristics of a typical commodity; it had a value equal to its socially necessary labor time and it had a specific social use value: it could be used as capital to produced surplus value. The specific social use value of this commodity, argued Marx, explained how capital created profit apparently out of nothing.

It also explained how capital violates the premises of commodity exchange generally.

In commodity production, of which capital is a specific historical form, the value of a commodity is equal to the socially necessary labor time required for its production. The time spent on production of the commodity in excess of what is necessary on average for its production creates no value.

To illustrate his point, Marx pointed to the case of a producer who, by lack of skill or laziness, spent more time producing her commodity than the social average. This additional labor time, argued Marx, produced a commodity with no more value than that embodied in a commodity produced by a skillful efficient producer. In the market, each would fetch the same price, with no more paid for the commodities of lazy unskillful producers than for the commodities of efficient ones.

The reproduction of labor power as a commodity, however, operates according to decidedly different laws than those of simple commodities. It is the source of surplus value and the quantity of surplus value created by its productive consumption is directly proportional to its duration. In contrast to ordinary commodities, therefore, the duration of labor expended by labor power in production must always exceed the duration of socially necessary labor time required for the reproduction of the labor power itself.

Labor power has a two-fold character with regards to socially necessary labor time. While the quantity of value it creates is directly a function of its duration, and the production of surplus value requires more labor than is required for reproduction of the labor power itself, the value created by labor power is embedded in the use values it creates that still must be produced with no more expenditure of labor time than is necessary on average for production of the commodity.

To function as a capitalist use value producing surplus value, no more labor can be expended on production of other commodities than is socially necessary for their production, yet more labor must be expended than is socially necessary for the reproduction of the labor power itself. Only when this two-fold labor time requirement is fulfilled does the labor power fully meet the minimum requirement as capital.

Post-Capitalism? Or simply Post-Capitalist?

Surprisingly, there is nothing in Marx’s labor theory of value that suggests a necessary role for the capitalist in this process. As is well known among Marxists, social producers can operate as their own capitalist and require no individual capitalist to operate this way. Marx’s argument is framed in such a way that any number of particular personifications of capital can appear in successive order as “the capitalist”. Marx’s theory suggests the capitalist is not an individual function, but a social function. In the capitalistic mode of production, only the producers are necessary for capital to function as capital.

In the first part of this essay, I assumed the worker-owned cooperative operated according to rules that were different from the rules under which the capitalist firm operates. This was accomplished by proposing that the production price of the cooperatively produced commodity is v while that of the capitalist commodity is v+s. In fact, it can be shown that, to the extent the social producers also create surplus value surplus over their own consumption, cooperatives and even entire socialist states can be assumed to operate according to the same rules as capitals. (This fact is entirely separate from how these social producers imagine they operate.) In this case, as a practical matter, the production price of a cooperatively produced commodity would the same as that of a capitalistic produced commodity; namely, v+s.

Why might we want to assume cooperatives and even entire socialist economies can operate like capital? Well, if my reading of Marx’s theory is correct, it leads to a surprising conclusion that the collapse of the Soviet Union in 1991, shows us first-hand why capital necessarily ends in collapse.

The objection to this conclusion that could be made by the opponents of Marx’s labor theory of value is that, in principle, we are dealing with two different and distinct modes of production in the S.U. and western capitalism. The Soviet mode of production was characterized by a centrally managed economy operating according to a definite plan. The capitalist economies of Europe and North America are characterized by multiple privately owned capitals that operate across many nations whose relations are mediated through exchange values within the world market.

My reading of Marx’s labor theory of value suggests we can treat these two allegedly distinct modes of production as one and the same thing for purposes of analyzing the trajectory of the capitalist mode of production. To the extent each mode of production produces a social surplus, (which, in the Soviet Union, were the means for its explosively rapid growth), they each imply the existence of the uniquely capitalistic commodity, labor power.

On some level, therefore, they must operate according to the same laws that periodically throws western capitalism into crises, even if the S.U. never displayed such crises because of its central plan.

Three objections

I admit my hypothesis for this argument faces several very important theoretical obstacles. The first step, of course, would be to prove it is not at all absurd to describe the Soviet Union as capitalist. The second step would be to show how the forces that were at work in the collapse of the S.U. are also at work in western capitalist countries.

At least 3 features of the Soviet mode of production distinguishes is from western capitalist economies:

a. zero unemployment
b. absence of periodic crises
c. the planning mechanism

Anyone trying to unify the S.U. with western capitalist economies has to address these differences and to show they are not necessary to our definition of capital. The crucial question that has to be answered is whether any economy lacking these three characteristics can still be called capitalist. I will address these in order.

