Capital, commodity production and collapse (IV): Collapse or Collapsed?

by Jehu

Part 4: Back to the future?

If you ask the typical Marxist to name the most important prediction made by Marx’s labor theory of value, they will likely point to his prediction of a proletarian social revolution. Few, if any, Marxists will argue Marx’s most important prediction was that commodity production would break down, capitalist private property would be expropriated and the bourgeois state would be forced to undertake management of production.

Which is odd, since, in the intervening 160 years, no successful proletarian revolution has occurred, yet we have witnessed the collapse of production based on exchange value, the expropriation of capitalist private property and we have seen the state undertake management of production — a ubiquitous and routine function in all countries today. By the measure of an alleged prediction of a proletarian social revolution, it can be said Marx’s theory, at best, remains unproven. Yet, by the measure of a break down of production based on exchange value, Marx’s theory has been remarkably accurate.

It’s almost as if Marx knew what he was talking about. “Almost”, reply many of our most influential Marxist theorists.

In my last post I suggested a proletarian social revolution was only a contingent possibility, while the breakdown of production based on exchange value was the necessary immediate historical result of capitalist production. In plain English, Marx predicted commodity production would break down and the management of production would have to be socialized. IF the working class was sufficiently organized, it could take advantage of this event to assert its own control over the production process. According to Marx’s labor theory of value, the break down of production based on exchange value had to take place, while proletarian socialist revolution was contingent on the state of the working class itself — it’s organization and consciousness.

Did commodity production break down as Marx predicted?

Here, almost all Marxist theorists seem to agree no such break down occurred. Michael Heinrich, for instance, in his “An Introduction to all Three Volumes of Capital” asserts Marx’s original prediction of breakdown of commodity production was mistaken and ultimately withdrawn by Marx himself — an argument he reiterates in a 2013 essay for Monthly Review. Among an influential section of Marxists theorists this assertion is the standard boilerplate.

Two things are problematic with this assertion: First, a close reading of the literature will show most Marxist theorists conflate the breakdown of commodity production with the breakdown of production for profit itself — a conflation with no support in Marx’s own writings. Second, to support the mainstream view among Marxists that the two mode of production are the same, Marxist theorists have been forced to substantially revise or “correct” what they see as ambiguities or incorrect formulations in Marx’s labor theory of value.

It is no surprise to me that the effort by some Marxist theorists to substantially revise or correct Marx’s labor theory of value begins with his definition of money. We are, after all, talking about the breakdown of production based on exchange value. In Marx’s labor theory of value, exchange value, the phenomenal expression of the value of commodities, takes the material form of a money commodity. Logically, therefore, a breakdown of production based on exchange value must the form of a breakdown of production based on money itself.

Breakdown of money in Marx’s theory

In his labor theory, Marx assigns two chief functions for money: First, money supplies a concrete material for the expression of the value of commodities. Second, money serves as a medium for the circulation of the commodities. The breakdown of production based on exchange value (money) must, therefore, imply the breakdown of the relation between these two chief functions of money in Marx’s theory.

How might the function of money as the material to express the value of commodities become detached from the function of money as medium for circulation of commodities? What we call money actually consists of a number of materials that together carry out the two chief functions of money. There is the commodity itself, which supplies the concrete material for the expression of the values of commodities. There is a (typically) national currency that serves as symbolic representative of money and medium for circulation of commodities. Finally, there is credit money, which represents money that does not as yet exist.

Since each of the functions of money are represented in the specific material body of a specific money instrument, the possibility exists they might become increasingly divorced from one another over time. More or less gold may be present than is required to express that values of commodities. More or less currency may be in circulation than is required to serve as a medium for the circulation of commodities. More or less credit might be available than can be satisfied by actual production of commodities. Since money implies production itself is unplanned and anarchic, the relations between each of the money forms and the relation between these money forms and the requirements of production are bound to constantly fluctuate.

Moreover, since production and exchange are subject to innumerable fluctuation arising from the anarchy of production, the relations between the money forms must be allowed to shift as the material requirements of production shift. Thus commodity production not only implies imbalances between the various money forms and the needs of production, it necessarily requires this flexibility.  Marx’s prediction of a breakdown of production based on exchange value, i.e., based on money, therefore, results from the impact production for profit has on this flexible monetary (commodity production) system.

The key money form to understand in this relationship is not gold (commodity money) or currency (paper money), but credit money; i.e., money that does not yet actually exist, an IOU, a promise to pay actual exchange value in the future.

While gold is the money in a system of production based on exchange value, credit is the money in a system of capitalist production for profit. Gold is money in its palpable material form, but credit is imaginary money, or future money — money that does not yet exist. The antagonism between the two modes of production must, of necessity, take the form of a contradiction between gold and credit money, between actual exchange value and the promise to pay exchange value in the future. According to Suzanne de Brunhoff, “Credit money issued by banking systems is the form of money in modern capitalism.” Indeed, it is significant, in this regard, that Marx argued, “The uprising of the proletariat is the abolition of bourgeois credit, for it is the abolition of bourgeois production and its order.” (Class Struggles in France)

Credit, currency and gold

The objection to my argument, however, is that, as  George Caffentzis explains, Marx held the credit system ultimately could never be detached from gold. And, indeed, Caffentzis’ argument is actually supported by Marx in Capital, when Marx writes:

“But it should always be borne in mind that, in the first place, money — in the form of precious metal — remains the foundation from which the credit system, by its very nature, can never detach itself.” —Marx, Capital, Volume 3

Anitra Nelson, who has made an exhaustive survey of Marx’s writings on the subject, concurs with Caffentzis in a book edited by Fred Moseley, “Marx’s Theory of Money: Modern Appraisals”, and in a separate book, “Marx’s Concept of Money: the God of Commodities” that she published in 1999. However, these two Marxist theorists overlook a essential caveat: Marx argues that the credit system can never be detached from gold, but he never suggested the credit system founded on gold was itself immune to catastrophic collapse itself.

And this is exactly what happened with the onset of the Great Depression in 1929, an event I have argue elsewhere that fully meets Marx’s definition of a breakdown of production based on exchange value.

Marxists theorists like Heinrich, de Brunhoff, Nelson and Caffentzis never asked the question they should have asked: Is a credit system founded on state issued valueless inconvertible fiat currency the same as one founded on commodity money? The answer to this question can only be affirmative if commodity money is the same as state issued valueless inconvertible fiat currency. No one, including the Marxist theorists I have referenced in this post makes the argument Marx considered commodity money and fiat currency as more or less the same thing. Yet, we are supposed to accept the idea that, in Marx’s theory, a credit system based on the former is the same as a credit system based on the latter.

On what basis is this assertion founded? What reason do we have to treat two different credit systems as the same when the monies on which they are founded are not?  If we strictly hold to Marx’s labor theory of value, it is obvious a credit system based on commodity money is one founded on exchange value; and, if we strictly hold to Marx’s labor theory of value, it is obvious a credit system based on fiat money is not founded on exchange value unless this paper currency is fixed to a definite quantity of gold.

This raises the implication that the collapse of the gold standard during the Great Depression and especially after 1971 is telling Marxists a story they have not yet absorbed into their analyses. If Marx’s breakdown already happened as I argue, Marxists may be looking for something to occur in the future that has actually already happened in the past.

Concretely, this would mean Luxemburg’s argument mankind faces a choice between “socialism or barbarism” is not in our future, as many Marxists assume, but in our past. We made that choice already and we chose barbarism.

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