Schrödinger’s Capital: Money, “technological unemployment” and the cold war

NOTE 13: Historical materialism minus the history part

I have been reading, “Marx and Monetary Theory”, by Matthijs Krul. At the outset, Krul makes this statement:

“In the context of the current crisis, with ‘quantitative easing’ to the tune of hundreds of billions of dollars on the one hand and the rush to liquidity that accompanies financial crises on the other, it may be useful to take a look at how Marx’s economic theory relate to issues of money and monetary policy. The aim here is to provide a clear and understandable overview of what Marx’s theory of money was, how it relates to our current-day monetary system internationally, and how this relates to his value analysis generally.”

According to Krul in this 2010 essay, the financial crisis makes it useful to compare Marx’s approach to money (and, by implication, value and exchange value) with bourgeois monetary theory. The problem, however, is that in Marx’s theory money is the expression of the values of commodities. By contrast, bourgeois theory lacks a theory of money and treats money as a mere system for counting up incommensurable use values.

Since the commodities themselves are incommensurable, what else the prices might represent is unclear from Krul’s discussion — he never mentions the word, value, until he discusses Marx. It is possible that bourgeois economics believes money is a system for counting itself. As Arthur puts, money is both the form and measure of value.

In any case, bourgeois theory bounces between two poles: in times of relative calm it adheres more closely to the Austrian theory. During times of crisis, it suddenly declares, in the words of Milton Friedman, “We are all Keynesians now.”

How the basic income scheme could become the Left’s worst nightmare

So, let’s do a thought experiment just for the hell of it.

WARNING: This exercise is definitely not recommended for the fainthearted nor for those trapped in the social democratic delusion that the fascist state is a neutral field for competition between classes:

In my last post I asked if basic income can be employed to maintain wage slavery in face of chronic overproduction of capital. I explained, in this regard, the fact the basic income was incompatible with wage slavery has no place in the discussion, because chronic overproduction itself is already incompatible with wage slavery.

This means chronic overproduction itself should have already brought down wage slavery whether a system of basic income existed or not. Given this fact, the task is to explain why chronic overproduction did not bring down wage slavery and how  the capitalists managed to prevent this from happening.

When Charles Murray met David Graeber

One of the great difficulties Leftists who support the idea of basic income have is trying to explain why some of the most notorious Rightists in post-war United States have, at one time or another, embraced this idea themselves.

Response to David Graeber: If basic income is so good, why not start with the Koch Brothers?

This Graeber article, “Why America’s favorite anarchist thinks most American workers are slaves”, is just chock full of the most egregious bullshit on the basic income issue possible.

There are two possible directions for the Left to take at this point and both are said to achieve the same goals. The first is basic income and the second is reduction of hours of labor. For some reason, David Graeber has suggested the working class should be fighting for the first, not the second.

Superfluous labor and state debt

In his “Apotheosis of Money”, Robert Kurz makes this statement:

“If State consumption and State credit, crushed together as if by an avalanche, play a central role in this development, this is also due of course, to the fact that the State (unlike a private entity which avails itself of credit) is considered to be a “secure debtor” which means, however, that the State, in the event of a great monetary and credit crisis, will not declare bankruptcy, but will simply expropriate its citizen-creditors.”

The argument Kurz makes here is that the unproductive consumption of surplus value, made possible by the credit extended to the state, is dependent on the state’s ability to repay its debt and must, sooner or later, result

Decreasing federal deficits preceded both the 2001 and 2008 crises. (Source: St. Louis Federal Reserve)

in the state expropriating the owners of capital. I am not especially satisfied with the way Kurz formulates the problem here. My difficulty with Kurz’s formulation is probably best expressed in the words of the bourgeois simpleton, Paul Krugman — for reasons that are not entirely clear to the bourgeois simpletons the long-standing prediction of an impending crisis for Washington’s finances over the last thirty years never finally materialized:

“Fear of a Greek-style fiscal and financial crisis has loomed over much of our policy discourse over the past four years, and has played a significant role in shaping actual policy, constituting the principal argument for austerity in countries that don’t face any current difficulties in borrowing. However, despite repeated warnings that crises of confidence are imminent in floating-rate debtors – mainly the United States, the UK, and Japan – these crises keep not happening.”

Krugman has his explanation for why the predicted crisis “keeps not happening”, but he is a simpleton who thinks the problem is, “as simple and silly” as he is. Labor theory offers a much simpler and elegant explanation for why Washington has never experienced the sort of crisis predicted by bourgeois economists. It is an explanation I will need if I am to finally explain how reduction of hours of labor affects profits in an economy characterized by massive expenditures of unproductive labor time.

