Capital, commodity production and collapse (V): After collapse, what?

by Jehu

Part 5: Is Marxism today out of sync with history?

“Whether you can observe a thing or not depends on the theory which you use. It is the theory which decides what can be observed.” –Albert Einstein

In first place, the failure to recognize production based on exchange value has already collapsed implies Marxists are (or may be) looking for an event to occur in the future that has already happened in the past. In second place, it is effectively the same thing as stating Marx was wrong about the ultimate trajectory of capitalist production. At best, we have to explain why Marx’s predicted breakdown has not happened already; at worst, we might conclude Marx’s theory has been falsified by history.

This problem is further complicated when Marx’s theory is misread to predict something he clearly never predicted, “a collapse of capitalism”. If capitalism did not collapse as Marx said it would — and, obviously, it has not — it must follow his theory has been falsified by history. The problem with this conclusion, of course, is that Marx never actually predicted capitalism would collapse, he predicted production based on exchange value would collapse. In Marx’s theory, the collapse of production based on exchange value might very well lead to the end of capitalism as well, but it could just as easily lead to the state becoming the national capitalist, the direct exploiter of the working class.

If you think Marx predicted the collapse of capitalism, Marx is obviously wrong. This is bad for Marx, but no worse than hundreds of would-be prophets throughout history who have turned out to be wrong, including a considerable population waiting for Jesus to return. But if you think Marx predicted the breakdown of production based on exchange value, as I do, the implications are much worse for the working class today.

If Marx was right, Marxists today are completely out of sync with history.

Looking in the wrong direction

In second place, Marxists may not only be out of sync with history; it is highly likely they are also misapprehending its trajectory. To understand my point here, let’s look at one of the most famous and popular revolutionary Marxist slogans, “Socialism or Barbarism”. According to Ian Angus, in her “Junius Pamphlet” of 1916, Rosa Luxemburg wrote:

“Friedrich Engels once said: “Bourgeois society stands at the crossroads, either transition to socialism or regression into barbarism.” . . .   Until now, we have all probably read and repeated these words thoughtlessly, without suspecting their fearsome seriousness. . . .  Today, we face the choice exactly as Friedrich Engels foresaw it a generation ago: either the triumph of imperialism and the collapse of all civilization as in ancient Rome, depopulation, desolation, degeneration — a great cemetery.  Or the victory of socialism, that means the conscious active struggle of the international proletariat against imperialism and its method of war.”

Although Luxemburg traces this slogan to Engels, Angus’s research suggests it was actually lifted from Kautsky, who in a passage very similar to Luxemburg’s argues,

“If indeed the socialist commonwealth were an impossibility, then mankind would be cut off from all further economic development.  In that event modern society would decay, as did the Roman empire nearly two thousand years ago, and finally relapse into barbarism.

As things stand today capitalist civilization cannot continue; we must either move forward into socialism or fall back into barbarism.”

Like Luxemburg, Kautsky argued society had to move forward to socialism or it would regress or collapse into barbarism. Angus points to the obvious similarities between the passage from Luxemburg and that of Kautsky. He concludes this passage is likely the origin of the ideas Luxemburg turned into one of the most famous quotes in Marxism.

Angus’s argument is likely controversial, but let me add another wrinkle to it: Not only is it likely Marx and Engels were not the source of the Kautsky/Luxemburg prediction, the prediction of the latter two writers is not even consistent with the one made by Marx and Engels in “Socialism, Utopian and Scientific”? The text in “Socialism” suggests a regression to barbarism was not at all the alternative Marx and Engels had in mind. Instead, they argued society eventually would be forced to recognize the social character of modern production in one form or another:

“The fact that the socialized organization of production within the factory has developed so far that it has become incompatible with the anarchy of production in society, which exists side by side with and dominates it, is brought home to the capitalist themselves by the violent concentration of capital that occurs during crises, through the ruin of many large, and a still greater number of small, capitalists. The whole mechanism of the capitalist mode of production breaks down under the pressure of the productive forces, its own creations. It is no longer able to turn all this mass of means of production into capital. They lie fallow, and for that very reason the industrial reserve army must also lie fallow. Means of production, means of subsistence, available laborers, all the elements of production and of general wealth, are present in abundance. But “abundance becomes the source of distress and want” (Fourier), because it is the very thing that prevents the transformation of the means of production and subsistence into capital. For in capitalistic society, the means of production can only function when they have undergone a preliminary transformation into capital, into the means of exploiting human labor-power. The necessity of this transformation into capital of the means of production and subsistence stands like a ghost between these and the workers. It alone prevents the coming together of the material and personal levers of production; it alone forbids the means of production to function, the workers to work and live. On the one hand, therefore, the capitalistic mode of production stands convicted of its own incapacity to further direct these productive forces. On the other, these productive forces themselves, with increasing energy, press forward to the removal of the existing contradiction, to the abolition of their quality as capital, to the practical recognition of their character as social production forces.

Now here is the surprising twist:  In “Socialism”, Marx and Engels predicted the practical recognition of capital as social production forces could take one of two forms: society would move forward to socialism or the state itself would be forced to become the national capitalist.

