Part One
In the General Theory, Keynes
is concerned with how and why capitalist industry leads to crises – financial
and investment - that result in “involuntary unemployment”. The reason, he
explains, is that once capitalist employers reach a certain level of
profitability (revenue minus costs) they no longer find it profitable to re-invest
the profits accumulated to that point. At that precise conjuncture, Keynes
argues, the capitalists’ “propensity to consume” declines, resulting in excess
savings and fall in aggregate demand, which only exacerbates the margin of
profitability on fresh investment. What Keynes does not address, however, is
that apart from the falling propensity to consume on the part of employers once
income distribution becomes overly skewed in their favour so that all of the
output cannot be cleared at profitable market prices – apart from this factor,
there is also the far more important one that the rate of profit has a tendency
to fall beyond a certain level of investment. Why is there such a “tendential
fall of the rate of profit”? As we saw earlier with regard to the capitalist
tendency to induce overpopulation, this is because at a certain level of
profitable productive expansion, the reserve army of the unemployed begins to
be exhausted and cannot be expanded further for reproductive (fertility) or
political reasons. It is at such a juncture that capitalist investment reaches
the limit of its profitability.
Let us proceed in orderly fashion. We
saw earlier how capitalist profit is nothing other than a “hypothecation” over
future human living labour to be reduced to the status of a marketable
commodity in the guise of “labour-power”. That means that once full employment
is reached any further expansion of output will result in workers’ demands for
higher money wages, and therefore real wages at current price levels. But this
means that the higher consumption of real goods by workers will enhance their
emancipation from wage labour, and lead inevitably to demands for either higher
money wages or for more leisure time. The only way capitalists can protect
themselves from this wage-push inflation is by raising prices so that the real
wages of workers remain the same or else even begin to fall. And the other way
is by expanding the reserve army of the unemployed so that growing money-wage
competition between workers facilitates fresh profitable investment while money
wages are kept stable and real wages per capita actually decline. Keynes
explicitly excludes the possibility that existing employed workers will accept
a reduction in money wages because (a) workers compare their money wages with
those of other workers quite easily, and (b) a lowering of money wages would
actually reduce aggregate demand even further than just the decline of the
capitalists’ propensity to consume, with predictably devastating consequences
for employment and consumption and therefore social well-being and political
stability (strikes and political upheaval).
It follows from all this that where
it is not possible for capitalists to expand the reserve army of unemployed,
whether within national boundaries or by investing in low-wage countries
(preferably authoritarian ones), the economy will stagnate. Worse still,
because capitalist investment involves the presence of credit whereby lenders
lend to borrowers at a fixed interest rate in the hope that borrowers will be
able to pay the interest on their loans out of fresh profits – because of this
contractual “term-structure” of interest-bearing loans, once borrowers are
unable to repay interest on loans, the lenders will begin to reckon with the
possibility that even their principal will not be repaid by borrowers. At that
point, the ensuing panic will lead to the liquidation of existing loans and the
winding up of businesses – with the inevitable recession and even depression.
This is the financial mechanism whereby it is in the essence of capitalist
industry and finance to over-extend itself until the rate of profit falls below
the rate of contracted interest on loans and the entire economy goes into
recession or depression.
We can see from the foregoing account
how Keynes’s entire economic theory is based on “secular stagnation” (Harrod)
or is indeed “the economics of depression” (as J. Hicks called it in “Mr.
Keynes and the Classics”). It is notions like the money-wage (for workers), the
propensity to consume and “liquidity
preference” (for employers and workers combined if they refrain from spending)
that help account, for Keynes, for the occurrence of involuntary unemployment
and economic crises. For the Bursar of King’s College, in the absence of fresh
profitable investment opportunities – which for us are due to unavailability of
potential workers to add to fresh consumers and in part to the extension of the
reserve army -, the capitalist economy can be saved from political upheaval and
even harmful falls in living standards and industrial output by the only social
entity that can procure (a) fresh capital to prop up capitalist enterprises
through lower interest rates and the expansion of the monetary mass in
circulation (“the transmission mechanism”), (b) welfare payments to maintain
workers’ consumption, and (c) fiscal measures for direct investment by the
State to maintain and boost “aggregate demand” especially in areas of
industrial activity with which the State is already familiar such as
infrastructure, public service and the like.
