Decoding the Ideological Bullshit of a Bourgeois Simpleton (Part 2)

This is part 2 of a two part post.

To summarize the argument of Nobel Laureate and bourgeois ideologue Michael Spence from part one of this series: The goal of “economic restructuring” (or “rebalancing”) is for the advanced countries to export more of what they produce at the expense of their domestic consumption. The future expansion of socially necessary labor time (value production) and, therefore, the expansion of surplus value will depend on the growth of exports of the advanced countries into the world market. Spence proposes this can be accomplished (1) by depreciating the real purchasing power of money wages; (2) stagnant nominal wages, in turn, will reduce real wages and domestic consumption generally; and (3) the resulting “structural adjustment” will force constant and variable capital of the advanced countries to flow into sectors of production that can be exported.

It follows from this that state economic policy should be solely concerned with raising the profitability of capital by extending unpaid hours of labor in the export sector. According to Spence, if the advanced countries are to increase unpaid hours of labor, they must increase the relative size of the “tradable sector of the domestic economy”. Which is to say, in relative terms, the portion of the working day during which the working classes of the advanced countries produce its wages and state social expenditures must be reduced, while the portion of the working day that can be turned into exports must expand. The resulting “adjustment” will allow constant and variable capital of the country to flow into forms of commodity production that can be exported.

Thus the crisis can be resolved by turning the advanced national capitals into export platforms, much as has already been done with the less developed nations through IMF imposed restructuring.

Decoding the Ideological Bullshit of a Bourgeois Simpleton

This is part 1 of a two part post.

Labor theorists of various persuasions have spent a lot of time discussing the causes of the present crisis. That discussion is extremely important, because it seeks to find the causes of the crisis that result from its fundamental premises. However as important as this discussion is, it is clear the crisis continues and the capitalist class is not so much concerned about its cause, as it is about how to cure it. In this spirit, I spent some time trying to understand how exactly the capitalists think the crisis will be resolved. In an essay, published by Project Syndicate, “What’s Stopping Robust Recovery?”, Nobel Laureate Michael Spence explains why the so-called “recovery” isn’t robust and what has to be done to change this.

(WARNING: you will need to set your Marxist decoder ring to “simpleton” in order to translate this bullshit.)

The future does not, in any way, belong to the wage laborer

Mr. Excess Capital allow me to introduce you to Mr. Excess Population Of Workers.

According an essay,  “Europe’s Hidden Stimulus”, by the bourgeois simpleton, Eric Labaye, European companies had excess cash of €750 billion in 2011 that is not being invested.

Indeed, publicly traded European companies had excess cash holdings of €750 billion ($1 trillion) in 2011, close to a 20-year high. Unlocking that cash would give Europe a much larger stimulus package than any government can provide. In 2011, for example, private investment in Europe totaled more than €2 trillion, compared to government investment of less than €300 billion.

And yet, while trends among European economies have varied, private investment was, overall, the hardest-hit component of GDP during the crisis, plunging by more than €350 billion – ten times greater than the fall in private consumption and four times more than the decline in real GDP – between 2007 and 2011. The magnitude of the private-investment downturn was, in fact, unprecedented – and lies at the heart of Europe’s economic malaise.

Likewise, by historical standards, the private-investment recovery is running late. In more than 40 past episodes in which GDP fell and private investment declined by 10%, recovery took an average of five years. Europe is four years removed from the onset of recession, but private investment in 2011 was still lower than its 2007 level in 26 of the European Union’s 27 member states.

It seems only logical to this bourgeois apologist that Europe could bring this excess capital together with a staggering mass of excess labor power Europe now suffers. The problem clearly is not the lack of means nor the lack of workers able and willing to work — Greece, for instance, now suffers upwards of 27% unemployment and youth unemployment is far higher — but the lack of profit for employing either. Labaye argues this mass of frozen capital could be freed up for investment if the proper deregulatory regime were enacted and he proposes some marginal changes. He argues over-regulation is

Does New Keynesian Theory Confirm Marx?

An interesting confirmation of labor theory is apparently buried in New Keynesian theory, according to John Cochrane in a recent post to his blog, The Grumpy Economist, “All state spending is wasteful”.

But, before you dismiss this as just the typical ideology-driven nonsense spewed by a neoliberal enemy of fascist state social spending, take a moment to hear Cochrane out:

“While fiddling with a recent paper, “The New-Keynesian Liquidity Trap” (blog post), a simple insight dawned on me on the utter and fundamental difference between New-Keynesian and Old-Keynesian models of stimulus.”

