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.
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 human level of 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. But that is not enough. 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, 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”: thus, 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. 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 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!
The third aspect of consumerism is 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.
Profit and Uneven Development
The repercussions of this dynamic on inter-national relations
are obvious: capitalists in a given nation-state seek to unload the antagonism
of the wage relation in their state to the working populations in other states.
This dynamic works on several levels. For one, capitalists select those
countries other than their own (!) where working conditions and governance are
worst - either dictatorships or authoritarian countries; and especially nations
with large and growing excess populations. The advantage for capitalists is,
first, that nominal wage payments in their nations can be kept low; second, at
the same time, real wages in their nations can grow through the import of cheap
products from the less emancipated nations. By virtue of this process,
capitalists buy social peace at home and “export” class antagonism to other
more repressive governments and their workers.
For the reasons we have listed here, if we wish to understand
why the global population keeps growing to the point where it is becoming
unsustainable for the ecosphere, then we have only the capitalist mode of
production to blame. But the objection will be promptly moved: if that is so,
why is it that the most advanced capitalist countries are beginning to
experience stable or stagnant or even declining populations? The answer is
relatively simple: as capitalist accumulation grows, the process runs against
political and environmental limits as capitalist ruling classes attempt to keep
their own national populations pacified through rising living standards
relative to other nations. But then, second, this first condition requires the
presence of other nations (especially if under the control of authoritarian
dictatorships – notably China at present) where populations of potential
workers can absorb the profits accumulated in the more advanced industrial
capitalist countries.
This model of international capitalist division of social labour
is premised therefore on the “uneven development” of national economies - not
just in terms of industrial development but also in terms of the adaptation of
national institutions to the industrial requisites of the bourgeoisie. As
nations become more advanced from an industrial viewpoint, they also are left
with no choice but to emancipate their own working classes. Yet at the same
time, these more advanced capitalist nations need to find less advanced nations
whose working populations they can exploit and expand through higher rates of
fertility! An important example is the desperate attempt by the Chinese
Dictatorship to redirect it’s excess capital away from its own subjects to New
areas it can more easily exploit – Africa in particular, where the existence of
easily corruptible dictatorial regimes makes this absorption of excess capital
less exposed to domestic conflict generated by the excessive wage emancipation
of Chinese workers.
It goes without saying that this process of “uneven development”
gives rise to tremendous conflicts between the more advanced and the less
advanced capitalist countries - in all sorts of directions from migration
pressures, to international tensions as each nation seeks to unload its
domestic wage antagonism on other countries.
The Military Apocalypse
Perhaps the greatest immediate threat of this irrational process
of capitalist accumulation is that capitalism needs the existence of national
boundaries and of authoritarian and despotic nation-states to be able to ensure
the constant process of overpopulation in the less developed despotic
nation-states – “the periphery” -, and of consumerism in the parliamentary
nation-states that capitalists use as a refuge in case of conflict with the
exploited nations – we call these advanced capitalist nation-states “the
metropole” as opposed to the newly-exploited states of “the periphery”.
Hence, we have a clear contradiction between the process of
capitalist “globalization” and the simultaneous rise of international conflict that
threatens to lead any moment now to a new world war!
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