Again, we can see that Keynes’s
overriding preoccupation was with maintaining social stability in times of
capitalist crisis by seeking to understand the origins of crises and then
suggesting appropriate remedies such as interventions in state-managed interest
rates and money supply. The title of his major work clearly outlines Keynes’s
rank of priorities: it is The General Theory of Employment (first), Interest
and (then) Money. And we can also see, upon a proper interpretation of his
analytical framework, how The General Theory centred on the tendential
fall of the rate of profit upon the decline of investment opportunities due to
the exhaustion of the reserve army of the unemployed (“new markets”) to absorb the
“profits” (surplus value) generated by existing capitalist industry (declining
“propensity to consume”) – and therefore the need for “external political
intervention by the State” to provide monetary (interest-rate and money supply)
remedies and, where these failed due to “the liquidity trap”, fiscal
intervention to stabilize employment and social welfare and ultimately
political stability.
There is a clear, over-riding,
pervasive and inescapable pessimism in “the economics of Keynes” (to be
distinguished from “Keynesian economics”) about the future of capitalism – “in
the long run, we are all dead”. As Schumpeter soberly reminds us, Keynes was
always concerned with stagnation and depression – never with Schumpeter’s own
obsession, capitalist “development” and “business cycles” – in other words,
with “the capitalistic use of crises”, or as he called it, “creative
destruction”. Ultimately, Keynes’s economic theory boils down to the limit of
overpopulation – the expansion of both the army of the employed and the reserve
army of the unemployed – to make up for the political intractability of
overpopulation itself and of the growing inequality of income distribution in
capitalist societies. The impossibility of capitalist industry to resolve its
inherent contradictions was the reason why Keynes had to turn to “the social
capitalist” par excellence, the State, to take over the reins of
investment and employment so as to preserve and maintain the society of
capital. (We shall deal with Schumpeter’s divergent focus on crisis as the
consequence of capitalist innovation in a separate piece.)
Part Two
But overpopulation is only one pillar
of capitalist accumulation and, therefore, of the systematic destruction of the
ecosphere. As we indicated earlier, the other aspect is consumerism.
The reason why we use the term “overpopulation” to indicate the first of the
“twin evils” of capitalism is that capitalism pushes population increase to the
limit of sustainability so far as the existing human and natural resources are
concerned at any current level of technological utilization. As we have shown, capital
is impelled to do so by that end-less (without quantitative
limit, and without qualitative human goal or purpose) accumulation of
capital that is its essential being, its raison d’etre. The intrinsic
and imprescindible goal of capitalism is not the achievement of a particular
level of human well-being, but rather the never-ending numerical or accounting
task of maximizing the return on investment – profit. Needless to say,
overpopulation has an automatic reflex therefore in “overconsumption” because,
if the working population and the reserve army of the unemployed combined
exceed what is sustainable, it must follow that the level of consumption is
also unsustainable because it extends or exasperates the level of productive
output to the limit of what is environmentally sustainable for human society.
Just on its own, the overconsumption
needed to satisfy the reproductive needs of overpopulation will push humanity
toward ecological catastrophe. It is an evident fact that as workers’
antagonism to the wage relation rises, capitalists need to produce more real
goods for workers to consume, and at the same time they need to ensure that the
reserve army grows so as to drive down workers’ demands. But this extension of
the reserve army engenders, of course, greater excess consumption. It gets
worse. For capitalists to ensure that workers are more dependent on the wage
relation, the nature of their consumption must be distorted so that as great a
part of workers’ consumption is directed toward “distorted needs” or, better named,
“wants”. This has obvious implications for “overconsumption” because – as is
evident – if a society consumed only those products that served its needs
rather than its wants, it would not need to produce as much as with distorted
needs or wants.
