“We’ll get back to you on that later.” –Benanev and Clegg

by Jehu

This is the final part of this series. I know you are as happy to hear this as I am to say it. I want nothing more than to put these unethical charlatans behind me.


How the geniuses at Endnotes buried the critical role of the state and crippled the argument for communization

In the next two sections of their essay, titled, respectively, Surplus Populations Under Deindustrialisation and Surplus Capital Alongside Surplus Populations, Benanev and Clegg must now explain how technological unemployment did not lead to the collapse of wage slavery as Keynes predicted. They have to show, why, despite growing surplus capital and a growing surplus population of workers, capital still managed to create hundreds of millions of new wage jobs world wide after 1973. Somehow we have to get a mass of excess capital and a mass of technologically unemployed workers to combine into millions of shiny new fast-food jobs and favelas.

Simple enough, right?

I thought so too. So, imagine my shock when, having not yet even begun to offer us an explanation, Benanev and Clegg summarily throw in the towel and tell us,

“Unfortunately we will be able to do little more that touch on this subject matter here, leaving a more extended treatment to Endnotes no.3.”

I was so disappointed.


The reason Benanev and Clegg throw in the towel at this point is that they still cannot explain why wage labor continued to grow despite a process that, on a technical level, should have only produced massive unemployment and capitalist collapse long before now. Absent Marx’s categories — value, surplus value and exchange value — the progressive technical improvement in the productive power of social labor should have rapidly led to the demise of capitalism. That it did not implies we are not looking at a process whose development is determined solely by the technical conditions of production alone.

To address this hole in Keynes’ theory, the writers present us with a theory of financialization; a theory that basically argues that surplus capital and the surplus population of workers shed by capitalist firms somehow magically came together to produce new jobs as workers and governments borrowed the excess capital to pay their bills and financial speculation exploded.


Their narrative goes something like this: employment growth, from 1950 to 1973 may appear to defy Keynes’ prediction of technological unemployment, but that growth was the product of a one-off event: the augmentation of the urban work force by the conversion of the rural work force into proletarians:

“We might begin by remembering that the miracle years of the previous golden age (roughly 1950-1973) depended not only on a world war and an enormous uptick in state spending, but also on a historically unprecedented transfer of population from agriculture to industry.”

Technological development having wrought devastation in industrial employment in the 1930s, turned its attention in the 1950s to what remained of rural agriculture labor — quickly dispatching, in the space of a generation or so, almost all human labor in favor of machines, science and technology. As rural labor was summarily pink slipped from agriculture, the newly proletarianized population streamed into cities where the replacement of human labor by machines was already underway.

As capitalism began to run into the problem of “saturated” markets. Prices collapsed. The over-production of commodities combined with the under-consumption of the growing mass of proletarians led to a fall in the rate of profit and growing unemployment and underemployment. In this situation, say the writers, “the capital-labour accord snapped” and wages stagnated.

With capital now dependent on international trade and with increasing competition world-wide, industrial employment began to shrink — first relative to total employment, then in absolute numbers. The decline of industrial employment was more than made up by the growth of the so-called services sector. However, the expansion of the services sector has not been sufficient to prevent stagnation of wages and increasing debt.

“Relative industrial employment is falling even as agricultural employment collapses. Just as deindustrialisation in the high-GDP countries entails both the exit from manufacturing and the failure of services to take its place, so also the explosive growth of slums in the low-GDP countries entails both the exit from the countryside and the failure of industry to absorb the rural surplus.”

While many Marxists confuse the services sector with unproductive labor in the capitalist sense of that term, i.e., unproductive of profit, the more accurate characterization of the services sector, say the authors, is one where the increase in profits can only be achieved by increasing the aggregate labor time of the employed work force or working them harder.

“Thus as the economy grows, real output in “services” tends to grow, but it does so only by adding more employees or by intensifying the work of existing employees, that is, by means of absolute rather than relative surplus value production. In most of these sectors wages form almost the entirety of costs, so wages have to be kept down in order for services to remain affordable and profitable, especially when the people purchasing them are themselves poor: thus McDonald’s and Wal-Mart in the US — or the vast informal proletariat in India and China.”