That fundamental difference, according to Cochrane, is that the “old” Keynesian model assumes that as income increases so does consumption:

Some thoughts on Michael Roberts’ North Star essay on the crisis

I have been trying to understand Michael Roberts recent essay on the present crisis and its causes, “From Global Slump to Long Depression”.

In the essay, Roberts tries to present evidence for the case that the 2008 financial crisis was caused by a fall in the rate of profit. Roberts is part of the school that argues the law of the tendency of the rate of profit to fall (FROP) is source of crises n the mode of production. It is the smaller of the two main schools among labor theorists, but fiercely defended by its advocates as an orthodox Marxist approach.

The other approach — the underconsumptionists — to the present crisis, championed by Dumenil and Levy, is summarized by Roberts this way:

“Some Marxists have argued that the credit crunch of 2007 and the ensuing Great Recession is not a classical Marxist crisis  of profitability and that Marx would have also seen the crisis as financial in cause.”

The underconsumptionist school sees the cause of the present crisis as fundamentally rooted in the increase in profits at the expense of wages. This increase in profits is said to have led to speculative excesses and bubbles that eventually led to the crash. Roberts essay is an attempt both to refute the arguments of the “underconsumptionist” school and to account for the speculative bubble.

According to Roberts,

“Marx posits the ultimate cause of capitalist crises in the capitalist production process, specifically in  production for profit. He developed a theory of crises based on his law of the tendency of the rate of profit to fall over time   as capitalists accumulate.”

This law does not rule out speculative bubbles like the one seen in the run up to the present crisis, however, Roberts argues, the cause of the crisis is the falling rate of profit. not the speculative bubble. Most of the back and forth between the two schools consists of publishing data pointing to evidence for or against the idea the rate of profit is falling. Depending on how the relevant data is defined and how it is measured, it seems one can arrive at either position.

To an extent, the problem here is not the one both schools point to — the cause of the 2008 crisis — but another question altogether: Why hasn’t there been a repeat of what society experienced during the Great Depression 80 years ago.

Everything you think you know about fascist state deficit spending is wrong (2)

To summarize my argument in part one:

The present crisis arises from the fact that there is a mass of superfluous capital that cannot, under any circumstances, become real capital — that is, cannot produce surplus value and, therefore, profit. This mass of superfluous capital poses the constant threat to the mode of production of a general devaluation of the existing capital as a whole. If a general crisis of devaluation is to be avoided, the state must run deficits, i.e., it must spend more than it takes in in tax revenue. State deficit spending is, therefore, not determined by the needs of society (and, in particular, by the needs of the social producers), but by the needs of the owners of capital, who, if they are to avoid a nominal devaluation of this superfluous capital, must hand it over to the state to be consumed unproductively in return for interest payments.

The purpose then for the fascist state to borrow the excess capital is to avoid a nominal devaluation of capital. Avoiding this nominal devaluation of capital does not mean the capitalists avoid a real devaluation of their capital. Which is to say, the real means of production and labor power of society is really consumed by the fascist state in the form of unproductive expenditures. But, in this real devaluation of capital, the nominal value of the capital, expressed in some currency, is replaced by the fascist state in circulation by valueless tokens, by treasuries, which represent it only symbolically and which take effect as such. The real capital consumed is, therefore, replaced by fictions of capital in the form of promissory notes issued by the state and on which it pays interest.

Everything you think you know about fascist state deficit spending is wrong

Part One: The owners of capital compete for the opportunity to lend their capital to the fascist state

In a recent lecture, Paul Krugman explained why, in his thinking, the US is not Greece. (Hint: almost nothing to do with language differences or geography.) Krugman lecture is an argument for why a country borrowing in its own currency cannot experience a Greece-type crisis, where bond buyers force the country into default by refusing to advance it further credit:

“Are Greek-type crises likely or even possible for countries that, unlike Greece and other European debtors, retain their own currencies, borrow in those currencies, and let their exchange rates float?”

