Commentary on Political Economy

Friday 6 April 2012

Money As 'Measure' of Social Antagonism

A recent piece on the Fed and inflation by Paul Krugman has prompted me to publish these two short pieces I wrote a while ago. Due to family illness I have been unable to write much over the last two months - so, my apologies to friends visiting this site may be owing. I will dig into my earlier work to keep our friends interested! Thanks and regards to all!

Market Choice and Economic Science - Money as 'Measure' of Social Antagonism


In this series so far we have seen how money can play no role in bourgeois economics because it is an institutional measure of the level of social antagonism in capitalist society - not just between workers and capital, but also between capitalists and, in the guise of exchange rates, between national bourgeoisies. The antagonism between workers and capital is over the share of wages and profits in total output, and that between capitalists is over the distribution of profits amongst themselves. It is clear that because capitalism is based on the exploitation of living labour, on its violent reduction to abstract labour that can be "measured" fictitiously in terms of money (wages) which then represent equally fictitious aliquot shares of "total output" - because of this violent "political" need of capital to transmute magically what are use values (living labour and social resources) into fictitious abstract values (monetary calculations of social resources), capitalists must isolate and alienate individual workers from one another and from the means of production so that the entire fiction of the "free market", based on "free labour" and "free choices", can be maintained!

But the social antagonism of the wage relation infects not just workers. Above all it infects the capitalist class itself because the antagonistic "push" from workers (expressed in wage and conditions demands) forces individual capitals (not necessarily individual capitalists) into"competing" with one another not just over the distribution of profits, but also (what amounts to the same thing) over the distribution of the wage antagonism! In other words, each capital wants its own workers to be paid less and the workers of other capitals to be paid more so that they can consume more. The ideal for capital would be a pricing system in which the money wage could reflect as closely as possible the level of wage and social antagonism in a particular area of production. The reason why this cannot be done is quite simply that it is physically impossible to equate wages and antagonism because they are two categorically different things. But capitalists always try to mediate these potential conflicts in terms of all sorts of "policies" (incomes policy, investment policy, regulations over government spending, employment, industrial and environmental policies, and so on). Internationally, these inter-capitalist rivalries take the shape of disputes over trade and exchange rate policies - which is what we are witnessing right now between the US and China and Europe (Germany especially).

At a more theoretical level, we can see that capital always presents social activity in a dichotomy: on one side is the total level of "inputs" (social resources) which it claims are quantitatively and scientifically "scarce" and "measurable"; on the other are the "free choices" of consumers ("households") and investors ("firms") which determine the "relative distribution" of this total pile of "inputs" according to the "market price mechanism" - in terms of "supply and demand". We know that this is pure fiction because the "inputs" of an economy cannot be "priced" independently of their "relative market prices", which we do not and cannot know until "the market" (consumers and investors) decide by way of supply and demand what those "prices" are going to be! In other words, the "absolute constraint" of the "available inputs" can only be determined by the "free choice" of market participants!!! Even Blind Freddie could see the glaring contradiction in this proposition!

What we are arguing here is that bourgeois economics claims to be able to determine "scientifically" (through relative prices) the allocation of social resources to various uses for means of the "free choices" of individual market participants! That this "miracle" is not possible is proven by the fact that the capitalist economy - far from being "scientifically" analysable and "managed" - is prone to very violent cycles and crises that are the product of the "undemocratic" manner in which the decisions about the allocation of social resources are made! And the lack of democracy extends to more than just workers, but to the entire society, including capitalists themselves whose "fratricidal" rivalries are increasingly threatening world peace.