In theory at least, the shift of employment growth to the service sector, say Benanev and Clegg, in no way contradicts the story of a technologically-driven crisis of wage employment that Keynes predicted in 1930. The rising share of the services sector in the economy in no way implies that problem of technological unemployment has been solved.


But Benanev and Clegg still haven’t told us why, despite the collapse of rural agricultural employment by technological development, wage slavery continued to grow overall after 1973, even if this growth was confined to the low wage, low productivity services sector. They only tell us that this theoretical problem is not explained by the peculiar nature of services as a site for production of exchange value: a service produced and sold as a commodity is still a commodity.

So far as the problem of technological unemployment is concerned, a waitress is as much a producer of exchange value as a farmworker. While government statistics may make a distinction between industry, agriculture and services, we don’t make such distinctions. Industry, agriculture and services all produce commodities, i.e., objects having both use-value and exchange value. The differentiation of wage employment into industrial, agricultural and service employment cannot explain why wage slavery continued to grow for most of the 20th century, despite Keynes’ prediction of its incipient collapse.

As the authors explain, the distinction to be made in the economy is not between declining industrial and agriculture employment and growing service employment; each sector employs wage labor for the production of commodities and one commodity is indistinguishable from another, insofar as they each serve as a repository of value. The service sector may be less amenable to application of labor saving technology — for instance, there is a limit to how many tables even the most energetic waitress can serve — but, as many workers in the fast food industry are now learning, advances in automation suddenly can place even abysmally low wage employment at risk.


Realizing at this point they have a huge hole in their narrative, the Endnotes folks next turn to financialization as the most likely suspect to explain why capital continued to add new jobs to the economy despite its tendency toward technological unemployment. What is financialization? Well, the term is meaningless, as Benanev and Clegg admit, but the story they tell goes something like this:

The US emerged unscathed from World War II. It not only controlled two thirds of global gold reserves, its allies owed it tremendous debt. The dollar was quickly established as the international reserve currency backed by gold and a fixed exchange rate between currencies. European budget deficits were funded by US capital exports. By the 1960s, however, many countries had recovered from the devastation of the war. They no longer relied on US imports. Some of these countries were actually beginning to compete with US producers, leading to still another global glut of capital.

At the same time, US budget deficits incurred by funding the Vietnam war made devaluation of the dollar appear inevitable. US deficits were a drain on US gold reserves, and placed a strain on the fixed exchange rate system. Anticipating devaluation of the dollar, many central banks began to cash in their dollars for gold, while speculators began to put pressure on the currencies of export-surplus economies who were most at risk from the effects of dollar devaluation. When the US finally abandoned the Bretton Woods agreement, it was able to impose a new flexible dollar reserve currency standard on the rest of the world.

But exiting Bretton Woods also had another effect: it removed budgetary constraints from the US, allowing it to run up deficits and issue dollars at will. Foreign nations had no choice but to recycle the excess dollars back to US financial markets, particularly into US government debt. US public debt quickly replaced gold as the global reserve currency. Treasuries became the source of expanded state and consumer debt, as well as speculative financial bubbles.

“Unprecedented weakness of growth in the high-GDP countries over the 1997-2009 period, zero-growth in household income and employment over the whole cycle, the almost complete reliance on construction and household debt to maintain GDP — all are testament to the inability of surplus capital in its financial form to recombine with surplus labour and give rise to dynamic patterns of expanded reproduction.”

In other words, this explanation for why capital continued to add new jobs to the economy after 1973 involves a lot of interesting hand-waving, but, ultimately, the authors are forced to admit they are licked: ‘Perhaps by the time Endnotes 3 is published we can cobble together a coherent story. In the meantime, here is a cute picture of a cat.’

To understand why the story of financialization fails, we need only ask why US public debt replaced gold as the global reserve currency (whatever this silly statement means). In fact, by 1936, almost a decade before the Bretton Woods agreement, not a single industrial economy on the planet was on the gold standard. When, for instance, Nazi Germany announced it had achieved full employment in 1936, it had already been off the gold standard at least for five years.

Effectively, gold no longer was money, i.e., it no longer served as the medium for the circulation of commodities. Gold likely had not served to express the values of commodities since 1929, when the owners of gold began to withdraw their money from circulation as the global economy tipped over into the Great Depression. In fact, according to most readings of the period, the depression of the 1930s bottomed only after national currencies were severed from gold.

