“It is difficult to make predictions, especially about the future” is an old Danish proverb, often attributed to Nils Bohr, the Danish atomic physicist and quantum theorist. And amusing and insightful as it may be, there is no getting away from realising that applying the scientific method to any issue requires making predictions that can be tested to support or throw doubt on a theory.
In the natural sciences, as they are called, where human beings are not being studied, prediction plays an important role. For example, according to Einstein’s theory of relativity, tit was predicted that large stellar objects will bend space itself through ‘gravitational waves’. And exactly 100 years ago, that prediction was confirmed through astronomical observation of a solar eclipse.
Applying the scientific method and making predictions in social science is clearly much more difficult because the subject being studied are human beings. Scientific method is full of pitfalls: human mistakes; inadequate data; unrealistic assumptions; inconsistent conclusions. And these pitfalls are probably greater in the social sciences, given less data and where the political and ideological pressures are greater. Nevertheless, I reckon that prediction must be part of the social scientific process.
But there is a difference between predictions and forecasts, in my view. Take the climate. We can predict that in the temperate regions of the planet, there will be four distinct seasons from spring, summer, autumn and winter. And we can predict that the sun will come over the horizon in the morning and set in the evening. Modern climate scientists are predicting that the earth is set to warm up at a rate not seen in thousands of years because of greenhouse gas emissions. Physicists predict that in about one and a half billion years, the moon will eventually break out from its orbit around the earth, producing catastrophic damage to the earth’s atmosphere and wiping out all life. We won’t be around to confirm that prediction.
Similarly, we Marxist economists can make predictions with some degree of certainty; namely that under the capitalist mode of production there will be regularly occurring crises of slumps in investment and production that cannot be avoided. We can also predict, I would claim, that the profitability of capital will fall over time as capitalism expands the productive forces and matures.
But that is not the same as making a forecast. Climate scientists cannot be sure when the earth will heat up to a tipping point that leads to uncontrollable warming that damages the fabric of the planet and engenders destructive floods, droughts etc. We don’t know in which year, decade, century or millennium when the moon will break away from the earth. We have limited ability to forecast when it is going to rain, shine or snow – although we have got much better in making such weather forecasts. And in social sciences, any forecast is even more uncertain. We cannot forecast when or how much the rate of profit will fall in any one year or the exact change in output or investment likely to be achieved in a year or month; or exactly when a new slump in production might come.
All this preamble in this post is designed to make excuses for the failure of my forecasts of a new global recession to emerge over the last few years. After the end of the Great Recession in 2009, I made a prediction that eventually there would be a new global slump. And I made a forecast that this would happen from about 2016 onwards and most likely by 2018, after all post-war recessions had come along about every 7-10 years. And yet, as we enter 2020, the world capital economy has avoided a new slump for the longest period since 1945. So how did I get my forecast wrong?
My forecast was partly based on a theory of cycles in capitalism built around the long term cycle of 55-70 years first expounded by Russian Marxist economist, Kondratiev. I reckon there have been four K-cycles since the start of the industrial revolution in Europe. The fourth cycle started in 1946, peaked in the early 1980s and should have troughed around 2018.
Marxist economist Anwar Shaikh has put forward a similar forecast to mine, also based on the dating of the K-cycle. When measured by the gold/dollar price, he forecast that the downphase in the current K-cycle would trough around 2018. More recently, Greek Marxist economists Tsoulfidis and Tsalikis (TT), in their new book, also identify long cycles. Like me, they base the up and down waves in these cycles primarily on the movement in the rate and mass of profit. However, TT reckon that the bottom of the current cycle will not be reached until 2023-28.
Cycle theory argues a new trough and slump in capitalist production is necessary to devalue the existing stock of capital before a new round of innovations based on rising profitability can begin. But forecasting when that will happen is very difficult. For the record, this is what I said at the beginning of each year since 2016, when the trough of the current cycle should have been reached. In 2016, I said: “As for 2016, I expect much the same as 2015, but with a much higher risk of new global recession appearing….even if a new global slump is avoided this year, that could be the last year that it is.” There was no slump in 2016 but the year did deliver a ‘mini-recession’ with global growth at its lowest since 2009.
Then in 2017, I said: “2017 will not deliver faster growth, contrary to the expectations of the optimists. Indeed, by the second half of next year, we can probably expect a sharp downturn in the major economies …far from a new boom for capitalism, the risk of a new slump will increase in 2017.” This forecast proved to be wrong as, instead, there was a mild recovery from the previous year in the major economies.
For 2018, I explained: “What seems to have happened is that there has been a short-term cyclical recovery from mid-2016, after a near global recession from the end of 2014-mid 2016. If the trough of this Kitchin cycle was in mid-2016, the peak should be in 2018, with a swing down again after that.” That forecast proved correct as growth slowed from mid-year 2018 and into 2019.
My forecast this time last year for 2019 was as follows: “slowing profits growth and a rising cost of (corporate) debt, alongside all the politico-economic factors of an international trade war between China and the US, suggest that in 2019 the likelihood of a global slump has never been higher since the end of the Great Recession in 2009.”
Well, there was no slump in the major economies in 2019, but they achieved the slowest rate of growth in any year since the end of the Great Recession.
So, while the decade of 2010s was the longest period without a slump in the major economies since 1945, it was also the weakest recovery from any recession in the same period.
And in 2019, global growth recorded its weakest pace since the global financial crisis a decade ago.
What were the factors for the slowdown and what are the factors that have enabled the major capitalist economies to avoid major slump that cycle theory predicts should have happened by now?
On the negative side, slow real GDP growth (of 1-2% a year) has been driven by continued low investment rates. In its recent global outlook, the IMF highlighted that: “firms turned cautious on long-range spending and global purchases of machinery and equipment decelerated.”.
The ongoing trade war between the US and China along with trade frictions with the EU was also an important factor in the slowdown in technology spending. Global trade—which is intensive in durable final goods and the components used to produce them—slowed to a standstill.
Indeed, since the end of the Great Recession, globalisation and ‘free trade’ has increasingly given way to protectionist measures, as it did in the 1930s. Since 2009, governments worldwide have introduced 2,723 new trade distortions, the cumulative effect of which was to distort 40% of world trade by November 2019.
The global trade and investment slowdown has particularly hit the so-called emerging economies, several of which have slipped into outright slumps. Emerging markets face a serious “secular stagnation” problem. Growth in almost all cases has been far lower in the last 6 years than in the 6 years leading up to the Great Recession. And in Argentina, Brazil, Russia, South Africa and Ukraine, there has been no growth at all.
Nevertheless, 2019 did not see a new global slump. Why not? First, the monetary authorities quickly reversed their previous policy stance that the global economy was fine and had ‘normalised’. In 2018, many central banks had been on hold with their policy interest rates or in the case of the Federal Reserve had hiked the rate. In 2019, the opposite was the case.
Interest rates on government bonds and other ‘safe assets’ fell back towards zero or even turned negative. With borrowing so cheap, large corporations and banks sucked up cheap credit; but not to invest in productive assets, but instead to buy up shares and bonds.
Stock market prices rocketed, up 30% in the US. Global stock markets are now worth $86trn, just shy of all-time high and equal to almost 100% of global GDP.
The main purchasers of corporate stocks are the corporations themselves. These so-called buybacks pushed up stock prices, in turn making it easier to buy out other companies or gain even more credit. Much of the buyback funds were borrowed. This expansion of what Marx called ‘fictitious capital’ has replaced investment in productive capital and it has been financed by Minsky-style Ponzi finance (ie issuing more debt to fund the cost of servicing existing debt).
The major capitalist economies are now in a fantasy world where the stock and bond markets (‘fictitious capital’) are saying that world capitalism has never had it so good, while the ‘real economy’ is stagnating in output, trade, profits and investment.
The other counteracting factor that has enabled the capitalist economies to avoid a new slump in the 2010s has been the rise in employment and the fall in unemployment. Instead of investing heavily in new technology and shedding labour, companies have sucked up available cheap labour from the reserve army of unemployed created in the Great Recession and from immigration. According to the International Labor Organization, the global unemployment rate has dropped to just 5%, its lowest level in almost 40 years.
This did not happen in the 1930s Great Depression. Then unemployment rates stayed high until the arms race and impending world war militarised the workforce. In the 2010s, it seems that companies, rather than reducing their costs in the face of recession and low profitability by sacking the workforce and introducing labour-saving technology, opted to take on labour at low wage rates and with ‘precarious’ conditions (no pensions, zero hours, temporary contracts etc). As a result, there has been a sharp increase in what are called ‘zombie companies’ that make only just enough money to pay a low-wage workforce and service their debts, but not enough to expand at all.
High employment and low real GDP growth means low productivity growth, which over time means stagnating economies – a vicious circle. The great AI/robot revolution in industry has not (yet) materialised. Globally, the annual growth in output per worker has been hovering around 2 per cent for the past few years, compared with an annual average rate of 2.9 per cent between 2000 and 2007.
These counteracting factors may have delayed the advent of a new slump, but in my view, they can only delay it. The fundamental driver of a capitalist economy is profit – and rising profits at that. The most important factor for analysing the health of the capitalist economy remains the profitability of the capitalist sector and the movement in profits globally. That decides whether investment and production will continue. This blog has presented overwhelming evidence that profits and investment are highly correlated and in that order – see our book, World in Crisis.
Neither average profitability of capital nor the mass of profits is rising in the major economies. According to the latest data on the net return on capital provided by the EU’s AMECO database, profitability in 2020 will be 4% lower than the peak of 2017 in Europe and the UK; 8% down in Japan; and flat in the US. And profitability will be lower than in 2007, except in the US and Japan.
My estimate of global mass profits also shows, at best, stagnation. Japanese corporate profits are currently down 5% yoy, the US down 3% and Germany down 9%.
As for the largest and still leading capitalist economy in the world, the US, its rate and mass of profit have been falling since 2014. In 2018, on my measure, US overall profitability rose very slightly over 2017 (probably due to Trump’s corporate tax cuts). But profitability in 2018 was still 5-7% below the 2014 peak. If we assume real GDP, employee compensation and fixed asset growth for 2019 will have been similar to the mini-recession of 2015-16, we can expect a further significant downturn in US profitability, to levels well below 2006. On another measure, of earnings as a % of fixed assets in US non-financial companies, the rate is lower than in 2008 and approaching the all-time lows of 2001 and 1982.
This growing profitability crisis threatens to turn the increased credit for corporations from a bonus into a burden. The Institute of International Finance estimates that global debt has now hit $250 trillion and is expected to rise to a record $255 trillion at the end of 2019, up $12 trillion from $243 trillion at the end of 2018, and nearly $32,500 for each of the 7.7 billion people on the planet.
Separately, Bank of America recently calculated that since the collapse of Lehman, government debt has increased by $30tn, corporate debt by $25tn, household by $9tn and financial debt by $2tn. The BofA warns that “the biggest recession risk is a disorderly rise in credit spreads & corporate deleveraging.”
The World Bank joined the BIS (the ‘central banks’ central bank) in warning that the largest and fastest rise in global debt in half a century could lead to another financial crisis as the world economy slows. In a report titled, Global Waves of Debt, the World Bank looked at the four major episodes of debt increases that have occurred in more than 100 countries since 1970 — the Latin American debt crisis of the 1980s, the Asian financial crisis of the late 1990s and the global financial crisis from 2007 to 2009. During the fourth wave, from 2010 to 2018, the debt to GDP ratio of developing countries has risen by more than half to 168%: a faster increase on an annual basis than during the Latin American debt crisis.
World Bank chief David Malpass warned that “a sudden rise in risk premiums could precipitate a financial crisis, as has happened many times in the past.” And that risk was confirmed this time last year, when interest rates rose too high – due to the attempt to ‘normalize’ policy – and stock and bond prices tumbled.
As we enter a new decade and go into the 11th year since the end of the last global slump, these are the fundamental factors that suggest a new slump is not far away. They are: stagnant or falling profits and profitability; weak or falling investment; rising corporate debt and falling trade (amid a global trade war).
But there are also counteracting factors that have so far enabled the major economies to escape a slump in production and investment (if at the price of low GDP growth, productivity and wages). Global costs of borrowing are at all-time lows, partly due to central bank policy of zero interest rates and ‘quantitative easing’; but also because there is no demand from the capitalist sector for credit to invest in productive assets or from the governments to spend. So the stock and bond markets of the world are hitting record highs. And there is the new phenomenon, not seen in previous long depressions, namely low unemployment rates that provide at least a modicum of income for households.
Mainstream economic forecasts for 2020 are generally mildly optimistic. The Fulcrum macro-model published in the FT reckons that “the outlook from the models shows global growth rates rising next year, returning roughly to trend rates. Recession risks are deemed to be low, currently standing about 5 per cent for the US and 15 per cent for the eurozone.” Alternative models, such as those from Goldman Sachs suggests a recession risk of 24 per cent in the US next year.
Maybe these forecasts will prove to be right. But eventually, the fundamental factors of profits and investment must override the counteracting factors of low interest and unemployment. Profits rule investment and investment rules employment and income, and that rules spending. The fantasy world cannot continue much longer. 2020 may be the year that it collapses.
Michael Roberts Blog 
Nils Bohr used the famous proverb about predicting the future, but he just ment to have quoted the well-known Storm P. However, it seems that it is a proverb often used in the Danish parliament before the last war.
Jon Langdal
“My forecast was partly based on a theory of cycles in capitalism built around the long term cycle of 55-70 years first expounded by Russian Marxist economist, Kondratiev. I reckon there have been four K-cycles since the start of the industrial revolution in Europe. The fourth cycle started in 1946, peaked in the early 1980s and should have troughed around 2018.”
According to Kondratiev, the cycle is between 40-60 years, with an average of 54. You can only get a cycle that starts in 1946, and ends in 2018 with a 72 year cycle. If all cycles were that length then the four so far would mean 300 years, which from the start of the Industrial Revolution in 1760 would take you to 2060, which, last time I looked we are not yet at by some way.
You can only fit the long wave cycle into your schema by making a nonsense of the timing of each wave. If we take the average length of a wave as 54 years, then a wave starting in 1946 would peak reach its nadir in 2000. I beleive that is what has been seen. The huge rise in trade, GDP, fixed capital formation, as well as in the huge rises in oil, mineral, and food prices that occurred after that period are consistent with it.
Moreover, other long wave theorists have pointed to the connection between the long wave cycle and the Innovation Cycle. Mensch and others have found that the Innovation Cycle peaks around 40 years prior to the peak of the long wave cycle. They dated the peak of the Innovation Cycle to 1935, pointing to the peak of the long wave cycle in 1975, which is consistent with the end of the post-war long wave cycle in that year. They predicted a new Innovation Cycle peak in 1985, which is again about the time when the majority of new technologies based upon the microchip were introduced, with all new developments since then being simply developments of more powerful faster chips, different applications of those technologies etc.
That would put the peak of the long wave cycle then at 1985 + 40 = 2025. Given a 54, year cycle, that would put the start of the long wave uptrend in 1998, again consistent with the strong rises in trade, GDP, gold, oil and mineral prices that occurred at the end of the last century, start of this one.
“Cycle theory argues a new trough and slump in capitalist production is necessary to devalue the existing stock of capital before a new round of innovations based on rising profitability can begin.”
That’s back to front. Its innovation that leads to new technologies and rising social productivity that leads to the existing fixed capital stock being morally depreciated, and results in variable-capital and circulating constant being reduced in value. That creates a release of capital that can then be utilised for additional capital accumulation, as well as resulting in an increased supply of money-capital which lowers interest rates, as seen in the 1930’s, and 1980’s. The devalued capital resulting from this innovation causes the rate of profit to rise, and the lower value of labour-power directly cause the rate of surplus value and rate of profit to rise, which also thereby creates the conditions for the mass of profit to rise, creating the basis for the new upswing.
The innovation arises to resolve the causes of the crisis of overproduction, which causes wages to rise, and rate of surplus value to fall, as well as leading to increased difficulty in realising profits, as workers demand for a range of staple wage goods becomes sated, whilst they cannot replace the demand of the rich for luxury goods. The latter falls as profits fall, and a greater proportion of profits are diverted to capital accumulation rather than unproductive consumption by the rich.
This rise in productivity causes the rate and mass of profit to rise relative to the lowered condition it faced during the crisis due to profits being squeezed by high wages, and stagnant productivity growth. But, as Marx illustrates in relation to his law of the falling rate of profit, this new higher rate of profit is lower than it was at the corresponding point in the previous cycle, because relatively less labour is used in output. In other words, the rate of profit rose in the 1930’s, as new labour-saving techniques are introduced, and reversed the squeeze on profits that arose in the pre-war period.
In the 1950’s and 60’s, wages start to rise, and by the late 60’s, early 70’s have risen to a degree whereby profits are squeezed again. Labour saving innovations are introduced in the 1970’s, reaching a peak of innovation in the mid 1980’s. This creates a relative surplus population, wages fall, profits rise. Capital is depreciated, rate of profit rises. This raises the rate of profit compared to the 1970’s, but this 1980’s rate of profit is lower than the 1930’s rate of profit, as a consequence of the LRTPF.
However, as I have pointed out, before, the LRTPF depends upon that rising productivity causing the amount of processed material to rise. That is the mechanism described by Marx of how c rises as a proportion of c + v/s. In economies where manufacturing no longer forms the majority of industry, it no longer performs that function and so the LRTPF ceases to operate. The long wave cycle, and crises of overproduction do, because they are not driven by the LRTPF.
“For 2018, I explained: “What seems to have happened is that there has been a short-term cyclical recovery from mid-2016, after a near global recession from the end of 2014-mid 2016. If the trough of this Kitchin cycle was in mid-2016, the peak should be in 2018, with a swing down again after that.” That forecast proved correct as growth slowed from mid-year 2018 and into 2019.”
But, global growth in 2018 had been predicted at around 4%, and came in at 3.7%. Moreovoer, nearly all of this undershoot was explained by economists from the OECD to the IMF as being due to the effects of Trump’s global trade war, which knocked around 0.£5 of China’s growth.
“My forecast this time last year for 2019 was as follows: “slowing profits growth and a rising cost of (corporate) debt, alongside all the politico-economic factors of an international trade war between China and the US, suggest that in 2019 the likelihood of a global slump has never been higher since the end of the Great Recession in 2009.”
Well, there was no slump in the major economies in 2019, but they achieved the slowest rate of growth in any year since the end of the Great Recession.”
No as I recall, it was me that said that there would be no slump. Those who suggested remembering those words, in the expectation of hurling them back at me, are free to recall them at will, as I was right, and despite Trump’s intensified trade war, despite increasing sanctions against a range of countries, despite Brexit, despite all of the austerity measures, despite all of the QE to try to divert resources into speculation, there was no slump, or even a recession.
Instead, despite all of that the US has had strong economic growth, it continues to increase employment by phenomenal amounts given its existing low unemployment levels, and indeed across the globe, including in a declining Britain, low levels of productivity are prompting unemployment to fall to ever new low levels, which must sooner or later result in far more rapidly rising wages, and a potential squeeze on profits. It is certainly likely to lead to a requirement for accelerated capital accumulation to supply an increased demand for wage goods.
Has anyone looked into the rate of profit of the military/industrial sector of the US economy? US spending on war and paramilitary infrastructure is incommensurable with even the combined expenditures of leading militarized states in “the west”. So the US’s “strong economic growth” is a kind of economic singularity related to its military expenditure (much of which is hidden in secret, private paramilitary expenditure that sees the light of day in the flood of refugees its humanitarian interventions create .
The singularity of the US is also evident in its misleading official reports on the rate of unemployment, in its booming population of the homeless, and its actual (rather than its underestimated) percentage of the US working population (euphemistically) classified as the “working poor” (i.e. the vast majority of Americans working multiple jobs with no benefits, for the minimum wage or less.
Military spending is a detraction from capital accumulation, and so growth. Its only Keyensians/Malthusians who beleive that such state spending is a means of resolving problems of realising profits, or increasing growth.
Marx explains that in his critique of Malthus in TOSV. Malthus argued that the problem for capital was being able to realise profits, because workers never consume all they produce, and capitalists have to accumulate profits as a result of competition, which means that they produce even more, which can’t then be sold. His solution was for the landlords to consume this surplus production out of rent, so that the profit was realised.
As Marx points out, Malthus failed to point out that this rent is itself a deduction from profit, and so Malthus’ solution amounts to nothing more than the capitalists simply handing over their surplus production to the landlords. Keynes’ solution is simply a more nuanced and elaborated version of this solution provided by Malthus a century earlier.
It simply means the state takes the surplus product in the form of taxes, and then spends it giving the appearance that profits have been realised, whereas the state simply hands back money in payments it has taken in in taxes, or else has taken out of the money markets via borrowing, but which it must pay back ultimately out of tax revenues.
The idea that military spending leads to higher economic growth is a fallacy. It leads to the opposite, because it takes profit out of the system that could have been accumulated as productive-capital, and effectively destroys it, i.e. it is consumed unproductively. The fallacy was developed in the form of the so called Permanent Arms Economy Thesis by Keynesian economists, some of whom called themselves Marxists.
Incidentally, some of those economists were those in the Stalinist camp who tried to explain the huge economic boom that occurred in the postwar period, which contradicted the so called Varga’s Law, by such means. The other means they used was to try to simply distort the economic reality, by picking out individual items of economic statistics similar to the way you have done, in order to try to pretend that the economic growth of the post war period was not real.
Military spending is not rent, except for the wages of soldiers. As long you have an industry that is capable of reproduce commodities, like bullets, guns, and equipment, you will have a surplus.
Military spending is not rent, but it is paid for out of taxes, which are themselves a deduction from surplus value, just like rent. It has the same effect, therefore, in reducing the surplus value available for accumulation as capital, and so consequently acts to reduce capital accumulation and growth.
Indeed, Malthus argument was not just in relation to rent to landlords, but made the same argument in relation to taxes and tithes appropriated by the state and the clergy. It is equally fallacious as Marx set out in TOSV.
The production of commodities such as bullets, guns and so on is a different argument entirely. Of course, if I am a gun producer, and I produce guns that are bought by consumers of guns, for example, for hunting, or for sport, then I have produced a commodity like any other. The surplus labour undertaken in its production constitutes surplus value, and can be accumulated as additional capital.
That is not the point, the point is where the revenue for the purchase of the guns comes from. The revenue of consumers of guns for sporting purposes etc. comes from their wages, or alternatively their profits used for personal consumption, their rents, interest etc. In other words, it comes from the consumption fund, from revenue.
But, when the state undertakes military expenditure, it can only finance this expenditure via taxes, and those taxes are a deduction from surplus value. It is a deduction from the surplus value that the capitalists would otherwise have had to utilise for additional capital accumulation. It thereby acts to reduce capital accumulation and economic growth.
Moreover, if we compare it with say, the taxes that the state levies to say build a bridge, the bridge itself constitutes new value when constructed. This value is then returned to circulation piecemeal, as every time a vehicle uses it, a part of the value of the bridge in wear and tear is transferred to the value of the commodities transferred across it, or alternatively forms a part of the value of the consumption of the passengers that travel over it. No such return of value to circulation is provided by military spending, because the resultant weapons form no part of future productive or personal consumption.
The productive part of the military is the labor of the industry that builds airplanes, bullets, equipment. The value produced by it does get into circulation as in other part of the industry. You can exchange videogames for bullets and airplanes and that’s the same. After its use or obsolence, it gets replaced. The profit from taxes is no different from rent or interest, indeed, and money capitalists do buy stuff that require industrial production. You remove from consumption and put it in consumption of other commodities. This is how money capitalists do to keep profiting.
“The productive part of the military is the labor of the industry that builds airplanes, bullets, equipment.”
Except that is not the military its the armaments industry. They are two different things.
“The value produced by it does get into circulation as in other part of the industry. You can exchange videogames for bullets and airplanes and that’s the same.”
Yes, a producer of videogames, including a worker in that industry, can exchange video games for bullets, rifles etc. I made all these points previously. But, the military does not do that. The military exchanges tax revenues for bullets, rifles etc. Where do the tax revenues come from? They come from surplus value, which means that surplus value that otherwise would have been used to accumulate additional capital, or to fund the unproductive consumption of capitalists is sequestered and used to buy arms for the state.
It fulfils exactly the same function that rent sequestered from surplus value by landlords plays, when that rent is then used to buy consumption goods for the landlord class. It is not a production of additional surplus value, but a transfer of it from productive to unproductive purposes. It does not bring about additional growth, but by diverting surplus value from productive use in capital accumulation to unproductive use in the production of weapons, acts to reduce the total capital, and economic growth.
Unlike weapons and bullets bought by workers as part of their consumption, or by hunters to kill animals to sell meat and furs, so that the value of the guns and bullets are returned to circulation, the arms bought by the military serve no such function, and do not re-enter circulation. Either they lie unused as a deterrent, or worse still they are used in some kind of violent act, which thereby destroys existing use values and wealth. In other words, they act not as means of production or consumption but literally as means of destruction.
“The profit from taxes is no different from rent or interest, indeed, and money capitalists do buy stuff that require industrial production. You remove from consumption and put it in consumption of other commodities. This is how money capitalists do to keep profiting.”
You seem no to have read or understood any of Marx’s analysis of Capital. You are quite right that taxes are no different from rent or interest. That is precisely the point! Neither rent nor interest represents additional surplus value. They are deductions from surplus value! The recipients of these revenues are described by Marx as parasitic for precisely that reason.
The money-lending capitalist, like the landlord, like the state does not create any new value, but they receive revenue (exchange-value), and that is only possible by diverting revenue from capital, revenue that could have been used for capital accumulation. That is why the military expenditure funded from such taxes is a deduction from surplus value, and so from potential capital accumulation, which thereby reduces economic growth.
The state does produce value. The state can be one, huge monolithic capitalist. If you give it the worker the control of it, you then have socialism. Also, if there is need, workers can self forgive collective debts. In this way you can evade law of value, it is necessary.
The analogy with guns and videogames was that, after you buy games for a console, and uses electric energy from the grid, it may sit idle. Military equipment does not sit idle, it uses bullets (which carries energy in the form of gunpowder) for training, a military spends fuel when training or patroling. Thus, bullets and fuels are like games for game consoles, where both use energy from some type of energy source, and becomes useless when they become outdated (a new console is released), broken or run out of energy.
“The state does produce value. The state can be one, huge monolithic capitalist. If you give it the worker the control of it, you then have socialism.”
