Commentary on Political Economy

Friday 9 December 2016

Postcard From Prague - Capitalism as Kafkaesque Nightmare


No-one has ever truly understood Franz Kafka until he or she understands Wittgenstein’s enucleation of his maxim: “The law always catches the criminal”. Because if the law “always” catches the criminal, then it is no longer “the law” but becomes instead an inexorable fate. The aim of bourgeois economics is, as it were, to square the circle, to present a specific historical reality – that of the capitalist “market” where human beings alienate their living activity – as an inexorable fate. By reducing this “political” reality to an inexorable fate, bourgeois economics is then able to turn social relations of production into inescapable mathematical formulae and equations that yield “economic equilibrium”. But the very “success” of this operation – the “ful-filment” of its conditions, their “satis-faction” or “com-pletion” – leads to the con-clusion (German, Voll-endung, full-ending) and de-pletion of their con-tent: in other words, the algebraic formulae of bourgeois economic equilibrium, just like the law in Kafka, lose all meaning and content of their categories at the precise instant that they seem to capture it.

This is how capitalism has turned from a specific oppressive historical institution into a Kafkaesque nightmare of ecological suicide for the human race. Even the Classical economists limited the extent of capitalist production and profitability to the exertion of “labour” – in the sense that Classical Political Economy (Adam Smit, David Ricardo and J.S. Mill) could envision the limit of capitalist accumulation as the political choice made by workers to exert their “labour”. Such was the “positive” metaphysical slant of the Labour Theory of Value that Karl Marx himself (!!) in the entirety of his theoretical work could never envisage the eventual destruction on the part of capitalism of the entire ecosphere through sheer human overpopulation!

The Classical Political Economists could see that “goods” in vast abundance – such as water and air – did not and could not carry any “value” – and therefore could not form the basis of capitalist profitability. In its “constructivist” and “objectivist” slant (the labour theory of value poses value as a positive objective quantity), this theory could not lead to the “negative” subjectivist inversion of the theory of value operated by Neoclassical Economic Theory (from Menger to Jevons to Walras) that would lead to the nihilistic Schopenhauerian “renunciation” of life itself – and therefore to the conceivable annihilation of human life on earth. This nihilism of Neoclassical Theory is best captured by the notion of “scarcity”. Where the Classical labour theory of value put value as “wealth through labour”, the Neoclassics erected “wealth through privation”, - that is to say, scarcity as the origin of wealth. But whereas for Classical Political Economy labour, and therefore wealth, were finite quantities easily exhausted, for Neoclassical bourgeois economic theory, wealth becomes an inexhaustible downward spiral of selfish appropriation of resources!

As Bohm-Bawerk put it, “the first law of physics is that in the universe nothing is created and nothing is destroyed: everything is transformed”. For the Neoclassics, the self-interested individual is the centre of the universe. All the Labour in the world – like the Sisyphean Arbeit in Schopenhauer – cannot positively create any “wealth”. Wealth can only be the transferral or “exchange” of possessions or properties from one individual to another – and then only if some individuals “renounce” their right to present consumption “in exchange for” future consumption. “Scarcity” is the inexorable fate of a society that has put the unquenchable thirst for the accumulation of social resources as the endless pursuit of the self-interested individual! Scarcity is the end-result of Wicksell’s “universally free competition” amongst self-interested individuals. In the Neoclassical bourgeois capitalist economy, nothing is created, everything is transformed or delayed. In this “exchange” nothing is “positively” created – selfish individuals have only re-balanced their current legal claims to property into the indefinite future. As Keynes himself put it, “money is a bridge between the present and the future”. For the capitalist, money is the legal claim to future human living labour. Capitalism is a hypothecation, a mort-gage (French, morte, death, and gage, pledge – dead pledge) on the future life of workers.

But the result of this endless capitalist hypothecation of future human activity can only entail the ceaseless exhaustion of social resources through relative overpopulation – that is to say, through a human population of living labour that constantly exceeds the means available for its reproduction, for the survival of the human race. The constant “scarcity” of social resources engineered by the capitalist economic system must perforce engender the depletion of the ecosphere through human overpopulation. The erstwhile saying “Socialism or Death” may yet come to reveal a hitherto unknown facet – one that even the great fatidic Karl Marx could not envisage.

Friday 2 December 2016

Over-population and Secular Stagnation

To introduce the next post, I can really do no better than to quote our friend Dan's last comment on pur previous post - a comment that, if I may, is once again striking for its perspicacity - either that or the rest of us are too lazy and nonchalant or have too little time to reflect on the reality of capitalist production and society - or else are too greedy and corrupt and irresponsible to care:

Thanks for the reply to my previous comment! If I may add one comment to the present analysis, I think we must also consider the role that innovation plays in increasing relative overpopulation. To use Marx's terminology, relative overpopulation can be increased through innovations that decrease the socially necessary labor time embodied in commodities, which cheapens the means of subsistence and frees a portion of the existing labor force to absorb the surplus product. So theoretically capital can remain profitable in spite of a stagnant population if it is able to sufficiently increase productivity on a continual basis. There is much talk lately of a coming automation revolution (e.g. self-driving cars) that will eliminate millions of jobs. However, those hopes may not be realistic, and even if innovation could prop up the rate of profit sufficiently, the environmental threat that you mention would remain because consumption per person would have to grow.