If we are to explain why wage employment continued to grow despite Keynes’ prediction of technological unemployment, we should at least begin with the collapse of the gold standard within industrial economies in the 1930s.


But let me argue for another approach to this problem.

If after 1973 wage slavery continues to add new jobs, this cannot be explained simply by where the jobs are added; rather, we should ask what the workers performing these new jobs are actually doing. By this question, I do not mean to ask whether the worker in question is producing a ton of steel, an acre of corn or simply waiting tables. What I am asking here is whether the worker, whatever she is doing, is actually producing a commodity.

One of the first distinctions Marx makes in Capital in terms of commodity production is that between a use value produced for exchange versus a use value that is directly consumed privately by the producer or by someone who acquires it without a reciprocal exchange. A laborer can wait a table in a tavern or in the house of her slave master. She can grow crops for sale in the local market or for her lord. The first types of labors — production for exchange — produce commodities, use values for exchange, while the second do not.

As Benanev and Clegg argue, the important distinction among labors in this regard is not between waiting a table versus growing a crop, but whether the producer expends her labor power on production of a use value for purpose of exchanging it for another commodity. Likewise, when we try to understand the growth of wage slavery in the face of technological unemployment, the critical distinction to be made is not whether this new employment of labor power leads to an expansion of either services or goods, but how and to what extent expansion of either services or goods results in expansion of commodity production and exchange.

And here, the observation Benanev and Clegg make, almost in passing, that the expansion of post-war wage employment depended, at least in part, on a world war and an enormous uptick in state spending is of critical significance, despite the fact they actually ignore both in their analysis.

Why might this observation be critical to the discussion?

The short answer to this question is that the enormous uptick in state spending cannot be explained if we assume the premises of simple commodity production as outlined by Marx in the first chapter of Capital. To buy anything in Marx’s labor theory of value, the buyer must first sell a commodity of his own in the market. Once he has sold his commodity, he now has acquired the means to buy the commodity of another producer. (There is an important exception to this general rule, of course: the capitalist buys before he sells. But even here the capitalist must sell in order to buy again.)

Simply stated, for the most part, the state doesn’t engage in commodity production. It does not produce a commodity for exchange in the market. Thus, based strictly on the premises of labor theory of value, the state can no more buy, for example, labor power without raising tax revenue than the rest of us can buy groceries at the corner store with an empty wallet.


In fact, however, contrary to Marx’s assumption in Capital, since 1900 we have seen the unparalleled growth of spending by a state sector that itself produces nothing and thus should have no mean to spend absent a corresponding growth of taxes. Not only has state spending increased, in the 109 years covered by the chart below, the state has ballooned to monstrous proportions without producing so much as a shoe string, an ear of corn or a french fry.

Federal Net Outlays, Millions of Dollars, Annual, Not Seasonally Adjusted (1901-2010) (SOURCE : Federal Reserve Bank of St. Louis)

Of course, the entire so-called economy is much bigger as well. So shouldn’t we expect the federal government to grow with it? Perhaps we should, although why it should grow at all is not immediately obvious.

But even if we accept the idea the state should increase in size along with the so-called economy, should we expect the federal government to grow eight or nine times faster than the economy as a whole? As can be seen from the chart below, taken by itself, US federal net outlays as a percentage of total US GDP rose from a ‘modest’ 2.33% of GDP to an astonishing, (at least by 1900 standards), 21% of total output. More than one dollar of spending in five is today accounted for by the federal government alone.

Federal Net Outlays as a percentage of US GDP (1901-2017)
Sources: Federal Reserve, measuringworth.com

Not surprising, as the next chart shows, the employment of wage labor in the state sector since 1939 has become one of the largest single factors in the growth of employment overall. Wage employment by the state has grown as robustly as employment in the services sector:

Employment growth by sector from 1939-2012 (Sources: Bureau of Labor Statistics, US Census Department)

The result of this robust public sector employment growth is that, today, employment in the state sector has easily surpassed total employment in the so-called goods producing sector of the so-called economy. Starting in 2007, government alone employed more wage workers than agriculture, mining, construction and manufacturing combined:

Total Employees: Goods producing versus Government employment (1939-2012)
(Source: Census Bureau)