You continually having lost one argument, change the nature of the question. The question is not whether the state as state capitalist can produce value in the same way as any other capitalist – i.e. its the workers employed by capital, state or private, that actually produce value – but whether military spending by the state produces value, and thereby surplus value. In other words does state consumption create value. The answer is quite obviously no, just as consumption by a private capital does not produce value or surplus value. On the contrary it consumes value.
In the case of consumption that does not go to productive consumption, in which category is military expenditure it thereby detracts from surplus value, and potential capital accumulation, and so detracts from economic growth.
“If you give it the worker the control of it, you then have socialism. Also, if there is need, workers can self forgive collective debts. In this way you can evade law of value, it is necessary.”
No you don’t, because socialism involves a whole lot more than just state ownership. But, then as you’ve said previously you consider the monstrous anti-working class constructions of Russia and China under Stalinism to be the pinnacle of Socialism. Nor does state ownership or forgiveness of debts evade the law of value, because so long as labour is constrained in supply the law of value continues to operate, i.e. choices of how to allocate that labour in order to produce a desired range of use values have to be made.
“The analogy with guns and videogames was that, after you buy games for a console, and uses electric energy from the grid, it may sit idle.”
So, what its not the purchase and use or non-use of the video game that is the source of the new value or surplus value created, but the labour consumed in the production of the video game to begin with. As soon as the labour is expended, then provided it was expended in the production of an actual use value, i.e. something that was demanded, the value and surplus value is produced. It is realised in its sale. The surplus value at that point is available for accumulation as capital whatever the purchaser of the video game does with it having bought it.
“Military equipment does not sit idle, it uses bullets (which carries energy in the form of gunpowder) for training, a military spends fuel when training or patroling.”
But it similarly does not matter whether the guns and bullets are idle or not. It is not the consumption/purchase that creates the value/surplus value, but the production. For an arms maker, the labour expended creates value/surplus whether the state/purchaser uses the guns and bullets or not, just as with the video games producer. The difference in relation to the state and its purchase of arms is that the revenue for this purchase can only come from the appropriation of surplus value from capital via tax. It is a reduction in the total amount of surplus value, and thereby a reduction in the total potential capital accumulation, and so acts to reduce economic growth.
It fulfils exactly the same role that rent appropriated by the landlord, or interest by the money lending capitalist plays, in reducing surplus value available as profit of enterprise, and so reduces capital accumulation.
And, as I set pout previously, military expenditure is even more destructive of value than is other forms of state spending. If the state raises tax as a deduction from surplus value, and uses the tax to build a road, at least the value of this road reenters circulation. A portion of its value as wear and tear is contributed to the value of everything transported on the road. But no such reentry into circulation exists with military spending, and at worst the weapons themselves destroy other forms of existing value, by blowing them up etc.
Actually, here’s a list of what you said Boffy:
March 2019
“Yet, the US job numbers continue to rise, which with a growing need for the US to spend on infrastructure, alongside Trump’s tax giveaways, creating a ballooning budget deficit that will have to be fiannced by borrowing, alongside a ballooning trade deficit, despite the tariffs, which will also have to be financed by borrowing, at a time when China is reducing its purchases of US debt, and may begin to sell some of it, means that the US is heading for a 1987 style Twin Deficits Crisis, and means that whatever the Federal Reserve might want to achieve via lower official rates, real interest rates in the global economy are going to be headed higher.”
So uhh…first there hasn’t been spending on infrastructure from or by the Trump administration. The growing deficit was triggered by tax cuts, correct, and growing military spending. And……where have real interest rates headed higher?
You also claimed “The pressure arising from that is likely to result in Trump’s Trade War policy collapsing, with a consequent surge in economic activity, as the pent up investment spending is released.”
Not exactly, right? Trade war hasn’t exactly collapsed– although Trump did back off in November 2019, but he’s added tariffs to Brazilian steel……”and where is the pent up investment spending”?
And in April, you were at it again:
” the US continues to grow at a clip. US employment figures continue to rise, as do US hourly wages, which together with the rise in total wages due to higher employment levels means a continued increase in the demand for wage goods. The Chinese economy appears to be growing faster again. Trump’s trade war, and its impact, which is only distorting trade rather than causing a global recession, which it might have been expected to do, if the fundamentals of the global economy were really weak, will not last forever. Brexit which has had a debilitating effect both on the UK economy and EU economy, and thereby on global growth, is also going to be resolved one way or another, hopefully and probably with it being scrapped.”
Well, yes and no. The US grew, and employment figures rise. However the Chinese economy did not resume levels of growth prior to 2009, but continued on the downward trend. Brexit hasn’t been resolved, and certainly won’t be resolved even if the UK pulls out January 31 st, and it certainly isn’t being scrapped, is it?
Right, you did say there would be no recession. Me? I never predict what the capitalist economy is going to do and when. If I could do that I would have never had to work for a railroad all those years. I could have stayed home and played the markets. You did, OTOH, declare that business investment would pick up, and significantly.
“In short, political factors – and insofar as Trump’s trade war is concerned it is purely political, and about shoring up his voter base, rather than in any way beneficial to the US economy, as is the case with Brexit, too which is about internal Tory Party management, and quite disastrous for the British economy – will inevitably be only temporary, and the effect they have had in holding back investment, raising costs, and redirecting trade and investment flows in other channels, which inevitably causes a disruption, will be reversed.”
You also argued:
“As Marx points out, and as a simple look at the facts over the last century shows, not only are asset prices, and so stock markets not determined by the state of the real economy, they tend to move in opposite directions, because the main determinant of asset prices – as capitalised revenues – is the rate of interest. The rate of interest reaches its lowest point during periods of stagnation. That is why asset prices soared in the 1990’s.”
Well, first the period 1992-2000 was not a period of economic stagnation in the US. But the period 2009-2019 certainly seems to qualify, and interest rates are lower for the latter period than they were in the former.
In May you were still at it, saying there would be no recession (and to which I replied “remember those words” and that I didn’t know if there would be a recession either, but that in recent history US profits peak 16-24 months ahead of a recession, so maybe the clock hasn’t full run out yet on Michael’s prediction) and then you told us the real source of the problem was the conflict between “real capital” and “fictitious capital” as if each doesn’t produce the other, as if each didn’t exist in the other. Not overproduction, not declining profitability, but a conflict between “real capital” and real capitalists I guess, and fictitious capitalists– represented by whom? Bankers? Really? Is that the best you can do? Is that all you got? Real vs. fictitious capital? How popular front-ish of you.
In July you were telling us:
“That is because in modern service based economies accumulation of circulating constant capital (raw materials) plays little part – which is also why the LTRPF, which depends on the mass of raw materials processed growing at a faster rate than labour, is defunct – and instead accumulation of circulating capital takes the form of an increased quantity of contemporaneous labour being employed, whilst investment in fixed capital is lumpy, with it going through phases of accumulation followed by exploitation, where the same fixed capital is simply used more intensively by a growing amount of labour – the internet is a good example.”
Well, no, the LTRPF according Marx depends on the rising organic composition of capital, which itself represent the product, issue, synthesis between the changing technical composition of capital and the value composition of capital– where living labor power is expelled from production, therefore pressing down on the extraction of surplus value.
As for that “fixed capital is simply used more intensively by a growing amount of labor– the internet is a good example” surely you jest. I think it would be illuminating to look at the expansion of fixed capital investment in the FANG economy– the expansion in technical terms and value terms of the server farms required to culture and direct the cash flow to these enterprises.
And let’s not forget, Boffy, you telling us that capitalism was the best hope of the 80%– those suffering from what is mistakenly called “under-development.” Really, we should never forget that.
In August you were out to convince us that capitalists don’t seek profit for its own sake, but for the sake of capital accumulation. Leave it to you, Bof– to prove exactly what you think you are refuting, and refute exactly what you are proving.
Here are some words written in response to your nonsense:
“First we get Boffy telling Michael he (Michael) is wrong in stating that profit determines the decisions of capitalists to invest (and to produce): “Capitalists do not seek profits for the sake of profits, as Marx sets out in Capital II. ”
Then we get Boffy quoting Marx, again to prove Michael wrong, “It must never be forgotten that the production of this surplus-value — and the reconversion of a portion of it into capital, or the accumulation, forms an integrate part of this production of surplus-value — is the immediate purpose and compelling motive of capitalist production”…
…as if that doesn’t refute Boffy’s claim that profits don’t determine the trajectory, and the itinerary of capitalist production.
Marx, however, provides a bit of clarification, although Boffy might think Marx got that bit wrong too: “It is the rate of profit that is the driving force in capitalist production, and nothing is produced save what can be produced at a profit.” Capital Vol 3 “Development of the Law’s Internal Contradictions.””
Well, enough of this… you are right Boffy, you predicted no recession in 2019. And there is much vulnerability to an analysis that is always predicting the onset of a recession, as if it’s recession that is the seat of all contradictions in capital. Nevertheless, Michael’s analysis and evidence on profit and profitability is “spot on” as my friends in London like to say, and the your lack is spot off.
Happy Brave New Year…
“Are you kidding me? Have you ever actually read Lenin’s economic analysis of the development of capitalism in Russia, and the vital role that foreign/imperialist capital played in speeding it up?”
I sure have, and Lenin’s analysis is grossly inaccurate where it does not deliberately distort the growth of capitalism in the Russian countryside, vastly inflating the number of peasant proprietors producing independently for, and dependent upon, the markets.
According to Lenin capitalism was established, or almost established in the countryside, which is what leads him in part to his equally misguided and inaccurate formulation of the coming Russian Revolution as “democratic-dictatorship of the proletariat and the peasantry.”
Certainly the Bolsheviks courted international capitalism after seizing power, and all through and after the civil war– particularly in areas of transportation, trying to restore the disrupted rail networks. This represents nothing but an index to the revolution’s isolation in confronting the archaic relations between city and countryside, and the low level of agricultural productivity. It is that low level of agricultural productivity– worsened again by the destruction of the international workers movement leading to WWII– that plagues the former USSR to its last days.
Military expenditure in the US is supported by its austerity programs: privatization of social services together with wages cuts and/or a relative increase in the price of wage goods (indirect forms of appropriating absolute surplus value in the service of war[see Luxemburg]).
The profitability of US capital also depends on the wealth it extorts via its State’shumanitarian interventions: the theft of Venezuelan gold reserves in England and Venezuelan gas stations in the US, etc.:the Trump/Biden Ukrainian circus. It also depends on the imperial rents extracted from its peti-imperialist satraps (via the petrodollar, etc.). Modern forms of primitive accumulation?
I should have prefaced the above, by agreeing with Buffy that military spending is a drain on the capitalist economy as a whole, but pointing out that production of arms as such can serve to enrich particular capitalists invested in this particular, destructive branch of production in a particular militarized state.
The United States, however, is special. As the hegemonic, imperialist power it is able, through its monopoly of the means of destruction (including the use value of its military bases) and means of international payment (the use value of the petrodollar) to produce and reproduce its brutal “service” economy by laundering both imperial rent (levied on both the G7 and peripheral, ex-colonial states) and expropriated material wealth (Venezuela, Iraq, Libya, Bolivia, etc.) into “profit.”
What we have here is an application of he old Mercantilist economic theories to explain profits, capital accumulation and growth. On austerity/wages this argument undermines the whole of Marx’s theory of value, and explanation of surplus value, as objectively determined.
Do wages fall below the value of labour-power for whole periods? Yes, of course they do, just as, at other periods when labour-power is in relative short supply, because there has been an overproduction of capital, wages are pushed above the value of labour-power. Wages are the market price, and so like all market prices revolve around the value of the particular commodity – in this case labour-power. But, Marx’s theory is a theory of objective value. It says that this objective value, which forms the locus around which these market prices fluctuate is precisely that – objectively determined. It is determined by the labour required to produce the particular commodity.
In the case of labour-power, the labour required to reproduce it is that required to reproduce the commodities that the worker requires for their own reproduction. So to say that military spending is in some way paid for by reducing wages, including the social wage is straight off to reject Marx’s value theory, and to reduce the value of labour-power to being something subjectively determined in the market place as a consequence of purely supply and demand, the determination of employers to force down wages as against the will of workers to resist.
As a market price, of course wages are subject to such contests, such interaction of supply and demand, but that supply and demand does not at all exist in a vacuum separate from the objective determination of values!
Similarly, does US capital obtain what Steuart and the Mercantilists called “profit on alienation”, that is a profit resulting from unequal exchange, buying low and selling high? Yes, of course it does. Every capital in every economy also enjoys some degree of this, either on the positive or the negative side, as Marx describes in the Addenda to TOSV, Part III. Its partly this which leads to the illusion that such profits are the consequence of the particular skills of this or that individual entrepreneur.
But, as Marx describes the great advance of Adam Smith was not just in showing that profit as a whole cannot be explained by this profit on alienation – because it cancels out – but only from the production of surplus value in production, but that Smith explains the cause of The Wealth of Nations, is itself not as the Mercantilists believed as a result of such unequal exchange, but is precisely the production of such surplus value in production, and its subsequent conversion into capital, which enables production to be undertaken at a greater scale and at lower costs, which enables greater amounts of profit and accumulation to take place. It wasn’t a greater ability to buy low and sell high that enabled Britain to surpass the Netherlands as the pre-eminent capitalist power, but precisely Britain’s industrial revolution, and its ability to produce huge amounts of surplus value in production, which it accumulated as a huge amount of additional capital!
It is that vast accumulation of productive capital that is the basis of US profits, and growth not any imperial rents and so on, which form a small part of the total source of US capital accumulation.
I’m afraid that this resort to the old Pre- Adam Smith mercantilist arguments to explain the development of capitalism, and its continued expansion is just another example of those old Stalinoid arguments used to try to shore up Varga’s Law. They are eerily reminiscent of the Sismondist arguments put forward by the Narodniks and Legal Marxists that Lenin had to dismantle, when they used the same kinds of line to explain why the development of capitalism in Russia could not proceed beyond very constrained limits.
As for my “pre-Adam Smith” and “Stalinoid” arguments, they recognize the existence of the imperialism/neoimperialism of late finance industrial capitalism, of which you seem blind, even blind to Lenin’s (stalinoid?) analysis of it, in which he indeed posits imperialism’s imposition of very strict limits on the development of the productive forces of peripheral states like Russia.
For the rest of what you have to say about the proper use of the labor theory of value, you seem blind to Marx’s critique of political economy, and reveal yourself more liberal than marxist, cheerleading the eternal expansion of the destructive mode of capitalist production and accumulation.
“even blind to Lenin’s (stalinoid?) analysis of it, in which he indeed posits imperialism’s imposition of very strict limits on the development of the productive forces of peripheral states like Russia.”
Are you kidding me? Have you ever actually read Lenin’s economic analysis of the development of capitalism in Russia, and the vital role that foreign/imperialist capital played in speeding it up? Are you aware of the importance that Lenin placed upon trying to get that foreign/imperialist capital to invest in Russia even after the revolution so that Russia could benefit both from a) the capital, b) the more advanced technology, and c) the more rapid training of Russian managers, technicians and so on. Are you aware of lenin’s friendship with Arman Hammer of Occidental petroleum, in trying precisely to ensure that such imperialist investment occurred in Russia for those purposes.
Lenin said,
“And from these principles it follows that the idea of seeking salvation for the working class in anything save the further development of capitalism is reactionary. In countries like Russia, the working class suffers not so much from capitalism as from the insufficient development of capitalism. The working class is therefore decidedly interested in the broadest, freest and most rapid development of capitalism. The removal of all the remnants of the old order which are hampering the broad, free and rapid development of capitalism is of decided advantage to the working class.”
Lenin – Two tactics of Social Democracy In The Democratic Revolution, Chapter 6.
Lenin’s pamphlet “Imperialism” is a polemical pamphlet, and was proved wrong in most part even at the time it was written. It has certainly been proven wrong in the 9 decades since, and why you would think it has any relevance today beyond value as an historical novelty is beyond me.
Are you aware of Trotsky’s outlining of those same principles described by Lenin in relation to Mexico’s Second Six Year Plan? Trotsky wrote,
“Considerable international capital is seeking areas of investment at the present time, even where only a modest (but sure) return is possible. Turning one’s back on foreign capital and speaking of collectivisation and industrialisation is mere intoxication with words.”(On Mexico’s Second Six Year Plan)
And,
“Despite all these advantages (enjoyed by the USSR, AB) the industrial reconstruction of the country was begun with the granting of concessions. Lenin accorded great importance to these concessions for the economic development of the country and for the technical and administrative education of Soviet personnel. There has been no socialist revolution in Mexico. The international situation does not even allow for the cancellation of the public debt. The country we repeat is poor. Under such conditions it would be almost suicidal to close the doors to foreign capital. To construct state capitalism, capital is necessary.” (On Mexico’s Second Six Year Plan)
And
“The reactionaries are wrong when they say that the expropriation of the oil companies has made the influx of new capital impossible. The government defends the vital resources of the country, but at the same time it can grant industrial concessions, above all in the form of mixed corporations, i.e. enterprises in which the government participates (holding 10 percent, 25 percent, 51 percent of the stock, according to the circumstances) and writes into the contracts the option of buying out the rest of the stock after a certain period of time. This government participation would have the advantage of educating native technical and administrative personnel in collaboration with the best engineers and organisers of other countries. The period fixed in the contract before the optional buying out of the enterprise would create the necessary confidence among capital investors. The rate of industrialisation would be accelerated.”
(On Mexico’s Second Six Year Plan)
The bowdlerisation of Lenin’s analysis of imperialism, and of capitalist development is again a feature of Stalinism, and ot of Marxism.
Of course, Lenin hoped the social democratic west would help the Soviet Union industrialize. But he turned to NEP as necessary step backward.
Unfortunately the social democracies opted for social imperialism before WW1 (to which you apparently fatuously ascribe) and eventually played out after the end of that war as Nazism in Germany…the rest is the history we (but apparently not you) know all to well …I don’t think Trotsky had NAFTA in mind regarding capitalist development in Mexico and the rest of Latin America…. anti-communist, anti-socialist revanchist cold and hot wars, impoverishment, not real development, has been the fate of the rest of the still “undeveloped” world. Capitalism in Russia has meant de-industrialization and impoverishment. It has made Stalin popular…China’s development is a special. Its further growth is challenging the unravelling, neo-imperial club. It will be forced to turn comprador or de-link.
I see that you have returned to your use of insults entirely as an alternative to even a semblance of rational argument. Its fairly obvious that you do not have any kind of grasp of the actual economic history of the USSR, or pre-revolution Russia. I’d suggest reading some of the standard university texts on soviet and pre-soviet economic history such as Carr, Nove and Dobb.
You don’t have to look at what Lenin wrote, as opposed to your rather feeble attempt to try to gloss over your lack of what he said and when. Look back to Marx’s letter to Zasulich, for example. Zasulich asked Marx if it was possible for Russia to skip over the stage of capitalism and go straight to socialism based on the village communes. Marx replied that in theory it was, because the Russian communes could theoretically utilise all of the technologies that capitalism in the West had already developed.
The Narodniks and Legal Marxists tried to use that argument to suggest that such a transformation might be possible, but, in fact, as Lenin showed comprehensively, and as Marx and Engels had themselves already previously recognised, in the period after the Emancipation, capitalism had already become established in Russia, in the towns, and had spread to the countryside with a differentiation of the peasantry. Faced with the reality of capitalist development the Natodniks had to try to portray it as being in some way unnatural and imposed by foreign capital, much in the same way as you do now.
In fact, this role of foreign capital in speeding up economic development and bringing about such social revolutions is nothing new to Marx or Engels, because it is precisely the same process they identify as having taken place in India.
Lenin did not see the “social-democratic” West assisting Russia. His comments in Two tactics, were written prior to the revolution, and are about the requirement for capitalist development as the route to revolution. It is wholly consistent with his line of argument against the Narodniks in the 1890’s and after. Nor was NEP a “necessary step backward” as you put it, as anyone familiar with soviet economic history knows. Rather as Lenin explained, it is War Communism which was imposed on them, as a result of the Civil War. Lenin had no doubt that the process of transformation ran through a process of capital accumulation, and a prolonged period in which the market and commodity production and exchange would continue.
Read his comments in attacking the Left-wing communists in that regard.
Again, you seem not to know the history of Mexico into which Trotsky’s comments fit either. Mexico under Cardenas had just nationalised British oil interests in mexico and was facing outright opposition from British imperialism of a far more direct variety than anything that mexico today faces as a result of what you seem to think is imperialist oppression under NAFTA! At the time Trotsky was writing mexico was a very poor country, today it is the 12th richest economy in the world. But, then it appears for you that the world is frozen in aspic as to how it was a century ago, divided into the same imperialist and colonial countries it was then, never to change, whatever the facts might say to the contrary.
“not real development, has been the fate of the rest of the still “undeveloped” world.”
And, those are precisely the terms that the Narodniks used to try to claim that there had been no “real” capitalist development in Russia, that it was all imposed and artificial and a diversion from the natural path, and other such crap that Lenin thoroughly dismantled. Yet, oddly, whilst you repeatedly quote what you think Lenin might have said, you seem peculiarly unaware of what he actually did say, and instead give is the Stalinist misrepresentation of it, which is in reality closer to the Narodnik line that Lenin argued against, than Lenin’s actual arguments!
“Its further growth is challenging the unravelling, neo-imperial club. It will be forced to turn comprador or de-link.”
is just more Stalinoid Newspeak and nonsense.
Boffy, if I’ve called you a neoliberal marxist and social imperialist in my “Stalinoid Newspeak”, it because you have set an ugly precedent. But I continue to admire your erudition (which unfortunately does not militate against your consistent use of empty cold war signifiers and apologetics for imperialism.
Enough said that I’ve read more than you think. “There’s more in heaven and hell…” So thanks for your elaborate, condescension.
“Boffy, if I’ve called you a neoliberal marxist and social imperialist in my “Stalinoid Newspeak”, it because you have set an ugly precedent.”
then you should intelligently set out exactly what that “ugly precedent” is with evidence and rational argument, which you persistently fail to do, and instead simply make one unsubstantiated assertion after another, sprinkled amongst endless repetition of Stalinoid tropes and mantras, agains without any kind of substantial evidence or rational argument to support them.
Its not condescension when its an accurate description of the argumentation of someone. Its not condescension when you justify your statements by reference to the obvious lack of knowledge and reading on a subject of the person against whom you are debating. There is the difference.
It’s not enough to consistently disregard every substantial point regarding the neoimperialist system, to denigrate them as “stalinoid newspeak”.
I think I get Boffy’s reasoning. The better is the economy, the better workers can bargain their way to revolution. It is like they’d become more or less like rich soccer player or rich actors.
Except you do not give any evidence regarding “the neo-imperialist system” backed up by any substantiated facts or rational argument. You simply parrot dogma and assertions.
Its only slightly better than the trolling approach of Boom who devoid of any rational arguments they can justify simply relies on mindless use of snide comments that simply act to expose the wide expanse, and depth of his own ignorance.
His comments illustrate that he seems to have no concept of what Marx means by Historical Materialism, why Trotsky argued that periods of extended crisis and stagnation were not at all conducive to the Communist Party and interests of workers, or why it was that Marx believed that the revolution to be successful must first come in a developed capitalist society, and why, therefore, the development of capitalism plays a vital role in bringing that about.
These are the basics of Marxism that decades ago would have been learned in the first few months.
It is true than both Marx and Engel believed–and the historical materialist approach led them to believe–that socialism could only grow out a fully developed capitalism in the west that would eventually spread globally. But at least Marx believed that a revolutionary Russia based on its soviets, and with the aid of the democratic capitalist west, could avoid the miseries of primitive accumulation.
Unfortunately the civil war that the bolsheviks were forced to fight after WW1 was one fomented and supported by industrialized democratic Europe and the US–which (despite Armand Hammer and the father of the Koch brothers) remained actively hostile to the Soviet Union from its inception to its demise.
Both Marx and Engels feared the countervailing effects of the colonial system, but even they could not have imagined the disasters of the imperial world wars followed by neo-imperialisms wars of the neoliberal era, which you seem to believe will result in world socialism–perhaps so! but only if the imperialists are opposed rather than cheered on.
Otherwise there is nothing to stop them from policies that will render everybody and nature itself “rather..dead than red (in the words of a famous wealthy American patriot.
“But at least Marx believed that a revolutionary Russia based on its soviets, and with the aid of the democratic capitalist west, could avoid the miseries of primitive accumulation.”
What on Earth are you talking about? The first soviets did not arise in Russia until the 1905 Revolution, 22 years after Marx had died!!!
If you mean that Marx had said in his letter to Zasulich that it was theoretically possible that Russia could use the village communes as a basis for industrialisation and modernisation, by adopting the modern technologies that western capitalism had already developed that is true. But, Marx made clear that this was only a theoretical possibility, and in fact, what it really involved was workers in the West undertaking a revolution so that these technologies could be made available.
But, Marx and Engels both on the basis of the actual developments in Russia recognised that that possibility had passed, because after the Emancipation of the Serfs in 1861, a process of rapid differentiation of the peasantry occurs into bourgeois and proletarians, and capitalism takes hold in both the towns and then the countryside.
In reality that meant that Russia had to follow the same path that Western Europe had trod, and within which Marx makes clear the progressive historical role that capitalism plays. In TOSV, Marx makes clear that in Europe there was no actual alternative to capital as the means by which the scattered means of production could be brought together so as to raise social productivity, and create the conditions required for a transition ultimately to Socialism. That is precisely the point that Lenin makes in Two Tactics.
“Unfortunately the civil war that the bolsheviks were forced to fight after WW1 was one fomented and supported by industrialized democratic Europe and the US–which (despite Armand Hammer and the father of the Koch brothers) remained actively hostile to the Soviet Union from its inception to its demise.”
The Bolsheviks would have had to fight that civil war whether it was fomented by imperialist powers or not. But, let’s assume that it had not had to fight that war, the fact remains that Lenin’s analysis, as that of all the leading Bolsheviks was that the market and commodity production would have to continue for some time. NEP was, in fact, simply an implementation of the economic policy that they would have wanted to follow if they had not had War Communism imposed on them. Lenin believed that the NEP or something like it would have to be in place for around 25 years!
Loon at what Lenin wrote in 1924.
“We went too far when we reintroduced NEP, but not because we attached too much importance to the principal of free enterprise and trade — we want too far because we lost sight of the cooperatives, because we now underrate cooperatives, because we are already beginning to forget the vast importance of the cooperatives from the above two points of view….
