Mandel’s strange argument on value, exchange value and prices

As I showed in the first part of this series, Marx’s argument is that the rate of profit falls because, over time, generally less labor is employed in the production of commodities. The falling rate of profit triggers a crisis during which capital attempts to restore the normal operation of the mode of production.

Among Marx’s findings: Even if an increased quantity of labor is generally employed throughout the ‘economy’, this increase in the total sum of labor is accompanied by a decrease in the labor embodied in each of the individual commodities produced. The result is that, over time, even if more value is created, it is embodied in even more use values, each of which requires less labor to be produced.

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Ernest Mandel on currency crises and the end of money

For people who care about how the dollar works to slow capitalist collapse, Ernest Mandel wrote an interesting piece in 1968, The Crisis of the International Monetary System. I found the essay both interesting and puzzling.

Why I find the essay interesting is probably obvious to anyone who reads this blog regularly. I think Marx’s view of money and associated issues is far too blithely dismissed by even those who consider themselves orthodox followers of his theory. My argument is simple: you cannot claim labor theory is legitimate and valid while arguing one of the most fundamental and critical labor theory premises of commodity production and exchange — that money itself must also be a commodity — is invalid.

(Which is to say, of course, you can hold this position, and may even be right about it, but the results of your analysis won’t be consistent with labor theory. Something has to give here.)

Before I explain why I found Mandel’s essay not only interesting but, more importantly, puzzling, I want to provide some context.

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Can SYRIZA be fixed? Can Greece?

If this Jacobin article, Becoming Syriza Again, is any indication, even the remaining radicals within SYRIZA have no idea why it is failing.

The writer acknowledges that the debate over Greece leaving the euro, which raged within SYRIZA for a period of time before the split, was an oversimplification. However, even now he proposes no alternative economic program that would allow SYRIZA to achieve its stated aim of bringing austerity to an end while avoiding Grexit.

He proposes a 5 step solution in which SYRIZA must:

  • Hold onto power;
  • Stop fighting with KKE and other Leftists;
  • Eliminate opportunism in its ranks;
  • Reconsider staying in the eurozone; and,
  • Put forward a new vision that inspire the country.

Here is my problem with this essay.

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A conversation with Phil Greaves: Neoliberalism, Communism and the State

I spent the greater part of a day having an exchange with Phil Greaves over the situation in Syria. The exchanges have been sharp and uncompromising, but very helpful to me, in the sense it has allowed me to understand a problem that can only be discussed in wider context than I have so far.

That problem is this: So far as I can figure out, neoliberalism is the crisis of the existing state, a period of its collapse. If this is true, we are looking at almost 200 states that will more or less effectively disappear over the next few decades. I have spent most of the last year watching this process unfold in Greece, but Greece is not by any means the only example of the process. Just to name a few, we have seen political crises in Egypt, Spain and Japan. We have watched the rise of a nationalist movement in Scotland and euro-skeptic movements in the UK, France, Germany, etc. Finally, we have seen ongoing US and NATO aggression in Ukraine, Venezuela, Libya and Syria. The crisis of the state is now morphed into a prolonged global political and economic crisis.

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First we get the power, then we get … Oops!

Okay, now what?

scarface_17Citizen CoKane always has relevant comments to my blog that put me on the spot:

His question this time is what are workers in Greece supposed to do when their counterparts in Germany appear to be complacent, even indifferent to their plight? The workers of Greece clearly can’t overthrow capitalism worldwide all by themselves and the rest of Europe seems paralyzed at best. I reproduce his comment in its entirety:

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A reply to Reidkane on the class character of proletarians

In 1846, Karl Marx and Frederick Engels met together with a few other communists to lay out their common approach to the social revolution then developing in Europe. The results of their work, hqdefaultas we all know, was an unpublished manuscript now known as the German Ideology. In it Marx and Engels elaborate on a method of social analysis we now refer to as historical materialism.

That document makes a number of claims about the proletarians which we today might consider heresies. Three in particular are the subject of the commenter, Reidkane:

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The historical context of Greece’s election

No matter the outcome of Greece’s election circus, the capitalists are losing the war. Can the Left take advantage of this?