Moreover, as the next chart shows, federal net outlays is only the tip of the iceberg: the share of aggregate US GDP consumed by the public sector at all levels of government is now almost 40% of all annual output — nearly two dollars of every five spent in the economy is accounted for by the federal, state and local government. This is a higher percentage of total GDP than when Washington was simultaneously fighting total war across two oceans, on three continents, during World War II:

Total government spending (federal, state and local) as a share of GDP, 1929 to 2010 (Source: Bureau of Economic Analysis)

Why might these charts be critical to explaining the stubborn growth of wage slavery over the last 120 years or so despite prediction of its imminent demise? Well, for one thing, like the upward spiral of prices of commodities despite the decline in their values over the last 90 years or so, we cannot account for wage employment growth in the state sector based on the premises of commodity production as described by Marx in chapter one of Capital. State spending is a black hole where capital disappears and it not replaced in circulation of commodities.

Something has happened since 1900. That something was the breakdown of production based on exchange value.


At least in theory, the state has an economic relation to the rest of the so-called economy more like that of a feudal lord or parson to a peasant than that of a commodity buyer to a commodity seller in the market. Thus, one of the fastest growing parts of the so-called economy is a sector that cannot account for its own growth, directly or indirectly, on the premises of commodity production and exchange. Not only can the state not account for its own growth, it also cannot account for the growth of wage employment generally despite being one of the fastest growing sectors of wage employment.

You would think the geniuses at Endnotes would ask themselves how the state manages to bypass the material requirements of simple commodity production, but you would be wrong because the geniuses at Endnotes apparently don’t even notice it is happening.

Let me state the paradox posed by the expansion of so-called public employment over the last 120 years or so explicitly: state deficit spending cannot account for any part of the growth of wage employment since 1901 precisely because the state produces nothing with which to buy the labor power it employs. Yet state deficit spending is the fastest growing sector of wage employment. Even if you assume the state “buys” without selling at the point of a gun — by taxation or outright expropriation — you have now violated the premises of simple commodity production just as surely as you would if you argued the capitalist makes a profit by cheating his worker or overcharging his customer.

Just as the production of surplus value assumes that the capitalist pays the full value of the labor power of the worker, from which he then extracts his surplus value by working the worker longer than is required for her wages, so the secret of the state’s ability to buy without first selling has to be explained in a way that does not violate the premises of capitalist production.

Of course, Benanev and Clegg already have the answer to this puzzle, but they are just too stupid to realize it: the state can buy labor power without selling a commodity of its own because, owing to what Keynes called technological unemployment, the capitalist mode of production is now awash — indeed, almost drowning — in an ever growing mass of surplus capital and population of surplus workers that cannot, under any circumstances, be productively employed as capital, i.e., for the production of additional surplus value.

The state simply borrows the excess capital and uses this excess capital to employ the surplus population of workers — exactly as Keynes suggested in 1933.


Three things should now be obvious:

First, when the state, following Keynes’ suggestion in 1933, borrows excess capital and uses this capital to employ the surplus population of wage workers, it does not violate the premises of capitalist production, because, from the point of view of the mode of production itself, this capital is already no longer capital, i.e., it cannot be employed for purposes of production of additional surplus value. Capital has reached the absolute material limit of its development; the point where, as Marx explained in volume three, “the increased capital produced just as much, or even less, surplus-value than it did before its increase”.

Second, by borrowing the surplus capital and using it to employ the surplus population of workers, the state is not adding to the mass of surplus value produced; rather, it is solely adding to the superfluous labor time of the vast majority of society. State deficit spending does not and cannot add to the material wealth of society. It can only unproductively consume this wealth. State deficit spending is superfluous to the needs of the producers and the material requirements of production.

Third, the monstrous swelling of the state and the rising portion of total output falling to it with the technical improvement in the productive power of social labor indicate the degree to which a fully communist society is possible. Communization is only possible where wage labor itself has become superfluous to the production of material wealth. The conditions for a fully communist society has been reached once the further expansion of wage labor requires the expansion of state deficit spending.

You won’t hear any of this if you read Endnotes, because, frankly, the Endnotes collective isn’t actually interested in communism. They are only interested in hijacking communization theory and turning it into another apology for wage slavery.

Fuck them.