There is another aspect this question. From the point of view of the “enlightened” European there is not much left for us to do to induce absolutely everyone to take not a passive, but inactive part in cooperative operations. Strictly speaking, there is “only” one thing we have left to do and that is to make our people so “enlightened” that they understand all the advantages of everybody participating in the work of the cooperatives, and organizes participation. “only” the fact. There are now no other devices needed to advance to socialism. But to achieve this “only”, there must be a veritable revolution—the entire people must go through a period of cultural development…
At best we can achieve this in one or two decades. Nevertheless, it will be a distinct historical epoch, and without this historical epoch, without universal literacy, without a proper degree of efficiency, without training the population sufficiently to acquire the habit of book reading, and without the material basis for this, without a certain sufficiency to safeguard against, say, bad harvests, famine, etc.—without this we shall not achieve our object. The thing now is to learn to combine the wide revolutionary range of action, the revolutionary enthusiasm which we have displayed, and displayed abundantly, and crowned with complete success—to learn to combine this with (I’m almost inclined to say) the ability to be an efficient and capable trader, which is quite enough to be a good cooperator. By ability to be a trader I mean the ability to be a cultured trader. Let those Russians, or peasants, who imagine that since they trade they are good traders, get that well into their heads. This does not follow that all. They do trade, but that is far from being cultured traders. They now trade in an Asiatic manner, but to be a good trader one must trade in the European manner. They are a whole epoch behind in that.”
(On Cooperation)
You say,
“Both Marx and Engels feared the countervailing effects of the colonial system, but even they could not have imagined the disasters of the imperial world wars followed by neo-imperialisms wars of the neoliberal era, which you seem to believe will result in world socialism.”
This is another example of you simply throwing out assertions and insults.
What does your first sentence mean? What was it thy feared? How did they fear it? What were these countervailing effects? What were they countervailing effects to? Without details this is just a meaningless, vague statement. In fact, Engels in a note in Capital pretty much did foresee WWI. His letters to Kautsky certainly foresaw an industrial scale war between Germany and France.
But, what also does the last sentence mean? Where have I said that neoliberal wars will lead to world socialism? I’ve said nothing even remotely like that. Its just an insult.
1. Surely you must have surmised I was referring t0 the soviets at the level of the peasant communes, which Marx referred to his letter to Zasulich, and to which you refer. This letter was written 20 years after the emancipation of the serfs.
2. But the point is that they not only had to fight a civil war, and not simply against Kulaks, but a devastating civil war back by the major capitalist states of the West. That Lenin rightly saw the need to re-educate the peasants so that they might organize themselves cooperatively reflects the undermining uncooperative nature of Western, imperial capitalists during NEP, and, of course, after.
3. I’m specifically referring to Marx and Engels reference to English imperialism’s uprooting effects in Ireland and its subsequent divisive effects on the labor movement in England. By the 1860’s Marx had already realized that England was more interested in super-exploiting Indian labor than than in developing the country industrially.But he hoped that this negative aspect of British colonialist/imperialism might wake up its laboring population. However, India is still mired in a comprador form of capitalism. What is the nature of US foreign policy, especially in Latin America, but to undermine any attempt at independent development? Even that nation with the (misleading) 12th largest GNP, Mexico, remains underdeveloped, its chief product still is “illegal” immigration of its uprooted peasant population to the corporate plantations, slaughter houses, and prisons of the United States.
4. I’ve been puzzled (since I don’t doubt your sincerity as a staunch anti-“stalinist” marxist), by your tendency to ignore even mainstream data of an ever-increasing inequality of income between the ex-colonial nations and their masters and your positive view of neoliberal capitalism generally. So it occurred to me that somehow, you must really believe that imperialism’s policy in the peripheries is to produce a kind of primitive accumulation of capital there. China (the exceptional NEP orientated revolutionary “socialist” peripheral state) seems to serve as your example, and I’m inclined to agree with you only here. However…
…the average wage of capitalistically employed labor in India is 1/10th of similarly waged labor in China, whereas the average wage of a worker in China is 1/10th of the average (below poverty level) wage of a Wall Mart or Amazon worker in the US. So even the exception, is not doing so well in catching up. To make matters worse, capitalist China’s need for investment and trade possibilities is seen by the imperialists (and David Harvey) as imperialism. This makes sense, since full blown capitalist IS imperialism. So we have a trade war and preparations for real war.
It would seem that the point has been reached, as suggested by that stalinoid ignoramous, Samir Amin, that China is being forced into comprador accommodation or, worse than that, what you might call a “stalinist” delinking from its NEP program and development of its “socialist” sector.
We’ll see…
The word soviet means “Workers Council”. This is totally different from the Russian village peasant commune. Quite true Marx’s letter of 1881 is 20 years after the Emancipation, and in it Marx talks of his difficulty in obtaining the data required to make a detailed analysis and conclusion. In further letters he talks about the historical opportunity that the village commune offers existing alongside capitalist development in the West, slipping away. Engels in later articles and letters is even more explicit in that regard. Kautsky undertook a more thorough analysis and sets out exactly why the Russian peasants could never have done what Marx hoped for, compared to the example of the agricultural workers cooperative at Ralahine, because the Russian peasants were imbued with a spirit of individualism. It is what leads those amongst them that can to become capitalist farmers. Lenin’s analysis is even more comprehensive in demonstrating that.
“But the point is that they not only had to fight a civil war, and not simply against Kulaks, but a devastating civil war back by the major capitalist states of the West. That Lenin rightly saw the need to re-educate the peasants so that they might organize themselves cooperatively reflects the undermining uncooperative nature of Western, imperial capitalists during NEP, and, of course, after.”
This is a diversion from the point at issue. I said, assume that they had not had to fight a Civil War. The fact is that, in that event, the kind of economic policy that Lenin introduced with NEP would have been implemented from Day 1.
You have replaced your vague statements in relation to the “countervailing effects of the colonial system” simply with more verbose vague statements in that regard. Again you talk about what Marx is supposed to have said or hoped in relation to Ireland and India, but provide no quotes or evidence for your assertions.
And you use the same approach in discussing your assertions about current conditions. For example,
“India is still mired in a comprador form of capitalism.”
Evidence please.
“What is the nature of US foreign policy, especially in Latin America, but to undermine any attempt at independent development?”
Really?
“Even that nation with the (misleading) 12th largest GNP, Mexico, remains underdeveloped, its chief product still is “illegal” immigration of its uprooted peasant population to the corporate plantations, slaughter houses, and prisons of the United States.”
Really? And not its large oil industry, or its motor industry, its cement and construction industry and so on?
Once again you offer us Stalinist tropes, not any kind of sensible analysis.
“I’ve been puzzled (since I don’t doubt your sincerity as a staunch anti-“stalinist” marxist), by your tendency to ignore even mainstream data of an ever-increasing inequality of income between the ex-colonial nations and their masters and your positive view of neoliberal capitalism generally.”
So, I asked you to provide even just one quote of where I had said that “neoliberal wars will lead to world socialism?”, which you claim to be my position. Just one quote would have done. I didn’t even ask that it be a quote saying those exact words, but simply a quote in which that sentiment is clearly expressed. Not much to ask I would have though for something you asserted so definitively.
Have you done so? No, of course you haven’t. Instead, you have simply doubled down on your assertion Trump like. Instead of providing any such quote, you now compound your fabrication with another claiming that I ignore increasing inequality between former colonies and their masters – by which i assume you mean the former colonial power, and you claim I have a positive view of neoliberal capitalism generally. In other words, you add to one unsubtantiated allegation with two more, without in any way having provided any substantiation for the first!
You then, continue to provide any substantiation for your assertion that I believe that “neoliberal wars will lead to world socialism?”, and introduce a whole load of unrelated verbiage in connection with economic development in industrialising economies! What does any of that have to do with neoliberal wars as a means of bringing about world socialism?
I see no point discussing any of these additional matters until such time as you provide evidence for your original allegation that I believe that “neoliberal wars will lead to world socialism?”
Provide the evidence for that allegation just one quote where I state that to be the case, or else retract it. Let me save you the time and bother of looking. You will find no such quote, because I have never said anything like it. So, if you want any further discussion on the extraneous further unsubstantiated allegations you have made, you may as well retract and apologise for your initial allegation now.
Comrades, can we not use this blog as a forum to argue over the history of Russia, or there will be no end to it. For example, James D White argues, ‘ It is regrettable that “narodnik” or “Populist,” the polemical label that Plekhanov and his followers attached to Danielson and Vorontsov, has been allowed to persist. The term was coined to imply that these two writers and those who shared their views belonged to a current of thought that was dif- ferent from, or even hostile to, Marxism. Nothing could be further from the truth. Both Danielson and Vorontsov have valid claims to be classed as Marxists, and Danielson in particular was one of Marx’s closest collabora- tors in the last decade of Marx’s life. The article “Studies in Our Post- reform Economy” published in 1880 under Danielson’s name was in fact a joint work by Danielson and Marx.
In Soviet times, the ideology of Marxism-Leninism made it obligatory for Danielson and Vorontsov to be classed as “narodniki.” So Marx the narodnik! cf White’s “Marx and Russia”: The Fate of a Doctrine” (20019).
J,
I have to disagree with you on this one. Danielson and Vorontsov were part of the same ideological tendency as Mickailovsky and other Narodniks and legal Marxists. That Marx worked with some of these elements is not to be wondered at, because as Marx himself says he had struggled to try to find information on Russia to work with as part of his studies, and he had to take what was available.
The reality is that Mickhailovsky, Danielson and Vorontsov were Sismondists, or Economic Romanticists as Lenin described them. They sought to hold back capitalist development in Russia, seeing it as somehow unnatural or imposed, in the same way that some of the contributors here see capitalist development in industrialising economies.
The reality of what Marx thought about that actual form of approach is set out in his Letter to Editor of the Otecestvenniye Zapisky complaining about Mikhailovsky.
In answering some of the other contributors here, let me also quote from what Marx says in that letter the following.
” If Russia continues to pursue the path she has followed since 1861, she will lose the finest chance ever offered by history to a nation, in order to undergo all the fatal vicissitudes of the capitalist regime.”
This letter was written in 1877, and Engels was to note the later developments in Russia of Capitalism. Marx’s point, as also set out in his letter to Zasulich is to defend his theory of historical materialism, and thereby to reject the deterministic notion that social development proceeds by the same stages in all parts of the world. I would recommend Marx and The Third World by Umberto Melotti as a good description of Marx’s position as opposed to the kind of rigid determinism presented by Stalinist theorists, in which they see all countries having to go through similar stages of development, as though there were some preset course of history. Thereby the Asiatic Mode of production is presented as either a form of feudalism or a temporary divergence from it, prior to capitalism.
Marx most certainly was not supporting the ideas of Mikhailovsky, or of Vorontsov and Danielson in suggesting that capitalist development was somehow unnatural in Russia. The idea that any path of development is unnatural as opposed to flowing logically from a given set of material conditions, is itself alien to Marx’s theory entirely.
I would recommend this letter from Engels to Danielson, written in 1893, as setting out the position of Marx and Engels in relation to Russia, but such development in general. It puts into context Marx’s letter to Zasulich. Letter to Danielson.
Engels makes clear that whilst Russia could have gone from the village commune to socialism, by adopting the advanced technologies that capitalism provides, the condition for that is that the socialist revolution has already occurred elsewhere. He says,
“You yourself admit that “the social conditions in Russia after the Crimean War were not favourable to the development of the form of production inherited by us from our past history.” I would go further, and say, that no more in Russia than anywhere else would it have been possible to develop a higher social form out of primitive agrarian communism unless – that higher form was already in existence in another country, so as to serve as a model. That higher form being, wherever it is historically possible, the necessary consequence of the capitalistic form of production and of the social dualistic antagonism created by it, it could not be developed directly out of the agrarian commune, unless in imitation of an example already in existence somewhere else. Had the West of Europe been ripe, 1860-70, for such a transformation, had that transformation then been taken in hand in England, France, etc., then the Russians would have been called upon to show what could have been made out of their commune, which was then more or less intact. But the West remained stagnant, no such transformation was attempted, and capitalism was more and more rapidly developed. And as Russia had no choice but this: either to develop the commune into a form of production from which it was separated by a number of historical stages, and for which not even in the West the conditions were then ripe – evidently an impossible task – or else to develop into capitalism; what remained to her but the latter chance?
As to the commune, it is only possible so long as the differences of wealth among its members are but trifling. As soon as these differences become great, as soon as some of its members become the debt-slaves of the richer members, it can no longer live. The kulaki and miroyedy (kulaks and parasites) of Athens, before Solon, have destroyed the Athenian gens with the same implacability with which those of your country destroy the commune. I am afraid that institution is doomed. But on the other hand, capitalism opens out new views and new hopes. Look at what it has done and is doing in the West. A great nation like yours outlives every crisis. There is no great historical evil without a compensating historical progress. Only the modus operandi is changed. Que les destinees s’accomplissent! [Only the mode of operation is changed. Let fate be accomplished.]”
But no doubt there will be those who decry Engels for even suggesting that “capitalism opens out new views and new hopes” for countries still enmeshed in medieval squalor. What kind of apologist for neo-Liberalism must this Engels have been for pointing out to the Russians what capitalist development might offer them by referring them to “what it has done and is doing in the West” in revolutionising society and raising living standards?!
1. There is no question about what were the Bolshevik’s intentions regarding the need for western investment. That intention was complicated by the effects of war, the hostility of Western capital, intervention, the absolutely disastrous civil war, the basic contradiction of the peasant problem–all of which led to the “one step backward implementation of NEP. …All of which you are well aware, but treat rather cavalierly, blaming everything bad on “stalinism”.
You should expect resistance from other commentators on this platform to your rosy views regarding the health and even the good intentions of capitalism as such (not its personifications). This resistance seems to bring out the worst in you (red-baiting).
2. Comprador capitalism is a forcibly created and maintained, unequal social relation between ex-colonial nations of the “global south” and the global institutions (military, juridical, financial) created leading imperial states dominated by the US– that support the leading transnational corporations of these states to dictate economic and political policy to the ex-colonies, through the governments of their well rewarded comprador elites .
Comprador capitalism serves to increase exploitation and retard (or destroy) real development in the “underdeveloped” world: e.g. most recently in Afghanistan, Iraq, Libya, Syria, Venezuela, Bolivia, Iran…and all over Africa).
3. I didn’t assert your belief in anything… I merely wondered (and tried to guess at) how, as a marxist, you can maintain your blindness to the comprador nature of the present imperial system and to the current world crisis, and the reactionary, destructive political and economic responses to it by the US and its NATO satraps. So I recalled your admiration for Kautsky’s pre WW1 “social imperialist” views (which goes back a bit). But how can one charge you with being a social imperialist if you don’t even recognize the existence of imperialism? Just a marxist view of a gloriously expanding capitalism! …But I agree with jlowrie. Things got our of hand.
*See your first comment on this post regarding strong economic growth (military and fictitious in the US, especially the latter in England) and the positive spin you put on “increased (poorly paid) employment…productivity…demand, etc. etc.
Martha,
You said,
“Both Marx and Engels feared the countervailing effects of the colonial system, but even they could not have imagined the disasters of the imperial world wars followed by neo-imperialisms wars of the neoliberal era, which you seem to believe will result in world socialism.”
What is “You seem to believe” if not an assertion by you of beliefs you claim I hold?
As usual you throw out these assertions without any evidence to back them up, just as you repeatedly sally forth with vague statements that amount to nothing more than the repetition of tired Stalinist tropes.
I have asked you to provide just one quote from me that validates your assertion that I “seem to believe” that “imperial world wars followed by neo-imperialisms wars of the neoliberal era” “will result in world socialism.” You have singularly failed to do so. You will continue to fail to do so, because it is an outright lie.
I continue to demand therefore that you retract your lie, rather than that you continue to simply double down on it Trump style with further fabrications and vacuous unsubstantiated statements.
A further example now is your assertion that I deny the problems caused in Russia by the Civil War. Again provide one quote where I have said that the Civil War did not pose obvious problems for economic development in Russia. Just one, please!
I am loathe to be bothered to engage with any more of the nonsense you purvey, because your methodology is clearly that of a troll, in like manner to that of Anti-Capital and his sock puppets, and I have a policy of not feeding the trolls. Unless you retract the lying statement referred to above, and which I have asked you now to retract on several occasions, then I certainly will not be bothering to respond to any more of your comments.
But, let me first simply point to this comment.
“Comprador capitalism is a forcibly created and maintained, unequal social relation between ex-colonial nations of the “global south” and the global institutions (military, juridical, financial) created leading imperial states dominated by the US– that support the leading transnational corporations of these states to dictate economic and political policy to the ex-colonies, through the governments of their well rewarded comprador elites .”
So, large parts of the UK economy is today owned by Indian companies. Mittal Steel, Tata Steel, for example own most of the steel production in Britain. Tata owns Jaguar Land Rover, and so on. So, on your basis is then British capital in the camp of the comprador bourgeoisie or the imperialist bourgeoisie. Is Indian Capital, which owns these large swathes of the UK economy then imperialist, or is it still a colonial country suffering the yoke of neo-colonialism. I could ask the same questions about the Chinese companies that are heavily invested in Britain too.
I might also ask in relation to your assertions about imperialism destroying and undermining economic development across the globe in a range of countries “and all over Africa).” why it is then that of the ten fastest growing economies in the world in the last ten years, six of them have been in Africa? Why is it then that in the 1980’s and 90’s, it was the Asian Tigers that enjoyed the fastest growth rates in the world? Indeed, why did countries in Latin America such as Brazil and Argentina enjoy higher than average growth rates?
Why is it that looking at per capita GDP, between 1989 to 2012, it rises by 162% for the whole world, but for the developing world it rises by a massive 404%%. Douglas McWilliams calls the last 25 years the “greatest economic event in world history.” Compare it with previous periods. World GDP rose by just a third in the century after the discovery of the Americas, with per capita GDP rising by only 5%; even with the Industrial Revolution at its height, in the 50 years after 1820, world GDP rose 60% and per capita by just 30%. Between 1989 – 2012, world GDP rose by 272%.
The reason is that growth now covers a much larger proportion of the planet, and the fastest growth is not as you claim amongst the already rich, but amongst the developing economies.
You may not like the facts as they contradict your moral sensibilities and Stalinist tropes, but the fact remains as Lenin states in his Two tactics, and as Marx and Engels describe, for those economies still mired in medieval squalor, their best hope, or as Engels puts it “new hope” rests in capitalist development, and the more rapid that development the better for them. And, as Trotsky pointed out in relation to Mexico, given that the problem for these economies is preciseley theri poverty, their lack of capital, the most effective way of gaining that rapid development is by encouraging investment by foreign capital in their economy. As Engels says, after all Socialism itself is only possible because of the revolutionising effect of capitalism, which revolutionises production, raises living standards, and simultaneously creates the organised working-class, which is the active agent by which that development is transcended and becomes socialism.
Martha,
While you are at it, perhaps you could also retract or substantiate these other outright lies.
“So I recalled your admiration for Kautsky’s pre WW1 “social imperialist” views (which goes back a bit).”
Again a quote to substantiate this lie would be nice. You will not find one, because its a lie.
“But how can one charge you with being a social imperialist if you don’t even recognize the existence of imperialism?”
Another lie, I have written extensively on imperialism, and I’m currently working on a five volume book on imperialism!
“See your first comment on this post regarding strong economic growth (military and fictitious in the US, especially the latter in England) and the positive spin you put on “increased (poorly paid) employment…productivity…demand, etc. etc.”
See it in what regard? I realise that you have a problem with accepting facts when they contradict your Stalinist tropes in support of Varga’s Law, but how is stating the fact about continued strong economic growth in the US, including employment growth something that a Marxist should avoid? How is stating facts to be putting “positive spin” on them, other than it contradicts your requirement in line with Varga’s Law to always be pretending that capitalism is in crisis in decline, that living standards are declining and so on.
What a terrible lackey of imperialism you must think Engels to be to have recommended to Danielson and the Russians that capitalism offered them new hope given the reality they faced in the latter part of the 19th century, how you must rage at his support for neo-liberalism and the “positive spin” he puts on the revolutionising role that capitalism had played in the West in transforming society and raising living standards.
I’m not an economist. I try to apply a Leninist historical materialist critique to my own experience: first hand, through friends, from print, where I have encountered your “factual” (rather positivistic) comments here.
All the gnp growth rates superlatives which you supply, as, for example, to India, however, are contradicted (not by more such necessarily bourgeois data, but) but by what I have been able to read (Jayat Ghosh, Vjah Prashad, Arundhati Roy, etc.) about conditions of the working people there, conditions of destitution which help determine an average wage (2019) for Indian wage earners (who lucky enough to be actually employed by a local comprador industrialist).It is about 1/20th the average wage for a poorly paid service worker in England (who, indirectly, benefits much more from Indian labor than the producer herself.
I do have moral sensibilities.
“I do have moral sensibilities.”
Unfortunately, those moral sensibilities do not extend to you telling the truth do they? So, you lied when you said that I believed that imperialist wars “followed by neo-imperialisms wars of the neoliberal era… will result in world socialism.”
Despite asking you several to substantiate this charge with even a single quote where I say anything like that you have failed to do so, and have also failed to retract it. Instead you simply added to it with further lies.
You claimed that I admired “Kautsky’s pre WW1 “social imperialist” views”, which is yet another lie. I have again asked you to substantiate that claim or retract it. Again you have failed to do so.
You claimed that I denied that the Civil War in Russia had a detrimental effect on the Russian economy and development. Yet another ridiculous lie. I have asked you to substantiate your allegation or retract it. Again you have failed to do so.
You claimed that I do not believe that imperialism exists. Yet another ridiculous lie. Once more I have asked you to either substantiate your allegation or withdraw it. Once more you have failed to do so.
Its clear that you are an unreconstructed liar of the Trump variety who never substantiates the allegations they make, but when challenged instead just doubles down on them by throwing out even more ridiculous lies and unsubstantiated allegations. In other words, you are simply an ignorant troll.
Your comments in relation to GDP growth rates simply reinforce this fact of your total rejection of the use of facts and data, in favour of your own subjective opinions and moral sensibilities. The actual facts relating to GDP, to the relative performances of economies, to the changes in living standards of workers in various countries do not fit your world view and prejudices, and so you deny the facts, and instead again Trump like put forward your own “alternative facts”.
You admit that you are not an economist, and yet on the basis of this moralistic and subjectivist approach – the very opposite of the “Leninist historical materialist” methodology – you make bold assertions about global economic development and reality!!! You do not seem to understand that Lenin’s critique of the Narodniks and legal Marxists in relation to the development of capitalism in Russia was a critique of the very moralistic and subjectivist method you adopt! The Narodniks spoke in almost identical terms to those you use. The Narodniks said, look how can it be that capitalism is developing rapidly, and expanding the economy in Russia, and that its continued growth is sustainable, if we see that so many peasants are being impoverished. That is the question that Lenin deals with in “On the So Called Market Question”. You do not seem to understand that the two things, as Lenin shows go together!
They not only go together as Lenin shows in relation to Russia, but as Marx also showed, they went together in Britain and elsewhere too. The creation of capital, and the development of a market goes means the concentration of the means of production in the hands of a small number of capitalist producers, and the ruination of a very large number of individual peasant producers. But, the development of capital, then as it did in Britain, France, Germany, the US and elsewhere, then becomes the basis upon which social production is revolutionised and living standards rise.
Moreover, like the Narodniks you talk in vague generalities and use data in absolute terms without any kind of understanding of relativities. Telling us that the wage in India is 1/20 that in England, for example, tells us nothing about the amount of value created by the average Indian worker compared to that in England, where productivity rates are much higher; it tells us nothing about the cost of living of the Indian worker compared to the English worker; more importantly it tells us nothing about the standard of living of the Indian worker today compared to the standard of living of an Indian peasant. In other words, has capitalist development and industrialisation raised that standard compared to if India had continued to be a largely peasant based economy. Or to put it in Marx’s terms, has capitalism rescued millions of Indians from the idiocy of rural life, which is exactly why Marx saw colonialism, by bringing about a social revolution in India, and introducing capitalism played an historically progressive role despite the brutality and inefficiency by which it did so.
I have elsewhere given data about the improved diet in China as a result of its industrialisation and rise in living standards. India which remains a largely vegetarian society does not show the same rise in meat consumption, but it shows a similar pattern of falling consumption of grains/cereals (mainly rice) and rise in the consumption of eggs/dairy as a result of rising living standards due to industrialisation brought about by capitalism.
Perhaps the best measure, however, along with improvement in literacy/numeracy etc., is the change in life expectancy which is a good proxy for living standard. In 1960, the average life expectancy of an Indian was just 42. In 2015 it had risen to 68, comparable to the life expectancy of citizens in advanced capitalist economies.
But, no doubt you will sally forth with further vague statements and “alternative facts”, and you will continue to make unsubstantiated statements/lies that you fail to validate or withdraw.
So, I have no interest in further interaction.
Boffy. I posted a reply, which was awaiting moderation, and then disappeared, so I shall try again tomorrow.
In his ”Karl Marx’s Ecosocialism” ( a worthy recipient of the Deutscher Memorial Prize) Kohei Saito remarks that, ” Taking into account the deepening of Marx’s theory of metabolism, it is plausible that Marx in 1881 recognised not only a non-Eurocentric, multilinear ways to socialism but also developed a more ecological vision of socialism. However this expansion of Marx’s interest made it extremely hard to complete his project of Capital (P265). Readers of the 3 Volumes of Capital will no doubt share this writer’s intense frustration on reaching the very last chapter where Marx begins to analyse the nature of class, at which point Engels inserts a footnote to the effect that at this point Marx’s manuscript breaks off! Why ever did Marx not finish Capital? To Engels it was only too clear:Marx had devoted too much time and effort to studying Russian social conditions(150 volumes in Russian alone) as an excuse to avoid working on Capital.
But what had caused Marx to devote so many of his last years to the study of pre-capitalist societies and Russia in particular?
Here I follow the arguments of J.D.White in his “Marx and Russia (2019) and his article ”The Development of Capitalism in Russia” (Class History and Class Practices. Research in Political Economy Vol 34 3-31).
Originally Marx had assumed that the circulation of capital would subsume all the economic spheres in which it operated, making capitalism the universal system, ”The country that is more developed only shows to the less developed the image of its own future” But in his 1872 second edition he removed most of his philosophical vocabulary including the sixth chapter, which discussed subsumption at some length.Other countries he now argued such as Russia might ”avoid the fatal vicissitudes of the capitalist regime” and denied he had ‘a historic-philosophical theory of the universal path every people is fated to tread.”
