Where Marx went wrong — according to Benanev and Clegg

by Jehu

I am continuing with my examination of the Endnotes collective’s economic argument for communization. This argument is outlined in Endnotes 2, in an essay, titled Misery and Debt, by Aaron Benanav and John Clegg.

In two sections of their essay, respectively titled “The crisis of Reproduction” and “From Re-industrialization to De-industialization”, these meatheads summarize the alleged defects of Marx’s theory of accumulation this way: Marx identifies a shift from labor-intensive to capital-intensive industries. This results in a fall in the demand for labour in new industrial lines as well as old. At first, the unemployed wage workers thrown off by this shift, tend to be reabsorbed into the circuits of capitalism. But, In time, they tend to outgrow this function and become absolutely redundant. Capital thus tend to produce a population of wage workers who become absolutely redundant to the needs of capitalist production. Left unchecked the relative decline in labour demand becomes absolute. At first, this prediction by Marx was born out by the evidence available in his time, say the writers.

Over time, both a growing population of workers and a growing mass of capital would be unable to find a place in the production process. In this way, the proletariat as a class progressively is locked out of all productive employment. Capital proletarianizes the small producers, but these newly created proletarians cannot sell their labor power because, by gaining employment, they undermine their own material conditions of existence. Wage-labor is inseparable from the accumulation of capital, but the rising productivity of social labor reduces the demand for wage labor. Thus, in a society based on wage-labor, the reduction of socially-necessary labor-time expresses itself in a growing scarcity of jobs.

All good, right? Marx predicted the end of capitalism based on the growing scarcity of wage employment?

Well, not so much.


What Benanev and Clegg describe here is a pretty good summary of Keynes’ explanation of technological unemployment, but it has little to do with Marx’s discussion in Capital. By stripping out Marx’s discussion of value, surplus value and the law of value from the process of technological development described above, these two morons have reproduced the argument in Keynes’ 1930 essay. Then, having attributed Keynes’ argument to Marx, they allege Marx has been contradicted by the history of capitalism!

Here is how history refuted Marx, according to Benanev and Clegg: the formation of an absolutely redundant mass of proletarians that Marx allegedly predicted did not happen, at least as he had envisaged it, because Marx did not foresee the emergence of new industries that absorbed much of the excess surplus labor and capital. Labor-saving innovations gave rise to capital-and-labor absorbing new markets and new products. These new markets and new products were able to simultaneously absorb large amounts of capital and labor, even as productivity increases reduced relative costs of production. The new industries and markets stemmed the decline of wage employment for more than half a century. Thus, even as newly proletarianized peasants streamed into urban labor markets wage employment grew.

The really bizarre thing about these allegations against Marx is that there is not a single piece of evidence to suggest Marx ever held to anything approaching a theory of technological unemployment. While it is true that Marx believed improvements in the productivity of social labor, owing to the application of science, improved machines and technology in production, would eventually begin to reduce the need for human labor in production, the employment of human labor in production was not solely driven by the technical requirements of production. Human labor was also required for the production of exchange value, not just use values. It should be obvious, even to the boneheads at Endnotes, that although Marx argued machines could replace workers in the production of use values, he also believed that no machine could replace a worker in the production of exchange value.

What the fuck is wrong with you academics? You cannot possibly be stupid enough to expect this argument will be swallowed by anyone the least bit familiar with Marx’s labor theory of value.


I just have to introduce this quote from Benanev and Clegg, because it is so damn precious:

“Yet, as the unprecedented state deficit-spending which supported this process indicates, there is no inherent tendency to capital that allows for the continual generation of product innovations to balance out its labour-saving process innovations. On the contrary, product innovations themselves often serve as process innovations, such that the solution only worsens the initial problem. When the car and consumer durables industries began to throw off capital and labour in the 1960s and 70s, new lines like microelectronics were not able to absorb the excess, even decades later. These innovations, like those of the 2nd industrial revolution described above, emerged from specific process innovations within industry and the military, and have only recently been transformed into a diversity of consumer products. The difficulty in this shift, from the perspective of generating new employment, is not merely the difficulty of policing a market in software — it is that new goods generated by microelectronics industries have absorbed tendentially diminished quantities of capital and labour. Indeed computers not only have rapidly decreasing labor requirements themselves (the microchips industry, restricted to only a few factories world-wide, is incredibly mechanised), they also tend to reduce labour requirements across all lines by rapidly increasing the level of automation. Thus rather than reviving a stagnant industrial sector and restoring expanded reproduction — in line with Schumpeter’s predictions — the rise of the computer industry has contributed to deindustrialisation and a diminished scale of accumulation — in line with Marx’s.”