As we have seen in our previous posts, the Wicksellian notion of “the natural rate of interest” has two main purposes: one is ideological in the sense that it seeks to justify capitalism and profit (Wicksell’s “natural rate of interest” is an equilibrium average rate of profit) as if they were “natural” phenomena. But the other purpose, the one that seeks such ideological justification in the “physiological” relationship between the social conflict that capitalism and the wage relation engender (“universally free competition”), is truly enlightening in that it reveals how the “universally free competition” needed for the natural rate of interest to obtain is really a level of social antagonism that may lead to the “unnatural” demise of civilization.

The reason for this link between the natural rate of interest as “universally free competition” and the demise of civilization at the hands of “market forces” or capitalism is simply this:
If indeed profit can exist only by means of the capitalist “saving” or “renouncing” present consumption for the sake of “future” consumption – and if this “renunciation” is then indefinite because the capitalist never ends up consuming the “saved” product – then in that case it is clear that the entire aim of “saving” is for the sake of accumulating social power over the living activity of more and more workers. Here, workers stand for the people who do not save and therefore are forced to sell their living activity to pay for their immediate consumption.

Extrapolating from this schematic social relation of production, we can then conclude that the effect of capitalism is to increase the “excess” population on the planet – and therefore to destroy the environment in order to keep alive this “excess” population. This population is in “excess” because it exists not in order “to produce” – because its production would not be “profitable” – but rather in order to suppress the part of the population that is actually employed by capitalists – so as to force these workers “to sell” their living labour “in exchange” for part of the product they produce!
As Thomas Friedman once said, “the Earth cannot afford 8 billion Americans” because, if the living standards of Americans are what is needed to maintain capitalism as a system of production, then the “excess” population needed is such that the environmental demands to keep it alive are simply impossible to meet! When economists beginning with Larry Summers and Paul Krugman among a myriad others complain that capitalism has entered a phase of “secular stagnation” because of “the ageing of the population”, what they really mean is that the “excess” population needed for workers to be employed profitably is no longer environmentally and politically “sustainable” – and therefore neither is capitalist industry and society!

In this regard, let me quote what I believe is one of the most important passages in the entirety of Karl Marx’s work – a passage that ought to be read and parsed more carefully than any other in the history of humanity if we are to protect our future survival on planet earth:

It is the law of capital, as we have seen, to create surplus labour, namely, disposable time [free time not needed for the reproduction of workers or not employed for their leisure]. And it is able to do so only to the extent that it creates more necessary labour – that is to say, to the extent that it exchanges dead labour [produced goods] with the worker [fresh living labour, that is, for human beings who are also forced to work]. The tendency of capital therefore is as much to create more [necessary] labour as is possible [in absolute terms, that is, in terms of numbers of workers], as it is to reduce the [amount of necessary] labour [needed for the reproduction of each individual worker relative to disposable labour] to the minimum necessary. Capital therefore tends both to increase the working population and to reduce incessantly part of it to the condition of over-population – as population that is superfluous [useless] until the moment that capital can utilize it [to create surplus value]. (From which we derive the truth of the theory of overpopulation and of surplus value.)

Capital tends both to render human labour (relatively) superfluous and also to push it beyond all boundaries. Value is nothing other than objectified labour, and surplus value (the valourisation of capital) is nothing other than the excess of objectified labour on the amount necessary for the reproduction of the labour force. But living labour is and remains the fundamental requisite of objectified labour and of surplus value, while surplus labour [disposable labour] exists only in relation to necessary labour, and therefore only to the extent that there still is necessary labour. Capital must therefore incessantly create more necessary labour [in absolute terms] to create surplus labour [and therefore surplus value]. It has to multiply surplus labour (by means of simultaneous working days [by means of more individual workers]) in order to multiply surplus value. At the same time, capital has to suppress necessary labour so as to turn it into surplus labour…

It is for this reason that the capitalist seeks the increase of the working population. And it is the actual process of reduction of necessary labour that enables the capitalist to employ new living labour [new workers] (and therefore create surplus labour [that is, surplus value]). (In other words, the production of workers becomes “cheaper”; and therefore it is possible to produce more workers in the same measure as the time for necessary labour decreases or the time needed for the reproduction of the labour force decreases....) – K.Marx, Grundrisse, 3.2.25)