Marx became concerned at the devastation that the introduction of capitalism was visiting on the Russian social fabric. The peasants were being dispossessed, but there were no factory jobs for the majority, who were left to starve.
Marx argued, ”The rural Commune is the fulcrum of social regeneration in Russia, but….. the harmful influences assailing it on all sides must first be eliminated and then assure it of the normal conditions for spontaneous development.” This would entail a revolution against the Tsarist State.
”In January 1882, Marx and Engels had provided a preface to the Russian edition of the Communist Manifesto that Plekhanov had translated. This had stated that the peasant commune could serve as the basis for socialism in Russia, provided that the Russian revolution was accompanied by a proletarian revolution in the West (Marx & Engels, 1985, p. 296). This idea belonged to Engels rather than to Marx, who was suffering from ill health at this time. There is, moreover, an indication that Engels had written the passage in question. The preface speaks of the peasant commune being an “age-old” (uralt) form of landownership. Marx could hardly have used this term, since in the recently written drafts of his letter to Vera Zasulich he had drawn attention to the fact that the peasant commune was the latest stage in the historical evolution of the institution. It was from his reading of Maxim Kovalevsky’s book Communal Landownership (1879) that Marx knew that the peasant commune was not “age-old” and was unlikely to describe it as such in the preface.” (quoted in White)
Russia’s economic development was on Plekhanov’s side as the government pursued a policy of attracting foreign capital and the number of industrial workers increased, so that Plekhanov could predict that the ‘revolutionary movement in Russia will triumph only as a working class movement.” Of course when the actual revolution came, Plekhanov argued that Russia had first to undergo more capitalist development and refused to participate. In any case the hyper industrialisation of the Soviet Union under Stalin ( praised by Trotsky!) settled the matter, and its great social and economic transformations initially attracted 3rd world countries postwar. Whatever may be one’s evaluation of the Russian revolution, can the subsequent trajectory of Stalinist or indeed any hyper industrialisation policy serve as a template for the problems that now confront humanity? I suggest not.
There is a thesis among some Marxists that the ongoing dispossession of Chinese and Indian peasants and their urbanisation as workers will give rise to a huge class conscious proletariat ready finally to storm the barricades. Well and good, but what then? Given that the Indian and Chinese governments seemingly intend to replace their peasantry with industrial agriculture, and analogous transformations are taking place in Brazil, Africa and the rest of Asia, the situation clearly recapitulates that which Marx finds in Russia. Can capital absorb them?These ‘proletariarii’ are in the city but not of it, ( Mike Davies and ”The Planet of Slums”) and not only is their way of life but the very land and water on which it depends are being destroyed. How these hundreds of millions of dispossessed people are to find employment by capital those Marxists who see this development as progress do not feel obliged to explain. Dr William Rees , who formulated the ecological footprint analysis, has described modern cities as ‘entropic black holes’ and sustainable cities as ‘an oxymoron.’ I think we need to revisit Marx and Russia, and reconsider the possibilities of industrial – agricultural communes. This will necessitate a return to the country, no easy task, but one recalls that the abolition of the difference between city and country was one of the original demands of communism.
Boffy: “Why is it that looking at per capita GDP, between 1989 to 2012, it rises by 162% for the whole world, but for the developing world it rises by a massive 404%%. Douglas McWilliams calls the last 25 years the “greatest economic event in world history.” Compare it with previous periods. World GDP rose by just a third in the century after the discovery of the Americas, with per capita GDP rising by only 5%; even with the Industrial Revolution at its height, in the 50 years after 1820, world GDP rose 60% and per capita by just 30%. Between 1989 – 2012, world GDP rose by 272%.”
And: “Perhaps the best measure, however, along with improvement in literacy/numeracy etc., is the change in life expectancy which is a good proxy for living standard. In 1960, the average life expectancy of an Indian was just 42. In 2015 it had risen to 68, comparable to the life expectancy of citizens in advanced capitalist economies.”
Makes you wonder why a proletarian revolution, or socialism, is even necessary doesn’t it? So let’s ask Boffy, since capitalism can produce the “greatest economic event in world history,” since capitalism is capable of not permanent expansion, but perennial, persistent expansion, what’s the need for socialism? Where’s the necessity?
Some might look at the “civil wars” perpetuated in Africa by capitalists and capitalisms seeking oil and mineral resources, and say “there’s the reason.” Or some might look at the dispossession of agricultural producers in India and the floods of migrants to the cities, and say, “there’s a reason.” Or even others might look at the capitalists in China failure to pay wages, the ongoing scams involving local governments and real estate, and say “there’s the reason,” but it’s unclear if Boffy thinks there is any need for socialism given his repeated homages to the idol of perpetual accumulation.
Is socialism a necessity now in the United States because the average life expectancy has fallen, thanks you Purdue pharmaceutical company, but wasn’t a necessity during the previous years when life expectancy wasn’t falling but rising.
Or maybe, rising or falling life expectancy, literacy, like GDP and per-capita GDP aren’t the point– the point being the price that is paid for the “gains” in accumulation; gains which can and will be reversed; gains that demand more than a pound of flesh?
Tell us Boffy, if capitalism isn’t pursued across time and space by the tendency of the rate of profit to fall; it every contraction is just a cyclical blip, a credit crunch made worse by stupid (governments, bankers, central bankers, bond traders– pick one or more) if we’re still in the first 25 years of a “long wave upturn” and if co-operatives represent the invading socialist society even though something like 85% of cooperatives are in the financial/insurance sector, why socialism? Marx and Engels were foremost and forever revolutionists, seeking to determine what historical conditions made social revolution necessary, a historical requirement for the social emancipation of labor. So where’s that historical necessity today?
Boffy, you don’t have to an economist to be a marxist. Marx was himself such a marxist. He was first of all a material, social being, a revolutionary, and among the early critics of metabolic rift between the capitalist mode of production and care of the earth itself. But he did depend on and criticized the work of good economists.
I’d have to dig into the archives of Robert’s blog to find your comments on Kautsky to which you refer. I’ve pointed out in many postings on this blog, that your consistently positive views regarding capitalism’s health that you “seem” blind to the existence of imperialism. Of course you know that imperialism does exist, but, it would seem, as a positive force in leading mankind out of capitalism.
For the rest, I thank jlowrie and anti-capital for taking the time to fully lay out the view of marxists with whom I identify. But this blog is Robert’s, not yours or ours.
‘For the rest, I thank jlowrie and anti-capital for taking the time to fully lay out the view of marxists with whom I identify.’ Martha, I am not sure what you mean, but if you read White’s book, which you should, you will perhaps find as I have done that Marxists you thought you identified with were at times decidedly advancing ideas that you could not identify with. Lenin, for one!
“Nevertheless, 2019 did not see a new global slump. Why not? First, the monetary authorities quickly reversed their previous policy stance that the global economy was fine and had ‘normalised’. In 2018, many central banks had been on hold with their policy interest rates or in the case of the Federal Reserve had hiked the rate. In 2019, the opposite was the case.”
But, the additional QE was not to stimulate growth. It was to do the opposite. There was no lack of growth in the US, and its employment level continued to rocket. QE diminishes economic growth because it encourages those with potential money-capital to use it for speculation rather than real investment; it encourages those with money they might spend on consumption, to use it to bid up the price of bonds, shares and property instead. It diverts money away from the real economy. The central banks do that deliberately to boost asset prices, and to slow economic growth to hold back wage growth, and raises in interest rates that threaten asset prices.
As you say yourself.
“With borrowing so cheap, large corporations and banks sucked up cheap credit; but not to invest in productive assets, but instead to buy up shares and bonds.”
If you want to see why thy do so, and have no interest in yields rather than speculative capital gains. Look at the experience of the issue of the Austrian 100 Year Bond in 2017. It had a 2% yield, but in the two years since its launch, its price has risen by 60%!
As Moneyweek wrote recently the real problem for 2020 will be if everything goes right. If Trump’s trade war ends, if Brexit ends, and we see a sharp increase in growth, at a time when employment is at all time highs, and unemployment at near all-time lows (still about double the rate in the early 1960’s) then wages will rise very sharply as labour shortages spread, the demand for wage goods will rise sharply, workers will demand wider ranges of goods and services, requiring large-scale capital accumulation, which given the nature of service industry means a much greater accumulation of circulating capital, a resulting squeeze on profits, and subsequent rise in interest rates which will crash asset prices.
Indications of the problems are already being seen in the several short term liquidity crises that have erupted, and rumours that a year end liquidity crisis may erupt with banks and shadow banks needing to liquidate available assets.
Hey, Michael,
New Years greetings to you and all.
Merely to underscore the always unfinished business of science, it isn’t actually correct to assert that,
See, for example, the fascinating — if studiously neglected and ignored by relativists — empirical proofs by physicist Dr. Paul Marmet that the supposed interaction between light and gravity, and by implication and let alone, gravity and space, was never proven and, indeed, remains unproven to this day: a) The Deflection of Light by the Sun’s Gravitational Field: An Analysis of the 1919 Solar Eclipse Expeditions. (P. Marmet); and b) Relativistic Deflection of Light Near the Sun Using Radio Signals and Visible Light (P. Marmet and C. Couture)
And now to get back to the rest of your prediction for 2020 . . .
My apologies. I muffed the second link in my comment: Relativistic Deflection of Light Near the Sun Using Radio Signals and Visible Light (P. Marmet and C. Couture)
“What were the factors for the slowdown and what are the factors that have enabled the major capitalist economies to avoid major slump that cycle theory predicts should have happened by now?”
All of this can be ultimately be explained by one factor: this time, they know.
The capitalist classes have simply learned from their past mistakes and acted quickly in the aftermath of 2008.
The USG immediately entered with the bail out. There were no half-baked implementation of the band aids: Obama wrote a blank check to the capitalist class and disbursed whatever amount of taxpayer money was necessary to stop the bleeding (as it happened in 1929).
The capitalist classes also sobered up and became ruthlessly pragmatic: the countries which had to be brutally subdued they did it (e.g. Greece); the countries where they had to fraud the democratic process, they did it (e.g. USA, UK); the countries where they had to support fascists they did it (e.g. Brazil, Bolivia, India); and, where they needed to throw the ideological principals of liberalism in order to save the system from itself, they did it (trade war with China, embargo of Russia).
Also, where the liberal order didn’t crumble, they are not measuring efforts to gain whatever time they can, as we can observe by the fact that they are not ashamed of things like ZIRP, NIRP, QE etc. in countries like Japan, USA, the members of the Euro Zone etc.
The capitalist class also lost any shame in unceremoniously throwing their clerics (Economics “experts”) under the bus: they are hiring and firing them as the season goes, without hesitating one second about the hypocrisy and bad PR involved.
They are also probably reading and studying Marx in secret: right after 2008, an UBS bigwig published a journalistic article claiming Marx was right. This is the ultimate pragmatic move a capitalist can make in his life.
In sum, the capitalist class is now more class conscious and more determined to save the system than ever. That’s why the whole thing didn’t collapse yet.
–//–
“And there is the new phenomenon, not seen in previous long depressions, namely low unemployment rates that provide at least a modicum of income for households.”
This “reverse stagflation” phenomenon is very interesting because it is one of the structural factors many USSR experts claim were the cause of its collapse.
With birth rates plummeting across the capitalist world and technological progress halted, capitalism is more and more reliant on expansive growth, instead of intensive one. That’s the true reason Merkel made the mistake of opening the German borders to Syrian refugees, that’s the true reason Macron is going to reform (i.e. destroy) the French pension system.
That also happened in the USSR, where birth rates plummeted too early and eventually labor productivity fell suddenly in the 1970s. It eventually came to a point technological progress became pointless, as even if the new machinery was invented, there were simply not enough people to learn them and operate them.
a minor correction, which is irrelevant to the quality of the article:
the prediction that corroborated Einstein’s theory 100 years ago was that gravity bends the trajectory of light at twice the amount predicted by Newton’s theory. Gravitational waves were indeed predicted by Einstein’s theory and Einstein knew that, but technology only lately made detection possible (against a soft prediction by Einstein, who thought that such waves would be too weak to detect).
The chart of cycles upon cycles is horizontally level — but the capitalist mode of production reaches an apogee and then rolls toward its end. The real median earnings of U.S. workers peaked in 1973 — 46 years now! Technical progress will continue, but what matters for the working class is that developed capitalism can no longer return to relative mass prosperity.
Here comes Boffy with his clockwork long cycles again. It has to be about 54 years because history is just that regular! He still genuinely believes we have seen Spring and Summer since the turn of the millennium!
He was right about now new slump as yet? So what he’s been wrong about the last two decades!
This is a 2nd critique of his theory of K cycles in the same article. I hope you don’t dislike it.
The correct predictions come out of the correct diagnoses, and so, perhaps you should try this different diagnosis of the Kondratiev cycles.
Forecast ’My forecast was partly based on a theory of cycles in capitalism built around the long term cycle of 55-70 years first expounded by Russian Marxist economist, Kondratiev. I reckon there have been four K-cycles since the start of the industrial revolution in Europe. The fourth cycle started in 1946, peaked in the early 1980s and should have troughed around 2018. ’’
Kondratiev cycles and revolutionary cycles.
In my modest opinion (really modest next to the many excellent authors – yourself – who have studied the economic cycles) it is on the date that you indicate as the beginning of the current Kondratiev cycle where the origin of your predictions and forecasts are not certain. You take that date to 1946 and you should place it in 1.917. A synthesized explanation, explanation with little academy and few macro but certain data, of that date change is that the K cycles are, in reality, revolutionary cycles and 1917 and their Socialist Revolution is the beginning of the present K cycle. K of the nineteenth century, all of them begin, not coincidentally, on the date of the liberal revolutions of 1,789 and 1,848. Those two revolutions gave rise to and consolidated capitalism. There is no cycle if there is no momentum. Kondratiev and others explain that their cycles begin because of large business investments, especially those of the industrial revolution, but the truth is that there can be no industrial innovation without competing companies in the markets. And it is the French Revolution (its slogans and laws are equality, fraternity, freedom and … free enterprise, with laws that eliminate feudal economic monopolies) that creates such non-existent competition in the monopolized markets of Feudalism. It is the revolution that legally allows the bourgeois class an explosion in the creation of companies, companies were banned before. Industrial innovation and the greatest investment in the XIX are produced AFTER the expansion of bourgeois capitalist competition. The phases of growth and decrease of the K cycles of the nineteenth century are the phases of progress and retreat of these revolutionary capitalist cycles.
The revolutions of 1,789 and 1,917 created two new economic subjects. The one of 1,789 creates and consolidates the private capitalist company and the one of 1,917 creates the socialist public company. It is these two new economic agents that multiply the associated growth. Capitalist growth (Agnus Maddison) grows on average at 1.5% per year in the nineteenth century from 0.5% Feudal, and socialist growth at 5.5% (Golden Age Capitalism and China) Why do they grow more? For the same reason: the two new economic agents have much more size and power with respect to the previous agent. It is a change of economic scale. The capitalist and socialist economic subjects increase in size increasing the number of their partners. The private capitalist company did so by increasing to X # of partners the only partner (Mr. Feudal and his family) existing in feudalism and the socialist company increased its partners to the entire population of a country. It can be said, shortly, that if companies have more partners they will have more own resources, more financing, more safety nets, more education, more health, more productivity, etc … and more growth will originate. The productive capital and the number of its owners and contributors are the nuclear factor of an economic model. If the number of its owners is increased, growth increases. And vice versa, just like today.
The current deceleration of growth (which is not and will not be a recession and abrupt fall) is the phase of the K cycle back in 1917. Cycle with a backward phase that began in the 80s with the privatization of any existing public enterprise, both in real socialism and in Western economies. It is a period of capitalist restoration, in the same way that in 1815 (the beginning phase of the decrease in the K cycle) there was a restoration of Feudalism with the European Restoration. Today that restoration is being carried out by Neoliberalism.
The current revolutionary K cycle started in 1917 must end (giving rise to a new cycle) around 2,050, if the symmetries of the previous cycles in their forward and reverse phases are repeated. The cycle will have a longer duration (over 130 years) than the previous K cycles for a single cause: the socialist economic subject created and the associated impulse of its creation is more potent than the capitalist subject and its impulse.
On the revolutionary impulses and their cycles they have spoken from different sciences and optics R. Luxemburg, Ragnar Frisch and Walter Scheidel
Best Regards,
Here’s another evidence that extensive expansion of productivity amid stagnant technological progress and negative birth rates are the underlying reasons many Western Democracies have done, are doing or are flirting with pension reforms:
“Over-65s to account for over half of employment growth in next 10 years”: https://www.theguardian.com/society/2019/dec/31/over-65s-to-account-for-over-half-of-employment-growth-in-next-10-years
The funniest part is the euphemistic subtext: “Employers urged to unlock potential of older workforce and create supporting environment”
Marx noted that profit and unemployment are directly related. As unemployment goes down employers are forced to offer higher wages, and profits, esp the rate of profit, fall. The same thing has happened just before every recession of the last 70 yrs. As the economy recovers, unemployment begins to fall, wages rise incrementally, and the rate of profit falls. Profits fall to a point where capital exits the market, a recession occurs until the “deadwood” (as in “destroy stocks, destroy labor, destroy the banks”) is cleared away.
This not entirely accurate, though I take your central point. Firstly, employers do not automatically have to offer higher wages when unemployment goes down. First of all, they can get workers to work overtime. Marx describes this in TOSV. To begin with, they may be able to get additional hours labour without additional wages. That actually raises the amount and rate of surplus value, and probably the mass and rate of profit. Only probably, because as Marx says, surplus value is the basis of profit but they are not the same thing. The rate of profit in particular can fall even when the rate of surplus value rises, which is fundamental to Marx’s LTRPF.
Secondly, employers may pay workers additional wages for the additional hours worked. In that way, the rate of surplus value remains constant, but the mass of surplus value/profit rises, as does the mass of wages. Third, overtime rates may be paid. This reduces the rate of surplus value, because wages rise relative to surplus value, but it still results in a larger mass of surplus value/profit, and probably a rise in the rate of profit, unless wages rise to such a level that profit ceases to grow – i.e., a crisis of overproduction of capital.
Fourthly, capital can draw in new groups of workers from the reserve army. Women workers may be recruited, along with children, in peasant societies, or societies with large agricultural workforces, labour can be brought in from the countryside, and immigrants can be encouraged. All of these are means of increasing the size of the social working day, which means that more value and more surplus value is produced, even as the total of wages rise.
All of these things can be observed in periods where capital had started to accumulate faster than the labour supply. It can be seen markedly in the post war period. After 1999, as Britain faced labour shortages, as the new long wave upturn commenced, it saw the wages of plumbers and other skilled trades people rocket. Teachers and other professionals retrained in these jobs. Blair encouraged additional EU migrants to come to fill these vacancies, with 2 million additional workers being quickly absorbed into the workforce. The ubiquitous Polish plumbers were the means by which this upward pressure on wages was constrained. But, there were shortages of other workers like lorry drivers. UK petrol tanker drivers quickly got a 14% pay rise after just a couple of days strike.
As Marx describes in Capital III, Chapter 15 and elsewhere, for example TOSV Chapter 21, an overproduction of capital arises when capital accumulation outstrips the growth of the labour supply, and an absolute overproduction of capital arises when it outstrips it by such an amount that any additional increment of capital, causes the demand for labour, and so rise in wages to prevent any additional surplus value being produced. That is a crises of overproduction of capital.
As Marx describes in the above places, and again in Value, Price and Profit, where he describes the situation in 1849-59, in relation to agriculture, when the situation reaches that of such a crisis, capital is then forced to respond by innovation, by looking for labour-saving technologies. That creates a relative surplus population, which means unemployment rises, and wages then fall back, the mass and rate of profit then rises, and this creates the conditions for the next long wave upswing. This is why these periodicities of crises of overproduction, and of the long wave cycle exist, because they are tied to these objective material conditions, of the times required for the reserve army to be used up, for new generations of workers to be produced, for existing technologies to require replacing and so on.
The new technologies that create the relative surplus population also do not lead to less labour being employed, and so less surplus value/profit being produced. As Marx makes clear it is only a relative reduction in the amount of labour employed, i.e. relative to the amount of constant capital employed, particularly the mass of raw material processed, due to higher levels of productivity. The total amount of labour employed, and so the total new value and surplus value rises throughout this period.
For example, as Marx explains, if a new cotton gin is invented, it may do the work that 100 workers would have been required to do. Does this mean that 100 workers are laid off? No. If the cotton gin means that cotton would not have been picked, now is, and the value of cotton falls, the demand for cotton from textile firms rises, and the supply now matches it. The cotton gin not only does not result in unemployment but requires labour to operate it, to transport the additional cotton, and to process the cotton into yarn. Similarly, the Channel Tunnell would not have been built if it had to be done by labourers with picks and shovels. The development of boring machines, capable of doing the work of hundreds of labourers did not cause any such labourers to be laid off, because they were not employed to begin with. It did, however, mean that the construction became viable, and so thousands of labourers did get actual employment.
That means that both more labour is employed, and this labour produces a higher rate of surplus value, (because wages have fallen, and higher productivity reduces the value of labour-power) which means that the mass of surplus value/profit rises rapidly due to both these causes. That is the basis for the new upswing.
“IN chapter two on page 108 in the SR1.5 IPCC report that came out last year it says that if we are to have a 67% chance of limiting the global temperature rise to below 1.5C, we had on January 1st 2018, 420 gigatonnes of CO2 left to emit in that budget. And, of course, that number is much lower today, as we emit about 42 gigatonnes of CO2 per year, including land use. With today’s emissions levels that remaining budget will be gone within about eight years.”
Greta Thunberg addressing the COP 25 Conference on December 12, 2019.
What legislation will be pursued by governments to reduce greenhouse gas emissions to zero in eight years?
We’re on the brink of an ecological collapse. Greenhouse gas emissions are rising, not falling. This should probably be a major issue as wealth has only two sources: human resources and natural resources, both of which are under existential threat. That piece of science should probably be figured into any predictions about what this decade will bring.
Well, Michael… I think more than a few of us were left with egg on our face after this year. I certainly wouldn’t have predicted the recovery to continue until now. My own prediction was that the next recession was going to hit between winter 2018 and summer 2019. There have certainly been some signs of zero growth or even contraction in specific markets but no repeat of 2008 so far.
In my opinion, the reason for the lagging of recession is ironically increased ductility due to highly inreased financialisation which has amazing weight in relation to past. I mean the fictituous profits of fictituous capital retards the recession. But the same factor will also increase the intensity of the probable slump vhen it occurs, as we have seen on 2008.
Quite the contrary. It was the financial crisis of 2008 that led to the economic slowdown not vice versa. It was rapid economic growth prior to 2008 that led to rising interest rates, from their ridiculously low levels (for official rates at least, as a result of the Greenspan Put) which provided the park for the 2008 financial crash.
Had the trillions of dollars that went into bailing out the banks and asset prices been used instead to ensure that there was liquidity for real capital and commodity circulation to continue, allowing the speculators to simply lose their money, then the economy would have recovered faster. There is evidence for that from the experience of Iceland for example, where the banks were allowed to go bust and asset prices to collapse. The banks assets could have simply been taken over by their workers as cooperatives. The bank premises, machines and so on, were all still in existence, as were the mortgages and so on that they owned.
The real economies were following the usual V shaped recover path until 2010. At that time the tea Party in the US began to shout, and their success was picked up by David Cameron, who used the austerity message to get elected. His Liberal coalition partners right up to the point of joining government were caught on camera saying that austerity was a big mistake at that point. Austerity was implemented by conservatives in UK and EU for electoral political purposes, but also to restrain the economic growth that was already returning. Despite the Tory rhetoric about Labour cratering the economy, in the last quarter that Labour was responsible for in 2010, GDP growth reached 1%, or about 4% annualised, a rate of growth the Tories have never managed to equal.
They restrained growth to restrain wages, and to restrain the demand for money-capital, which prior to 2008 were the two things that sparked the collapse of asset prices. Where they could, in the US the Tea Party Republicans also tried to frustrate Obama’s fiscal stimulus and implement their own austerity for the same purpose. That was combined with even greater liquidity injections by central banks to encourage money out of the real economy and into property and financial speculation.
They do that, because the dominant section of the ruling class, the top 0.01% now owns their wealth in the form of fictitious capital. The vast majority of industrial capital today is large-scale socialised capital. Objectively, as Marx sets out in Capital III, Chapter 27, and by him and Engels in Anti-Duhring, this socialised capital belongs to the firm itself, which can only be understood as the associated producers themselves, i.e. the workers in the firm, including the salaried managers, administrators etc. As Marx describes there the owners of the fictitious capital now stand in an antagonistic relation to this real capital, and its objective owners, i.e. the associated producers/workers. The install their own shareholder representatives to protect their interests against the interests of the firm/workers, and they can do this because their political power enables them to shape company law to give them the right to exercise control, over property they do not own. Where they do not exercise this right directly, they exercise it indirectly via the shareholdings of banks and so on, which they control, most notably in pension and insurance companies.
The top 0.01% now see their wealth and power as indissolubly linked not to the productive-capital and the profits it produces, but to the value of their shares and bonds, and the capital gains they obtain from their continual appreciation.
Conservative government and central banks have been busy in the last ten years undermining and destroying the real economy, in order to keep these asset prices inflated, and thereby the wealth and power of the top 0.01% intact. They have printed money token to such an extent that there is now $25 trillion of bonds with negative yields. Yet, at the same time, small and medium sized firms are starved of funds. They either cannot get loans, or else they must resort to use of peer to peer lenders charging 10% p.a. and rising, or else they must use credit cards for finance, charging upwards of 30% p.a., or for the very smallest, the day to day self employed and traders, they have to resort to the pay day lender, and loan sharks alongside their neighbours who are unemployed or in precarious employment, charging up to 4000% p.a.
A totally insane world in which you can borrow at negative rates of interest to buy worthless bits of paper that circulate around the system like confetti, or else to buy property for speculation, and not even for rent, which has risen to astronomical heights, but where loans for real capital investment either are not available or else are inordinately expensive.
Yet, despite all of those obstacles, Trump, Brexit etc. global growth continues to move forward, and as it does, the seeds for the next financial crash are being sown along with it.
“Quite the contrary. It was the financial crisis of 2008 that led to the economic slowdown not vice versa. It was rapid economic growth prior to 2008 that led to rising interest rates, from their ridiculously low levels (for official rates at least, as a result of the Greenspan Put) which provided the park for the 2008 financial crash.”