The upshot of this discussion is to show that the capitalist economy is intrinsically antagonistic, and that this antagonism spreads from the base - the violence of the reduction of living labout to abstract labour that can be rewarded with dead objectified labour through the money wage - to the very vertex of the pyramid of suffering and exploitation that is capitalism. Because at the top of the pyramid are extreme and very violent rivalries between capitalists about the distribution of "profits", that is to say about who can appropriate the greatest amount of "monetised" social resources with the least amount of antagonism from workers and society! This is why all the national bourgeoisies in the world, as the conflicts among them mount, come to resemble a gang of bandits or a band of robber barons - from the Chinese dictatorship to the Russian oligarchs, from the Saudi sheikhs to the American plutocrats, from the Mexican narco-trafficants to the French and Italian prima donnas, from the German descendants of the pro-Nazi elite name it. Cheers and good week-end.



Prices, Inflation, and Conflict in the Society of Capital


When we say that money "measures" the level of antagonism centring on the money wage and "prices" generally, we mean that the capitalist system starts with a "given" level of prices that represent a particular "balance" of forces in particular "sectors" of capitalist enterprise. These various "balances" represent a certain degree of "stability" in those sectors or industries. (Joan Robinson famously sought to replace the concept of "equilibrium" with that of "tranquillity" - which, although she may not have known it, was first adopted by the mediaeval humanist Marsilius of Padua to indicate the "health" of the "body politic".) In other words, we accept the basic premise of "the New Institutional Economics" that capitalism is a series of institutions that "regulate" politically the effective functioning of the system. The "system" therefore is not one that owes its "regularities" to "mechanical" and "scientific laws" that link the various "quantities" involved in the utilisation of social resources. Rather, these "regularities" are the result of a current "tranquillity" that is always threatened by the political and dynamic nature of the social antagonism that capitalism engenders.

As Michal Kalecki realised, pricing in capitalist industry reflects the "degree of monopoly" (of control) that the various capitalist firms involved in a given sector (economists would say "market") can command and that is subject to regulatory checks from the collective capitalist, the State. That is why "price stability" is so important to monetary authorities - because the faster prices change (in times of high inflation, for example, or because of supply or demand disruptions), the harder becomes the maintenance of tranquillity in that sector and consequently in adjacent sectors of industry. The concentration of capitals in key sectors of capitalist industry is absolutely essential to governments for them to be able to co-ordinate the economy as a whole. However much governments may condemn monopolisitc behaviour and collusion in certain industries, the reality is that capitalist industry would be impossible without "price leadership" or "price fixing" - for the simple reason that "prices" can never be set by the mythical "market" but rely instead on the pre-existing regulation of a particular "market". Where new "markets" arise that affect the functioning of capitalist industry in other sectors, the State intervenes to regulate them before they become dysfunctional and pose "systemic risks" to the reproduction of the entire "society of capital".

Of course, even the absence of inflation may be problematic. This is what happened with the Great Moderation: real wages were kept up and wage inflation down in the West through the ferocious exploitation of Chinese workers by the dictatorship of the Communist Party of China with the complicity of Western capital (chief among them Apple Inc., run by that "saint" and "genius" Steve Jobs!). But what seemed like a period of "tranquillity" or "moderation" was in fact occasioned by the disastrous expansion of credit to Western workers, which kept up artificially profitability for finance capital as asset prices swelled into a bubble - until it burst in 2007 and 2008! The disruption to the entirety of capitalist industry was such that only enormous political intervention by Western governments and their state machineries has managed to avert the collapse of capitalist society. But the shock waves are still reverberating and it is proving to be extremely hard to settle the intercapitalist rivalries about who should "pay" for the crisis and the necessary "adjustments" in terms of the devaluation of previously-inflated assets and other price disruptions. Nowhere is this more so than at the inter-national level, especially within the European Union where the crisis has shown the limits of German domination of European industry.

So our next task will be to look at how the wage relation is reproduced through the essential, pivotal "mediation" of the very means of production from which living labour is "separated" by capital. This is where capitalist "entrepreneurship" plays a vital role through technological and managerial "innovation" in ensuring the perpetuation of the "command" of capital over workers. Yet it is also the area of analysis in which the first signs of the possible liberation of living labour from the yoke of capital first become visible.

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