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Kevin Ovenden has a very interesting post to Counterfire, Dispatches from hope: a primer on the Greek election, in which he places the SYRIZA election campaign in the historical context of a long struggle against the neoliberalist political forces that emerged out of the 1970s depression. The present developments in Greece echo the struggles of the 1980s, says, Ovenden, but while the tune is familiar, the words have changed:

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MMT and the United States as the international monetary sovereign

NOTE FOR THE READER: I want to reiterate that fascism, in the sense I use the term, only describes a state managed economy. I need to clarify again that my argument is not that modern money theory (MMT) is wrong, but that it correctly describes how fascism works. Nor do I wish to suggest that fascism means MMT is Nazism — many people who could never be described as Nazis embrace MMT insights. A fascist state, as I use the term, must be contrasted with a commune of the social producers, not with ‘democracy’ or a bourgeois republic. In fascism the bourgeois state manages the economic activity of the whole society, while a commune of social producers is self-managed. If the reader fails to keep these critical ideas in mind when reading this post, nothing much of my argument will make sense to you.

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A ‘sufficient’, but not ‘necessary’ cause?

At this point, I want to discuss a critical weakness in Tymoigne and Wray’s “Modern Money Theory 101: A Reply to Critics”, that is exposed when a third, external trade, sector is introduced to the simple two-sector MMT model of an reservecurrencieseconomy. In the simple two-sector model, the means of exchange used by society in its exchange relations is assumed to be supplied by the state. According to MMT, the preference for state issued inconvertible fiat currency — over commodity money or bank notes — is that the state imposes taxes for which it only accepts its currency as payment. This, the writers argue, is sufficient to explain what “drives” state fiat as currency:

“The simple fact is that almost all monies of account are ‘state monies’ and almost all government currencies do have taxes or other obligations standing behind them. Further, even if one can find a money of account and a currency that has no fee, fine, tax, tribute, or tithe backing it, that would not invalidate MMT. Perhaps Palley does not understand the difference between ‘necessary’ and ‘sufficient’ conditions: a tax (or other involuntary obligation) is sufficient to drive a currency; it might not be necessary. MMT theory relies on the sufficient condition, not the necessary condition.”

For the moment, I will overlook the questionable assertion that “almost all monies of account are ‘state monies'”. For July alone, in the US, consumer credit outstanding — a money form that is not in any way a ‘state money’ amounted to $3.2 trillion. This private money is, of course, denominated in US dollars, but it is a privately issued money form that seldom takes the form of state currency.

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Public Debt and Financial Accumulation: The fascist implications of the MMT two sector model

NOTE FOR THE READER: I want to reiterate that fascism, in the sense I use the term, only describes a state managed economy. I need to clarify again that my argument is not that modern money theory (MMT) is wrong, but that it correctly describes how fascism works. Nor do I wish to suggest that fascism means MMT is Nazism — many people who could never be described as Nazis embrace MMT insights. A fascist state, as I use the term, must be contrasted with a commune of the social producers, not with ‘democracy’ or a bourgeois republic. In fascism the bourgeois state manages the economic activity of the whole society, while a commune of social producers is self-managed. If the reader fails to keep these critical ideas in mind when reading this post, nothing much of my argument will make sense to you.

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Continuing with my critique of Tymoigne’s and Wray’s defense of modern money theory, which can be found here. In my last post, I argued that MMT has no explanation for how the state became monetarily sovereign and thus avoids PICTURE: MMTexamining the implications of this development. The very way the paper is organized leads to the conclusion that consumption must come before production and buying must come before selling.

This is explains why Tymoigne and Wray begin their discussion with an examination of the monetarily sovereign state and then proceed to introduce the so-called private sector into their analysis. This method of presentation of their argument makes it appear as if the state’s activities precede that of society. In fact, the premise of the state’s activities is the overproduction of real capital — a mass of excess capital in the form of money, means and labor power. We can trace this excess not to some distant historical event, surrounded by the mists of time, but to the Great Depression. In the paper, however, the writers never discuss this ‘prehistory’ of the fascist state because they begin with the assumption the fascist state already exists.

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Catastrophe: Modern money, the state and labor theory

1. Modern Money Theory, or the state as monetary sovereign

I am reading, “Modern Money Theory 101: A Reply to Critics by Eric Tymoigne and L. Randall Wray”. I like this paper because it is a comprehensive defense of the ideology of the modern money school (MMT). Because it is a comprehensive statement of this school, it is possible to show modern money theory is a theory of fascism on steroids.

teapartyI want to state at the outset that by fascism I do not mean Nazism or any other peculiar manifestation of fascist politics from the 1930s. (Indeed, the ideas associated with modern money theory are popular across the entire spectrum of American politics — from the Tea Party to the progressive Left.) Rather, I will show that MMT expresses a fundamental tendency inherent in the capitalist mode of production toward the displacement of the capitalist class as managers of the production of surplus value by the state.

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