It follows that when we examine
consumption or “demand” in a capitalist society we must also keep in mind the
horrendous distortion and waste occasioned not just by the need to keep alive
entire armies of reserve workers, but also by the capitalist requirement to
distort social needs into wanton wants for the sake of reducing the ability of
social production to satisfy real needs and therefore to emancipate workers
from wage labour! Thus, overconsumption is only one intrinsic aspect of
overpopulation which, in turn, is an intrinsic aspect of capitalism. There is a
separate reason why capitalism pushes us toward the destruction of our
ecosphere: this aspect we can call consumerism. Consumerism is distinct
from overconsumption in that the latter is tied more strictly to the process of
the extraction of surplus value from workers – hence of the accumulation of
capital and finally of overpopulation. Consumerism is quite distinct from
overpopulation and overconsumption because whereas these are merely factual
aspects of the operation of capitalism, whereas these are requisite operational
aspects of capitalist industry and accumulation, consumerism is instead the
very ideology of capitalism in that it serves not so much an organic purpose in
capitalist production but much rather a propagandistic role in the
subjugation and exploitation of workers. Indeed, many languages used the
word propaganda especially after World War Two until it was replaced
with the far less pejorative word “advertising”: thence, the direct political
use of capitalist propaganda was turned into an innocuous “advertence to
consumers” – a simple “notice” serving the useful purpose of “adverting your
attention to” a given product.
Consumerism is, as it were, the sugar-coating that allows workers and the
proletariat at large to swallow the bitter pill of capitalist exploitation and
lack of real participatory democracy in liberal parliamentary bourgeois
regimes. How so? The wage relation is one of violence in that workers would
never accept to sell their living activity in exchange for the dead product of
their living labour - that is surely an “exchange” that amounts to fraud (if
unwitting) or violence (if workers are aware of it). Of course, the very fact
that workers are willing to work for “a fair wage” means that the capitalist
mode of production does have a minimum of legitimacy (Weber). Nevertheless,
legitimacy does not mean absence of conflict: capitalist society is founded on
social antagonism between capitalists and workers - and specifically on the
antagonism of the wage relation. It is at this level that the reality of alienation
(of workers and all of society) from control over production and of reification
(the global extension of alienation to the commodification of all social
relations) – it is at this level that Lukacs’s notions (developed in History
and Class Consciousness and critically reviewed by us earlier) come into
their own – that is, not at the point of production but rather in the sphere of
consumption. The third aspect of consumerism is therefore the ideological
component – “marketing”. Hence, the pervasive bombardment of workers through
“advertising” and the relentless emphasis on “consumer choice” as a substitute
for true participatory democracy is tantamount to the collective brainwashing
of our “democratic” societies.
The question then arises of why the
antagonism of the wage relation has not exploded into open social conflict -
into civil war in many advanced industrial capitalist societies. The answer has
to do with capitalist growth and development. Let us see how this works.The
“specificity” of a capitalist society consists in the ability of capitalists to
dominate living labour, workers, not just through explicit coercion but rather
through a complex set of institutions that force workers to exchange their
living labour for the objects that they themselves have produced, with “dead
labour” - again, not through direct coercion from a particular capitalist
toward particular workers because the capitalist does not “own” the workers as
is the case with slavery or with feudal relations where the “serfs” are tied to
the land, the feud or glebe. One of the fundamental institutional pillars of
capitalism – as against feudalism and slavery, for instance – is that workers
are “formally legally free” in the sense that their employer (the capitalist)
does not “own” them the way feudal lords and ancient masters did. Because
capitalists have no ownership of workers but simply purchase their labour-power
on the “free market”, it follows that capitalists compete with one another for
workers’ labour-power. Part of this competition gives rise to a simple paradox
to which the bourgeoisie is exposed: although each individual capitalist wants
to pay his workers as little as possible, the same capitalist wants other
employers to pay their workers as much as possible so that they may spend their
income on the goods he produces! This is a variant (the converse, if you like)
of the “paradox of thrift” first illustrated by Marx in Capital and
then adopted by Keynes.
The result is that workers’ consumption is distorted in two very nefarious
ways, deleterious to society and to the human environment. The first aspect is
that capitalists cannot produce goods that emancipate workers from wage labor –
this occurs indirectly through wage-push and demand-pull inflation. The second
aspect is that capitalists must employ marketing to persuade workers to spend
their wages on the repressive goods they force them to produce. This obviously
results in the most horrendous irrational waste!
No comments:
Post a Comment