Quite the contrary, it was the peak in the rate of profit in the second half of 2006 which led to the recession beginning the 4th quarter of 2007, all of which was triggered by tremendous overproduction, over-capitalization of real fixed assets– in maritime trade, in steel, in auto production, in natural gas extraction.
Not for Boffy of course– for him capitalism is always and forever intrinsically expansive. Whenever a “fault” or a “flaw” occurs, it’s not because the fault is immanent in the accumulation of capital, it’s because of a nefarious 0.01% of the population; it’s the fault of fictitious capital; it’s the stupid policy of governments, opting for austerity to drive down wages rather than the enlightened policy of social democrats.
” Had the trillions of dollars that went into bailing out the banks and asset prices been used instead to ensure that there was liquidity for real capital and commodity circulation to continue, allowing the speculators to simply lose their money, then the economy would have recovered faster. ”
That’s just ignorant. It’s impossible to maintain a circulation of commodities when the exchange markets for capital, and for money, are frozen. The US Fed had to initiate open-ended currency swap lines with the ECB, the Bank of Japan, the Swiss National Bank, and the Central Bank of Brazil to keep international trade afloat. In Brazil in particular the central bank was forced to underwrite international trades by itself, using its access to dollars, as commercial banks refused to let their dollar reserves for guaranteeing trades. So if the banks had not been kept afloat, international trade would have cratered even more than it did. That’s what happens in the real world.
Sure it’s all about the 0.01% owning possessing their wealth as “fictitious capital”– or claims on “real capital.” Sure, that’s why GM and Chrysler went bankrupt, and GM closed 1/3 of its factories in the US– because the “real capital” was expanding, but the nefarious 0.01% wanted to protect its fictitious wealth represented by the paper claims entailed in………GM stock and GM bonds. Odd isn’t it?
Sure it had nothing to do with the doubling of steel production capacity in ten years; the rapid expansion of shipyards to meet the hyper-demand for new ships ordered in 2004, 5, 6, 7– and continues to this day.
Sure, workers would have taken over and run the factories like cooperatives– on planet Boffy maybe, not here on earth, even Iceland. This is the real world; with real capitalists who will protect their property, to the last drop of every worker’s blood.
Boffy thinks the bourgeoisie are opposed to the interests of the “firm/workers”– as if “the firm” isn’t precisely the social relations of production, of the bourgeoisie, that give it power over and against the workers.
And this guy claims to have understood Marx?
I agree with you other than this sentence: “It was the financial crisis of 2008 that led to the economic slowdown not vice versa.” In my short comment, I had used the fictituous capital and profit as having mainly negative function but with together “positive” retarding effect. My intention was to draw attention only to the problem of capitalism’s inability to produce sufficient surplus-value commensurate with the existing mass of capital as becoming chronic problem carrying an important systemic risk inside.
‘’ It was the 2008 financial crisis that led to the economic slowdown, not the other way around. ’’
The current economic slowdown neither begins after 2008 nor is it caused by the bursting of the 2008 real estate-financial bubble.
Asset bubbles only have temporary effects in the pin ’prick’ years of the bubble inflated balloon. That is, the 2008 bubble already had its negative effects on the decrease of 2009 and immediate subsequent years. The current slowdown comes from afar and is far-reaching. In fact, and with only a little more perspective and insight, it is observed that growth has been slowing since the 70s / 80s and has as its main cause the change from ‘’ socialist growth ’’ to ‘’ capitalist growth ’’. If the public-socialist company is the engine and main agent of an economy, the country can grow at 5, 5% annual GDP (Golden Age Capitalism 1945-1973, real socialist countries, China) and if the main agent of the economy is Private enterprise (OECD since the 80s, 19th century capitalist) growth will fall to an average of 1.5% per year.
The current growth (scarce and not exceeding 1.5%, except in USA) is the NATURAL AND NORMAL growth of the capitalist mode of production. Why does growth recede? Why does it go from socialist to capitalist growth? Because since the 80s we are attending a Capitalist Restoration. It is the Neoliberal Restoration. And it is, of course, the phase of regression, of regression of a revolutionary cycle. From the socialist cycle started in 1917
“My intention was to draw attention only to the problem of capitalism’s inability to produce sufficient surplus-value commensurate with the existing mass of capital as becoming chronic problem carrying an important systemic risk inside.”
But, there is no evidence that this was a problem in the period prior to 2007/8. There was massive capital formation after 1999 in certain areas, particularly in raw material/energy food production. This was a reflection of the start of the new long wave uptrend in 1999, and of the sharp rises in primary product prices that ensued, because existing supplies resting on the previous cycles’ investments in mines, farms and so on were no longer able to increase supply fast enough to match the rapidly rising demand.
This is entirely consistent with Marx’s analysis on long wave movements in market values in TOSV Chapter 9 for example. It goes along with the need to invest in large scale infrastructure so that new mines, farms and so on can be linked up with the necessary roads, rail, ports, schools, hospitals for the new workers and so on.
A look at the rise in copper, iron ore, steel, oil and other such prices after 1999, shows the start of the new long wave expansion at that point. Even by 2007, there were global food riots because the new rapidly expanding global workforce, particularly in places like China, which also saw a transformation in diet, as living standards rose, caused the demand for food to rise sharply, leading to sharp rises in food prices, and shortages.
Necessarily these price rises caused additional investment which was seen in the following period. But, its interesting to note that, the 2008 financial crisis, and the economic slowdown it caused leads to a temporary decline in prices of those primary products, but it rapidly recovers. The real drops in primary product prices arises in 2014, when for example oil drops from around $90 to $25, and similar drops in other prices occur. Milk prices fell so low that a litre of milk could be bought for less than a litre of water.
Again, this is the normal swing that occurs in the supply of such products over the long wave cycle, as described by Marx in TOSV Chapter 9, whereby all of that investment put in at the start of that period along with all of the infrastructure investment, not only brings about this increased supply, which reduces market prices, but also brings about a lower market value – due to the naturally greater fertility/higher productivity of the new supply. This partial overproduction in these spheres sees the older higher value production phased out until demand and supply are rebalanced, but now at lower prices, due to the lower market values. But, the fact that prices for these products recovered after the shock of 2008, and do not go into a phase of actual overproduction until six years later in 2014, is itself indication that the nature of the 2007/8 crisis was not rooted in the economy, and overproduction.
And, of course that does not mean that every firm in every sphere has no problem with profitability. Capitalism would not be capitalism if that were the case. Firms produce products in the expectation of being able to sell them without any guarantee they can, or that they can do so at prices that produce profits. Sinclair produced the C-5 expecting to have a similar success to that he had had with calculators and the ZX Spectrum. Turns out he couldn’t, and companies produce all kinds of products that at any one time, any of these companies cannot sell at prices that produce profits, as for example, US car companies found as they continued to produce gas guzzlers when consumers were buying Japanese and European more efficient vehicles.
In fact, that experience is itself educative, because one reason that some of these big car makers could keep producing cars that consumers did not want to buy at prices that produced profits is that the car companies themselves had become financial corporations. For years GM made losses on the cars it produced that consumers did not want to buy. It could do so because of the size of its balance sheet, but also because GM made more profits from its finance arm GMAC than it did from making cars, and used those profits to subsidise its production. Its like today share and bondholders look to the money they make in capital gains from asset appreciation rather than the yield they get on their assets, which depends on the profits that the underlying companies produce. All well and good so long as the delusion of ever rising asset prices and capital gains continues.
In 2007, economies were continuing to expand rapidly, and profits were also continuing to expand rapidly. The 14% pay rise for UK lorry drivers reflected shortages in specific sectors, as with the plumbers. But, this certainly did not reflect an absolute crisis of overproduction of capital at that point. It simply reflected a point in which interest rates were being sent higher by strong economic growth, at a time when interest rates, and more specifically yields on government bonds that had been artificially lowered by the Greenspan Put and QE were so low that even the small absolute increase represented a large relative rise, which had a corresponding effect on asset prices.
That situation has of course been made much worse worse today, by the even greater QE undertaken after 2008. As 1848 showed, it is perfectly possible, however, for central banks to ensure that the required liquidity for capital and commodity circulation continues without bailing out the banks, their share and bondholders, or indeed the owners of fictitious capital in general. The function of a bank in the circulation of liquidity is quite different from the function of a bank as an investment bank. The former involves the bank only in its role as money-dealing capital, not in its role as money lending capital, and certainly not as a speculator in financial and property assets.
In part that was recognised by the banks in introducing the deposit guarantee schemes that distinguished between banks’s depositors and the the owners of bank shares and bonds. All that a central bank needs to do, as was seen in 1847 and 1857 is to have in place the required mechanisms to ensure that payments and receipts can occur. In theory a decentralised payments system based upon block chain could enable that to happen, by passing the commercial banks altogether. the central banks have been investigating such a possibility. In large part, the credit between firms operates on the basis of commercial credit, and they only require bank credit for larger longer-term requirements, or where commercial credit breaks down because of a credit crunch. Central bank provided adequate levels of liquidity ,and mechanisms can prevent that credit crunch taking hold, and so enable commercial credit to continue to function to circulate capital and commodities.
The idea put out by the bankers that only the private banks can perform this function is just a lie used to justify their demand that the banks and their shareholders be bailed out. It is the same lie that equates money-lending capital with capital itself, even though as Marx says this money-lending capital, its most fetishised form is not really capital at all, but only fictitious capital.
If you look at the data from the World Bank, and use the US rule of thumb- 2 consecutive quarters of negative GDP growth- then the only period that qualifies as a global recession is the 2009-2010 breakdown.
Rather than use GDP or capital formation as an indicator to the “vigor” of capitalism globally, I think we’d be better to look at what the bourgeoisie do with their money– as in an indicator like Foreign Direct Investment. The low point for the 21st century is 2003 at $739 billion, the high point is 2007 at $3.142 trillion. 2009 registers a decline to 1.4 billion, with a recovery to $2.651 trillion, before another steep fall-off in 2018 to $1.205 trillion, below the 2009 mark!
Recession in any year or not, capital’s expansion remains impaired from, and because of, the FDI splurge, with resulting overproduction and the decline in the rate of profit from not only the 2003 to 2007 period, but also the 1992-2000 period.
If that’s a “new period of long-term upward swing” somebody ought to tell the bourgeoisie– I mean minus the 0.01% who place all their wealth in fictitious capital.
Michael-
Why no mention of the BIS April 2019 announcement to recharacterize gold as a tier-1 asset? Do you not suspect this might have affected the repo market?
Trotsky was correct against Kondratiev. At this scale, shifts in the trendline are not directly determined by economic laws but by broader historical laws, i.e. the class struggle. This is what your forecast leaves out completely. We’ve seen a clear and sharp growth of the class struggle over 2019 and we can expect the trend to continue.
Obvious question then arises, what causes the ebb and flow of class struggle? Marx, Lenin and Trotsky were themselves quite clear on that matter; it is material conditions, primarily economic conditions. During periods of stagnation like the 1920’s and 30’s, workers are in a weak position, their organisations are undermined, their confidence is undermined, their ability to struggle is undermined. In periods of prosperity, such as the 1950’s, and 60’s, they start to rebuild those organisations, they can win pay rises more easily, they rebuild their political organisations, gain confidence, develop new ideas and so on. When the long wave uptrend falters, as it did in the 1910’s, and again in the 1970’s, firms start to resist wage demands, old solutions no longer work. Firms begin to introduce labour saving machines that undermine the position of labour and create a relative surplus population.
Old reformist and syndicalist solutions no longer work, so the period is characteried not just by economic crises but political crises, i,.e. Russian revolution, German revolution, etc. British general Strike. Unless the workers win and overthorw the system, the economic tide turns against them, a period of stagnation sets in, as happened in the late 1920’s, and 30’s, and as happened in the 1980’s and 90’s.
This is the basis of the Marxist theory of Historical Materialism as against the petite-bourgeois theories of sociological subjectivism that try to explain the movement of history on the basis of ideas that pop into individuals heads apparently from nowhere and lead them to decide out of the blue to engage in class struggle or not, depending upon how the whim takes them on the day.
No, it’s not when there is prosperity, but when the crisis is so acute that the power of the bourgeoisie is undermined. This is when the class struggle intensifies. That was the case of the Russian Revolution. And I am not sure to what country you are referring to. The 1950 and 60s saw an acute crisis in the colonial system and poorer countries and a strengthening of workers organization. You can also see a great fall in the world wide rate of profit. There might be exceptions, but these are probably a small percentage of the world population.
Not true. Firstly, Trotsky does not explain long wave cycles on the basis of class struggle, but on the basis of other economic and material changes, for example in the productive forces themselves, i.e. changes in productivity, itself derivative from technological changes, itself a function of a drive for innovation to deal with labour shortages and high wages.
As Trotsky puts it,
“Oscillations of the economic conjuncture (boom-depression-crisis) already signify in and of themselves periodic impulses that give rise now to quantitative, now to qualitative changes, and to new formations in the field of politics. The revenues of possessing classes, the state budget, wages, unemployment, proportions of foreign trade, etc., are intimately bound up with the economic conjuncture, and in their turn exert the most direct influence on politics. This alone is enough to make one understand how important and fruitful it is to follow step by step the history of political parties, state institutions, etc., in relation to the cycles of capitalist development.
By this we do not at all mean to say that these cycles explain everything: this is excluded, if only for the reason that cycles themselves are not fundamental but derivative economic phenomena. They unfold on the basis of the development of productive forces through the medium of market relations. But cycles explain a great deal, forming as they do through automatic pulsation an indispensable dialectical spring in the mechanism of capitalist society.”
He goes on,
“If periodic replacements of “normal” booms by “normal” crises find their reflection in all spheres of social life, then a transition from an entire boom epoch to one of decline, or vice versa, engenders the greatest historical disturbances; and it is not hard to show that in many cases revolutions and wars straddle the borderline between two different epochs of economic development, i.e., the junction of two different segments of the capitalist curve. To analyze all of modern history from this standpoint is truly one of the most gratifying tasks of dialectical materialism.”
It is not where the crisis is most acute that these revolutionary conjunctures occur, but at the point of juncture at which the working-class is still strong following a period of prosperity and boom. The long wave boom that began in 1890 falters in 1914, ushering in a period of crisis. The Russian revolution and the other revolutionary upheavals of the time occur not at the point of most acute crisis, which does not materialise until the late 1920’s, but at this initial point of crisis as the period of boom falters, but when the working class is still strong.
Trotsky takes up the argument in Flood Tide.
“This circumstance reinforces our conviction that the effects of a crisis upon the course of the labour movement are not all so unilateral in character as some simplifiers imagine. The political effects of a crisis (not only the extent of its influence but also its direction) are determined by the entire existing political situation and by those events which precede and accompany the crisis, especially the battles, successes or failures of the working class itself prior to the crisis. Under one set of conditions the crisis may give a mighty impulse to the revolutionary activity of the working masses; under a different set of circumstances it may completely paralyse the offensive of the proletariat and, should the crisis endure too long and the workers suffer too many losses, it might weaken extremely not only the offensive but also the defensive potential of the working class.”
He continues,
“But a boom is a boom. It means a growing demand for goods, expanded production, shrinking unemployment, rising prices and the possibility of higher wages. And, in the given historical circumstances, the boom will not dampen but sharpen the revolutionary struggle of the working class. This flows from all of the foregoing. In all capitalist countries the working-class movement after the war reached its peak and then ended, as we have seen, in a more or less pronounced failure and retreat, and in disunity within the working class itself. With such political and psychological premises, a prolonged crisis, although it would doubtless act to heighten the embitterment of the working masses (especially the unemployed and semi-employed), would nevertheless simultaneously tend to weaken their activity because this activity is intimately bound up with the workers’ consciousness of their irreplaceable role in production.
Prolonged unemployment following an epoch of revolutionary political assaults and retreats does not at all work in favour of the Communist Party. On the contrary the longer the crisis lasts the more it threatens to nourish anarchist moods on one wing and reformist moods on the other. This fact found its expression in the split of the anarcho-syndicalist groupings [1] from the Third International, in a certain consolidation of the Amsterdam International and the Two-and-a-Half International, in the temporary conglomeration of the Serrati-ites, the split of Levi’s group, and so on. In contrast, the industrial revival is bound, first of all, to raise the self-confidence of the working class, undermined by failures and by the disunity in its own ranks; it is bound to fuse the working class together in the factories and plants and heighten the desire for unanimity in militant actions.”
As Trotsky points out, even if periods of stagnation create moods of anger amongst the workers this is meaningless, because that same economic state means that the workers are powerless to respond to it. High levels of unemployment weaken them, atomise them, undermine their organisations and so on. The atomisation leads to the growth of subjectivism and individualism, which strengthens right-wing forces and ideas based upon those ideologies. It is why during such periods we see the rise of fascism.
“That was the case of the Russian Revolution.”
But, the Russian revolution came after a period of phenomenal economic development. The main strength of the workers movement, for example in the Vyborg District was amonsgt workers that were employed in the huge capitalist enterprises that had been established in the previous coupe of decades, most of them being the more technological factories, often foreign owned, in which the workers also tended to need to be better educated to operate the more modern technologies and machines.
The same phenomenon can be seen with the revolutions of 1848, which come after a period of rapid capitalist development across Europe, particularly as a new upturn arose in 1843. That development is not only which gives the confidence to the newly powerful industrial bourgeoisie to confront the landlords, and their associated allies amongst the money-lending capitalists – for example, with the Repeal of the Corn Laws in Britain, but is also what draws the working-class that has provided political support for the industrial bourgeoisie in that struggle into the fray, in the process that Marx and Engels describe as Permanent Revolution. It is the sharp crisis that broke out in 1847 that merely creates the spark for those revolutions.
The 1950’s and 60’s most certainly were not a period of economic crisis. They are a period of phenomenal economic boom. And, it is that boom that enabled workers to advance their position both economically and socially, and to rebuild their organisations that had been destroyed in the 1930’s and 40’s.
The crisis in the colonial system you refer to is in fact a reflection of the boom, because it is a reflection of the growing power of industrial capitalism and the multinational corporation. The main home of the latter is the US, which demanded the break up of the old colonial system, so that industrial capital could roam the world freely, and not be hamstrung by the old colonial monopolies.
Nor was there any kind of sizeable drop in the global rate of profit in the 1950’s. The squeeze on profits comes in the 1960’s, as this phenomenal economic growth causes capital to expand faster than the social working-day (overproduction of capital) so that absolute surplus value cannot be expanded further, and then wages rise preventing any rise in relative surplus value. Even in the 1960’s, as this rise in wages causes the rate of profit to be squeezed, the mass of profit continues to rise, as the amount of labour employed continues to rise. Its only in the 1970’s, marked by the 1974 crisis that this period of long wave expansion eventually comes to a halt, and a period of crisis ensues.
It was after that period, but it was followed by an enormous destruction of WWI, when the capitalists could not bribe the working class anymore.
Also, the fact that capitalism is spreading doesn’t mean it is not in crisis. The long period of stagnation of 1870-1890 saw the greatest spread of colonialism towards Africa and Asia. This colonialism can be seen as a type of primitive accumulation in these places. The crisis of 1920-1930 saw the intensification of class struggle in the largest colonial areas, India and China, which happens to be also to comprise a much more significant portion of mankind than the imperialist powers.
’No, it’s not when there is prosperity, but when the crisis is so acute that the power of the bourgeoisie is undermined. This is when the class struggle intensifies. That was the case of the Russian Revolution.
Ok, this is, in my opinion, to understand when the class struggle intensifies. Today is also intensifying. But that intensification should not be seen today in the protests organized by the unions and parties that eat power (equal to almost zero protests) but in the organized protests OUTSIDE the parliament and unions: yellow vests in France, 15-M in Spain, in all of 2019 in many countries, etc. That is to say, when the capitalist crisis is accentuated by the rate of decelerated growth, the class struggle is accentuated. But not vice versa
And what follows next is not to understand it, saying, in addition, one thing (the economy was sinking before the Russian revolution) and the opposite (the economy was rising) almost at the same time!
’But, the Russian revolution came after a period of phenomenal economic development’
‘When the long wave uptrend falters, as it did in the 1910’s, and again in the 1970’s’
Regards,
“It was after that period, but it was followed by an enormous destruction of WWI, when the capitalists could not bribe the working class anymore.”
This is not Marxism, its crude determinism of the kind Trotsky described in Flood Tide. If its the failure to be able to “bribe workers” rather than the previous period of boom, which creates greater confidence and organisation amongst workers, that is decisive, then why is it that in the periods of stagnation, when its even less possible to “bribe” the workers is their an absence of such class struggle and revolutions?
The 1930’s were not characterised by more heightened class struggle, but the opposite, as with the 1940’s. They are characterised by a dismantling of workers organisations, by the political dominance of conservative political forces, including of fascism. The same in the 1980’s and 90’s. During that period we see not only the rise of conservative political forces, and the adoption of conservative and individualist ideas even amongst large sections of the working-class, not only do we see workers organisations destroyed, but we also see even a huge reduction in the level of strikes, and other economic struggles, let alone class struggle.
“the fact that capitalism is spreading doesn’t mean it is not in crisis. The long period of stagnation of 1870-1890 saw the greatest spread of colonialism towards Africa and Asia.”
I don’t see the relevance of this to the argument. If your argument were correct then we should have seen the greatest class struggle between 1870-1890, but during that period it is relatively subdued, particularly after the defeat of the Paris Commune. Its in the late 1880’s, and into the 1890’s, and particular in the early 1900’s, they we see the most rapid pick up in class struggle and the formation of workers organisations.
The New Unionism amongst British unskilled workers begins in the late 1880’s, its after then that it begins to find representation in demands for a Workers Party, that materialises with the ILP, and then in 1906 with the Labour Party. Its in the period after 1890 that the German SPD experiences huge levels of growth.
“The crisis of 1920-1930 saw the intensification of class struggle in the largest colonial areas, India and China, which happens to be also to comprise a much more significant portion of mankind than the imperialist powers.”
Firstly, that is consistent with what I said, because the period of crisis begins after 1914-20. But, the Chinese revolution failed in that period, in part, as with the German revolution and the British general Strike during the same period, due to the misleadership of the Comintern by the Stalinists.
Moreover, its wrong to describe what is happening in China and India at this time as reflecting class struggle from a socialist perspective for the simple reason that only a tiny proportion of the population in these countries were industrial workers. These are essentially a combination of peasant struggles and national liberation struggles, not a proletarian class struggle.
Not sure if the Chinese Revolution failed. I see that they were increasingly successful until they managed to a revolution in 1949. India and Pakistan got independent in 1947, and in the following decades the colonial regimes fell. The rate of profit also fell tremendously.
You apparently talk about the most advanced capitalist countries( I get the clue from UK and France). But not sure to what you are referring to elsewhere. You seem to ignore that the system itself is expanding in the way I describe before. USA and Europe comprise a tiny part of humanity. But, even within USA, it seems some people do seem 1930s as very succesful in labor movements and Richard Wolff seems to have a very good exposition of that.
The 1960s also do show a very accute crisis, if you notice the falling rate of profit, if you see Michael Roberts data, and this is when you see the Black Right’s movements. The 1970s until now seems to have weakened. This also where when worker movement seems to have stalled. What I get here it is that USA is rich enough to keep a certain level of workers with enough bribes that it can set back the entire country. The Neo Liberals were elected, they were popular and gave support to dismantle worker’s associations.
So, you see, in order to increase the rate of profit up, better off workers railed against others.
I must also notice that there is no such thing true periods of boom, but periods of recovery from deep drops of the rate of profits. The tendency of capitalism is to always crash. Note also that class struggle does not lead necessarily to revolution, it might also lead to equilibrium of relations, though unstable. Revolution happen when capitalists cannot appease workers anymore. With the expansion of markets in the 1870-1890, there was not so much need for capitalists to sacrifice the internal economy to bribe workers.
100 years later, the internal economies of developed countries were developed enough and so that unequal exchange with previous colonial powers could be done. Also, there were too many “wealthy” workers so that the poorer ones could be sacrificed.
Correction in the last paragraph of my latest post: I meant, exchange with previous colonial subjects.
“Not sure if the Chinese Revolution failed.”
Really??? So what would you describe the murder of thousands of Chinese Communists at the hands of Chiank Kai Shek in 1927 as being then? Once again you seem to display the extent of your ignorance.
The period in which colonialism is at its height, is of course, not between 1870-1890, as you previously stated, but is during the 17th and 18th centuries, i.e. in the period prior to the rise of industrial capitalism, and when it is merchant and money-lending capital in alliance with feudalism that establishes the colonial empires. It is then that the Dutch East India Company is established and colonies large parts of Indonesia etc. The British East India Company similarly colonises India under Robert Clive. Both established their colonies in North America during that period, and Spain and Portugal established their colonies in South and central America during that period.
Britain, France and Portugal also established their colonies in Africa during that period, as well as engaging in the slave trade to provide slaves for their colonial plantations established in the Carribean. Indeed, by 1870, the colonies that had been established 200 years earlier in North America had come and gone. The American revolution had already overthrown British Colonial rule a century prior to 1870! By 1870, the world was already carved up into colonial empires.
Its one of the more obvious fallacies contained in lenin’s Imperialism, in which he associates the division of the world into colonial empires on the back of of monopoly industrial capitalism. In fact, its the rise of large scale industrial capitalism that leads to the dissolution of those colonial empires,as industrial capitalism eager to find new reserves of labour-power to exploit in order to produce surplus value, begins the process of industrialisation of these other areas of the globe. It is the US the main home of the multinational corporations who seek new areas of he globe to industrialise that demands that the European colonial empires be dismantled.
Trying to claim that the period after WWII, was some period of crisis for capitalism is simply bizarre and a return to all of the inanities that Stalinist apologists promoted during that period. It was a period of phenomenal growth. Indeed that growth is what sets up the conditions for the squeeze on profits that arose in the 1960’s and 70’s, when a period of crisis does emerge.
“But, even within USA, it seems some people do seem 1930s as very succesful in labor movements and Richard Wolff seems to have a very good exposition of that.”
Really? And, as against that you want to simply ignore the rise of fascism in Italy, Germany, Spain, France, the split of the Labour party in Britain and formation of a National Government, the decimation of basis organs such as the trades unions, and effective liquidation of the labour movement in the whole of Europe by Nazism?
“The 1960s also do show a very accute crisis, if you notice the falling rate of profit, if you see Michael Roberts data, and this is when you see the Black Right’s movements. The 1970s until now seems to have weakened. This also where when worker movement seems to have stalled.”