How Monthly Review Published a Scholarly Essay Fundamentally Revising Marx’s Argument

In April, 2013, Monthly Review  published an essay, Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s, by the labor theorist, Michael Heinrich, asserting that “In Marx’s work, no final presentation of his theory of crisis can be found. Monthly Review praised the essay, stating:

It is now clear that Marx never ceased to develop his thinking on the phenomena of crises in capitalism, and never ceased to discard earlier formulations; for example, at the end of his life he was focused on questions of credit and crisis. Monthly Review rarely presents its readers with discussions of economic theory at a relatively high degree of abstraction; this, however, is such an occasion. We trust that the author’s exemplary clarity will permit ready access to readers with any degree of interest in Marx’s theory; for those who wish to become familiar with the conceptual outline of Marx’s work, we cannot do better than to recommend the author’s An Introduction to the Three Volumes of Karl Marx’s Capital

In that essay, Michael Heinrich states:

In the so-called “Fragment on Machines,” one finds an outline of a theory of capitalist collapse. With the increasing application of science and technology in the capitalist production process, “the immediate labour performed by man himself” is no longer important, but rather “the appropriation of his own general productive power,” which leads Marx to a sweeping conclusion: “As soon as labour in its immediate form has ceased to be the great source of wealth, labour time ceases and must cease to be its measure, and therefore exchange value [must cease to be the measure] of use value. The surplus labour of the masses has ceased to be the condition for the development of general wealth, just as the non-labour of the few has ceased to be the condition for the development of the general powers of the human head. As a result, production based upon exchange value collapses.”5

These lines have often been quoted, but without regard for how insufficiently secure the categorical foundations of the Grundrisse are. The distinction between concrete and abstract labor, which Marx refers to in Capital as “crucial to an understanding of political economy,” is not at all present in the Grundrisse.6 And in Capital, “labor in the immediate form” is also not the source of wealth. The sources of material wealth are concrete, useful labor and nature. The social substance of wealth or value in capitalism is abstract labor, whereby it does not matter whether this abstract labor can be traced back to labor-power expended in the process of production, or to the transfer of value of used means of production. If abstract labor remains the substance of value, then it is not clear why labor time can no longer be its intrinsic measure, and it’s not clear why “production based on exchange value” should necessarily collapse. When, for example, Hardt and Negri argue that labor is no longer the measure of value, they do not really refer to the value theory of Capital but to the unclear statements of the Grundrisse.7

Marx indirectly addresses this set of problems from the Grundrisse in the first volume of Capital, when dealing with the concept of relative surplus-value: there Marx makes fun of the notion that the determination of value by labor is called into question by the fact that in capitalist production, the point is to reduce the labor time required for the production of an individual commodity—and that was the argument upon which the theory of collapse in the Grundrisse was based.8

In fact, a closer examination of this statement will show Heinrich is engaged in a fundamental revision of Marx’s argument in Capital and the Grundrisse for the express purpose of removing from labor theory both the idea of a final collapse of capitalism based on the inner laws of the mode of production and his law of the tendency of the rate of profit to fall. This is serious piece of academic malpractice and should be condemned.

Let’s walk through how Marx begins his discussion of the capitalist mode of production in Section 1 of Chapter 1 of Capital. Volume 1 and then compare it to Heinrich’s presentation of the same argument.

The Unmaking of Labor Theory by Michael Heinrich, Andrew Kliman et al.

Michael Heinrich has produced a “new interpretation” of labor theory that some argue removes any discussion of a theory of crisis implicit in Capital. In response to this alleged attempt to fundamentally revise labor theory, Andrew Kliman, Alan Freeman, Nick Potts, Alexey Gusev, and Brendan Cooney have published an essay purporting to defend the law of the tendency of the rate of profit to fall against Heinrich. Although it appears both sides are in conflict, I will show that actually both sides of this debate share fundamental agreement on the only real issue raised by Heinrich’s argument.

Heinrich has just about blown up the Marxist academy with his new interpretation of Marx and labor theory’s alleged crisis theory. His interpretation has been welcomed by some labor theorists and severely criticized by others. Michael Heinrich’s interpretation of Marx’s writings although less familiar to me, stands in contradiction to that of Robert Kurz. While Kurz believed capitalism had entered its final crisis, Heinrich, as I understand him, argues in his new interpretation that Marx’s writing contains no theory of capitalist collapse and not even a final theory of crisis.

‘Marxist Economists’ and Simpleton Trolls

“The dominant political economy Marx engaged with in his critique was a very different beast.” —Mike Beggs

I have come to the conclusion that anyone calling themselves a “Marxist economist” can safely be dismissed as an idiot.

The very idea of defending historical materialism from bourgeois simpletons is offensive to me. The idea of setting Marx on par with ideologues like Samuelson and Keynes, as though Marx was interested in “the economy” is disturbing. There is nothing in Marx that can be said to even distantly resemble a description of “How the economy works”. Marxists are “Marxists” precisely because they suffer the delusion Marx was, in turn, an “economist”, a “sociologist”, or a “philosopher, depending on which field the person talking about him belongs.