Comments on: The Great Depression and the war

By: James Burns

James Burns — Fri, 17 Aug 2012 12:51:58 +0000

Interestingly, prior to WW2, and in the depths of Great Depression, US “War Plan Red” http://en.wikipedia.org/wiki/War_Plan_Red extolled benefits of provoking a world war with British Empire

Great blog btw, Michael.

By: Mike Ballard

Mike Ballard — Mon, 13 Aug 2012 01:20:22 +0000

Unprofitable fixed capital is destroyed through competition too. Sure enough bombs will do it; but who is saying that outmoded fixed capital was destroyed in Germany, Japan, Italy and the USSR?

I think your charts demonstrate the need for free market capitalism to be guided by the planned State investments, based on forced savings, controlled wages and production goals, not to mention a whole lot of ‘primitive’ QE.

The basic contradiction is wage labour and the fact that wage labour is legally tied to so and so many hours of work per week will eventually lead to an inability of the market to absorb what is produced through sale. Giving more the of collective product of labour back to the working class will correct that somewhat, as will shorter work time with no cut in pay; but the contradiction will remain until wage labour is abolished by the workers themselves and common ownership of the collective product of labour is established along with a revolutionary change in the mode of production and exchange based on need, not commodity sale.

By: Mike Ballard

Mike Ballard — Mon, 13 Aug 2012 01:02:46 +0000

Agreed Cameron. This assertion became the dogma which turned the left from class based politics to a politics of progressive nationalism.

By: Cameron

Cameron — Fri, 10 Aug 2012 22:04:40 +0000

In the essay on imperialism Lenin says:
“Capitalism has been transformed into imperialism.
Cartels come to an agreement on the terms of sale, dates of payment, etc. They divide the markets among themselves. They fix the quantity of goods to be produced. They fix prices. They divide the profits among the various enterprises, etc.”
Fix prices? Fix quantities? No more anarchy in production?
There is no theoretical proof for this highest/final/ultimate stage. This is all based on observations not science. But let’s assume he’s correct. Then laws such as the LTV and FROP no longer operate. In this stage rate of profit will always be high enough since cartels can “fix prices”. Price is not an expression of value. It’s whimsically decided by cartels.

This theory simplifies political economy. I have and continue to see the damage done by it.

By: william smith

william smith — Wed, 08 Aug 2012 19:55:46 +0000

will president Osamabama lead the us into another depression of some sort. A job bill should have been his priority not obama care nor stimulus for the wealthy

By: Matt

Matt — Wed, 08 Aug 2012 16:33:14 +0000

The key missing point concerning the inevitable unevenness of the destruction of less profitable capitals has already been addressed: In the WW2 era, this occurred unevenly across nation-states, such that in the US this featured less the outright destruction of capitals than the reorganization (re-composition, raising the organic composition across the board) under state direction and fiat. The uneven destruction of capitals internationally is also necessary for the generation of a hegemonic center for the reorganization of world capitalism. This reorganization of the states system, foreign trade and the world market – the last 3 items in Marx’s “research project” as listed in the 1859 Preface – was also a necessary precondition for the so-called post war “Golden Age”.

It was the greatest act of “Bonapartist” capitalism in world history.

Now the really interesting question is: What way out this time? It is hard to imagine an all-out world war as the way this time, nor are there any solid indications that any of today’s powers are really gearing up for such a war. It would certainly be of such immense destructiveness as to leave no hegemon standing. So world capitalism faces an unprecedented historical impasse in this regard. And the leading state powers know this, I believe, though one cannot rule out some mad regime, a “Hitler regime” coming to power in, say the US of today, to get the ball rolling. We can certainly see elements of this both in the past GW Bush government and in its successor legacy of the wingnut section of the Republican Party. But this section is politically a fading demography of middle aged white men. Their future prospects are not good. The US is not a defeated post WW1 Germany full of embittered, still young, veterans plus a totally impoverished middle class (like Hiter himself) with whom the older reactionary generation could link up with. On the contrary, the younger generation in the US has shifted decidedly to the left, if Occupy, the 2008 election of Obama (aside from what Obama really represents), etc., are any indication.

One could say that the US is “already geared up”, but then what are they waiting for? IMO the US is NOT presently geared to launch such a war; on the contrary the US is increasingly oriented towards low scale interventions in civil conflicts. And therein may lie a clue to the real future: civil war.

The American Civil War, however internally destructive, was also famously a great kickstarter and reorganizer of a US capitalism still in its childhood. Another great act of Bonapartism in the real time of Louis Bonaparte. Shades of WW2. It would have the advantages of demolishing the most foot-dragging dead weight on the world capitalist economy (the US), while containing the conflict to the same. I’m not predicting that, on the contrary it is useful to point out in order to work to avoid such an awful outcome as a matter of policy for any Marxian socialist movement. Skip the civil war, move directly to the socialist revolution. If it can’t be avoided they convert into a revolutionary civil war. That of course would NOT be functional to the reorganization of world capitalism.

But it can’t be ruled out.

By: Daniel de França MTd2

Daniel de França MTd2 — Wed, 08 Aug 2012 16:26:46 +0000

The war itself paid itself with the destruction of profitable capital. Building profitable capital in USA instead of in those countries is equivalent of paying a debt.

Such capital transfer did not happen after WW1, so there was accumulation of debts which lead to a thing called in accounting “written off”. Which, it meant the hyperinflation of the Weimar Republic and the crash of the NY stock exchange in 1929.