How superfluous labor time creates inflation

The purchasing power of one dollar, as measured in percentage of an ounce of gold. (1970-2012)

I want to turn to the question of the impact of the growing mass of superfluous labor time has on the exchange value and prices of commodities. Once i am finished, I hope you will understand why inflation is not a mystery — and, consequently, why all inflation within the mode of production can be traced to the growing mass of unproductive labor.

As I explained in the previous post, the emergence of a significant mass of superfluous labor time within the mode of production is the result of the tendency toward overproduction of commodities, of overproduction of capital in the form of commodities.

According to Marx in Volume 3 of Capital, this overproduction necessarily results in the devaluation of capital: At the point where overproduction of capital becomes a general condition of the mode of production, no increase in the mass of capital can add to the mass of profits; indeed, the possibility exists that an increase in the mass of capital actually results in a fall in the mass of profits.

How does superfluous labor time alter the impact of labor hours reduction on profits

In my last post I showed why I think a reduction in hours of labor would affect the “economy” the same way as a crisis brought on by the falling rate of profit does. The reduction of hours of labor has the effect of withdrawing a portion of the surplus labor time of the working class from exploitation and of reducing the time available to capitalists for production of surplus value.

However, so long as the labor time withdrawn from the capitalist does not reduce hours of labor below the duration necessary for the reproduction of the labor power of the working class, the working class should suffer no change in its material standard of living. The reduction only affects capital and has the same impact as a rise in the organic composition of capital. In this case, however, the rise in the organic composition of capital is achieved by a forcible reduction in hours of living labor imposed by the actions of the working class, rather than by an increase in the proportion of constant capital to variable capital resulting from a crisis of overproduction.

I think this is correct and would appreciate any input others might have on this question.

In my last post I deliberately left out the question of the role superfluous labor plays in this problem; however, in reality the efficiency of the employment of capital in the course of the labor day is not 100%. Some portion of the labor day is wasted, i.e., does not produce value and, therefore, does not count as productive labor time. The portion of the labor day that might fall under this heading has been calculated by various yardsticks by both bourgeois simpletons and by labor theorists. The estimate employed by Borsch-Supan is that wasted labor time amounts to anywhere from 10% to 30% of the typical labor day. On the other hand, labor theorists, employing different measures from bourgeois economists and even among themselves arrive at between 50% and 66% of the typical working day. My own calculation, based on a comparison of currency prices to commodity money prices, finds this wasted labor time now amounts to more than 90% of the labor day.

How might a reduction of hours of labor affect profits?

After realizing Borsch-Supan ignored the impact of labor hours reduction on profits — he never mentions profits even once in the entire paper — it finally sunk into my thick skull that “the economy” would respond to a reduction in hours of labor in much the same way that it responds to a fall in the rate of profit resulting from other causes. This had occurred to me perhaps a year ago, but somehow I forgot it when looking at Borsch-Supan’s paper. That  realization was triggered by this ridiculous statement:

How do wages and prices respond to a reduction in hours of labor?

In this post I show the surprising results of the empirical literature on hours of labor reduction: Contrary to the commonsense assumption, if hours of labor are reduced, the reduction will probably have no impact on wages at all.

Borsch-Supan states there are arguments for the idea reducing hours of labor will reduce the rate of unemployment, but these arguments rest on assumptions that go against the empirical evidence (which he calls “counterfactuals”). The question he asks us to ponder is whether, based on empirical evidence, there is a case for the idea employment will increase if hours of labor are reduced.

By contrast, there is no basis for such an argument within labor theory, because the expansion of employment in labor theory is determined by the rate of surplus value and, all else held equal, the quantity of surplus value produced is a function of the duration of labor. If the duration of labor is reduced, the mass of surplus value will also be reduced; if the mass of surplus value is reduced, the rate of expansion of the existing capital (new employment of living labor) must also fall.

At the same time, a reduction in the mass of surplus value produced means the mass of profits have fallen, since profits are nothing more than the mass of surplus value divided by the total capital invested. Since profit is the motive of capitalist production, the capitalist will again take steps to increase profits by further reducing wages. How this is done is not important at this point, but in labor theory there is no reason to assume fewer hours of labor increases employment — just the opposite: fewer hours of labor accelerates the reduction of living labor in production.