On Postone’s concept of the hollowing out of working society – XVII

by Jehu

As I wrote in the previous post, in volume 3 Marx seems to suggest that, by combining the growing mass of excess capital with the growing surplus population of workers, after production based on exchange value had finally collapsed, Keynesian programs like FDR’s New Deal and Johnson’s war of aggression could, at least in theory, increase the mass of surplus value produced by the total national capital of a country.

But Marx also warned this effort to extend the shelf-life of capital would only succeed at the cost of further intensifying the contradiction between the conditions under which the additional surplus value was produced and the conditions under which it was realized. The result of such a strategy, which necessarily involves extra-economic intervention by the state, would be to increase the real productive power of social labor, even as the real consumption power of society was further narrowed.

Accumulation would accelerate, as would the expansion of the national capital, to produce additional surplus value on an extended scale. The policies we now refer to as Keynesian deficit spending stimulus would not solve the problem of absolute overaccumulation of capital, but actually exacerbate it. It is probably not hyperbole to state that crisis would become a permanent feature of the mode of production.

But, and this is what seems to get lost in a lot of the analysis that takes place particularly after 1971, this is a crisis of a peculiar sort: it is a crisis where the so-called economy paradoxically is stuck in a permanent state of overdrive, or hyper-accumulation of excess capital.

To illustrate what I mean, let’s start with the chart we used in the previous post:

What follows here is not going to be pretty; in fact, you may find it hard to accept.

Don’t be concerned, lots of Americans don’t accept the idea of evolution, yet they eat bananas and climb trees just like their evolutionary ancestors.

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Now, let’s strip off the layer of superfluous labor time, to leave only the underlying socially necessary labor time:

This gives us an idea of the trajectory of capital during what is fondly remembered as the golden age of the social welfare state — the period from the end of World War II to about 1971.

Is this a credible picture of what is taking place in the so-called economy at the time?

Well, let’s check.

One way to double check that we are actually seeing real useful information and not just useless noise might be if we can detect events that previously were not readily evident to us using traditional historical empirical datasets. For this reason, I want to bring your attention to the two weird notches in the chart above that I have highlighted in the chart below:

Interestingly, those notches coincide with dates NBER researchers have identified as the effective beginning and end of full convertibility of currencies under the Bretton Woods fixed exchange system that was initially established in 1944. Most writing on the Bretton Woods system point to the 1944 date, but NBER researchers focus on 1959-1968 because this was the period of full convertibility. The dataset I am using, based on actual commodity money, indicates that a monetary disturbance of some sort actually took place during those time periods. After 1968, according to the NBER researchers, the Bretton Woods system effectively collapsed into a chronic dollar currency crisis, and the United States gave up trying to manage the crisis altogether in 1971. In this chart, those dates stand out like twin beacons, as does the date Nixon effectively ended US participation.

We capture all three dates on this one chart:

Once Nixon ends effective US participation in Bretton Woods, the value of United States gross domestic product, as measured in gold, falls off the cliff, producing the crisis of the 1970s that most radical Leftists and Marxists agree happened, but which cause they have mostly never been able to explain.

 

Radical and Marxist economists are unable to explain the crisis, because, according to official data, it never happened. Yes, there were some pretty bad recessions. And an oil shock or two. And a lot of inflation. But these folks mean more than just that.

They want to say there was a crisis, like the Great Depression was a crisis. Only, between 1971 and 1980, with the end of the dollar peg to gold, when the so-called U.S. economy slumped into a deep depression, there was no replay of the Great Depression in terms of massive unemployment of the working class. Paradoxically, superfluous labor time, rather than being shed, and converted into mass unemployment of the Great Depression type, simply expanded to monstrous proportions.

Another way to say this is that the existing US national capital was temporarily devalued to a fraction of the value it had prior to the crisis — roughly 17.4% of its former value, or about 3.4% of the total labor day. At the same time, the portion of the labor day that was superfluous to the production of value expanded to 96.6% of the working day by 1980.

And no one can explain how or why this happened; and they couldn’t even explain what had happened, because, in currency terms, nothing of what was happening appeared in official government data!

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The collapse of Bretton Woods is a critical watershed moment because, unlike with FDR’s devaluation in 1933, once it is gone there is no practical limit on the portion of the total working day that can be superfluous to the production of exchange value. By 1980, the working day in the United States was almost entirely hollowed out, emptied of exchange value producing labor.