The 1960’s did not show an acute crisis. That does not manifest until the 1970’s, the spark being the 1974 oil crisis. During the 1960’s, the prosperity of the postwar period meant that workers organisations began to be rebuilt. The shop stewards movement developed and so on. Marxism was once more found by whole layers as new groups increased their membership rapidly. It led to a series of other actions such as May ’68 in France, the Prague Spring, and so on. But, the fact that this was not an acute crisis is shown by the fact that capital could accommodate these actions. French workers wages and conditions were improved, student conditions improved, and so on.
Even in the early 1970’s, the extent that crisis conditions were developing is shown by, for example, the British Miners Strike of 1972, and the subsequent strike of 1974. These are still distributional struggles rather than class struggles, but they begin to take on more of the character of a class struggle, as the Miners are joined by large number of other workers, for example to close Saltley Gates. But, the fact remains that capital was able to accommodate these struggles. The Miners got wage rises, and in 1974, the Tory Govenment is repalced by Labour.
Its later in the 1970’s, and in the early 1980’s that the crisis becomes acute. And, by that time, capital has already begun to respond by introducing new labour-saving technologies. At he point that the crisis is most acute in the early 1980’s, having failed to go beyond economistic industrial struggles and solutions in the 1970’s, the workers go down to defeat after defeat. The print workers lose, the steel workers lose, the car workers lose, and their shop stewards organisation begins to be dismantled. Labour councils are confronted and defeated, the Left in the LP is witchhunted. In 1985 the Miners are defeated in a complete reversal of the situation in 1974. Similar defeats are seen in the US with the defeat of he Air Traffic Controllers, and Miners.
Why are you ignoring the fight against the Japanese and the Civil war? You are focusing in a set back in the early history of the Chinese Communist Party, why?
European colonies were tiny, more like trade posts, except for those in the Americas. But in this case, they did not enter in the industrial circuit, I don’t think you can call them colonialism in the capitalist sense. They were more like conquered lands of Genghis Khan or like great empires of antiquity, except that those submitted were far, far weaker and had much more precious metals and fertile lands. In any case, the total populations and area of Africa and Asia taken over within 30 years in the latest decades of the XIX century were far greater than those of the Americas.
I ask you to notice the falling rate of profit in the 1950-1970. Even if the mass of profit might be growing, the share of profit that each capitalist receives is smaller, that means they need to compete much more fiercely to continue in the market. It is usually when monopoly capitalism matured. If you are thinking about workers within such monopolies, you might get a rosier picture, but most people are employed by smaller corporations.
Also, again, you think about class struggle in terms of unions. But workers do have a more varied background, including those from backwards places. Fascism rose in some more advanced industrial regions, but even in the latter, it was to fight against anti capitalist forces, thus, overall, class struggle was more intense. For example, Soviet Union and Nazi Germany was the most intense of such struggles.
“Why are you ignoring the fight against the Japanese and the Civil war? You are focusing in a set back in the early history of the Chinese Communist Party, why?”
I’m not ignoring the fight against the Japanese or the Civil War. The argument was about the supposed rise of class struggle in relation to your claim that it is periods of crisis/stagnation that promote it. You described the 1920’s/30’s as such a period, but having failed to justify your argument in relation to actual class struggle – because during that period the working-class in Europe suffered huge defeats, as did the working-class in the US in the 1930’s, where the entry into crisis was ten years behind that in Europe – you sought refuse instead in anti-colonial struggles.
The Chinese Revolution occurred in the 1920’s. It was part and parcel of the anti-imperialist struggle against the Japanese. Stalin, as part of his strategy and opposition to the theory of Permanent Revolution put forward by Trotsky and the Left Opposition, demanded that the Chinese Communists ally with Chiang Kai Shek’s nationalist KMT, in the same way he argued for the British Communists calling for support for the reformists of the TUC leadership. Trotsky warned against the danger of this position.
He was right. Chiank Kai Shek turned on the Communists that Stalin had delivered unto him, and slaughtered them in their thousands, leading to the defeat of the Chinese Revolution. I’d suggest you read Trotsky’s account of the defeat of the Chinese Revolution in Problems of The Chinese Revolution
“European colonies were tiny, more like trade posts, except for those in the Americas.”
Absolute nonsense. Both the Dutch East India Company and the British East India Company were mega corporations even at the point of their formation in the 17th century. The British East India Company had its own army and navy, and by 1778, they had 67,000 troops stationed in India. Hardly a small trading post!
“But in this case, they did not enter in the industrial circuit, I don’t think you can call them colonialism in the capitalist sense.”
That’s because when the colonial empires were actually established in the 17th and 18th centuries capitalist production itself had not been properly established! When capitalist production becomes properly established as industrial capitalism in the 19th century, the importance of colonialism starts to wane. By the 19th century, industrial capitalism makes its profits from the extraction of surplus value in production not via profit on alienation from exchange. Its why the ideas of mercantilism go into decline. By the 20th century, large scale industrial capitalism, as multinational capital requires all of the colonial monopolies to be removed, and requires the ability to industrialise the former colonies so as to have access to large masses of exploitable labour from which to produce surplus value. That is why the colonial empires are destroyed.
“In any case, the total populations and area of Africa and Asia taken over within 30 years in the latest decades of the XIX century were far greater than those of the Americas.”
Except India and other parts of Asia were taken over By Britain and other colonial powers in the 17th and 18th centuries!!!
“I ask you to notice the falling rate of profit in the 1950-1970. Even if the mass of profit might be growing, the share of profit that each capitalist receives is smaller, that means they need to compete much more fiercely to continue in the market.”
Nonsense. Firstly, I dispute the figures for a falling rate of profit in the 1950’s. More importantly, even if there is a falling rate of profit it only becomes a problem if it falls so low that firms are unable to accumulate capital at an adequate level so as to compete. There was no problem of capital accumulation in the 1950’s, or most of the 1960’s. As Marx says, in reality, what is important to capital is not the rate of profit, but the mass of profit available for accumulation. A large mass of profit produced by a large mass of capital with a lower rate of profit, can accumulate more capital than a small mass of profit produced by a small mass of capital with a high rate of profit.
The fall in the rate of profit that does begin in the 1960, and intensifies in the 1970’s is not due to the effects of Marx’s Tendential Law, as I have set out elsewhere, but is the result of the expansion of capital resulting in the supplies of labour being used up which prevents absolute surplus value being expanded, and from a resultant rise in wages, which prevents relative surplus value being expanded. But, this does not reach crisis proportions until the 1970’s.
“If you are thinking about workers within such monopolies, you might get a rosier picture, but most people are employed by smaller corporations.”
But, it is the wage levels set by the larger corporations that are determinant. That is one reason the small capitalists are hostile to the large corporations. The higher wages set by the large companies act to drag up wage levels generally, because the small capitalists have to compete for labour. Wages for workers in the smaller companies are never as good, but that does not change the fact that in such conditions wages for them too are driven higher.
“Also, again, you think about class struggle in terms of unions.”
Absolutely not. Trades unions are as Marx and Lenin said only means of conducting economic distributional struggle not class struggle. They act as a necessary pre-school for class struggle, as a means of bringing workers together collectively so that they can be drawn into the school of class struggle, but industrial struggles are not themselves class struggles, they are only struggles to improve the lot of workers inside the existing capitalist system to obtain a better price for the commodity – labour-power – they sell. The whole point as Marx says is not to bargain for a better price, but to replace the system of wage labour itself.
“Fascism rose in some more advanced industrial regions, but even in the latter, it was to fight against anti capitalist forces, thus, overall, class struggle was more intense. For example, Soviet Union and Nazi Germany was the most intense of such struggles.”
That’s true, but a) the Russian Revolution occurred in 1917, that is in the period that immediately follows the period of rapid economic growth, which leads to the most rapid development of the labour movement, it does not occur at the point of most acute crisis of capital, in fact, the degeneration of the Russian revolution in the 1920’s and 30’s, can itself be directly linked to the period in which the working-class at a global level is in retreat; b) the German Revolutions of 1918 and 1923 similarly occur in this same period immediately following the period of rapid economic development and growth of the labour movement; the same of the Hungarian Revolution of 1918 etc.; the more distant from the period immediately after the period of rapid economic growth, the more likely it is that the workers are defeated. So:
The Italian workers movement is defeated in the 1920’s, and leads to the rise of Mussolini, the German Workers are defeated in 1923, and more decisively by Hitler in 1933. The British workers are defeated in 1920 and again in 1926. The Spanish workers are defeated in 1936.
As Trotsky says in Flood Tide its not crisis and stagnation that is the foundation of revolutionary struggle, particularly ones that lead to success, but economic growth that enables the workers to gain confidence, to build their organisations to improve their economic and social position, to educate themselves to build political organisations and so on. It is all those things that forge a working-class that is capable of fighting and winning the class struggle. The outbreak of crisis is merely the spark that provokes such a revolutionary struggle. The further you go from the period of rapid economic growth, and into a period of more acute crisis, the weaker the position of workers, and the less likely they are to succeed, or even to engage in struggle.
Check the maps. The process of colonization of India began towards the end of the 18th century. It took decades to finish. Only when it was finished it is when the rest of East Asia and the partition of Africa was taken. There was no means to manage colonies without the telegraph, by settling or sending massive armies, like England did to India. The Americas, South Africa, Australia and New Zealand were settled by large waves of colonists.
If you dispute the falling rate of profit graphs, then I cannot argue the arguments that refer to it. But notice that though mass of profits it is what drives capitalism, it is the falling rate of profit that drive capitalism.
Also, if you consider that the Russian revolution degenerated during the 1930s, I cannot argue the points that refer to it. But notice that the French Revolution advanced the Bourgeoisie even though Robespierre went to far in killing supporters and Napoleon crowned himself as an Emperor, even if this as a type of title of the ancient regime. The point is that the remains of feudalism were repressed, even despite the excesses.
I consider the 1930-1960s as the peak of socialism in Russia and the Cultural Revolution the peak in China, as the remains of capitalism were being repressed. I see no trace of socialism today in neither, but I don’t think the revolution was defeated, as they put in motion the means of capitalism to self destroy, either by war ( a nuclear war), or by internal instability (no means to go to go into a complete war, without a mutual destruction by nuclear powers).
So, now you admit that colonisation of India begins much earlier than 1870. I agree it took decades to achieve, but the first colonisation by the East India Company starts in 1757. The facts disprove your initial claim that the presence in India and elsewhere amounted only to small trading posts, so you have no elided that, and moved to a different argument. The facts are that you cannot say that it amounted to only a small trading post when it had 67,000 troops in India already by 1778. In fact, by 1806, it had 154,000 troops in India, and this understates the real position and presence of the company, which ruled via its alliances with local princes.
“But notice that though mass of profits it is what drives capitalism, it is the falling rate of profit that drive capitalism.”
These are two contradictory statements contained in a single sentence. For Marx, it most certainly is not the falling rate of profit that drives capitalism in the way you mean. The Tendential Law, as Marx says is extremely small in amount, and only visible over very long periods of time. Its main short term effect of to govern the allocation of capital between different sectors, by causing accumulation in lower profit sectors to be slower, and accumulation in higher profit sectors to be faster. But, as Marx sets out in TOSV, even this is something that only takes effect over long periods, because he says its impossible to determine what the actual rate of profit is in any particular sphere by taking an average over a period of around 7-10 years. Moreovoer, other factors intervene ion this process in the era of monopoly capital, because significant barriers to entry and of exit arise.
For similar reason the tendential law does not determine the overall accumulation of capital. What affects that is squeezes on profits caused by rising wages, which itself arises from an overaccumulation of capital. This squeeze on profits affects capital in two ways, first it makes crises of overproduction more likely to erupt, and secondly it leads capital to switch from extensive accumulation to intensive accumulation, so that it invests in labour-saving technologies that raise productivity.
As Marx sets out, these productivity raising technologies thereby act to raise the rate of profit because they cheapen capital, and because they raise the rate of surplus value.
“I consider the 1930-1960s as the peak of socialism in Russia and the Cultural Revolution the peak in China, as the remains of capitalism were being repressed.”
If you think that the grotesque constructions in Russia and China represented any kind of Socialism then I am not surprised that you have the perverted views that you have expressed.
But it is indeed limited to trade posts. Please, check the maps. India is a major advance towards neocolonialism, but as you can see, it happens towards the end of the 18th century, but still a rehearsal in comparison to what would happen later in the 2nd part of the 19th century.
Regarding the
“But notice that though mass of profits it is what drives capitalism, it is the falling rate of profit that drive capitalism.”
, it seems to be a mistype. It should be read
“But notice that though mass of profits it is what drives capitalists, it is the falling rate of profit that drive capitalism.”
There are many factors going on here. If you have places where there is a very low industrial level, small investments in fixed capital with low wages will attract investments. If you have most of the humankind in such state, it will be the main drive of capitalism, by motivating capitalists to become imperialists. When colonies accumulate a bit of constant capital, they become less profitable, while giving the local population more value to exchange for weapons, driving decolonization.
So, it’s not wages that drive down profits, but also increase in constant capital. Also, the flight of industries from developed countries towards less developed ones, increase the rate of profit in developed countries, while wages stagnate. Migration of cheap labor to developed countries is another factor to keep the rate of profits up.
I have looked at the maps, and I’ve looked at the data. The process of colonisation begins in the 17th century, and accelerate in the 18th century. A concise picture in relation to the East India Company is provided here.
Your correction of the supposed mistype does not change anything.
“When colonies accumulate a bit of constant capital, they become less profitable, while giving the local population more value to exchange for weapons, driving decolonization.”
Totally untrue, and all of Marx’s analysis demonstrate that its untrue. What explains the increasing mass of surplus value, is precisely the accumulation of capital, and in particular the mass of constant capital, specifically the accumulation of fixed capital which raises productivity, which thereby reduces the value of constant capital and variable capital, creating both a release of capital, and raising the rate of surplus value, whilst making possible the employment of larger masses of labour, which itself creates a greater mass of surplus value.
“If you have places where there is a very low industrial level, small investments in fixed capital with low wages will attract investments. If you have most of the humankind in such state, it will be the main drive of capitalism, by motivating capitalists to become imperialists.”
Totally untrue for the reasons that Marx describes. Firstly, there is no point introducing technologically advanced fixed capital into an economy that does not have the educated and skilled labour required to operate it; secondly, there is no point introducing such fixed capital, even if it only requires unskilled labour, if the other required infrastructure in the country is inadequate so that overall levels of productivity remain low, thirdly, there is no point developing such an industry, where it is dependent upon other locally sources inputs, where these inputs are not available, or else are expensive because of the low level of economic development of the economy. For example, there is no point introducing large scale industry that requires large amounts of electricity if the economy concerned cannot produce it.
That is why what you claim should happen never did. The vast majority of overseas investment by “imperialist” states occurred into other developed economies, and not into “colonies”. Colonies were developed by feudalism (the typical means by which the landed aristocracy increased its rents) and by merchant and money lending capital, in the 17th and 18th centuries. The latter obtained their profits via unequal exchange, and trade. In the 19th century, industrial capital allowed these Mercantilist elements to continue this operation which provided them with cheap materials, and guaranteed markets, whilst focusing most of their own investment in existing developed economies.
In the 20th century, as industrial capitalism asserted its dominance, it started to dismantle colonialism. It needed to dismantle colonial monopolies, so that industrial capital could invest across the globe, and exploit labour. But, all the constraints described above continue to apply. That is why such investment by industrial capital occurs only in selected developing economies, and often selected areas within those economies, where the required infrastructure, educated workforce etc. are available.
“So, it’s not wages that drive down profits, but also increase in constant capital. Also, the flight of industries from developed countries towards less developed ones, increase the rate of profit in developed countries, while wages stagnate. Migration of cheap labor to developed countries is another factor to keep the rate of profits up.”
On the contrary. Its rising wages that drive down profits, which in turn is what drives capital to invest in labour-saving technologies to reduce wages and push up profits.
You did not look at maps, which is what I asked you for. If you don’t look at maps, you won’t have an idea of the extension of colonial territories.
I did not say application of advanced means of production, but only low investment in fixed capital with low wages. That means, low investments, guaranteed profits. The fact that you had most of mankind in such a primitive stage, a small investment will get you large masses of profit.
Only some of these places could be described as having feudalism as advanced as that in Europe. In all cases, they was disconnected from capitalist circulation, but they had developed means of production independently from Europe. The great masses of people could initially supply demands with the use of great masses of people and, in many times, like in India, with native technology. But, only with telegraph and/or railroads, it is that you could coordinate the exportation of commodities from vast expansions.
The dismantling of colonialism was indeed a move done by capitalism, but notice the national struggle of independence. This is class struggle, and it could only happen because the nationals were at least developed enough to acquire weapons.
Concerning your assertion that it is only, or mosty, wages that drive down the rate of profit, this is something that I am not aware of happening in the real world. I need examples.
“You did not look at maps, which is what I asked you for.”
Yes, I did. The greatest expansion of colonies comes in the period prior to 1870. The main era of colonisation is in the 17th and 18th century. Its then that UK, France and Netherlands establish their North American colonies. Its then that Spain and Portugal establish their South American colonies wiping out the Aztec, Incan and other civilisations. Its then that the Netherlands establishes its colonies in East Asia, and in Australia. Its then that Britain established its colony in Australia. The only area not mostly colonised by that time is Africa, where only 10% of the continent was colonised, but that is largely due to the fact that in the earlier period, it is largely only the coastal regions that are colonised, because of the ease of communication. Dutch colonisation of South Africa, however, also began in the 17th century, replacing Portugal.
You have continually talked about this colonisation only amounting to small trading posts, but the facts show a completely different story. For example, Britain alongside Indian companies began constructing railways across the continent in 1832. The railways were vital to both the shipment of Indian raw materials to be exported, for example, Indian Opium to be exported to China, as well as cotton sent to Britain, but also for the industrialisation of India itself. One of the early railways was to transport stone for the Godavari Dam. Indian Railway History. Besides the near 200,000 East India Company troops in the country at the start of the 19th century, this creation of a railway network, largely by British exports of materials and capital, but also leading to the development of Indian steel making, and engineering industries, as well as civil engineering and construction companies shows that what existed even in the first half of the 19th century is way more than being just a small trading post.
I’d suggest you read Bill Warren’s “Imperialism Pioneer of Capitalism” in order to divest you of some of these old Stalinist tropes and mantras.
“I did not say application of advanced means of production, but only low investment in fixed capital with low wages. That means, low investments, guaranteed profits. The fact that you had most of mankind in such a primitive stage, a small investment will get you large masses of profit.”
Except it doesn’t for the reason Marx sets out in Capital I and III. The prices of commodities are determined in the world market, and that world market price is determined by the average labour-time required for production, i.e. it is a function of productivity. productivity is a function not just of the fixed capital used in the particular industry, but of the level of productivity in the country overall, which is a function of the general level of development, including in infrastructure. So, for example, Marx explains that although wages in Europe were 50% lower than in Britain in textile production, British textile producers made far more profit than their European counterparts, and enjoyed a higher rate of profit too. That is because British productivity in textile production was far higher, and so Britain set global textile prices. It made surplus profits at these prices, whilst European producers made below average profits. Even so, Indian and other textile producers made even lower profits and rates of profit, because they still produced using handicraft techniques, which were even less productive.
If what you say were true, then advanced countries would have sent vast amounts of capital to be invested in these undeveloped economies, but they didn’t. Instead they sent nearly all of their foreign direct investment into other developed economies. They did so for the reason Marx sets out, that it is these higher levels of productivity that enable the higher profits to be achieved, even when higher wages are paid. Again you are simply repeating 70 year old Stalinist tropes that bear no resemblance to the reality.
“Only some of these places could be described as having feudalism as advanced as that in Europe.”
None of them had feudalism of any kind!
“But, only with telegraph and/or railroads, it is that you could coordinate the exportation of commodities from vast expansions.”
But, if you bothered to check the fact you would see that the railroads were developed in India already in the first half of the 19th century, not after 1870. Again electric telegraph systems were in operation in India in the first half of the 19th century, and between India and Britain.
“but notice the national struggle of independence. This is class struggle, and it could only happen because the nationals were at least developed enough to acquire weapons.”
National struggle is national struggle, not class struggle. Its why Lenin in his Theses On the National and Colonial Questions says its important to make a clear distinction between the two, and for communists not to give a communist cloak to bourgeois forces engaged in such national struggles.
“Concerning your assertion that it is only, or mosty, wages that drive down the rate of profit, this is something that I am not aware of happening in the real world. I need examples.”
I didn’t say its only wages that drive down the rate of profit. The rate of profit can fall as a result of a rise in the organic composition of capital, or fall in the rate of turnover of capital. It can fall as a result of a rise in the price of commodities that comprise constant and variable capital. But, its only a rise in wages that can cause the mass of profit to fall – assuming the same mass of labour is employed – because profit=surplus value, and surplus value is new value created minus wages.
This is Marxism 101. If you want real world examples look at what Marx sets out in Value, price and profit in relation to the rise of agricultural wages in Britain between 1849 and 1859. If you want more recent real world examples look at Glyn & Sutcliff; “Workers and The Profits Squeeze” concerning the squeeze on UK profits in the 1960’s and 70’s due to rising wages.
King and Regan “Relative Income Shares” also say concerning G & S,
“Their conclusions are supported by a careful reworking of the data by Burgess & Webb.” (See: The Profits of British Industry, Lloyds Bank Review (April 1974))
They go on to cite further confirmation in the work of Thirlwall, Heidensohn, and Zygmant, “according to whom “a steady rise of the wage income ratio since 1950 appears to accelerate in the 1960’s.”.
(See Thirlwall, “Changes in Industrial Composition in The UK and the US and Labour’s Share of National Income 1948-69”, Bulletin of the Oxford University Institute of Economics and Statistics (Nov 1972); Heidensohn and Zygmant, “On Some Common Fallacies in Interpreting Aggregate Pay Share Figures” Zeitschrift fur die Gesamte Staatswissenchaft (Apr 1974))
King & Regan conclude the chapter by saying,
“Glyn and Sutcliffe suggest that the profits squeeze is an international phenomenon, although some of their evidence for other Western economies is rather weak… Convincing evidence of a recent shift to labour in the United States is provided by Thirlwall, and also by Nordhaus. For Germany, on the other hand, Heidensohn and Zygmant show that the wage income ratio has been constant, with perhaps a slight downward tendency since 1956.” (p 27)
(See also W.D. Nordhaus, “The Falling Share of Profits”, Brookings Papers on Economic Activity (1974))
The process of rising wage share during the 1960’s identified by these writers intensified in the 1970’s, and results in a continued squeeze on profits that results in crises. This is the consequence of an overproduction of Capital as identified by Marx in Capital III, Chapter 15, and in TOSV, Chapter 21.
In Chapter 15 Marx notes,
“There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit. As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.”
In TOSV, Chapter 21, Marx notes this process in more detail. Firstly, he describes how it is manifest in an extension of the social working-day. Firstly, existing workers are employed for longer without additional wages, then additional wages are paid for he additional hours, then overtime rates have to be paid for the additional hours. The latter two forms result in a fall in the rate of surplus value and so of the rate of profit, unless offset by other factors. Then the social working-day is extended by increasing the workforce by drawing in from the reserve. Women and children are employed, peasants are drawn from the countryside, immigrants are brought in. When all of these measures are exhausted, then as he says in “Chapter 15”, this is the limit to which absolute surplus value can be expanded.
It is then only possible to expand surplus value by reducing wages, but at this point with the demand for labour high wages are under pressure to rise not fall. Its only possible to reduce wages if the value of labour-power can be reduced, and that requires investment in new technologies that can reduce the value of wage goods.
As he says at the start of the chapter,
“Given the necessary means of production, i.e. , a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e. , the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given. ”
But, this introduction of new technologies cannot happen overnight. It requires that a new round of innovation occur to develop those technologies and then to install them. This is why this process is closely tied to the cycle of the long wave. Its only when these new technologies are developed and introduced that they can begin to a) reduce the value of wage goods, so that wages can be reduced, as a result of the fall in the value of labour-power, b) begin to create a relation surplus population, so that the demand pressure causing wages to rise can be reversed, so that the rate of surplus value is raised, and with it the rate of profit, c) the value of constant capital can be reduced, so creating a release of capital, and rise in the rate of profit.
This is the means by which the crisis of overproduction is resolved. It causes the rate of profit to rise, and creates the conditions for the new upturn. The rate of profit rises, but due to the factors set out by Marx in his LTRPF, this higher rate of profit tens to be lower than in the equivalent phase of the previous long wave cycle, because now relatively less labour is employed compared to the raw material processed, so that the organic composition of capital is higher. However, as Marx says, this fall in the rate of profit is extremely small, and more than compensated by other factors, as Marx describes in TOSV, Chapter 23.
Moreover, as I have described even this fall in the rate of profit due to the LRTPF no longer occurs, because unlike Marx’s time, raw material processing represents only a small part of overall value and surplus value production. The majority of value and surplus value production occurs in service industry.
We have an issue here with what is feudalism. It’s not merely the system modeled out of the Franks. Any system which has not went through an Industrial Revolution, but has formed a state, will be feudal (bot the converse is not true). Industrial Revolution is application of science to improve production, without stop. If you don’t do that, there will be stagnation. Money and profits will not drive society, but the position to the ruler. Workers will be organized in the form of guilds or serfs/slaves belonging to a lord. This is homogenous, from Maya, to Astecs, to Egyptians until modernity.
The colonization of the Americas provided money that was accumulated was slowly accumulated by backwards coutries, like England or France, to get a technological advantage in relation to Spain and Portugal. They traded commodities, with an increasingly sofisticated production, having a surplus in foreign trade.
Spain and Portugal remained as feudal, just like their subjtects in the Americas. The process of independence of their colonies in the Americas represented a large change towards capitalism for both parties.
Regarding most colonies outside the Americas, that was a capitalist enterprise. Surely, investiments were to be low, because wages were extremely low, or otherwise you’d get a low organic composition. Investiments moves towards where the rate of profit is high.
The case of India, reasures what I wrote before. Railways in India were the way to start colonisation.You confirmed that it happened in the XIX century, and it was a necessity for expansion.
Also, England provided the competition needed for other countries to expand their empires. It had the largest empire, but was not alone, and most of (neo) colonialism came after 1870: see the case of Africa: (type this to see the video after any youtube link) EKE92ucqBfc
and SE asia ( dVITTpIiXyE )
Regarding the issue with wages, it seems that you are at times not considering the value due unequal exchange with the 3rd world. The mass of profit coming from the periphery far outweights the value imported. Divided World Divided Class, by Zak Cope, offers and interesting view on this.