Capital and unemployment

It is commonly assumed the complete elimination of unemployment is impossible under the capitalist mode of production. Yet, essentially, there was no unemployment in the Soviet Union. The typical vulgar Marxism argument goes something like this quote taken from the Marxist economist, Prabhat Patnaik:

“Coming back to the question, why we have unemployment, it follows therefore that under neo-liberal capitalism, where the level of activity requires “bubbles” to sustain itself, the paucity of aggregate demand as a general feature constitutes the obvious explanation.  But even in an economy where the State recaptures its ability to boost aggregate demand by pursuing whatever fiscal policy it wishes to, by way of taxation and fiscal deficit, the maintenance of a high level of employment requires increasing intervention by the State, from “demand management” to an “incomes and prices policy”, and so on, which undermines the social legitimacy of the capitalist system and which therefore is impossible to sustain within the confines of the capitalist system.”

His argument is that a high level of employment presupposes a degree of state intervention in the operation of the mode of production that it would undermine popular support for capitalism. This lack of popular support for capitalism would prevent the state from engaging in the kind of economic management that would make a zero unemployment economy possible, because a reduction in unemployment below some definite level would embolden the workers to demand higher wages at the expense of capital.

“This is because a reduction in unemployment, or more accurately in the magnitude of labour reserves (since unemployment does not exist only in an open form), would strengthen the bargaining position of the workers, who would demand higher money wages.  If these wage demands are conceded but prices are raised as a result of such money wage increases, then there would be a cost-push inflationary spiral, with money wages and prices chasing one another; this would destabilise the value of money under capitalism.  And if these wage demands are conceded and prices not raised as a result of such wage increases, then the share of profits would fall, which the capitalists would certainly not like.  It is important for the stability of the system therefore that the relative magnitude of labour reserves must not fall below a certain level.  This amounts to saying that the size of the “reserve army of labour” relative to the active (or the total) army has a floor below which it cannot fall.”

Patnaik’s argument rest on a variant of the vulgar Marxist theory that profits are created by using unemployment to hold wages below a certain level. However, we already know profits are created by increasing the labor time of the working class beyond the duration required for reproduction of their wages, a condition that would be facilitated by full employment. It is labor, not unemployment that creates profit in the labor theory of value. In labor theory, the labor reserve exists not to hold down the wages of the employed (although it might do this), but to allow for the increase in employment during times of expansion.

(Further, empirical data available on employment since World War II demonstrates, contrary to this vulgar argument, that wages have been falling even as employment has increased. If increased employment and a fall in the size of the labor reserve adds wage pressure on profits, where in this data is the evidence?)

All Patnaik’s argument suggests is that a reduction of unemployment to zero would require unprecedented intervention by the state to impose an income and prices policy on society. Which is to say, the state if full employment of the existing labor power is the aim, the state will also have to directly determine the wages of the working class and the prices of the commodities they produced. If the state brought the entire apparatus of production under its control, it would face no obstacle to achieving zero unemployment.

If this is true, zero unemployment is not evidence of the non-capitalist nature of production, but that this production process is managed in its entirety by the state. In any case, zero unemployment is compatible with capital so long as the state managed all employment, as well as wages and prices. A capitalist state could achieve zero unemployment only on the basis of a fully planned economy like that of the Soviet Union — a condition typical of any capitalist firm. With complete control of wages and prices, the state can drive unemployment to zero and fully utilize the total labor power of society for production of surplus value.

Rather than zero unemployment explaining why the S.U. was not capitalist, Patnaik explains how a planned economy can be fully capitalist.

Capitalism without periodic crises?

The second objection often raised to the idea the Soviet Union was capitalist was the absence of crises that are said to be typical of a capitalist economy. Surprisingly, most Marxists hold to the idea crises are an inevitable product of the capitalist mode of production. However, if crises are inevitable, why has there been no replay of Great Depression in the last eighty years? If crises are an inevitable feature of the capitalist mode of production, where are they? How have we avoided them since 1933?

This is not to say there have not been moments of instability, but these moments are nowhere near as intense as they were prior to 1933. Since 1933, the United States economy has not suffered a fall in GDP year over year until the most recent crisis of 2008. How does this fact compare with the dominant thinking among Marxists that, “crises are inevitable and will be increasingly severe until the contradictions inherent in the mismatch between the mode of production and the development of productive forces reach the final point of failure”.

Most Marxists forget, (if they ever knew in the first place), that crises are not a necessary feature of the capitalist mode of production, but only a means to temporarily reestablish conditions for the normal operation of the mode of production. However, since all production in the Soviet Union was subordinated to a conscious plan, it never experienced the sort of crises that periodically shook so-called Western capitalist economies, because the plan itself was the mechanism through which the necessary condition for normal operation of the accumulation process was enforced.