By: H.A. Cox

H.A. Cox — Wed, 08 Aug 2012 15:48:22 +0000

It seems that unprofitable capital was destroyed, not in USA, but in Europe, and USA had to renewed it, now profitanble. The rise kicks in right after the war begins and that is explained by the fast and destructive blitzkrieg tactic.
michael roberts Says:
August 6, 2012 at 2:24 pm | Reply

I think that this statement gets to the heart of the relationship between WW II and the subsequent boom. However, the war not only destroyed ‘unprofitable capital’ in Europe and Japan, it wiped out even ‘profitable’ capital and the whole infrastructure of many countries. This destruction could lead to the boom because the workers of Europe and Japan were not able to make the Imperialist elites pay for their crimes by making a revolution.

By: Choppa Morph

Choppa Morph — Wed, 08 Aug 2012 10:02:57 +0000

I’d like to make a couple of points.
In the first place I think the following statement is confusing:
“It is a key argument of Marxist economics (at least in my version!) that capitalist economies can only recover in a sustained way if average profitability for the productive sectors of the economy rises significantly. And that would require the sufficient destruction in the value of ‘dead capital’ (past accumulation) that is no longer profitable to employ.”
It’s profitable to employ capital (*any* capital – constant or variable) when it makes a profit. So you must have assumed a qualification there such as “no longer as profitable to employ as it used to be”. Capital that doesn’t make any profit at all is more than “dead”.
So we’re left with the more familiar equation that the quantity (value) of constant (ie non-living, accumulated) capital must be reduced in proportion to variable (ie living, workers’ labour) capital employed, if the rate of profit is to stay the same or rise.
This makes the destruction of constant capital a much starker historical necessity for the health of capitalism than you seem to want to admit.
You write: “I am not suggesting from this that the current Long Depression will only end with a new world war at the expense of millions of lives and destruction of material wealth.” But this is exactly what you are suggesting unless you clarify what you mean by an end to the Long Depression or how the destruction of material wealth can be accomplished without destroying millions of lives.
The historical and political choices we face are stark – in the orthodox Marxist-Bolshevik view it’s a question of “socialism or barbarism”, that is to say, a non-capitalist world or the destruction of civilization. If you don’t envisage a world war resolving the profitability dilemma of the capitalist class, what do you see in its place?
In the second place, and fundamentally, I lack the basic Marxist historical perspective of social development and change in your critique of profitability.
Marx assumed a non-reversible historical progression of modes of production driven by the development of the forces of production. When the forces of production mobilized by slave-owning society became too vigorous for the property relations of slave society to contain, these relations burst asunder and were replaced by feudal property relations, which in their turn were replaced by capitalist relations.
Now, Marx and Engels, and following them Lenin and Trotsky (and such orthodox Marxist economists as Preobrazhensky in his The New Economics) viewed all developments in the imperialist world economy in this perspective.
By 1867 Marx had already come to the conclusion that classical competitive capitalism was dead and that with the full development of the credit system the capitalist mode of production had reached its ultimate limits. (This is clear from the chapters on Interest-bearing capital and the credit system in Capital III, especially ch 27 “The role of credit in capitalist production”, eg
“III. Formation of stock companies. [...]
2) The capital, which in itself rests on a social mode of production and presupposes a social concentration of means of production and labour-power, is here directly endowed with the form of social capital (capital of directly associated individuals) as distinct from private capital, and its undertakings assume the form of social undertakings as distinct from private undertakings. It is the abolition of capital as private property within the framework of capitalist production itself.”)
Lenin subtitled his work on Imperialism “The Ultimate Stage of Capitalism” – not so much “высшая” “highest” as meaning “this high for the moment but can go higher” but as meaning “this is as high as it gets and will ever get” – ie all the theoretical categories potentially contained within the capitalist economic system had emerged and were realized in actual social existence.
Philosophically and scientifically capitalism already had nowhere left to go as far as Marx was concerned. And as the quote shows, he was absolutely convinced of this, hedged no bets, and took the ultimate demise of capitalism for granted (but NOT the victory of socialism!!! – capitalism was historically finished as a viable mode of production, but the character of its end was not historically ascertained – it was still being worked out in the living class struggle.)
This historical perspective of transition between two major modes of production – capitalism and socialism – is fundamental to any critique of capitalism that aspires to follow Marx’s theory in a principled way without eclectically sidestepping its inopportune and stigmatized historical and political elements.
If this perspective is missing, then the only audience for which a fundamental critique of capitalism has any real meaning (the revolutionary working class) is left dangling in the air as to the practical social and political context and consequences of what is being said.
In other words, it is essential to be clear about whether this present crisis can be resolved within the capitalist framework or not. And if so, why and on what conditions, and if not, then why not.
Capitalist theoreticians are professional jesters – what they say doesn’t matter. The capitalist economy regulates itself blindly and can only be analysed (as far as the principal regulator, value, is concerned) after the event. Marxist economists on the other hand are advisers in a war. And our war doesn’t fight itself. So every word counts.

By: bob montgomery

bob montgomery — Tue, 07 Aug 2012 14:59:21 +0000

Didn’t the Nazi economy under Schact operate the same way? Keynesians argue that recovery by 1935/36 resulted from massive public works spending and rising consumer and producer demand. But in reality the Nazi state actually looted consumer (worker) income thru direct deductions which ultimately ended up being collected by the giant banks and then funneled to the war industries– steel, auto, coal, metallurgy etc. A major part of this sequestering of consumer income involved “financial disintermediation”– the compulsory bypassing of savings and loans banks, as well as the stock market (didn’t the regime limit both S&L and the capital markets too??). So there was a massive elimination of small and medium capital, largely in the consumer goods sector. Also, this state-directed (Reichsbank and Treasury ministry) process involved compulsory “rationalization” of production– so producers in heavy industry which lacked sufficient capital went under and concentration of industrial capital increased. The main point is that the Nazi economy worked to force the market to restore profitability by depressing consumption and destroying less productive capital.
Bob Montgomery