Society chose Barbarism and it has its own peculiar political economy

Adam thinks the society I am describing no longer resembles the capitalist mode of production as described by Marx in Capital. He wonders why changes in the monetary system would have such far-reaching changes in how the mode of production operates. And he questions the validity of my reading of Marx’s labor theory:

The implication, Jehu, of what you say is that since April 5, 1933, capitalism has been replaced by a different system of society, an implication which no doubt you accept and which is the basis of your whole approach. But I don’t think it holds water. Society today is still based on the ownership and control of productive resources by rich individuals, corporations and states; production is still carried for sale on a market with a view to making a monetary profit, and is performed by people hired to do the work for a monetary payment. The change in the currency that took place in the USA in 1933 hasn’t altered this basic social fact. And, as a purely monetary change, there is no reason why it should have done. That workers should be paid in tokens for money rather than money itself is not a significant change. Nor was 1933 the first time it had happened.

Has capitalism been replaced by a different system?

Well, yes and no. I think it is pretty clear that we no longer live under the textbook version of capitalism that Marx described in Capital. For several years now I have referred to this different system as fascism and I have argued that it is basically what Luxemburg was talking about when she used the term “barbarism.” Barbarism was not a mere rhetorical device employed by Luxemburg against her social democrat opponents; she was referring to a real impending deep transformation in the political economy of capital.

Marxists never tire of telling us we face a choice between socialism or barbarism. In fact, society made that choice 90 years ago.

Society chose barbarism; we are living with the consequences of that choice.

But what is the political economy of barbarism?

By barbarism (fascism), I am referring to a highly advanced form of capitalism, which has an peculiar political economy that can be precisely described in terms of labor theory. In Socialism, Utopian and Scientific, Engels and Marx predicted that, following the breakdown of production based on exchange value, the state would be forced to undertake the direction of production. This direct management of capitalist accumulation would not do away with the capitalistic nature of the productive forces. Although capitalist private property would be abolished, and the state would become the national capitalist, the proletarians remained wage workers.

The production of surplus value would still take place and that means the employment of labor power remains in place. (How this process takes place without money — without exchange value — still remains for us to explain in detail, but take place it does.) The capitalist class would be rendered entirely superfluous to capitalism. The state, previously the ideal representative of the national capital, becomes its actual personification as well. This event would set the stage for the final resolution of the contradiction: the overthrow of the state.

I believe Luxemburg was referring to the passage from Engels’ book where all of this is detailed when she warned we faced a choice between socialism or barbarism. My only problem with her use of the term barbarism is that she appears to think barbarism represents some sort of economic regression. Engels explicitly called barbarism an economic advance that technically prepares society for communism.

As Adam notes, the idea that the state today is the national capitalist is the whole basis of my approach. Unfortunately, I would bet most communists today still view the state as an arena of class struggle, or worse, through Lassallean goggles, “as an independent entity, an instrument of justice essential for the achievement of the socialist program” (Wikipedia); rather than as the direct exploiter of the working class.

This is terribly wrong. The state is our immediate target.

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I agree with Adam that workers have always been paid mostly in tokens of money rather than money. But what occurred on April 5, 1933 was not a mere change in the form of money. It was a fundamental alteration in exchange relations themselves. Those relations collapsed and Washington was forced to replace commodity money with a state-issued scrip.

To put this in terms Marx might use, insofar as money serves as means of exchange, the circulation of money is a reflex of the circulation of commodities. As the production of commodities collapsed at the outset of the Great Depression, the circulation of money collapsed with it. Money was removed from circulation by its owners and withdrawn into hoards. This much is documented in the minutes of the United States Federal Reserve Bank during that period.

But when Washington replaced disappearing commodity money with its fiat, this was not a mere replacement of one form of money by another; it was also a change in the content of money relations in two ways: first, the state did not replace a convertible currency with a non-convertible currency; rather, it replaced gold (commodity money) with its non-convertible scrip. When gold was withdrawn from circulation, this was because the requirements of commodity exchange had suddenly and severely contracted as a result of the deep and prolonged crisis. Forcing the non-convertible currency into circulation at this point meant the state was replacing money itself, not convertible currency.

The breakdown of production based on exchange value means, in first place, that money itself was superfluous to the production of material wealth. By forcing its valueless scrip into circulation, the state was engaging in what we today call quantitative easing in an attempt to stoke inflation and drive down real wages.

It should be obvious from this brief discussion that the value represented by this scrip is determined by the requirements of capitalist production for profit and not by the requirements of commodity exchange as currency had been previously. The state can alter the peg at will or remove the peg entirely, as it eventually did in 1971, to meet the requirements of capitalist accumulation. This what changed: the state manages the process of accumulation through its fiscal and monetary policies.