Note how the writers simply drop the mention of state deficit-spending and the military in the above passage. In Capital, Marx barely mentions the state. Yet, the writers invoke state deficits and military spending to acknowledge the role played by the state in what they call the formations of new industries and markets that made it possible for capital to stem the decline of wage employment for half a century.

You would think the geniuses at Endnotes would highlight this development, particularly since, according to the most widely held readings of Marx, he did not bring his analysis of the mode of production together with his theory of the state to produce a unified theory. You would think the Benanev and Clegg would say to us, “Hey, look. Marx failed to anticipate the increasing role of the state in the capitalist economy as an increasingly important counterweight to the growing surplus population of workers and surplus capital.” This sort of observation might be significant, because, as we all know, the state only consumes exchange value and use values; it produces nothing itself. Since the state doesn’t produce anything, what does it use for collateral when it borrows? How does it repay what it has borrowed? This is a true mystery in any model of capital that assumes Marx’s notion of commodity production and exchange, where, as a general rule, labor value equivalents are exchanged.

How does the state manage to evade this fundamental premise of a mode of production founded on exchange value?

But there is also a problem with this observation: Marx (and Engels) actually does explicitly argue the state must become increasingly important. This argument is not advanced in the unfinished Capital, where it is commonly agreed the state was not integrated into the analysis of the mode of production. Instead, the prediction was made in another text — the third chapter of Engels’s book, Socialism, Utopian and Scientific. In that chapter Marx and Engels step us through the evolution of capital and make the firm prediction that, eventually, the bourgeois state would be forced to assume the management of national capitals. It might be possible to ignore this prediction, coming as it did in a text no one even reads today. But is it ethical for the academics at Endnotes to ignore the text when they actually cite state deficits and military spending as the reason Marx allegedly was wrong to predict technological unemployment?

Surely, if you want to hang Keynes’ prediction around Marx’s neck, you are at least obligated to note that Marx at least speculated in passing the state would be forced to directly manage national capitals; that it would become the direct exploiter of wage labor; and that this would mark an advance in the mode of production that would technically prepare society for communism. Which is to say, you would admit all of this if you were ethical.

There is, in fact, no evidence the Endnotes collective is trying to treat Marx and his theory ethically.


Far be it from me to whine that the academics at Endnotes are unethical charlatans, however.

Instead, I want to focus on the puzzle of what Benanev and Clegg rightly cite as the explanation for why Keynes’ prediction of technological unemployment went badly off the rails for at least fifty years.

Although Keynes initially diagnosed the Great Depression as a catastrophic collapse in the demand for wage labor brought on by “discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour,” which would likely mean the end of the system of wage slavery, by 1933, in an essay titled, The Means to Prosperity, Keynes was of the opinion that the state could at least temporarily provide wage slavery breathing space. If the problem of the depression was excess capital and excess workers, Keynes proposed a simple and elegant solution: the state should borrow the excess capital and use this borrowed capital to employ the excess workers.

Keynes based his ideas on three widespread assumptions:

(1) For commodities as a whole there can be no possible means of raising their prices except by increasing expenditure upon them more rapidly than their supply comes upon the market.

(2) Expenditure can only be increased if the public spend a larger proportion of the incomes they already have, or if their aggregate spending power is increased in some other way.

(3) There are narrow limits to increasing expenditure out of existing incomes,—whether by saving less or by increased personal expenditure of a capital nature. Incomes are so curtailed to-day and taxation so much increased, that many people are already, in the effort to maintain their standard of life, saving less than sound personal habits require. Anyone who can afford to spend more should be encouraged to do so, particularly if he has opportunities to spend on new capital or semi-capital objects. But it is an evasion of the magnitude of the problem to believe that we can solve it in this way. It follows, therefore, that we must aim at increasing aggregate spending power. If we can achieve this, it will partly serve to raise prices and partly to increase employment.”

Based on these assumptions, Keynes proposed the British state should borrow the excess capital “on a large scale and organised with determination … to stem the progressive deterioration, as firm after firm throws up the sponge and ceases to produce at a loss in the seemingly vain hope that perseverance will be rewarded.” A public works initiative of this sort had only been considered during times of war. “For hitherto war has been the only object of governmental loan-expenditure on a large scale which governments have considered respectable.”

But this time was different: the Great Depression was an unprecedented economic catastrophe that required application of war-time economic measures to a peace-time economy.


But Keynes deficit spending solution would not have been possible if it were not for another event that made the Great Depression notable: every industrial economy was forced off the gold standard and commodity money was replaced by valueless tokens issued by national governments. As actually Marx predicted, technological change did not end on the abolition of wage employment; rather, it ended in the collapse of production based on exchange value.

I will turn to this next.