My evidence for this assertion can be found by revisiting Marx’s discussion of fetishism in part 4 of chapter 1 of Capital. In that discussion Marx argues the material relations society enter into for purposes of production take the form of exchange value because these relations are not under their control; are not subject to their common conscious planning:

“[The] social character of men’s labour appears to them as an objective character stamped upon the product of that labour; because the relation of the producers to the sum total of their own labour is presented to them as a social relation, existing not between themselves, but between the products of their labour. This is the reason why the products of labour become commodities, social things whose qualities are at the same time perceptible and imperceptible by the senses.”

Use values, argued Marx, become commodities only because the individuals whose use values they are carry on production independently and only enter into definite relations during the act of exchange.

“In other words, the labour of the individual asserts itself as a part of the labour of society, only by means of the relations which the act of exchange establishes directly between the products, and indirectly, through them, between the producers.”

However, as Marx explained, in a society where these relations are subordinated to a common plan, value and exchange value would disappear. Essentially, by bringing the entirety of the process of production under a central plan, the Soviet Union put an end to the necessary function of crises in the mode of production.

Capital and planning

As I showed earlier, Marxists assume crises would increase in severity until the mode of production encountered failure, expressed, according to Marxists,  in a form, “determined by …. the development of the consciousness of the various social classes, and other ‘subjective factors’. Given this conclusion, the existence of the Soviet central planning mechanism for production, with itss absence off unemployment and periodic crises, leads many Marxists to assert the Soviet planning mechanism implied, if not a complete break with commodity production, at least the subordination of commodity production to the margins of Soviet society.

Like most Marxists, Marx and Engels also thought crises would become increasingly severe under the capitalist mode of production. However, Marx and Engel did not think the capitalist mode of production would necessarily reach a point of failure because of these crises; instead, they argued, the state would be forced to assume control of the forces of production.

In other words, in their book, “Socialism”, Marx and Engels predicted the mode of production would end up looking a lot like the Soviet Union, with the state managing employment, wages, prices and production. Crises did not necessarily lead to the collapse of capitalism, but to state management of the national capital; to the state functioning a the national capitalist. In “Socia;lism”, therefore, Marx and Engels seem to argue that a form of capital very close to the centrally managed Soviet mode of production, if not that particular form itself, was inevitable.

Some form of state managed accumulation was inevitable, irrespective of whether it would be achieved by the working class or by the other class. And they put special emphasis on this latter point in a footnote:

“[Even] if it is the State of today that effects this — is there an economic advance, the attainment of another step preliminary to the taking over of all productive forces by society itself”.

By the term, “State of today”, they clearly meant the present capitalist state, the dictatorship of the bourgeoisie.

The production of surplus value, production for profit

The dominant assumption underlying the claim the Soviet Union could not have been capitalist is essentially the argument a centrally managed economy is incompatible with capitalism. No actual evidence has ever been advanced to demonstrate why this must be true. Capital, however, is the production of surplus value, production for profit. No evidence has ever been offered for the idea production of surplus value is incompatible with a centrally planned economy.

To put it bluntly, in a centrally planned economy, capitalist accumulation can be built into the plan for production itself. A portion of the total social labor time of society is set aside for the subsistence of the working class; while another portion is set aside to serve as means of production for intensification and extensification of the exploitation of the working class. Indeed, central management of production proves there is no need for unemployment to limit the wages of the working class, since those wages, in the form of real use values, are limited by the planned employment of labor itself. People can’t eat what has not been produced; the real subsistence of the working class is determined by planned employment of labor.

The problem raised by the Soviet mode of production is not commodity production in general, but the reproduction of the peculiar commodity that is historically specific to the capitalist mode of production and has characteristics that are unique to that mode of commodity production, labor power. Thus, even if we assumed the whole of the national capital of the Soviet Union were brought under a common planning mechanism, we would still have to demonstrate labor power, the critical commodity for capitalistic production, no longer existed.

This is not a matter of commodity production in general, but the specific historical form of capitalist commodity production. To put this another way, all we could prove by the mere subordination of national production to a central planning mechanism, without more, is that the state now functioned as the national capitalist within Soviet society. What has to be proven by those who assert the Soviet mode of production was unique and distinct from the capitalist mode of production, (a possibility I cannot rule out, but only assume unproven for the purposes of this discussion), is that the buying and selling of labor power no longer occurred. Given the continuing existence of wages paid out in exchange for labor, the default position must be that the laws of capitalist production continued to rule the Soviet mode of production as before.