“Any system which has not went through an Industrial Revolution, but has formed a state, will be feudal (bot the converse is not true).”
No its not. The Asiatic Mode of production is not feudalism. You are just giving us the old Stalinist determinist stages theory.
“Spain and Portugal remained as feudal, just like their subjtects in the Americas. The process of independence of their colonies in the Americas represented a large change towards capitalism for both parties.
Regarding most colonies outside the Americas, that was a capitalist enterprise.”
It was merchant capital in all these cases that created the colonies.
“Surely, investiments were to be low, because wages were extremely low, or otherwise you’d get a low organic composition. Investiments moves towards where the rate of profit is high.”
This is theoretically confused. The organic composition is not a function of wages, but of the technical composition of capital. In less developed economies the organic composition is very low, because a lot of labour is employed relative to constant capital. This would cause the mass of surplus value to be high/rate of profit to be high if the rate of surplus value were the same. But in poor countries the rate of surplus value is much lower than in developed economies, because the level of productivity is very low. Even though workers in these economies obtain low standards of living, it still requires a much larger proportion of their working-day to reproduce these wages than it does for a worker in a developed economy. So, despite the low wages, the rate of surplus value in less developed economies is much, much lower than in developed economies, and along with it the rate of profit is lower. That is why exported capital from developed economies goes mostly to other developed economies and not to less developed economies.
“The case of India, reassures what I wrote before. Railways in India were the way to start colonisation.You confirmed that it happened in the XIX century, and it was a necessity for expansion.”
You now seem to be deliberately misrepresenting what I said. I have said all along in contradiction to your claim that the majority of colonisation outside the Americas occurred after 1870, that the majority of colonisation occurred in the 17th and 18th centuries. That is when the colonisation of India begins. The development of railways and the telegraph in India cannot then be a cause of colonisation because by the time the railways begin to be built, India had been colonised already for around 200 years. Its not railways that lead to colonisation, but colonisation that leads to the development of railways!
There had been plenty of expansion in India prior to the establishment of railways, do railways facilitate further expansion, absolutely, just as they did in Britain and elsewhere, but to claim that they were necessary for such expansion is clearly false. In Britain prior to the development of railways, for example, expansion occurred on the basis of he development of canals.
“Regarding the issue with wages, it seems that you are at times not considering the value due unequal exchange with the 3rd world. The mass of profit coming from the periphery far outweights the value imported.”
This is also not true, and is simply a return to the pre-Smithian views of the mercantilists, which explained profit on the basis o unequal exchange rather than the production of surplus value in production, and which explained wealth on the basis of the accumulation of such profits rather than on the basis of accumulation of capital.
To be honest, I see little benefit in further discussion, because you seem to have a poor grasp of Marxist theory, and a disregard for historical and other facts. So, its just a matter of you stating misunderstood theory, and non-facts for me to correct. I’m afraid I don’t have time for that.
Yes, the first railways were introduced into India in the 1830s. These were small, limited use railways, usually from a single site to a single site, like from a quarry to a construction site for a dam or other structure. We would call them “industrial railways” in the US.
First passenger railway company was NOT in business in the first half of the 19th century, but is formed right around the mid-point of the century, same time as rail service, based on the English system is introduced into Egypt, using “token-block”– the old “pass the baton” system to control train movements, still in use in Egypt today, and a good reason to never ride the locomotive of a train in Egypt.
Railways were not in a “developed” condition, were not a commercially dominant or significant means of transport in India before 1850.
Colonization in Asia, Africa, and the Americas long preceded railways, not to mention the commercial significance of railways in the colonies. That the construction of railways intensifies the exploitation, reduces circulation time, etc. etc. is not disputed or even at issue, but railways do not initiate colonization. The East India Company is in India long before railways; is a dominant colonial force long before railways.
First telegraph is demonstrated in England around 1816, but the first telegraph company isn’t in business until 1846, providing telegraph systems to…….right, said Fred, railways.
First subsea telegraph cable were laid between England and France in 1851– the world famous, even on this side of the Atlantic Gutta Percha company made the cladding to protect the wires from the water.
Don’t know the exact date of telegraph communication between India and the UK, but according to India’s Economic Times it was 1870:
https://economictimes.indiatimes.com/documents-reveal-contents-of-the-first-telegraph-message-between-india-england/articleshow/11976488.cms
Using ‘Feudalism” to label systems as diverse as those in Spain, India, pre- and post-conquest Mexico and Peru is a common, and profoundly mistaken use of the term.
Arguing “Any system which has not went through an Industrial Revolution, but has formed a state, will be feudal,” is, excuse the harsh language, just bollocks. You would call Britain after the 1646 but before the steam engine “feudal”? That makes no sense. The US before the 1840s is “feudal”? Mexico until when? 1937?, “feudal”? These are not even cases of expanding the meaning of the word until it loses all precision. It’s just a flat-out wrong use of the word.
Definition of Feudalism.
And that of Slavery, Capitalism and Socialism. It is exactly the amount of the owners on the means of production that defines the modes of production. It is a simple data, easy to verify and that analyzes the core of the model: the ownership of productive capital. Thus, the modes of production are only the evolution in the EXTENSIONS in the ownership of capital.
In England in 1846 and in USA in 1840 did the number of productive owners vary with respect to Feudalism? It is probable.
“FUNDAMENTALS OF MARXISM-LENINISM, MANUAL”, edited by the PROGRESS EDITORIAL of Moscow in 1964
The slavery regime. The basis of the production relations of this regime was the private property of the slaver not only of the means of production, but also of the workers themselves: the slaves
The feudal regime The basis of the production relations of this regime is the property of the feudal lords over the means of production
The capitalist regime The basis of capitalism’s production relations is the private property of the capitalist class over the means of production
The socialist regime The basis of the socialist mode of production is the social ownership of the means of production
‘“FUNDAMENTALS OF MARXISM-LENINISM, MANUAL”, edited by the PROGRESS EDITORIAL of Moscow in 1964
The slavery regime. The basis of the production relations of this regime was the private property of the slaver not only of the means of production, but also of the workers themselves: the slaves.” Antonio, I should suggest to consign this manual to the mice. For example, how about those slaves who possessed their own slaves? Class is a relationship of power and servitude but the economic relationship is not necessarily expressed in the juridical form.
The difference of a serf to a slave is very fluid. Give people land to cutivate their food, but with the penalty of regularly having to fulfill some tasks, with the failure being the punishment of being ostracized or killed. The difference becomes none existent. A pesron becomes part of the land, like a forest. If the land’s owner exchanges hands, so the person’s fate. The difference between Asian Mode of Production, Slavery and Feudalism is thin and unpredictable. You will find societies with all forms coexisting and succeeding randomly. What all of them have in common is that society is rigid. The worker and masters are linked in a hierarchy until it reaches the king. Money is generaly used for long distance trade and payment is in kind, because a person equals their use value. You don’t expect anything else.
As these so called modes of production are continous, you will expect that a society that is used to one of them will likely be spared of more brutal violence, as there is an expected level of obidience imprinted in people. And, indeed, of all the Americas, those places where there was state, those who didn’t live in comunal societies, have a much larger relative quantities of native descendants than those without. See Central America and Mexico and People of the Andes.
The industrial revolution started slightly before the steam engine, but I cannot say where right now. I must point out that because it was known even during Marx’s time that steam power was known since antiquity, but as a time. The modern use of steam had to be consequence the use of scientific method to improve industry. If you don’t have that, you won’t have the main law of capitalism, which is the tendence of the rate of profit to fall (this was stated by marx in volume 3), where labor must be freed to be of general use by the whole class of exploiters, not just a master, as it was before, and going to where it was more profitable.
Science as we know it, began in 1609 with the invention and spread of the telescope. Only then, it was possible to verify that the laws of gravity. Copernicus was good step, but in reality, the geocentric model was a conjecture, since anquity, and probably known by several people (that can be inferred by the use of certain mathematic notation, that was used by arabs, and used to name certain geometric transformations, which were known from the ancient greeks).
The move towards a new mode of production is a wide enterprise, and a conscient one, given objective condtions. I don’t think that the fact that Cromwell was actually pushing a bergeoisie revolution, that he actually managed to accomplish that. He set up the project to happen in England with high probability and he was aware of the Law of Value. William Petty (who was a personal secretary of Thoma Hobbes) used it as a way to tax the Irish during the conquest of Ireland.
The motion was set towards capitalism, and even though the specific project defeated (with the Restoration), the movement was not. It’s more or less like I see the push towards socialism. Even though specific projects were defeated in a way or the other (it depends on the taste), the movement is not.
*known as a toy, to Marx.
’For example, how about those slaves who possessed their own slaves?’ ’This does not seem relevant (majority) How many slaves owned other slaves – 1%, 2%, 3%, 10%?)
‘Class is a relationship of power and servitude but the economic relationship is not necessarily expressed in the juridical form’
Idem. What economic relations have no legal form? What is its relevance over the total economic relations?
Two ideas about the importance of this Manual a) It is done in a progressive phase of humanity (1917-1980). Since the eighties EVERYTHING, also intellectual work, is in decline. Except for M.R., of course. b) A proof of its value is that its definition of mode of production reaches the core of the model. It is core and root because there is nothing beyond Capital and its property that is known today.
No, I think I will keep this Manual for a season,
Regards
Have you thought about opening a list of discussion on google groups?
As I mentioned, there doesn’t seem to be a progressive form of work relation that can tell apart servitude and slavery. Despite that claim in the manual. I cannot see that in reality. The distinction exists for free labor within capitalist and those others. I mentioned the word “juridical” because it seems to be of no relvance beyond that existing in a given society.
“As I mentioned, there doesn’t seem to be a progressive form of work relation that can tell apart servitude and slavery. Despite that claim in the manual. I cannot see that in reality. The distinction exists for free labor within capitalist and those others. I mentioned the word “juridical” because it seems to be of no relvance beyond that existing in a given society.”
Of course there is; indentured servants could not be sold as property; you could not be born as an indentured servant; a contract of indentured servitude could, at rare times, be passed to heirs, but the contract had a definite life-span; the only defined terms of slavery were the life of the slave, or the will of the slave-owner to dispose of the slave.
A servant was not property. The employer was not an owner of the servant. Were these principles abused, distorted, violated in practice? Yes. But the labor itself was not organized around the principle of the human being as property of an owner.
The problem as see it is with the definition of how to own something. What is property? I don’t see it as working in the same way as in capitalism. Does a thing belong to someone as a mercy, a privilege, does it include collective ownership, is it imposed in such a way that a person effectively belong to the land, as river, a forest? A lord may not own anything, as it could be legally all a mercy from the king’s land, but in effect, he controlled a piece of the land. A servant debt could be eternal and passed on to his descendants. His uproot meant death or alienation to another owner. A slave could buy his freedom, be teachers, or general of armies.
Both servitude and slave could live side by side as important parts of society, as it happens in the Asiatic Mode of Production, where it seems to denote whenever Slavery or Serfdom mode of production don’t fit. There is no succession or determination in evolution of societies that is able to tell them apart. They could switch to each other depending on the particularities, randomly, depending of the dominating class.
The only thing that was common it is that people were confined to a certain activity and that they had to pay in kind, as use value. You could be a serf or a slave. New masters could change the legal condition of ownership without changing society. There was nothing like a reserve army, where people could be free to change hands of masters, according to market’s needs.
But my main point it is that if do not restrict yourself to Western Europe or Japan, and restrict to feudalism and slavery, the variety of modes of production is so great, that a material and historical analysis of world history becomes impossible. At least I cannot notice a pattern, unless you don’t adopt categories that begins with the negation of the characteristics of both capitalism and primitive communism.
But I don’t think you didn’t miss anything. I think your graphs shows that either you have a huge crisis or a series of small crisis, the latter making it seem a stagnation. You should also consider that intense crisis are not geographically simultaneous, but that they travel around the world. For example, Greece had a horrible crisis in 2013, but not so elsewhere. Or that the Great Recession hit UK and Germany in the early 1920s. Or that the 2001 crisis in USA was preceded by the Asian Tigers and Russia in 1997-8.
Greece wasn’t exactly alone in 2013, although the contraction was more severe. However 2013 was one of the years in the multi-year panic over the PIIGS– Portugal, Ireland, Italy, Greece, and Spain. Just some rough numbers– GDP in Spain 2013 was down 17% from its 2008 high; its unemployment rate was steady throughout the year at 26% of the workforce. Ireland’s ue rate came down from about 14% to about 13%, helped by a wave of emigration while GDP was down 13% from previous highs. Portugal’s GDP was off about 13% from its high.
So the synchronization of capitalist economies in Europe is a bit tighter than you might think.
Yes, you are right. But I had in mind something of the magnitude of the Great Depression in USA and I don’t know if that was the case for these other countries.
A thought on K wave
Capital , could be considered as constant and variable capital
but let us consider capital as K ; the part of capital that needs to be paid in advance, like a building which must be purchased before any production could happen and is long lasting , and k the part of capital that is being purchased as production process goes on, like most of row material that can be purchased after the start of production and as an ongoing process
So we have
M..K+k..P…K+k+S…M2
Then during next cycle we have:
M2..K2+k2…P2….K3+k3+S2…M3
During P2,let us assume that a new technology, invented,( something like computer that has profound effect on every aspect of production) ,and became widely used . so the SNLT ( socially necessary Labour time)for production of every thing including K, and k were reduced and the value of K is reduced to K’ and that of k to k’. For example a machine which is made by computerized and automated production process , is cheaper than the machine which is made before invention of computerized production process.
Because the investor buys k as production goes on ,the Change in value of k to k’ dose not make any difference for capitalist.
But because K’was paid as K but now it’s value isK’ which is now cheaper in market , it should be considered in calculation of profit, as a loss for investor.
So we have
K= K’+d
So:
M2…K2+k2…P2….K2-d+k2+S2…M’3
The transferred value of previously paid investment became less .
Now we can conclude that
If S2<d , there will be no profit for investor so Production will be stopped because no profit is expected .so we have the crisis
Then some of weak capitalist sell their K' cheap to others, and close their factories, unemployment raises so wages goes down and profit goes up and the cycle repeats itself
This is a fallacy, or as Marx says in analysing this in TOSV Chapter 22, an illusion of profits or losses arising from the use of historic prices rather than values, i.e. current reproduction cost. It is the error made by Ramsay and described by Marx in that Chapter.
The rise in value relative to historic price results in a Tie-Up of Capital, a fall in value compared to historic prices causes a release of capital. If the rise in value/price occurs between the point that output has been sold and the use values that comprise the consumed capital must be replaced, then this tie-up of capital gives the illusion of a loss (reduction in profit), because now, more of the realised value of the output must be used to reproduce the consumed capital, leaving less remaining as available profit.
For Marx unlike Ramsay or the proponents of historic pricing, capitalism is a continuous and dynamic system. The point of production is not the creation of money profits, but the expansion of the actual physical capital, because given any technical composition of capital, the quantity of labour employed is a function of the size of the physical capital, i.e. how many machines are employed, how much material is processed etc. Capital is this social relation between capital and wage labour, and the expansion of capital is the expansion of this social relation, i.e. the expansion of the mass of labour employed, because it is this labour that is the source of surplus value. To produce more surplus value, if the rate of surplus value remains constant, more labour must be exploited, and with a given technical composition that requires more physical capital to be employed.
So, the purpose of production is first to reproduce the physical components of the capital, and if possible to expand those physical components via accumulation. That is why Marx’s circuit of capital showing this expansion is P… C` – M`. M – C … P, and in which C` and M` divide into C and c, and M and m, C and M reproducing the physically consumed use values, and c and m, being available for accumulation. That is why Marx insists that to understand the reproduction process, and calculate the rate of profit it must be undertaken on the basis of the value of the consumed capital, i.e. its current reproduction cost, not the historic price, as Ramsay did.
The opposite occurs where the value falls relative to the historic price creating the illusion of additional profit even though there has been no creation of additional surplus value. If the value/price rises prior to the sale of the output, then as Marx sets out, and describes in more detail in Capital III, Chapter 6, the result is that this change is reflected in the end price (provided that market conditions allow any price rises to be passed on). In that case, a rise in value does not result in any illusory losses, and vice versa.
However, Marx sets out the difference then between these illusory profits or losses, and the capital gains or losses that also appear if instead of viewing the circuit as being P… C` – M`.M – C … P, you view it as M – C … P… C` – M`, which Ramsay did, and as he proponents of historic pricing do. To justify this circuit of capital, which is the circuit of newly invested capital, or capital leaving production, you have to view capital not as a continuous and dynamic process , i.e. dialectically, but instead view it sylogistically, as simply a series of discrete events. On that basis converting everything to a monetary value at the end of the circuit, inevitably results where values have risen to taking what is in reality a capital gain, and turning it into additional profit – even though there has been no increase in surplus value. It means that then using this inflated figure as the basis of calculating the rate of profit, you get an inflated rate of profit.
Likewise, if values have fallen, you get an illusory loss (reduction in profit) equal to the capital loss, and calculating the rate of profit on this basis, you get a deflated rate of profit. Given that because productivity and so values fall over time, the use of historic prices inevitably results in the inclusion of these illusory losses, and deflation of the actual rate of profit over time. As Marx says, as soon as you factor in the true nature of capitalism as a continuous and ongoing system, so that the physical capital must be reproduced, and so its higher or lower value is then accounted for, these illusory profits or losses, and distortions of the rate of profit disappear.
What does persist, however, as Marx sets out in Chapter 22, and in Capital III, Chapter 6, is that where the value of the elements of capital rises, then the rate of profit falls, and vice versa, because irrespective of any change in the mass of profit, resulting from these illusions, the value of the elements of capital that have to be reproduced rises in the one case, causing the rate of profit to fall, and falls in the other, causing the rate of profit to rise.
I think when I put the comment I put it in the wrong place, I’m reinventing.
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I pity economists simply because they have never worked in Mechanics of Turbulence .
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For more than thirty years of my professional life, I worked with Experimental Turbulence Mechanics. If I summed up all the time I was observing an actual signal obtained by any device that measures some property of flow, velocity, pressure and so on, it would probably give more than a year of observation.
To combat boredom this necessary function, in this tedious task of observing the signal before statistically analyzing it, I was joking about predicting what was going on in the next few seconds, and this joke served one thing, seeing that my predictions within the observed second were just under 50% wrong.
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I knew, for example, that the pressure would vary from X to 5 Delta X, not X up to 10 Delta X, but when the signal is 3 Delta X and all apparently suggests that the value will decrease, stubbornly it continues to rise, but actually after we have acquired all the statistical calculation sign will show that our initial hypothesis was entirely correct.
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I want to say that for a long time I have been following your blog, I am tremendously pleased with all your analysis. If we look at the mathematical basis of Kondratiev’s cycles, however elaborate they may be, they are more or less like my readings of the turbulent signals, we cannot predict with mathematical accuracy because there is a noise that overlaps these cycles.
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These noise may be called capitalism’s attempts to counteract them, that is, countercyclical movements that overlap with the main cycle, but noise is noise, it can distort the predicted movement, but not avoid it.
Michael
Taking advantage of the time zone in which the vast majority of commentators are sleeping and will give me time to criticize even my own previous comment. I found time to read your article a few more times and make some criticisms of your critics, yourself and even me!
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As I stated in the previous comment, I worked on processing turbulent flow data for a few years of my life (four years). Because of this my experience and some articles I read about the cycles of Kondratiev, I’m a petulance of a tiny knowledgeable economy, throw me to criticize what I find most important in your text.
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All of your important contributions to Marx’s analysis of the long-term decline in the rate of profit I’ve been reading, analyzing, and comparing with more than a few dozen articles for over a year and finding one of the most consistent defenses of Marx’s work. I clearly see respect for Marxist dialectic and follow it exactly for this.
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But (the problem with life is that there is always a “but”), when I saw that you based your analysis on when another major crisis would occur, it was in Kondratiev’s Long Cycle Theory. the basis of this theory, which is basically restricted to adjusting economic cycles by numerical methods. All my experience in this type of analysis (I worked a long time on an experimental project called: Unsteady turbulent flow with adverse pressure gradient (see https://doi.org/10.1088/0169-5983/42/3/035510) that more taught me was to distrust series analysis with cyclic oscillations.
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Well, based on my experimental experience of numerical treatment of an instational phenomenon exactly the same as Kondratiev’s hypotheses, I know that without a convincing explanation like Marx’s in his theory of “long-term decline in the rate of profit” To attempt to analytically remove the harmonics of an oscillatory behavior with variations between their period and amplitude characteristics in at least a dozen cycles is simply irresponsible.
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It should be noted that with long periods, as predicted by Kondratiev (five decades or more) the characteristics of capitalism in accumulation intensity, variation in fixed capital obsolescence, and dozens of smaller variables would certainly alter the period of these cycles. Not to mention the capitalists’ experience of coping with crises, which would lead to variations in their amplitudes.
With long observation period, using the right spectral analysis, cyclical crises of short-term can be obtained more reliably, but Kondratiev’s long periods are impossible.
To Buffy
A capitalist buys a machine for 1000 dollars ,hires a worker for 20 a day , buys 20 dollar a day of raw materials. And sells his products 10 dollars each, if everything was fine the machine would worth 400 after two month and 600of its value would have been transferred to products (30 /day)but After two month the same machine worth 10 dollars, because now a better and cheaper machine is in the market that others are using it , so the the replacement value of this machine is even less than 10 dollars .this capitalist doesn’t care about historic or current prices or values . The Only thing that he cares about is that he paid 1000 to establish a business that now worth 10 dollars or even nothing
If it is illusionary loss , it is a very painful illusion
No what he cares about, is that when he comes to replace his machine, he will now only have to pay $10 for it, and not $1,000, because he is not bothered about the asset values of his equipment, but the potential to produce profits on an ongoing continuous basis.
Your example simply proves the point i was making, and that Marx sets out in TOSV Chapter 22. If the capitalist was only going to operate for one discrete period and then sell up output and capital together, then your point is relevant, but that is not what capitalist production is about. Its about ongoing continuous production.
So, if we take your example, the moral depreciation of the machine from $1000 to $10 means that he suffers a $990 capital loss. He can only transfer $10 into the value of output as wear and tear, but now this $10 replaces the machine he has consumed in production. So in terms of physical capital it has been reproduced, he can continue producing on the same scale.
But, let’s say that the surplus value produced by the worker amounts to $20 a day, or over the entire period say $1,000. Previously, the rate of profit was $1000/3000 (1,000 machine, 1000 wages, $1,000 material) = 33.3%.
Now, this rate of profit is 1000/10 + 1000 + 1000 = more or less 50%. In other words, as Marx says, it means the rate of profit rises. Marx sets out that this rise in the rate of profit applies to the old machine too, because the rate of profit is calculated on its current value ($10) as a result of the moral depreciation, not on the basis of its historic price of $1,000. He further elaborates this in these chapters by illustrating the similar effect of raising the rate of profit as the machine is devalued not by depreciation, but simply by its annual wear and tear.
So, previously, the $1000 of profit would just have bought an additional machine, but to expand production would have required additional capital to employ an additional labourer, and additional materials. However, now the $1000 of profit would buy 100 additional machines! Alternatively, depending on the rate of turnover of the capital, the firm might buy say 10 additional machines ($100), and employ 10 additional workers at $20 a day ($200) and $200 of additional material to process. A total of $500. If it could turn this over in two days, it would have expanded its capital by 10 times, or 1000%. In other words, its effective annual rate of profit would have risen from 33% to 1,000%.
On the basis of this accumulation of capital, and the ten fold increase in labour employed, it would have increased its mass of surplus value/profit from $200 to $2,000.
Even on the basis of the same single turnover of capital, the rate of profit at 50%, means that after two years, the firm could double its capital, and thereby produce twice as much profit. It is that, which capitalism seeks to achieve not ephemeral capital gains from changes in asset prices relative to their historic price.
Moreover, as Marx describes in Capital III, Chapter 6, even if such a capital loss were to cause an individual capitalist to go bust, because they had borrowed the money to buy the machine, and could not now make repayments, this is irrelevant from the perspective of capital as a whole, because, this capitalist, or the bank that repossses the capital, will have to sell the assets including the machine at their current replacement cost (or less). The capitalist that picks up this physical capital at this lower value will then utilise it on that basis. In other words, they will pay $1,010 for the machine and materials, and lay out the same $1000 for wages. The worker will produce the same $1000 of surplus value, which will represent the same 50% rate of profit.
So coal mine industry owners and coal miners and Midwest residents ofUS are relieved that replacement cost is now cheaper , no unemployment , no crisis ! Life is or will be fantastic !
….on planet Boffy; where every street leads to the beach and we’re always surfing the long wave.
“So coal mine industry owners and coal miners and Midwest residents ofUS are relieved that replacement cost is now cheaper , no unemployment , no crisis ! Life is or will be fantastic !”
I wouldn’t go that far, but their problems are certainly not a consequence of capital becoming cheaper! Or put it another way, if there continued to be markets for coal, those markets would expand if the capital consumed in coal production such as long wall excavators became cheaper, because that would reduce the market value/price of coal and along with the fall in price the demand for coal would rise.
Moreover, because the cost of the machines are much lower, then as Marx describes the rate of profit of the miners is higher, and this higher rate of profit enables them to employ more machines and miners, to open additional mines, and so on. In the same way, when the cost of tunnel boring machines fell dramatically it meant it was possible to build the Channel Tunnel, which provided jobs for thousands of workers.
Or to give another example, the cost of solar energy production has fallen dramatically as the cost of Photo voltaic cells has fallen significantly. That means that thousands of US workers have now been employed in the solar power energy, where previously none were employed. In fact, more workers are now employed in alternative energy production in the US than in the production of fossil fuel energy. Even better the wages of the workers in these new industries are generally higher, and they do not have to suffer the potential for contracting pneumoconiosis.
Here’s a thought if you want to be taken seriously in intellectual debates, when you have run out of arguments either retire gracefully, or better still admit you were wrong, don’t try to hide your failure by making snide comments that only emphasise the fact that you lost the argument. There’s already anti-capital whose well versed in those kinds of trolling behaviour, as he has plenty of experience of being wrong and demonstrating his ignorance.
The problems with Boffy’s schemes are the problems with Boffy himself– everything is hypothesized in the abstract and has pretty much little to do with anything concrete.