That’s right; far from predicting the possibility society might regress into barbarism, Marx and Engels argued that even if the proletariat failed to seize power, the state would simply be forced to function as the national capitalist. Thus, contrary to Kautsky and Luxemburg, who imagined the collapse of production on the basis of exchange value as a historical regression, Marx and Engels argued this event was “economically inevitable … an economic advance, the attainment of another step preliminary to the taking over of all productive forces by society itself”, which would provide “the technical conditions that form the elements of a solution” to socialist management of production. Capital would force out the capitalists, and reduce them, to the ranks of the surplus-population; it would “show how unnecessary the bourgeoisie are .. [for] … managing any longer modern productive forces”.

Further, in a theoretically significant footnote to the text, they argued, when the state was forced to take on this function, it would mark another economic advance in the development of social production. This economic advance, they argued, while not a panacea for the ills of the capitalist mode of production, would technically solve the problem of socialist management of the productive forces. This suggests, not only did Marxists get Marx’s prediction wrong and are now out of sync with history, they are looking in the wrong direction for what had to happen next.

Marxists kept on expecting society to descend into some form of barbaric nightmare, when Marx and Engels actually saw it moving ever closer to communism.

What is the significance of the breakdown of production based on exchange value?

How does this happen? To explain it, we have to revisit each of the predictions made by Marx’s labor theory of value.

The first prediction made by Marx’s theory is that production based on exchange value breaks down. As I have mentioned in earlier post, Marx discusses exchange value in section 4 of chapter 1 of Capital, under the heading of “The fetishism of commodities and the secret thereof”. In an often quoted passage Marx asks an important question: Why do commodities have exchange value? His answer was simple: Commodities have exchange value because the productive activity of the members of the community are not subject to their common plan. The collapse of production based on exchange value would seem to suggest some sort of comprehensive planning has replaced production carried on by a community of individuals without a plan.

As several Marxist theorists have pointed out, the national capitals of many countries were being managed by the state according to a plan, at least until the 1970s. (There is less consensus on whether this is true today.) For instance, Jane Hardy has this to say about post-World War II Keynesian economic policy:

“In the Fabian-type world that would follow the implementation of Keynesian policies the grosser inequalities of wealth would be removed by fiscal means (Keynes supported some redistribution through taxation to boost consumption). No reward would be extracted by unproductive capital (the financial sector) and employment would be preserved at a near maximum by the manipulation of state investment. Capital left unregulated might still prove crisis-prone, but given social and economic state policies any instabilities could be kept within socially and politically acceptable limits.

So-called Keynesianism dominated all teaching and the main ­textbooks from the 1950s to the early 1970s. It held that governments could intervene in economies, through taxation and government spending, to create sufficient demand to have full employment. Economists were technicians who tweaked and fine-tuned these macro elements in the economy—ultimately capitalism could be managed.”

In other words, if Hardy is correct, by the end of World War II, many national governments were routinely managing their national capitals. Now, if Marx is correct in Capital, then, production based on exchange value is incompatible with this sort of state planning because production based on exchange value emerges when individuals are carrying on social production without a plan.

Stated briefly: The best evidence the breakdown of production based on exchange value has occurred is state economic policy itself.

Soviet planning versus Western planning

To return to the example of the Soviet mode of production that I discussed in the second part of this series, we know the aim of the five-year plans imposed on society and the means by which this aim was actually implemented. The Soviet state took the industrial infrastructure under its control and directly managed production with the aim of producing surplus value. Labor power and the means of production was directly allocated by the state among various branches of industry through the plan. Enterprises were told what to produce and in what quantities.

Not so with regards to the United States, for the most part. Here, the state publishes no comprehensive five-year plan for the “economy” as a whole; it does not allocate labor power or means of production; and it (mostly) does not tell capitalist firms what to produce and in what quantities. Given all of these caveats, how then is it possible to make the argument the state manages production?

In my opinion, these objections are founded on the fallacy that by undertaking management of production, Marx meant management of production of use values. Capital is not the production of use values, (although production of use values does occur in this mode of production as in every mode of production). Capital is the production of surplus value, production for profit. The production of surplus value is decidedly indifferent to the use values in which it is embodied. So, I assume that the state in its function as national capitalist is likewise completely indifferent to the definite use values the surplus value created takes.

Surprisingly, there is nothing in Marx’s labor theory of value that requires the state to directly undertake the production of use values in order to manage the production of surplus value. As Fred Moseley shows in his recently published book, “Money and totality”, capitalist production itself begins and ends with money.

When production on the basis of exchange value broke down, commodity money was withdrawn from circulation very rapidly and the state was given an exclusive monopoly over the medium for circulation of commodities. Effectively, its fiat currency was now the only “money” in circulation, which meant, effectively, the entire capitalist production process begins and ends with a fiction controlled by the state. Marxist theorists have paid very little attention to how the state controls the production of surplus value through its monopoly on “money”.

It may be thought that the state must take direct control of production to function as the national capitalist, but this is to misunderstand the nature of capitalist production as I will show in another post.