You want to talk renewable energy? Certainly the means of generating renewable energy have cheapened, but they’ve cheapened exactly to the degree that the total capital has increased: the increased investment, the mass of capital committed to the production has increased to the point where unit costs have declined dramatically.
On planet Boffy, where space cadet Boffy, is always searching for the perfect long wave, there would be little if any capital accumulation as the means of production have continuously become cheaper.
In the real world, the method by which capital, either that embedded in the means of production or that circulating in commodities becomes cheaper is through the massive expansion of investment in those fixed elements of production.
In the renewable energy industry, here are a few facts from a report sponsored in part by the German govt. and the UN:
1. in 1918 record 157 gigawatts of renewable power were
commissioned in 2017, up from 143GW in 2016 and far
out-stripping the 70GW of net fossil fuel generating
capacity added last year. Solar alone accounted for
98GW, or 38% of the net new power capacity coming
on stream during 2017.
2. Global investment in renewable energy edged up 2%
in 2017 to $279.8 billion, taking cumulative investment
since 2010 to $2.2 trillion, and since 2004 to $2.9
trillion. The latest rise in capital outlays took place in
a context of further falls in the costs of wind and solar
that made it possible to buy megawatts of equipment
more cheaply than ever before.
3.The leading location by far for renewable energy
investment in 2017 was China, which accounted for
$126.6 billion, its highest figure ever and no less than
45% of the global total. There was an extraordinary
solar boom in that country in 2017, with some 53GW
installed (more than the whole world market as
recently as 2014), and solar investment of $86.5 billion,
up 58%.
4. Renewable energy investment in the U.S. was far below
China, at $40.5 billion, down 6%. It was relatively
resilient in the face of policy uncertainties, although
changing business strategies affected small-scale solar.
5. Europe suffered a bigger decline, of 36% to
$40.9 billion. The biggest reason was a fall of 65% in
U.K. Investment to $7.6 billion, reflecting an end to
subsidies for onshore wind and utility-scale solar, and a
big gap between auctions for offshore wind projects.
Germany also saw a drop in investment, of 35% to
$10.4 billion, on lower costs per MW for offshore wind,
and uncertainty over a shift to auctions for onshore
wind. The latter change was also one reason, along
with grid connection issues, for a fall in Japanese
outlays of 28% to $13.4 billion.
6. There were sharp increases in renewable energy
investment in Australia, of 147% to $8.5 billion, in
Mexico, of 810% to $6 billion, and in Sweden, of 127%
to $3.7 billion. Just outside the world top 10, investment
in Egypt leapt nearly sixfold to $2.6 billion, and that in
the United Arab Emirates 29-fold to $2.2 billion.
The drop in unit costs is accompanied by massive expansion of investment in fixed assets, and the drop itself reduces profitability leading to declining investment, which should never happen if we were on planet Boffy, where capital is always the once and future king of expansion.
So in the advanced countries the future isn’t quite so bright that we have to wear sunglasses; and the less developed countries will soon follow the advanced down the road of declining profitability.
Marx’s analysis of the tendency of the rate of profit to fall is not dependent upon, either way, the cheapening of the means of production, but rather the expansion of the total accumulated value embedded in the means of production, replacing living labor DISPROPORTIONATELY.
“No what he cares about, is that when he comes to replace his machine, he will now only have to pay $10 for it, and not $1,000, because he is not bothered about the asset values of his equipment, but the potential to produce profits on an ongoing continuous basis.”
More ignorance from Boffy. Anyone who’s been involved in authorizing large scale, techincally intensive equipment– like locomotives–know just exactly how much detail you pay to the initial “sunk” cost of the locomotive, and how deeply you review life cycle costs, replacements costs, maintenance costs, fuel consumption, cost per operating ton-hour– AND how intensely you compare those numbers with a) already existing equipment b) new equipment on the market.
Everybody authorizing such purchases is concerned with depreciation and “moral depreciation” for the simple fact that you are sinking millions of dollar that have to be repaid, and if a new locomotive comes out that reduces operating costs per ton-hour, you will not be able to recover the cost of your investment. If I spend $4 million dollars for a locomotive, and based on calculations, the railroad requires 7 years to recover the full $4 million– and new locomotives are produced that drop the freight rates by half, it now takes my railroad 14 years at least to recover the full 4 million if I recover it at all, while I still have to pay the bank, the lender, the full 4 million in perhaps ten years. Short version, the capitalist is losing money, and the reduced replacement cost doesn’t mean bupkus– unless I can find someone to take my now obsolete equipment off my hands for some discounted amount, have the reserves to pre-pay the note on the locomotive, and still have enough credit to purchase the more advanced locomotive.
That’s one problem we face in the real world with replacement of capital. The other problem is—-when was the last time the initial cost of technically intensive production or transportation equipment declined? I’ve been working for and with railroads in the US for 48 years, and I don’t at any time in the last 38 years (can’t remember very much from the previous time at all) recall the initial price for a new locomotive declining. Life cycle costs have declined; operating costs per hour have declined; operating costs per ton-mile have declined, and that has always been accompanied by increased capital costs. The locomotive gets more expensive; the locomotive makes it less expensive to haul 10,000 tons 500 miles. The locomotive technologies make it possible haul 15,000 tons at the same cost, in the same time as it used to take to haul the 10,000 tons. The locomotive capital expense makes it possible to increase average train length from 5000 feet (about the avg train length in 1999) to 7500 feet (avg train length today), and increase average train weights accordingly. More hauled in less time with fewer crew members at less unit cost. That’s the mantra of capital equipment replacement in railroads, easily translated for the rest of the capitalist network as “More produced in less time with fewer bodies at less unit cost.”
Always keep in mind what Marx said in volume 3– you know that line that Boffy always forgets– “It is the rate of profit that is the driving force in capitalist production, and nothing is produced save what can be produced at a profit.” And it is very accumulation of capital that drives the rate of profit down.
And a final word on Boffy’s ignorance regarding the accumulation of capital, and the cheapening of the cost of production:
“I wouldn’t go that far, but their problems are certainly not a consequence of capital becoming cheaper! ”
writes Boffy re the collapse of coal mining in the US. As a matter of fact, yes indeed the problems are certainly a consequence of “capital becoming cheaper”– only it’s the capital embedded and embodied in natural gas, which because of large investment in extraction, including from shale fields, is now cheaper than coal per kWh of electricity generation.
And the gas extracting industry itself– swamped by an overabundance of gas as a result of the increase in the accumulated capital in the industry, with the subsequent decline in price, and accompanying decline in profitability– all brought to us courtesy of “cheaper capital.” It’s a good idea to not lose sight of the fact that a) capitalists are not only concerned with the physical replacement of the means of production but also, and primarily, the replacement of the value of the means of production, otherwise there’s no point to the extraction of surplus value b) commodities function not simply as use values, but as exchange values- as capital themselves; embodying the separation and antagonism of the producers from the products themselves; with the producers required to exchange their labor power, to constitute it as an exchange value, in order to avail themselves of the use value of the commodity.
To buffy
“Here’s a thought if you want to be taken seriously in intellectual debates, when you have run out of arguments either retire gracefully, or better still admit you were wrong, don’t try to hide your failure by making snide comments that only emphasise the fact that you lost the argument. There’s already anti-capital whose well versed in those kinds of trolling behaviour, as he has plenty of experience of being wrong and demonstrating his ignorance.”
From tabib:NO COMMENT
What is it about?
BOFFY asks me if I want to be taken seriously in intellectual debates….
Let me adress all of you for a moment to remind you what is it all bout! That we write and talk and …
If he or she lost 13 years of his or her life because of what he believed and said and did
If he or she was played Russian roulette at the middle of nowhere
If he had to leave his country and was not able to go back to his father and mother’s funeral
I will take him or her seriously
J,
I am too busy now to engage in further discussion, other than for the reply provided below. So, I’ve tried to make it comprehensive. Accordingly, apologies for the length.
I wrote a blog post on this a couple of months ago, which is due to be published at the start of March concluding my work on Marx’s Capital, and linking in to one of its first practical applications, the study of the development of Capitalism in Russia. It deals with the points you raise, so let me cite some of the relevant points, in response.
What was Marx seeking to achieve in writing Capital? As Lenin says, the point was that Marx in 1848 had developed, alongside Engels, the theory of historical materialism. It is a theory that explains social evolution on the basis of material reality, and changes in it, in the same way that Darwin’s theory explains biological evolution as arising from material reality, and changes within it. Mikhailovsky’s criticism of Marx is that he does not provide an analysis of all social evolution, and how his theory explains it, in the way that Darwin does. Lenin responds that what Marx does, in Capital, is to show how the development of one specific social formation – capitalism – can be explained on the basis of this theory, in the same way that evolutionary theory can be used to explain why, say, birds have evolved. If the theory can explain, in detail, this specific development, without resort to subjectivist explanations, such as human nature, then it will be validated, and, for Marx, the job of using the theory to explain the development of other social forms such as feudalism, the Asiatic Mode of Production, and so on can be left to others to conduct a similar detailed study using its methodology.
This is why Marx rejects all subjectivist notions in relation to this historical development of society, and with it all forms of Socialism that go with it, such as Sismondian Moral Socialism. It is why Marx steadfastly refuses to be drawn into the creation of schemas for how future society might be constructed, or what it might look like, because the future society will develop according to these same objective material laws that explain the development of past social forms, be it slave society, the AMP, or capitalism. For Marx, Socialism is not some moral imperative some form of better society that individuals in society are led to want to create, because it is “better”, or because they need it as an alternative to capitalism – or whatever mode of production they currently live under – but because it is the natural development that arises out of the laws of capitalism itself, just as capitalism was a natural development out of the laws of feudalism, driven by material reality. We do not “need” to create Socialism, any more than biology needed to create humans, the science simply explains why these particular phenomenon arise. If Marx, as a result of his analysis, had concluded that those laws lead not to Socialism, but to some further form of class society, he would have argued that that would be the next progressive stage of human development. Marx, as a scientist, does not start from Socialism, (indeed he did not begin life as a socialist but as a bourgeois liberal) and construct his justification for it, but starts from his scientific analysis of society, and conclusion that it leads inexorably towards Socialism. Marx’s comments in Capital III, Chapter 27, about the laws of capitalism leading to the development of socialised capital as the transitional form of property between capitalism and socialism, and his comment that this represents the abolition of capital within the confines of the capitalist system illustrate this perspective.
Marx does not start from any kind of moralistic notions about Socialism being a good thing, or something that society needs as an alternative to capitalism, but from the scientific perspective that society is developing in that direction irrespective. Its in that sense that he talks of its inevitability. But, of course, Marx does not mean inevitable in a mechanistic sense, because part of this historical development is the role of an important part of the material world, which is Man himself. Material conditions, social and historical laws create the social relations, and the conditions upon which ideas, culture, laws, political and other institutions are thereby constructed, but it still remains necessary for Man, as the only active social agent, to bring about these changes. In the case of slave society, they failed to do so, and it resulted in “the ruination of the contending classes”, rather than a transition to a higher form of society. As Trotsky wrote, it is possible that the working-class might also likewise fail.
So, as Lenin points out, right from the beginning, from 1848, Marx had never said that there was some unilinear historical progression, some series of stages by which every society must pass, because the whole point of his theory is that the way each society develops is determined by the unique material conditions it faces throughout history. The Native Americans did not develop even settled agriculture, as happened in other parts of the world, because the material conditions they faced, enabled them to survive simply on the basis of hunting and gathering, and migrations across a vast continent. The Egyptians, Chinese, Indians and so on developed the Asiatic Mode of Production out of the primitive commune, because they required a centralised administrative body to organise large scale civil engineering projects for water control, and so on, which itself develops over millennia into a bureaucratic collectivist state, held in place by a caste system, surrounded by taboos, and laws.
This is precisely the point of Marx’s letter in 1877 to Otecestvenniye Zapisky complaining about Mikhailovsky. Marx’s complaint was that Mikhailovsky had tried to attribute to him the idea that because Marx had said that an alternative path for Russia was theoretically possible, this meant that Marx was saying that Russia could develop directly into Socialism from the village Commune. Marx makes the point that his argument just as validly can be said to state that Russia could develop to Socialism via capitalism, as with the rest of Europe, because it depends upon the material conditions it faces.
He says,
“In the postscript to the second German edition of Capital – which the author of the article on M. Shukovsky (Mikhailovsky) knows, because he quotes it – I speak of “a great Russian critic and man of learning” with the high consideration he deserves. In his remarkable articles this writer has dealt with the question whether, as her liberal economists maintain, Russia must begin by destroying la commune rurale (the village commune) in order to pass to the capitalist regime, or whether, on the contrary, she can without experiencing the tortures of this regime appropriate all its fruits by developing ses propres donnees historiques [the particular historic conditions already given her]. He pronounces in favour of this latter solution. And my honourable critic would have had at least as much reason for inferring from my consideration for this “great Russian critic and man of learning” that I shared his views on the question, as for concluding from my polemic against the “literary man” and Pan-Slavist that I rejected them.”
So, we then have to look at what Marx sees as the material conditions existing in Russia, and what he sees those conditions leading towards. In the letter above, he gives an early indication.
He says,
““In order that I might be qualified to estimate the economic development in Russia to-day, I learnt Russian and then for many years studied the official publications and others bearing on this subject. I have arrived at this conclusion: If Russia continues to pursue the path she has followed since 1861, she will lose the finest chance ever offered by history to a nation, in order to undergo all the fatal vicissitudes of the capitalist regime…
If Russia is tending to become a capitalist nation after the example of the Western European countries, and during the last years she has been taking a lot of trouble in this direction – she will not succeed without having first transformed a good part of her peasants into proletarians; and after that, once taken to the bosom of the capitalist regime, she will experience its pitiless laws like other profane peoples. That is all.”
But, of course, even to have been able to take advantage of that “finest chance”, Marx was not saying that Russia could have simply gone from the village commune to Socialism. It could only do that, if previously, workers in the West had undertaken a successful socialist revolution. That would simultaneously provide the Russian peasants and workers with a model of society they could emulate, and at the same time enable the Russians to obtain the developed western technologies required for such development.
So, Marx looked at what the actual material conditions were in Russia, and how they were changing. He concluded that, in fact, avoiding a transition to capitalism was impossible. In the first draft of his 1881 letter to Zasulich, he points to two very real material conditions that made this inevitable. First is the effect of the 1861 Emancipation. It placed upon the free serfs the requirement to buy the lands they farmed, and that meant they were placed in the position of being debt slaves. A similar trajectory is described by Marx in The Eighteenth Brumaire as having been undergone by the French peasants after the Great Revolution. That meant that large numbers were proletarianised, whilst creating a tiny group of capitalist farmers. Second was the defeat of Russia in the Crimean War at the hands of Britain, France and Turkey. It showed to the Tsarist rulers that, however much their own wealth and power rested upon the old village system – just as the wealth and power of the Indian ruling caste rested upon the Indian village system – it was no longer tenable, when faced with the growing industrial and military power of capitalist states. Indeed, this same conclusion had been reached by the Prussian ruling class, who engaged in a process of state capitalist development to industrialise the country under Bismark.
The second main factor then is that the Russian state itself begins to dismantle the village commune, and to promote the development of capitalism. Its decision to do so is not simply a whim, but a reflection of material conditions.
So, in his 1881 letter to Zasulich, Marx writes,
““Since so many different interests, particularly the new ‘pillars of society’ constructed under Alexander Il’s benevolent empire, find an advantage in the present situation of the rural commune, why should they knowingly conspire to bring about its death? Why do their spokesmen denounce the evils weighing upon it as irrefutable proof of its natural decay? Why do they wish to kill the goose that lays the golden eggs? Quite simply, the economic facts, which it would take me too long to analyse, have uncovered the secret that the present situation of the commune is no longer tenable, and that, through mere force of circumstances, the present mode of exploiting the popular masses will go out of fashion. Thus, something new is required; and this something new, insinuated in the most diverse forms, always comes down to the abolition of communal property, the formation of the more or less well-off minority of peasants into a rural middle class, and the straightforward conversion of the majority into proletarians.”
So, although Marx, in 1881, writes to Zasulich that a transition from the village commune to Socialism is theoretically possible, he already, in that same letter, sets out why, in practice, it wasn’t going to happen, because the material conditions were already dissolving it, and capitalism was already established and developing at a rapid pace. Indeed, Danielson himself did not disagree with that. He simply believed that the development was only in the cities, in industrial development and not in the countryside.
And, so, Engels subsequent letter to Danielson is fully in keeping with Marx’s previous analysis and statements. Russia could have avoided going through a capitalist stage, and used the village commune as a basis, if there had been a socialist revolution in the West, and if there had then been a revolution in Russia. But, that had not happened. The material conditions in Russia then led a) to capitalism being developed in the towns and cities in industry, partly as a natural development, i.e. growth of the market and division of labour, partly because the state sought to encourage such development, in order to industrialise and modernise the economy, out of necessity, to avoid falling behind its western competitors (and Japan) and the potential thereby of facing the same kind of dismemberment that China had faced, and b) because the Emancipation had created a large number of debt slaves, and a proletarianisation of large numbers of peasants, along with a growing class of rich peasants and capitalist farmers.
Incidentally, this latter point is important. It explains the basis upon which Lenin describes the Tsarist state as being a capitalist state. It is driven to promote capitalist economic relations, even though the political regime itself is that of Tsarist landlordism. Similarly, as Trotsky was later to describe, Stalinism was a political regime representing the interests of the Stalinist bureaucracy, but the soviet state was a workers’ state, resting upon corresponding forms of property and social relations. It shows that, whatever the subjective superficialities, represented by the political regime, it is the underlying class relations, resting upon dominant property forms and social relations that determine the class nature of the state. The state must act to defend and promote those dominant forms, otherwise its own future is placed in jeopardy. Its a rejection of this principle by the subjectivists of Third Campism that enables them to focus their analysis on the nature of the political regime rather than the class base, which repeatedly leads them into error.
So, now let me turn to the other points contained in your comments.
“Taking into account the deepening of Marx’s theory of metabolism, it is plausible that Marx in 1881 recognised not only a non-Eurocentric, multilinear ways to socialism”
From what I’ve said it should be clear this was not new, but is the case from 1848 on.
“Readers of the 3 Volumes of Capital will no doubt share this writer’s intense frustration on reaching the very last chapter where Marx begins to analyse the nature of class,”
Others have suggested that Marx’s notes indicate that he had reached an impasse, and was going round in circles on the issue of class. These notes were written in 1865. As I’ve written in relation to that Chapter, I’m not convinced by those arguments. There is enough in the previous chapters to show where Marx’s analysis of class was going. I think ill-health, as Marx himself says, work for the International, and so on, provide as good an explanation. There was also death of family members, and other personal matters. Marx was a human being after all, not a God.
See above also for your comments in relation to the 1872 edition. In part, what Marx was doing here was what Engels referred to later in his 1890 letter to Bloch. That is, in their initial writings setting out their new theory, they had to bend the stick towards a more mechanical materialist statement, because they were confronting the existing subjectivist theories, but the consequence was that some of their followers, particularly those that came from the German materialist school, interpreted the theory in a crude deterministic manner. Having established the theory, they then had to confront those determinist interpretations of it.
“Marx and I are ourselves partly to blame for the fact that the younger people sometimes lay more stress on the economic side than is due to it. We had to emphasise the main principle vis-à-vis our adversaries, who denied it, and we had not always the time, the place or the opportunity to give their due to the other elements involved in the interaction. But when it came to presenting a section of history, that is, to making a practical application, it was a different matter and there no error was permissible. Unfortunately, however, it happens only too often that people think they have fully understood a new theory and can apply it without more ado from the moment they have assimilated its main principles, and even those not always correctly. And I cannot exempt many of the more recent “Marxists” from this reproach, for the most amazing rubbish has been produced in this quarter, too….”
“Marx became concerned at the devastation that the introduction of capitalism was visiting on the Russian social fabric. The peasants were being dispossessed, but there were no factory jobs for the majority, who were left to starve.”
In actual fact, in Russia, as in Britain, capitalism developed in the towns and cities before the countryside. The expansion of capitalism creates more jobs, as Marx indicates. Capitalism raises the rate of surplus value, and because it operates on a mass scale employs more labour. So, a combination of more labour exploited, plus a higher rate of surplus value, means more surplus value produced in total. A greater mass of surplus value itself means that capital accumulation proceeds more quickly, but capitalist development also reduces the value of constant capital (higher rate of profit) so that any given amount of surplus value sets in motion greater masses of capital, and labour, and so creates even greater masses of surplus value and so on. As Marx makes clear as against Smith, Ricardo, Hodgskin and others, whose theory of a falling rate of profit is based upon a falling rate of surplus value, in fact, the rate of surplus value, and mass of surplus value rises over time. It does so because of this tendency to employ more labour, and to raise productivity which reduces the value of labour-power. The effect of rising productivity is only to reduce the mass of labour employed relative to the mass of constant capital, but the mass of labour employed is increased over time by this same process. More capital in total is employed, thereby increasing the amount of labour employed, and because the value of labour-power is reduced, any given amount of surplus value employs also greater masses of labour.
In Britain, industrialisation caused millions of peasants and artisans to become proletarianised, but the total mass of labour employed increased even more. The argument you are putting is the same argument the Narodniks and Legal Marxists themselves put at the time, and it was wrong, as history demonstrated. Did it mean considerable misery, absolutely, just as it did in Britain’s industrial revolution. Did it mean, falling living standards, and a pool of unemployed labour, again absolutely, but that was still compatible with a growing mass of labour employed, and a growing mass of capital and profit produced, along with a rapid expansion of the market.
A look at the industrial statistics for Russia indicate the point. In 1800, Russian output of metal was equal to that of Britain. By 1854 it was way behind. The same is true of railways, the navy etc., indicating why the Tsarist regime after Crimea needed to industrialise. Looking at manufacturing and mining, using 1900 prices, Russian output in 1860 is 13.9, by 1880 it has doubled to 28.2, by 1890 it has doubled again to 50.7, by 1900, doubled again to 100, and by 1913, it has risen to 163.6. (Nove, An Economic History of the USSR, p 12) A look at the other data in that chapter illustrates the point. As Nove points out, one soviet estimate (unlikely to exaggerate Tsarist performance) showed that between 1860-1910 world production grew by 6, GB by 2.5, Germany by 6, and Russia by 10.5.
“Plekhanov argued that Russia had first to undergo more capitalist development and refused to participate.”
It could be argued that in that respect, Plekhanov was right, and moreover, it was a position that Lenin held until the April Theses. Stalin, Bukharin, Zinoviev, and Kamenev still held it, leading to Lenin threatening to split the party over the issue. The Old Bolsheviks said that Lenin had become a Trotskyist, effectively having adopted Trotsky’s theory of Permanent Revolution. As Trotsky says, Stalin, Bukharin, Zinoviev and Kamenev continued to hold that position, in reality after the revolution. It forms the basis of the division between the Centre and Right against the Left. It forms the basis of the Stalinist stages theory, and Stalin’s disastrous position in relation to the Chinese Revolution etc. And, of course, on this basis, the bloc of Stalin-Bukharin-Zinoviev-Kamenev did not initially go for hyper industrialisation. They went for industrialisation “at a snail’s pace” attacking the Left’s calls for more rapid industrialisation. Bukharin, a bit like Mandelsohn or Deng, invited the kulaks to get rich. Nor is it true that Trotsky supported Stalin’s hyper industrialisation, when, after the disaster of their earlier policy resulted in the kulaks strangling the food supply for the towns, they did a 180 degree turn. Trotsky and the Left condemned the break neck speed of the hyper industrialisation, as well as the inflation of the money supply that went with it, setting out why it undermined planned economy.
“There is a thesis among some Marxists that the ongoing dispossession of Chinese and Indian peasants and their urbanisation as workers will give rise to a huge class conscious proletariat ready finally to storm the barricades.”
This is a false view of Marx’s theory of social revolution. It sees revolution in terms of the kind of political revolution seen in the Great French revolution, or the 1917 revolution, but Marx’s theory of social revolution is one of a revolution in the forces of production and relations of production that arise upon it. The social revolution as described by Marx can be seen in Capital III, Chapter 27 of the transformation of capital itself into socialised capital as the transitional form of property. It can be seen in his Inaugural Address, talking about the development of cooperatives, and the effect that has on the ideas of workers, and the need for a political struggle based on those ideas. It can be seen in his writings in the Grundrisse in relation to the Civilising Mission of Capital, and the way it educated and develops the working-class culturally and so on, to a condition whereby it is able to become the new ruling class. Given the overwhelming size of the working-class, and given that the social relations are already transformed into socialised capital, objectively owned by the workers as “associated producers”, but still controlled by the representatives of the owners of money-capital, the actual political revolution, required to bring the political superstructure into alignment with the underlying social relations should need be only, as Marx put it, enough to suppress a slave holder rebellion. Part of the problem has been the romantic fascination of rrr-revolutionaries with 1879, and 1917, and waiting for a re-run, that they have failed to address the more imminent requirements, of recognising that Marx had shown that these social relations had already been transformed, that capital already was predominantly socialised capital, and that the real struggle was over industrial democracy, of securing workers control over that capital.
“Can capital absorb them?”
This is just a repetition of the old Malthusian/Sismondist catastrophism that Marx actually dismantled. Yes, of course, it can absorb them, in the same way that British capitalism absorbed millions of peasants liberated from the land, and millions more besides. In fact, as Marx sets out in Capital I, quoting the MP, Ferrand, it absorbed them, and then ran out of the additional supplies it required! It absorbs them because the development of capitalism also means an accumulation of capital, and that accumulation of capital means a massive increase in the employment of labour along with it. It also means a massive expansion of the market, it means that the consumption of all members of society rises significantly, which in turn expands the market, and creates an additional requirement for employable labour.
That is what Engels refers to as the new hope that capitalist development in Russia offered to the Russian people. As Engels wrote,
“But on the other hand, capitalism opens out new views and new hopes. Look at what it has done and is doing in the West.”
The real problem is not the conversion of peasants and small producers into proletarians, or even the raising of productivity seen throughout the history of capitalism, due to the introduction of more sophisticated technologies. All of those processes have always led to an increased mass of profit, increased mass of capital, expansion of the market, and increased employment. The problem today is whether the introduction of robotisation and AI, is of a different order, so that all labour starts to become redundant.
Wow this is long even by your standards! – perhaps time for everybody to take a breather on your debates for now
Okay, agreed!
I don’t think we should allow this to end with Boffy’s mischaracterizations of Marx’s work to go unchallenged.